Internship at EXIM Bank LTD

Modes of Investment in EXIM Bank Ltd.
Procedure, problem and recommendation
Introduction of the report
Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation
1.1 Origin of the report:

This report is originated having three months long internship program originated after completing the BBA program from Business Administration under Leading University. During the internship a student has to undertake an arena of investigation of any organization for in depth study. This report is the outcome of the assigned internship, suggested by the EXIM Bank Limited, Fenchugonj Branch, sylhet. My internship at EXIM Bank Limited started on February 01st, 2011 and it ended on April 28th, 2011. During these 3 months I was assigned at the Fenchugonj Branch. I had a lot of fun, but more importantly I finally understood working by actually being there. This practical orientation is necessary for the development and preparation of a person in the job world.
1.2 Background:
Bangladesh is one of the developing countries in the world. In an economy like this, banking sector can play a vital role to improve the overall social economic condition of the country. The banks by playing the role of an intermediary can mobilize the excess fund of surplus sectors to provide necessary finance, to those sectors, which are needed to promote for the sound development of the country. The word Bank refers to the financial institution that deals with money transaction. Banks collect deposits at the lowest possible cost and provide investment at highest cost. The spread between the two is the profit for the bank. Commercial banks are primary contributors to the national development of the country. This report is an attempt to reflect the position of EXIM bank Ltd in the banking industry of the country in respect of her activities in the arena of Investment Policy.
1.3 Objective of the report:

In this report, I tried to furnish all sorts of practical dealings that are conducted in case of handling various types of activities in investment department, the theoretical aspects, that is what should be the procedures and requirements maintained from first to last, and actual practices as well as the ultimate gain for the bank in conducting financial activities are mainly discussed. So the purpose and objective of this report can be summarized as follows:
Focus on the Brief description of investment policy. To know deeply about investment procedure. To examine banks performance in investment activities. To know how they minimize investment risks. To focus on some other activities of investment policy. To specify some findings on given topic To reveal some recommendation for better performance in investment policy.
1.4 Scope of the report:

Banking sector is a large and difficult area. A bank has different products, different services and different customers. However, the scope of present study was limited in a specific area of an organization EXIM Bank Limited, Fenchugonj Branch, sylhet. This study covers only various investment policies of EXIM Bank Limited, Fenchugonj Branch, and sylhet.
1.5 Rationale of the study:

Commercial banks in Bangladesh economy are to face an increasing competition for their business in coming days, like any other emerging market economies. This report is an effort to reflect a clear idea about the strategies, activities,
and performance of EXIM Bank Ltd. The Investment Policy is the vital part for financial institution. It is linked with all other department. So it is very important to have an effective and sound management System in banking business. As a BBA student having major in Finance, Financial institutions are the most appropriate field to gather the experience and among the financial institutions, Bank is the most prominent place.
1.6 Methodology of the report:

The methodology of this report is very different from conventional reports. I have emphasized on the practical observation though this report has to need some primary and secondary data. Nevertheless, eventually almost the entire report consists of my practical observation. While preparing the report, I have taken information from the following sources. Primary Sources: Observation of investment process, policy and activities. Overflowing Conversation with the in-charge of general banking department of EXIM Bank Limited, Fenchugonj Branch, sylhet. Working with my own experience while internship program. Daily diary (containing my activities of practical orientation in EXIM Bank Ltd) maintained by me, Various publications on Bank, Website of Bangladesh Bank, Website of EXIM Bank Limited, Annual Report of the bank, Personal investigation with bankers, Different circulars issued by Head Office and Bangladesh Bank Secondary Sources:
1.7 Potential problems of this report:

Some of the limitations faced in preparing this report are: It was very difficult to collect the information from various personnel for their job constraint. There were some difficulties in understanding some activities due to not being relevant to the theoretical knowledge. Due to confidentiality the Banks policy restricts disclosing some data. The study of such a short course of time is not free from limitation. So time limitation is the main point of limitation. The data relevant for the analysis report writing sometimes could not be collected due to excessive year-ending workload at the branch. It is too much difficult to comment and suggest based on only the annual report and information collected from written documents.
Organizational overview of the EXIM Bank Ltd.
Export Import Bank of Bangladesh Limited

2.1 Background:
Export Import Bank of Bangladesh Limited was established in 1999 under the leadership of Late Mr. Shahjahan Kabir, founder chairman who had a long dream of floating a commercial bank, which would contribute to the socio-economic development of our country. He had a long experience as a good banker. A group of highly qualified and successful entrepreneurs joined their hands with the founder chairman to materialize his dream. In deed, all of them proved themselves in their respective business as most successful star with their endeavor, intelligence, hard working and talent entrepreneurship. Among them, Mr. Nazrul Islam Mazumder became the honorable chairman after the demise of the honorable founder chairman. The bank was incorporated in Bangladesh on 2nd June 1999 as Banking Company under the Companies Act. 1994. But it starts functioning from 3rd August 1999 with Mr. Alamgir Kabir, FCA as the advisor and Mr. Mohammad Lakiotullah as the Managing Director. Both of them have long experience in the financial sector of our country. By their pragmatic decision and management directives in the operational activities, this bank has earned a secured and distinctive position in the banking industry in terms of performance, growth, and excellent management. The authorized capital and paid up capital of the bank are Tk. 10000.00 million and Tk 6832.27 million respectively. The Bank carries out its banking activities through 59 branches with around 1686 employees operating as per Islamic Shariah in the country. It also went for public issue of shares in the year 2004 and its shares are listed with Dhaka Stock Exchange & Chittagong Stock Exchange in Bangladesh. The bank has migrated all of its conventional banking operation into Shariah based Islami banking since 1st July 2004. The bank has developed the world renowned Core Banking Software namely TEMENOS-T24, for online banking. 7
EXIM Bank Limited is the first private sector bank in Bangladesh, which established exchange houses outside the country, for ensuring delivery of smooth and most reliable remittance services to Non Residence Bangladeshis (NRBs) living and working in abroad. The first exchange house of EXIM Bank Limited has started operation of its wholly owned subsidiary EXIM Exchange Company (UK) Ltd. on 30th June 2009 in London, United Kingdom, & the second one is EXIM Exchange Company (Canada) Ltd. on 23rd January 2010 in Canada. These exchange houses are compliant official money transfer channel to serve NRBs, outside the country. The bank undertakes all types of banking transaction to support the trade and commerce also available for the entrepreneurs to set up new venture of the country. The bank is being managed by a group of highly educated and professional team with diversified experience in finance and banking. The management of the bank constantly focuses on understanding and anticipating customer needs. The bank has already ranked as one of the quality service providers & is known for its reputation. The operation of the bank is 10:00 A.M to 6:00 P.M from Sunday to Thursday with transaction hour from 10:00 A.M to 4:00 P.M. the bank remain closed at Friday and Saturday including government holidays.
2.2 Key Statistics
Name of the Company Date of Incorporation Industry Type Headquarters Company Size Common Job Titles Median Age Median Tenure Branches Registered Office PABX Fax SWIFT Code Web Page Auditors
: : : : : : : : : : : : : : : :
Export Import Bank of Bangladesh Limited June 02, 1999 Banking Privately Held Dhaka, Bangladesh Around 1,700 employees Officer (Around 71%) 28 years 3.5 years 59 Symphony, Plot No. SE (F): 9, Road No. 142 Dhaka-1212, Bangladesh 880-2-988 9363 880-2-988 9358 EXBKBDDH www.eximbankbd.com Hoda Vasi Chowdhury & co., Chartered Accountants
2.3 Vision:
The motto is Together Towards Tomorrow. Export Import Bank of Bangladesh Limited believes in togetherness with its customers, in its march on the road to growth and progress with service. To achieve the desired goal, there will be pursuit of excellence at all stages with a climate of continuous improvement because, in EXIM Bank, they believe, the line of excellence is never ending. Banks strategic plans and
networking will strengthen its completive edge over others in rapidly changing competitive environment. Its personalized quality services to the customers with the trend of constant improvement will be the cornerstone to achieve our operational success.
2.4 Mission:
The bank has chalked out the following corporate objectives in order to ensure smooth achievement of its goals. To be the most caring and customer friendly and service-oriented bank. To create a technology based most efficient banking environment To ensure ethics and transparency at all levels. To ensure sustainable growth and establish to the honorable stakeholders. Provide high quality financial services in export and import trade. Being the trusted repository of customers money and their financial adviser. Making its products superior and rewarding to the customers. Sound capital base. Fulfilling social commitments by expanding its charitable
2.5 Core Values:

The Bank providing the most courteous and efficient service for Customers Promoting well being of the members of the staff. Ensuring fair return on their investment through generating stable profit. Socially responsible corporate entity for national policies and objectives. Upholding ethical values and best practices.
2.6 Achievement:
The bank has migrated all of its conventional banking operation into Shariah based Islamic banking since July/2004. It is a first private sector bank to open exchange house in UK,
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Implemented of the world renowned Core Banking Software namely (TEMENOS-T24). Member of the SWIFT. Online Branch Banking. Listed with Dhaka stock exchange & Chittagong Stock Exchange in Bangladesh.
2.7 Corporate Social Responsibility

EXIM Bank always keeps itself associated with the various activities toward the benefit of the society as well as the nation. In order to facilitate & smooth execution of its activities, it has already established a foundation named EXIM Bank Foundation. The bank allocates at least 2% of annual profit for the EXIM Bank foundation to conduct CSR each year. EXIM Bank started their CSR activities EXIM Bank Scholarship Programmed with the theme of- Promotion of education among all in the year 2006. The bank has taken around 1200 meritorious students from all corners of the country to take care their educational expenses till their completion of educational life. So far Tk. 32.9 Million (BDT 329, 00,000) has been disbursed as scholarship under this programmed including Tk. 19.6 Million (BDT 196, 00,000) in 2010. Under Education Promotion Scheme, interest free loan is provided for poor but meritorious student to help them bear monthly educational expenses including food, accommodation etc. The students are required to repay the principal amount in long term monthly installments after they have joined a confirmed job after accomplishing their education properly. By 31st December 2010, Tk. 25.7 Million (BDT 257,00,000) was sanction to take care of around 200 poor but meritorious student from reputed educational institutions in our country. Not on the above, but also the bank was donate to Prime Ministers Relief Fund for bereaved family members of the Army Officers during the carnage in 2009 at BDR Head Quarter (Pilkhana, Dhaka).
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EXIM Bank is always prompt to stands besides the helpless. The bank provides relief in cash, foods, and equipment of infrastructure development etc. in time of flood, earthquake, fire, cyclone and so on.
2.8 Business Areas Of EXIM Bank Ltd:

EXIM Bank Ltd consists of some major functional divisions. Those are as follows1. Corporate Banking Division - Foreign trade & treasury - Investment Administration 2. General Banking Division 3. Financial & Admin Division 4. Personal Banking Division 5. IT Division
2.9 Board of Directors:

Chairman Mr. Md. Nazrul Islam Mazumder. Directors Mr. Md. Nazrul Islam Swapan. Mr. Md. Fahim Jaman Pathan Mr. Zubayer Kabir. Mr. Md. Abdul Mannan M.P. Mr. Mohammed Abdullah. Mr. A.K.M Nurul Fazal Bulbul. Mrs. Rizwana K. Riza. Mr. Abdullah Al-Zahir Shaoan. Mr.Md.Altaf Hossain. Mrs. Nasima Akhter. Mr. Ad. Habibullah. Mr. Mohammed Sekandar Khan. Mrs. Nasreen Islam. Alhaj Md. Nurul Ami. Mr. Anjan Kumar Saha. Bay Leasing $ Investment Ltd.
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Managing Director Mr. Kazi Masihur Rahman. Company Secretary Mr. Md. Golam Mahbub.
2.10 Shariah Council

Chairman Maulana Mohammed SalahUddin, Khatib, Baitul-Mukarram National Mosque Maulana Mohammed Sadewl Islam Imam, Mohakhali Dohs Jame Mosjid Prof.h.m.saidul islam barakaty, director, southeast university. Mr.A.S.M.Fakhrul ahsan, Ex-Deputy Governor, Bangladesh Bank. Hafez maulana Mufti Md.Khairullah, Amborshah Madrasha, Tezgaon, Dhaka. Mr.Md. Nazrul Islam Mazumdar. Mr.Zubayer kabir.Mr.Abdullah Al-Zahir Shapan. Mr.Kazi Masihur Rahman. Mr.Md.Nurul Fazal Bulbul. Mr. Md. Abdul Mannan M.P. Members
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2.11 Organizational Hierarchy:
Managing Director (MD) Additional Managing Director (AMD) Deputy Managing Director (DMD) Senior Executive Vice President (SEVP) Executive Vice President (EVP) Senior Vice President (SVP) Vice President (VP) Senior Assistant Vice President (SAVP) Assistant Vice President (AVP) Senior Principal Officer (SPO) Principal Officer (PO) Executive Officer (EO) Senior Officer (SO) Management Trainee Officer (MTO) Officer Junior Officer (JO) Assistant Officer
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2.12 Highlights on the Overall Activities As at 31st December 2010

(Values in Million BDT)
Sl. No. 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Particulars Authorized Capital Paid up Capital Total Capital Reserve Fund Total Assets Total Liabilities Total Share holders Equity Deposits Investment (General) Investment (Shares & Securities) Operating Income Operating Expenditure Profit before Provision & Tax Profit Before Tax Net Profit after Provision & Tax Investment as a % of total Deposit Dividend: Cash Bonus 18 19 20 21 22 23 24 25 Right Share Cost of Fund Net Asset Value (NAV) Per Share Earning Per Share (EPS) Price Earning (P/E) Ratio Return on Asset (ROA) after Tax Return on Investment (ROI) No. of Employees No. of Branches 2008 3500.00 2677.75 5763.89 1532.55 68446.46 63457.26 4989.20 57586.99 53637.68 2894.02 8356.82 5838.43 2518.39 1989.55 1096.63 93.14% 26 -26 -9.52% 18.63 3.40 8.43 1.83% 2.03% 1312 42 2009 10000.00 3373.96 7718.89 2092.97 86213.37 79496.16 6717.21 73835.46 68609.91 2169.44 10383.62 7201.84 3181.78 2802.12 1694.10 92.92% 35 -35 1R:2 9.09% 19.91 2.64 14.28 2.19% 9.38% 1440 52 2010 10000.00 6832.27 10928.40 3154.76 113070.98 100596.13 12474.85 94949.40 93296.65 6012.86 13646.76 9752.98 5893.79 5308.95 3476.01 98.26% 35 -35 -7.10% 18.26 5.35 11.34 3.54% 35.01% 1686 59
2.13 About Islamic bank:

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An Islamic bank is a financial institution that operates with the objective of implementing and materializing the economic and financial principles of Islam in the banking arena. The organization Of Islamic Conference (OIC) defines an Islamic bank as a financial institution whose statutes, rules and procedures expressly state its commitment to the principles of Islamic Shariah and to the banking of the receipt and payment of interest in any of its operations.
2.14 Main condition for Islamic mode of transaction:

The transaction should be Riba (Interest) free The transaction should be Gharar (excessive uncertainly) free Maysir (Gambling) free.
2.15 Superiority of Islamic banks over conventional banks:

SL.NO 01. Conventional Banking Islamic Banking The functions and operating modes The functions and operating modes of are 02. based on is fully manmade based on the principles of Islamic of Shariah. a It promotes risk sharing between provider of capital and user of funds. principles. The investor
assured
predetermined rate of interest.
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03. 04. 05. 06. 07.
It aims at maximizing profit without It also aims at maximizing profit but any restriction. subject to Shariah restriction. Leading money and getting it back Participation in partnership business with compounding interest. is the fundamental function. Borrowing from the money market It must be based on a Shariah is relative easier. A conventional bank has approved underlying transaction. to Guarantee only al-wadiah deposits.
guarantee all its deposit. These banks give greater emphasis These banks give greater emphasis on on credit-worthiness of the clients. the viability of the projects.
2.16 Objective of EXIM Bank as a shariah based Islamic Bank:

To offer an interest free banking system in the financial market. To establish a partnership relationship with customer and eliminate the idea of debtor-creditor of traditional bank. To invest on profit and loss sharing basis; To invest to those business sectors that is found legal from the religious point of view. To accept deposits on profit and loss sharing basis. To contribute towards establishment of an Islamic Economic and Social System in the country.
2.17 Client Commitments of the bank

Founding life-long relationship based on mutual trust and respect. Response to customer needs with quickness and accuracy. Sharing their values and beliefs. Mutual growth. First-rated solutions of the banking problems and issues. Competitive pricing of products and services. Safety and security of their money in trust with Bank.
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2.18 Existing Products & Services of EXIM Bank Limited

(01) Deposit Products Name Al-Wadiah Current A/C (CD) Mudaraba Savings A/C (MSD) Mudaraba Short Term Deposit A/C (MSTD) Mudaraba Term Deposit Receipt A/C (MTDR) Mudaraba Term Deposit Receipt A/C (MTDR) Mudaraba Term Deposit Receipt A/C (MTDR) Mudaraba Term Deposit Receipt A/C (MTDR) Mudaraba Term Deposit Receipt A/C (MTDR) Mudaraba Term Deposit Receipt A/C (MTDR) Mudaraba Super Savings Scheme (MSSS) Mudaraba Multiplus Savings Scheme (MMSS) Mudaraba Monthly Income Scheme (MIS) Mudaraba Monthly Savings Scheme (MSS) Mudaraba Hajj Scheme Tenure ---01 Month 03 Months 06 Months 12 Months 24 Months 36 Months 06 Years 10 Years 03 Years 05-12 Years 05-20 Years Profit Rate (%) -7 3 12 12 12 12 12 12 Double on Maturity Triple on Maturity 12 10.50 --
(02) Investment Products There have several types of investment products are offered by EXIM Bank Limited in our country. These are: Corporate finance Commercial finance Industrial finance Project finance Lease finance Hire purchase finance & Real estate finance.
(3) SME Investment Products There have 4 basic types of SME products are offered by EXIM Bank: Exim Abalamban. Exim Uddyog.
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Exim Buniyad. Exim Kishan.
(4) Plastic Card Products Their have four basic types of plastic cards are offered by EXIM Bank Limited in our country. VISA Islamic Card International & Dual Classic VISA Islamic Card International & Dual Gold VISA Islamic Card Local Classic VISA Islamic Card Local Gold
(05) Remittance Services EXIM Bank Limited provides remittance services through two exchange houses in abroad. These are: EXIM Exchange Company (UK) Ltd. in London, United Kingdom, & EXIM Exchange Company (Canada) Ltd. in Canada. These exchange houses are compliant official money transfer channel to serve NRBs, outside the country. Not only have these, but also the bank also provided remittance services through Western Union Money Transfer, EL DORADO Money Transfer, and Online Banking without charges (06) L/C (Export & Import) Products A letter of credit is an instrument issued by a bank to a customer placing at the letters disposal such agreed sums in foreign currency as stipulated. It is issued against payment of amount by the importer or against satisfactory security. EXIM Bank Ltd. issues several types of L/C like- sight payment credit, deferred payment credit, acceptance credit, negotiation credit, transferable credit, red close credit revolving credit, stand by credit, and so on. 19
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Overall Banking and credit Management procedure of Private commercial banks.
3.1 History of Banking

Bangladesh inherited its banking structure from the British regime and had 49 banks and other financial institutions before the Partition of India in 1947. The Dhaka Bank established in 1806 was the first commercial bank in the Bangladesh region of British India. Later in 1862, the Bengal Bank Purchased the Dhaka Bank and opened its first branch in Dhaka in the same year. There were six other branches of Bengal Bank in operation in the territory of Bangladesh until the Partition of British-India in 1947. Following the emergence of Pakistan in 1947, State Bank of Pakistan, the Central Bank of the country, came into being in July 1948. Pakistanis owned most of these banks and only three of them namely, National Bank of Pakistan, Habib Bank Ltd. and the Australasian Bank Ltd, had one branch of each in East Pakistan in 1949.But all of them had their headquarters in west Pakistan.
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In the beginning of 1971, there were 1130 branches of 12 banks in operation in East Pakistan. The foundation of independent banking system in Bangladesh was laid through the establishment of the Bangladesh Bank in 1972 by the Presidential Order No. 127of 1972 (which took effect on 16th December, 1971). Through the Order, the eastern branch of the former State Bank of Pakistan at Dhaka was renamed as the Bangladesh Bank as a full-fledged office of the central bank of Bangladesh.
3.2 Origin of Bank

Barter System Money Bank. At past, people making transactions by barter system. In this system, they transactions products. If someone has enough rice, but his required fish then he goes to fisherman for collecting fish. On the other hand, fisherman has required rice & they transfer products one to another. By using this system, they were continuing their lives. However, at a time barter system failed due to divisibility. Due to failure this system, people develop money.
This is now the common medium for transactions. For securing money, people establish bank. By which they are maintaining their transactions.
3.3 Definition of Bank:

The Word bank is come from banke German (Banko) Italy and then Bank English. A brief definition "A broader definition A bank is any financial institution that receives collects transfer pays, exchanges, lend invest and safeguard money for its customer. To be a bank must authorized by the central bank. Intact bank is the lifeblood of modern economy. Generally speaking bank is referred to an organization that deals in money. The definition of bank is follow as: 3.3.1 From the bank owners perspectives: Commercial institution like a bank owner main objective is to earn profit through monetary exchanges.
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Banks provide different types of services to the government and people of the country. In order to earn profit through rendering services, bank need to have a lot of good will may be a bit more than other commercial institutions. To earn maximize profits; banks need to provide efficient service for which they require expert workforce.
3.3.2 From the government perspective: The government of different countries to provide its economy with a proper exchange media through banks, which also take upon the duty of maintaining the system. The government wants that bank assist in the macroeconomic objective of capital formation by encouraging people to participate in savings. The government wants to consist in capital investment and industrialization by lending out their accumulated capital. Government tries to stabilize the money market through banks.
3.3.3 From the clients perspective: One of the banks main objectives is to accept its clients deposits. Providing safekeeping of its clients monetary possessions and valuables is another one of banks essential objectives. Both the clients and government oily on the bank to act as their representative or trustees of monetary exchange activities. By providing interests against their deposits banks help their clients to improve their living standards.
3.4 Banking operation in Bangladesh:

The development process of country largely depends upon it economic activities for bringing about socioeconomic changes in a developing country like
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Bangladesh Three different sectors like agriculture, commerce and industry provide the bulk of a countrys wealth. Banks provide both short-term and long-time credit. The customers come from all walks of life from small business a multi-national corporation having its business activities all around the word. The banks have to satisfy the requirement of different customers belonging to different social groups. The banking business has therefore become complex and requires specialized skills. I regardless of the numbers of banks and nature of their functions and activities, a central bank exists to regulate the activities of other banks .All the commercials private and or nationalized and specialized bank perform service related activities within the jurisdiction of the central bank. In our country, Bangladesh the role of the central bank is entitled to be executed by Bangladesh Bank.
3.5 Current Structure of Banks in Bangladesh:

Bangladesh Bank (BB) has been working as the central bank since the country's independence. Its prime jobs include issuing of currency, maintaining foreign exchange reserve and providing transaction facilities of all public monetary matters. BB is also responsible for planning the government's monetary policy and implementing it thereby. The BB has a governing body comprising of nine members with the Governor as its chief. Apart from the head office in Dhaka, it has nine more branches, of which two in Dhaka and one each in Chittagong, Rajshahi, Khulna, Bogra, Sylhet, Rangpur and Barisal. Nationalized Commercial Banks (NCBs): SL. No. Name of Bank
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01. 02. 03. 04.
Sonali Bank Rupali Bank Janata Bank Bangladesh Krishi Bank
Private Commercial Banks (PCBs): SL. No. 01. 02. 03. 04. 05. 06. 07. 08. 09. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. Foreign Banks: SL. No. 01. Name of Bank HSBC Ltd. 25 Name of Bank Pubali Bank Limited Agrani Bank Limited AB Bank Limited EXIM Bank Limited The City Bank Limited IFIC Bank Limited Islami Bank Bangladesh Limited National Bank Limited United Commercial Bank Limited Uttara Bank Limited ICB Islami Bank Limited Eastern Bank Limited Al-Arafah Islami Bank Limited Prime Bank Limited South East Bank Limited Dhaka Bank Limited National Credit & Commerce Bank Limited Social Investment Bank Limited Dutch-Bangla Bank Limited Mutual Trust Bank Limited Standard Bank Limited One Bank Limited Bank Asia Limited Mercantile Bank Limited Jamuna Bank Limited BRAC Bank Limited Shahjalal Islami Bank Limited The Premier Bank Limited The Trust Bank Limited First Security Bank Limited Bangladesh Commerce Bank Limited Al Baraka Bank Bangladesh Limited
02. 03. 04. 05. 06. 07. 08. 09. 10. 11. 12.
Standard Chartered Bank City Bank NA Habib Bank Ltd. National Bank of Pakistan State Bank of India American Express Bank Muslim Commercial Bank Ltd. Shamil Islami Bank of Bahrain EC Standard Chartered Grindlays Bank Credit Agricole Indosuez (The Bank) Hanvit Bank Ltd.
Specialized Development Banks: SL. No. 01. 02. 03. 04. 05. Name of Bank Bangladesh Krishi Bank Rajshahi Krishi Unnayan Bank Bangladesh Shilpa Bank Bangladesh Shilpa Rin Sangstha Bangladesh Small Industries and Commerce (BASIC) Bank Limited
Other Banks: SL. No. 01. 02. 03. 04. Name of Bank Ansar VDP Unnayan Bank Bangladesh Samabai Bank Ltd. (BSBL) Grameen Bank Karmasansthan Bank
3.6 About Credit

Credit is a promise of future payment in kind or in money given in exchange for present money, goods, or services. Or In general credit means the granting of a period of time by a creditor to a debtor at the expiration of which the latter must pay the debt due. 3.6.1 Types of credit: -
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Funded credit: - Monetary credit provided by the bank is called funded credit e.g. cash credit, term loan, Personal loan etc. This type of credit is also called direct credit. Non-funded credit: - Credit where money is not directed provided e.g. Letter of credit, Letter of Guarantee etc. They are also called indirect loan facility or documentary credit.
Another way of loan categorization is continuous loan, Demand loan, fixed loan, term loan and short-term agricultural and micro credit. Continuous loan: - Loan account without any specific repayment schedules, in which transactions can be made within certain limit and have an expiry date for full Adjustment is called continuous loans. Examples are: - CC, OD etc 1. Overdrafts: -OD is usually a temporary arrangement and is granted to the customer having current accounts. It represents permission to overdraw a current up to a sanctioned limit interest is charged only on the amount actually utilized OD Accounts may be unsecured partly secured or fully secured. 2. Cash Credit: -Cash credit arrangement is similar to OD except is so far as OD Can be granted only where a current A/C is in existence cc is depend as daily balance. Interest is charged the daily balance in the A/C. to the service holders to buy car, furniture, computer, etc. The customer needs two guarantors. Mostly this loan has a time period of 2 years to 3 years. Demand Loan: -Loans that becomes repayable on demanded by the bank. Any contingent or any other liabilities turned to forced loans (i.e. without any prior approval as regular loan) will also be treated as demanded loans. Fixed term loan: -The loan, which is repayable within a specific repayment schedule, is called fixed term loan. Short term Agriculture and Micro credit: - Any credit in the Agriculture sector repayable within less then twelve month will also be included herein.
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Hire purchase: -HP is a type of instilment credit under which the borrower agrees to take the goose on live at a stately rental, which is including of the repayment of well as interest for adjustment of the loan within a specified period.
3.7 Credit Management

One of the two primary functions of a commercial bank is to extend credit to the deficit economic unit that comprises borrowers of all types. Which comprises agricultural, commercial and industrial activities of a nation. Therefore, a bank is supposed to distributes loan able fund among economic agent-in-deficit in a manner that it will generate sufficient income for it and at the same time benefit the borrower to overcome his deficit.
3.8 Credit Management and Bangladesh Bank

I have already mentioned that all the banks render services as per the instruction and guidelines of Bangladesh Bank. So I would like to focus a spotlight on Bangladesh Bank especially on the credit management in brief. Bangladesh Bank was established on 16th December 1971 under the Bangladesh Bank (Temporary) order 1971 (subsequently substituted by the Presidential Order No. 127 of 1972). The powers and functions of Bangladesh Bank are governed by the Bangladesh Bank Order 1972 and Banking Companies Act 1991(Act 14 of 1991). The functions of the bank may be classified into two categories(1) Central banking functions and (2) General banking functions. Bangladesh Bank formulates monetary and credit policies for attaining macroeconomic objectives. The main instruments of selective credit control are as follows: o Minimum margins for lending against selected commodities o Client on the levels of credit o Charging of minimum rate of interest on advance against specified commodities.
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Bangladesh Bank controls volume of credit in a quantitative way as to influence the total volume of credit in the following way: Bank rate: The bank rate is the rate of interest at which Bangladesh Bank re-discounts the first bills of exchange from commercial banks. Whenever Bangladesh Bank wants to reduce credit, the bank rate is raised and whenever the volume of the bank credit is to be expanded the bank rate is lowered. Open Market Operation: If Bangladesh Bank buys Government Securities in the market from commercial banks, there is a transfer of cash from Bangladesh Bank to commercial banks and this increases the cash base of the commercial banks enabling them to expand credit and conversely, When Bangladesh Bank sells Government Securities to the commercial banks, reverse is happened. Variable Reserve Requirements: Bangladesh Bank is legally authorized to raise or lower the minimum reserve that the commercial banks must maintain against their total deposit. Present minimum requirement is 4% of total demand and time liabilities. Credit cannot be extended to an unlimited extent because it would disturb price stability in the country, Reporting of CIB of Bangladesh Bank: Irrespective of outstanding amount, the banks have to submit credit information of all of then accounts of loans and advances to the CIB of Bangladesh Bank.
3.9 Category/classification of CIB Statements:

Range Over 1 crore Over 10.00 lac but Under 1.00 crore Under 10.00 lac but over 1.00 lac 3.9.1 Contents of CIB Statements: Period Monthly Quarterly Quarterly
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Name and address of the Account Borrower code Branch Serial Sanction limit Recovery amount Sanction code Expiry date Complaint date Cumulative disbursement Due for recovery amount during reporting period
Period Bank code Nature of Advance outstanding amount Security code Class code Classification date Grade
Overdue amount = Due for recovery Recovered amount Economic purpose code Cumulative recovery, total recovery Guarantee amount 50% of collateral asset Disbursed amount
3.10 Credit Investigation:

(The process selection of borrower for the preparation of credit report) Lending of money to different kinds of borrowers is the most profitable business of the commercial bank and the major source of income. But the fact is this while going on lending; a bank should be careful in selecting a borrower and must give paramount important to it. This may ensure safety of the lending of a bank. 3.10.1 Sources of credit information: Broadly, a banker collects the required information about a prospective borrower from the following sources: Loan application It contains information pertaining to the name of the concern, constitution, place of business, year of establishment, borrowers experience,
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particulars of assets and liabilities, purpose of advance, amount required, period of time, nature of security offered, sources of repayment etc. Market reports - Reports can be obtained from his borrower, friends, rivals or enemies. It is for the lending banker to analyze these reports and form a balanced opinion about the sincerity, honesty, integrity, capacity and financial position of the borrower. Study of account It will throw light on the aspect of keeping up commitments, and if the cheques were never bounced that will give an impression. Also requested to show the other banks relative passbook or statement of accounts so that all accounts can be studied side by side. Financial statement etc - The borrower should be requested to supply the latest statement in regard to his assets and liabilities, income tax statement &VAT payment document will give an idea about the sales. Other sources - Other sources include press reports regarding purchase and sales of property, auctions and decrees. Registration, revenue and municipal records with advantage to verify the properties. Personal Interview-The banker should be able to know from the interview the customers specific requirements, the prospects of his employing the funds prudently, his capacity to repay and the suitability of the security offered.
3.11 Credit Monitoring, Follow-Up and Supervision:

The other and equally important responsibility of the lending banker is to follow up and supervise the use of the credit. The two terms supervision and follow up are closely related.According to prominent writer of books on banking these are explained as follows: 1) Supervision gives more emphasis on proper end use. Supervision keeps track of the end use of fund lent. It includes adequate arrangement by banks for maintaining close contact with the borrower and his activities in order to remain well informed about the position and progress of the purpose financed and offers appropriate guidance to the borrower where necessary. 31
2) Follow up includes efforts to ensure that the terms and conditions of the advances at pre-disbursement, disbursement, post disbursement and recovery stages are complied with and money lent is repaid as per schedule of repayment. It also includes efforts to regularize the irregular advances. Recovery of advances largely depends on the effective follow up. Credit monitoring implies that the checking of the pattern of use of the disbursed fund to ensure whether it is used for the right purpose or not. The credit officer checks on the points: a) The borrowers behavior of turnover b) The information regarding the profitability, liquidity, cash flow situation and trend in sales in maintaining various ratios.
3.12 Risk Asset Management (RAM):

Contingent liabilities such as letters of credit and letter of guarantees must be treated from a credit approval point of view as having the same credit exposure as funds based assets. The purpose of RAM is for effective Risk Asset Planning and administration. RAM helps in the containment of credit losses and improves profitability of the bank through some steps-
i. Planning: The bank officer should consider risk inherent in each market; criteria to define characteristics of an acceptable customer. The bank will define the terms of acceptances of Risk to target market Bank will evaluate the clients needs. Here the bank will also try to know clients business and its environment. ii) Initiation: The bank encourages negotiation with prospective clients. While negotiation the officer should bear in mind both customer situation and the terms of acceptance for the target market.
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Facility application package i.e. credit memo should include full background/ financial information, analysis of historical trend, prospects, anticipated profitability vis--vis whether fund based or non-funds and/ or exchange business. Any exception must be listed for approval by appropriate authority.
iii) Documentation and Disbursement: The credit officer is suggested to identify any particular documents required for each facility. The officer is also required to enlist outside legal assistance where necessary e.g. when drawing up special term loan agreements etc. The credit officer should go through the various items of documentation, which are required to certify in the credit. iv) Administration: The branch should continue a close monitoring of the loan account. The branch should maintain contact with the customer in a regular basis to be knowledge about the client, his current activity, his business expansion and/or diversification plans etc. Security requirements should be update as per the requirements arisen.
3.13 Recent Development:

As all the schedule banks like as NCBs and other commercial banks have been experiencing a heavy toll for their classified loans and advances and investments, Bangladesh has taken various strict initiative in this regard which have resulted in the following recent developmentThe central bank is planning stringent regulation for banks next year to further minimize default loan. Central bank sources said that the volume of classified loans came down to 12 percent, hoping the classified loans to come down below 10 percent in the next year Bangladesh Bank may increase the capital adequacy ratio for the commercial banks and reduce the loan limit for individual borrowers to encourage banks to go for 33
more syndicate loans that has less risk. International best practices require that a loan be classified as non-performing if its principal and/ or interest is three months or more in arrears. Bangladesh Bank is allowed to classify non-performing loans based on a time frame of six months. In order to strengthen credit discipline and bring classification in line with international standards, this circular makes following adjustments: A continuous credit demand loan or a loan which will remain overdue for a period of 90 days or more will be put into Special Mention Account and interest accrued on such loan will be credited to interest suspense. Account instead of crediting the same to the income account. This will help banks to look at accounts with potential problems in a focused manner and it will capture early warning signals for accounts showing first signs of weakness. Loans in the Special Mention Account will not be treated, as defaulted loan for the purpose of section 27 ka (3) of the Banking Companies Act, 1991 and the status of loan (Special Mention) need not to be reported to the Credit Information Bureau (CIB) of Bangladesh Bank.
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Overall Investment Activities the EXIM Bank Ltd.
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As export import Bank of Bangladesh Ltd. Is shariah based Islamic bank, so it uses the term investment instead of credit & loan. The term investment is uses by other commercial bank credit &loan. Although it is shariah based Islamic bank but EXIM bank always following the rules and regulations of Bangladesh Bank for sanctioning the loan and credit as term investment.
4.1 Introduction: Export Import Bank of Bangladesh Limited is a new generation Bank. It is committed to provide high quality financial services/products to contribute to the growth of GDP of the country through stimulating trade and commerce, accelerating the pace of industrialization, boosting up export, creating employment opportunity for the educated youth, poverty alleviation, raising standard of living of limited income group and over all sustainable socio-economic development of the country. To provide a board guide line for the investment operation towards achieving the objectives of the bank, for efficient and profitable deployment of its mobilized resources and to administer the investment portfolio in the most efficient way, a clearly defined, well planned comprehensive and appropriate policy and control guidelines of the bank is a prerequisite.
4.2 About Investment: Investment means to layout of money or fund provided for a legal purpose for a certain period with a risk of profit or loss. In Islamic banking investment means utilization of fund or deployment of fund for a special legal purpose on profit/loss sharing basis for a certain period. Islamic banking as per shariah deals with goods and services, not money. Shariah law prohibited speculative trading that involves risk and uncertainty. Shariah also forbade investing in haram business such as gambling, alcohol etc.
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4.2.1 Functions of the Investment Department: Before a customer enjoys investments facilities it is important that the applicant should qualify for five Cs. The five Cs are: Character Intention to pay back the loan Capacity Borrowers competence in terms of utilizing the fund profitably and generate income Capital Financial strength to cover the risk Conditions General business condition between two parties Collateral Implies additional securities 4.2.2 Investment Sector: The guidelines contained general principles that are designed for implementation by the bank. The bank shall provide suitable investment services and products for the following sectorSteel and engineering Agriculture Service industries Bricks fields Construction Company Assembling industry Electronics and electrical commodities Others Food and allied Textile and garments Housing and real estate Cottage industry Trading (retail/whole sale) Pharmaceuticals and chemicals Construction Company
4.3 Investment categoriesInvestment have primarily been divided into two major groups4.3.1 Izara bill baia (fixed term investment): These are investments made by the bank with fixed repayment schedules. The term investments are defined as follows:
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Short term Medium term Long term a) Agriculture:
: : :
up to 12 months more than 12 and up to 36 months more than 36 months
Investment facilities to the agricultural sector falls under this category. It is subdivided into two major heads: Investments to primary producers: Financing investment facilities allowed to production units engaged in farming (EXIM kishan), fishing, forestry or livestock. Investment to dealers/distributors: It refers to the fincing allowed to input dealers and (or) distributors in the agricultural sectors. As such, it may fall under the head Izara Bill baia/lzara bill baia (hp)/lzara (lf). b) lzara bill baia for large & medium scale industry: This investments accommodate the medium and long term financing for capital structure formation of new industries who are engaged in manufacturing goods and services c) Izara bill bhaia to small &cottage industries: These investment allowed to small &cottage manufacturing industries such as land, building, machinery and equipment (excluding taxes and duties) does not exceed 30million taka and investment in machinery and equipment (excluding takes and duties) dose not exceed 10 million taka. No short term or continuing investment is to be included in this category. d. Working capital: investment allowed to the manufacturing units to meet their working capital requirements, irrespective of their size-big, medium or small. 4.3.2 Bai-muazzal (continuing investment): These are investment having no fixed repayment schedule, but have an expiry date at which it is renewable on satisfactory performance. This investment also called Cash Credit (BAIM/HYPO). Another are
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a. Investment on export: Investment facilities allowed to facilities export of all times against letter of credit and confirmed export orders fall under this category. It is accommodated under the heads-musharakr pre-shipment (ECC), musharakr pre-shipment (PC), foreign documentary bills purchased (FDBP), local documentary bill purchased (LDBP) etc. b. Commercial lending: Short term and continuing investment allowed for commercial purposes other than exports. it includes import financing for internal trade,service establishment etc. this category are allowed-murabaha post import(MPI),murabah import bills(MIB),bai-muazzal,izara bill baia,etc. c. Others: Any investment that does not fall in any above category is considered others.it include-transport equipments, construction works including housing(commercial/residencial),work order financing,personal investment,etc.
4.4 Investment facilities

Depending on the various nature of financing, all the lending activities brought under the following major heads Izara bill baia (general): short term, medium term, long-term investment allowed individual/firm/industries for a specific purpose but for a definite period and generally repayable by installments. Izara bill baia (HB): investment allowed to individual/enterprises for construction of house (commercial). The amount is repayable by monthly installment with a specific period. Izara bill baia (staff HB): investment allowed to the banks own employees for purchase/construction of house shall be know as investment (staff HB). Bai-muazzal: investment allowed to individual/firm for trading as well as wholesale purpose or to industries to meet up the working capital requirements against hypothecation of goods as primary security. it is allowed under the categoriescommercial lending when the customer is other than a industry working capital when the customer is an industry
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Murabaha: Financial accommodation to individual, firm, wholesale or to industries as working capital against pledge of goods as primary security. it is also a continuous investment.
Musharaka (partnership) : The bank and customer contribute capital jointly for marginal expertise and other essential service at agreed proportion.profit will also be distribute as per contract.
Izara bill baia (HP): izara bill baia(HP) is a type of installment investment under which the purchaser agrees to take the goods on hire at a stated rental, which is inclusive of the repayment of principal as well as profit for adjustment of the investment within a specific period.
Izara (LF): a client is given the opportunity to have an exclusive right to use an asset usually for an agreed period of time against payment of rent.it is term financing repayable by installment.
Household durable scheme (HDS): The investment are allowed on soft terms against personal guarantee and deposit of specified of equity by the customers. The investment is repayable by month installment within a fixed period.
Bai-muazzal(GENERAL/FO): Investment allowed to individual/firms against financial obligation ( i.e. lien on MTDR/PSP/BSP/Insurance policy/Share etc.) This may not be a continuous investment.
Bai muazzal (wo): investment allowed against assignment of work order for execution of contractual work. This investment is generally allowed for a definite period and specific purpose .i.e it is not a continuous investment.
Bai-muazzal(export): investment allowed for purchasing foreign currency for payment against L/Cs (back to back)where the export do not materialize before the date of import payment .this is also an investment for temporary period
Trust receipt (TR): investment allowed for retirement of shipping and release of imported through L/C.the goods are handed over to the importer. This also a temporary investment.
Foreign documentary bill payment (FDBP): payment to a customer through negotiation of a foreign documentary bill payment for temporary investment.
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Local export bill payment (LDBP): payment made against documents representing sell of goods to local export oriented industries. This temporary liability is adjustable from proceeds of the bill.
4.5 The Process of giving investment4.5.1 Investment Account Opening and Activation: Using the Investment Advance Module opens a new Investment Account for a specific SME Investment application and links the Customer ID No. Before fund Disbursement checks whether the voucher for fee received from the respective unit office and payment voucher from clients link account for Investment processing fee, documentation fee along with VAT and data verification charges against the Investment are received with the Investment application. The Investment applicants also pay Insurance Premium along with other fees. Client ID is created and details customer information is filled in client information module. Repeat applicants have the same client ID but a new Loan Account number. After the client ID creation, a list of clients is created where the following information are entered: Client ID Name of the business Accounts information (Branch, A/C No.) Approved Loan amount Unit Office & CRO information Disbursement date (As per the Loan application) The senior officers check this file and after loan account activation, disbursement is made to clients link account, which is mentioned in loan application. 4.5.2 Investment Sanction Activities: The respective unit office sanctions Investment to the clients if it is between 2 & 5 lacs and then sends the sanction letter including all necessary charge documents to the asset operation division for disbursement. If the amount is higher than 5 lacs then the respective unit office sends the proposal to SME head office for sanction.
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Bank shall not ordinarily go for any investment facilities for long-term basis. Short term Medium term Long term : : : up to 12 months more than 12 and up to 36 months more than 36 months
Select potential enterprise: In this step the officer conduct a survey and identify potential enterprise. Then they communicate with entrepreneurs and discuss the loan program. Collect confidential information: The sources of information are suppliers regarding the clients payment, customers regarding the delivery of goods of services according to order, various banks where the client has account which shows the banks transactions nature of the client. Fill up CIB form: CIB form gives to the client for fill up and sign in it. In some case if the client is illiterate then the CRO fill the form on behalf of the client. Then send to the SME, head office. Sending CIB to Bangladesh Bank: The SME, head office collects all information and sends the CIB form to Bangladesh Bank for clearance. Bangladesh Bank return this CIB form within 10-12 days with reference no. CIB report from Bangladesh Bank: In the CIB report Bangladesh Bank uses any of the following reference no: 1. NIL: if the client has no loan facility in any bank or any financial institution then BB (Bangladesh Bank) use NIL in the report 2. UC (Unclassified): if the client has any loan facility in any bank or financial institution and if the installment due 0 to 5.99 then BB use UC in the report 3. SS (Substandard): if the client has any loan facility in any bank or financial institution and if the installment due 6 to 11.99 then BB use SS in the report.
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4. DF (Doubtful): if the client has any loan facility in any bank or financial institution and if the installment due 12 to 17.99 then BB use DF in the report 5. BL (Bad lose): if the client has any loan facility in any bank or financial institution and if the installments due for more than 18 or above months then BB use BL in the report. This report indicates that the client is defaulter and the bank should not provide loan the client. 4.5.3 CIB Obtaining Process: Credit Information Bureau (CIB) of Bangladesh bank has a central database for all the lenders of Bangladesh. It contains the total credit history of a client and act as the most dependable source to analyze the credit worthiness of a prospective client. To obtain a CIB report, AOD fills up the following Bangladesh bank prescribed forms for each loan applicationInquiry Form: CIB 1A: For each individual/ institution Inquiry Form: CIB 2A: Owner information if borrower is institution Inquiry Form: CIB 3A: Group/ related business information of borrower CIB Undertaking form KA: For each individual/proprietor/director/partner. After receiving the reports from BB, prepares a summary of the report and put that as reference in the loan file along with the photocopy of the CIB inquiry forms, undertaking and copy of the original CIB report. 4.5.4 Investment Risk Management: Investment proposal should summaries the results of the risk assessment and include, as a minimum, the following details: Amount and type of investment(s) proposed. Purpose of investments. Investments Structure Security Arrangements
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In addition, the following risk areas should be addressed: Borrower Analysis: Any issues regarding lack of management depth. Complicated ownership structure or inter group transaction should be addressed and risk mitigated. Industry Analysis: Any issues regarding the borrowers position in the industry, competitive forces and the strengths and weaknesses of the borrower relative to its competition should be identified. Historical Financial Analysis: An analysis of a minimum of 3 years historical financial statement should address the quality and sustainability of earnings, cash flow and the strength of the borrowers balance sheet. Project Financial Performance: where term facilities (tenor>1 year) are being proposed indicating an analysis of the sufficiency of cash flow to service debt repayments. It may not be granted if cash flow is insufficient. Accounts Conduct: For existing borrowers, the historic performance in meeting repayment obligations (Trade payments, cheques profit and principal payments etc.) should be assessed. Investment structure: The amount and tenors of financing proposed should be justified based on the projected repayment ability and investment purpose. Security: A current valuation of collateral should be obtained and the quality and priority or security being proposed and insurance coverage should assess. Bank Guarantee: Bank guarantee is nothing but giving a guarantee (commitment) to a certain organization by a bank on behalf of its client stating that if the client of the bank fails to perform certain contractual obligation, the bank will settle the liability of the client to that organization (beneficiary).
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4.6 Approval Authority:

The responsibilities for investment policy, procedure, approval & review shall vest amongst the following groupsBoard of directors Executive committee of the board Managing director Head of investment, head office Head office investment committee Branch marketing and investment committee
This policy is adopted with the view to minimize the risk by screening the proposal at the approval stage. The following guidelines are to be applied in the approval/sanctioning investment Must be delegated in writing from the MD and Board and records of all delegation to be retained in IRM Before sanctioning any facility must be ensured that the borrowers CIB report is updated and clean Approval evidence made in writing, or by electronic signature& must be kept in the investment file Any proposal that does not comply with lending guidelines, regardless of amount, should be referred to head office for approval. Delegated approval authority should review annually by MD/CEO/Board.
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4.7 Security:
All assets must be covered under proper insurance risk with enlisted insurance companies. Insurance coverage outside enlisted companies is discouraged. it may be two types Primary: Hypothecation/mortgage on fixed and floating assets of the business. Collateral: For small entrepreneur: if the project is situated own land, mortgage of the land along with guarantee of (with net worth statement) 02 reputed local persons (acceptable to the bank). If project is situated on rental or leased property, security may be asked for on the basis of nature/status of the investment proposal. For medium and large entrepreneur: satisfactory security should be provided to cover the investment. The security that may be acceptable to the Bank Wage earners bond A category share Easily saleable & price stability L/C & guarantee Inventory Other values as considered deem it.
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4.8 Documentation All approval procedures and required documentation shall be completed and all securities shall be in place, prior to the disbursement of the facilities. General documentation, as required for different kinds of investment is enumerated belowDemand promissory note (the borrower promises to pay the loan as and when demand by bank to repay the loan) Letter of partnership (in case of partnership concerns) or resolution of the board of directors (in case of limited companies) Letter of arrangement Letter of continuity Letter of lien (in case of investment against MTDR) Letter of pledge (in case of pledge of goods) Letter of hypothecation (in case of hypothecation of goods) Trust receipts (for TR facility) Legal documents for mortgage property (as drafted by legal adviser) Copy of sanction letter mentioning details of terms &condition duly acknowledge by the borrower Letter of guarantee of all directors (in case of limited companies) Stock Report This report is report is used for OD and CC regarding the quality and quantity of goods hypothecated is furnished. Balance Confirmation Letter of disbursement.
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4.9 Processing of investment proposal Investment proposal shall be prepared in the approved format of the bank enclosing/furnishing documents/papers/informationPre-sanction inspection report containing KYC Project profile of business Copy of trade license dully attested Copy of Tin certificate Certified copy of memorandum and articles of association, incorporation, commencement of business, resolution of board of directors, partnership deed (where applicable) Personal net worth statement of the owner/director/partner. Valuation certificate with photograph of collateral security duly authenticated by the branch manager Three (03) years balance sheet, profit and loss A/C CIB enquiry from duly filled in Credit report from other bank Stock report duly verified Financial analysis to be prepared by the branch manager based on the financial performance and show trend in sales/profitability, liquidity, leverage etc. Justification/consideration for the facility.
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4.10 Pre Disbursement Activities -Money receipt (Risk fund) -Sanction letter -Demand promising note (With stamp of Tk 20/= -Letter of arrangement (With stamp of Tk 150/=) -General investment agreement (With stamp of Tk 150/=) -Letter of undertaken (With stamp of Tk 150/=) -Letter of stocks and goods (With stamp of Tk 150/=) -Letter of hypothecation book debt and receivable (With stamp of Tk 150/=) -Letter of disbursement -Photocopy of trade license (attested by Manager) -Insurance (Original copy) -Blank cheque with signature (one cheque for full amount and others same as no of installment on Favor of EXIM Bank, no date, no amount) -Two guarantors (one must be Spouse/parents) -If the investment provide for purchase of fixed assets or machineries and if the investment amount is over Tk 50,000/= then the stamp of a certain amount is require.
4.11 Disbursement:
Disbursement fund starts after documentation is completed and in line with the terms and condition of investment as well as the stage of the progress mode.
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4.12 Account treatment of various investments:
4.12.1 initiation stage a) Investment A/C of Mr.x . Dr. a) Current A/C No of Mr.x . Cr. 4.12.2 Adjustment stage a) Cash/ Current A/C No of Mr.x Dr. b) Investment A/C of Mr.x ...Cr. (Entire amount of net income including the principal shall be credited to and actual profit/loss shall be reflected therein) 4.12.3 Appropriation of profit a) Investment A/C of Mr.x . Dr. b) Income A/C of investmentCr. (Being banks share of profit) c) Current A/C No of Mr.x . Cr. (Being partys share of profit) 4.12.4 Appropriation of loss in 1st deal a) Investment (2nd deal) A/C of Mr.x Dr. (Being the amount of loss transferred from investment A/C No. Of the party) b) Investment (1st deal) A/C of Mr.x . Cr. (Being the amount of loss transferred to new investment A/C No. Of the party)
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4.12.5 Appropriation of loss in 2nd deal a) Income A/C of investmentDr. b) Investment A/C of Mr.x Cr.
4.13 INVESTMENT RISK GRADING The Risk Grade assigned to a borrower and its facilities should be immediately changed. Borrower Risk Grades should be clearly stated on investment proposal. Grade-1 Superior low risk = Fully cash covered, Govt./Int.guarantee Grade-2 Good satisfactory risk = Strong Repayment Capacity Grade-3 Acceptable faire risk = Consistent Earnings, Cash flow and Good Track Record. Grade-4 Marginal-watch list = Greater Attention Required Above Average Risk. Grade-5 Special Mention = Potential Weakness- Close attention required. Grade-6 substandard = Weak financial condition Grade-7 doubtful and bad (non-performing) = Repayment Unlikely Grade-8 Bad & Loss = no progress in obtaining repayment/on the verge of windup.
4.14 Investment monitoring management:

Oversight of the banks asset quality Directly manage all substandard, doubtful &bad loss accounts to maximize recovering and ensure that appropriate and timely investment loss provisions have been made. To ensure that all security documentation complies with the terms of approval and is enforceable To control investment disbursement only after all terms and conditions of approval have been met.
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To monitor borrower compliance with convenient and agreed terms and conditions, and general monitoring of account conduct/performance.
4.15 Non-performing investment:

An investment is said to be Non-performing when regular repayment is not made as per schedule of repayment, improper documentation leads to non-repayment and when value of security falls down/security become obsolete or security available does not patch the investment outstanding.
4.16 Procedure for recovery of Non-performing investment:

Contracting the investment client in writing and meeting personally- In case repayment as per schedule does not come manager shall personally enquire of nonrepayment. If necessary he will utilize the influence of the local elites to insist the investment client. Sending Resume of investment to head Office-the manager will send the resume of the client to the head office including investment, security, irregularities occurred for taking suggesting of future action. Issuance of Registered Notice- If persuasion does not bring any fruitful result he will issue a final registered demand notice for repay within 15 days time from the date of issue. Legal Notice to be issued- If the investment client does not come forward to repay within a reasonable period, legal notice is to be served through panel lawyer of the bank with copy endorsed to head office. The reaction of legal notice is also send to the head office. Suit to be filled- If filling of suit is allowed by head office the same should be filled against the debtor/client concerned and the guarantor if any under civil procedure code 9 for specific performance to be deemed as breach of contract.In case the investment is not 52
by collateral security suit is to be filed with attachment of asset before judgement.on the other hand if the investment is secured by mortgage property title suit to be filed. The copy of plinth as well as copy of written statement submitted to head office for record.
4.18 Write off

When all the avenues of recovery of a debt stands exhausted, or had to be abandoned for genuine reasons, the question of writing off a debt arises. Branches to approach head office for such writing off, reasonably establishing no other avenue are left to recover the dues.
4.19 Rate of Profit for investments

For Retail/consumer/personal investment = 15% to 17% For continues/cash credit (BAIM HYPO) = 13% to 17%
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Analysis of performance
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Table & Graph (a): Showing the Performance at this Branch FY: 20009-2010
(Amount in lac Tk.)

Year 2009 2010 Total Deposit 167.64 195.19 50.10 53.55 Total investment 12.05 11.40 Total Expenditure Total Total Income 14.33 16.10 Profit 2.28 4.70 Amount in Lac Tk.
200 150 100 50 0 2009 2010 Total Deposit Total Investment Total Expenditure Total Income Total Profit
Figure: Showing the Total Performance of EXIM Bank FY 2009-2010 In this graph shows that overall performance of this branch. In 2009, income was Tk.14, 33,000 and expenditure Tk 12,05,000 and the end of the year branch was earned profit Tk.2, 28,000.In 2010,income and expenditure both are increased but the profit was increased double Tk.4, 70,000 than 2009.The client response also increased in investment and deposit from 2009 to 2010.
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Table & Graph (b): Showing the various investment at this Branch FY: 20009-2010
(Amount in lack Tk.)

Year 2009 2010 BaiMuajjai (CC) 20.80 21.10 BaiMuajjai (FIN.OBL) 17.30 16.90 Bai-Muajjai (W.C) 2.40 1.90 IBB (HB) 2.85 3.20 EXIM (Kishan) 6.75 10.45 Amount in Lac Tk.
25 20 15 10 5 0 Bai-Muajjal (CCH) Bai-Muajjal (FIN. Bai-Muajjal (WO) OBL) IBB (HB) EXIM (Kishan) 2009 2010
Figure: Showing the various investments at this Branch FY: 20009-2010 This branch provides various type of investment for their client. But from the above chart we see that, it more focus on Bai-Muajjai (CC) and EXIM (Kishan). As it is a rural branch so, EXIM (Kishan) investment is more popular and at the end of 2009, total investment amounted to Tk. 06,75,000 compared to the Tk. 10,45,000 in 2010 than other investment. 56
Table & Graph (c): Showing the investment activities at this Branch FY: 20009-2010
(Amount in lac Tk.)

Year 2009 2010 Disbursement 50.09 53.55 Recovery 45.85 48.65 Outstanding 26.99 31.89
(Amount in lac Tk.) 60 50 40 30 20 10 0 2009 2010 Disbursement Recovery Outstanding
Figure: Showing the investment activities at this Branch FY: 20009-2010 From the above chart we see that the investment activities of this branch in last two years. In the year 2009,branch disbursed Tk.50, 09,000 and the end of the year investment department recovered 45,65,000 but outstanding is more due to include of (previous year outstanding + current year Disbursement - current year recovery). This situation occurred when a client take a investment from this branch and he can not payment his full amount in the end of the year but the beginning of new year that client take another investment from this branch. For these situation outstanding is increased from 2009 to 2010. 57
Table & Graph (d): Showing the various deposit at this Branch FY: 20009-2010
(Amount in lac Tk.)

Year 2009 2010 Current deposit 4.23 5.10 Saving deposit 32.08 40.90 Short-term deposit 7.47 9.05 Fixed deposit 85.08 92.85 Deposit under scheme 38.78 47.29
(Amount in lac Tk.)

100 90 80 70 60 50 40 30 20 10 0 85.08 7.47 38.78 32.08 Current Deposit Savings Deposit Short-termDeposit Fixed Deposit Deposit Under Schem e 4.23
Figure: Showing the various deposit at this Branch FY: 20009-2010 In figure we see that this branch has a very good position of their various deposit account due to better profit rate. From 2009 to 2010 fixed deposit and deposit under scheme increased rapidly than other. It means that, the branch is now receiving more deposit from its customers than that of any preceding years.
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Problem and SWOT analysis
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Problems in Investments
Prerequisite of any loan, CIB result often consume time sometimes it takes more than a month that is the initial barrier for loan processing. As per Bangladesh bank guidelines and banking acts there should be separate marketing, monitoring, and recovery, disbursement division. But in this branch there is no such kind of segregation. There is not so much diversification in investment portfolio. The branch is only focusing on trading business. Investment Officers do not visit site to assess the customer location and the condition of the property stock Without informing the bank, borrowers change their existing business. While borrowers taking investment sometimes provide false securities, colletarals. Sometimes, borrowers financial condition have changed but the officers does not properly examine all that things. The process of investment proceeds takes more than a month which some times makes the borrower helpless to get the investment on due time. When borrowers show the income statement, balance sheet of their current business but most of the time all the information is not correct. For which it becomes difficult to measure their financial position & bank have to face problems.
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The acronym for SWOT stands for: STRENGTH WEAKNESS OPPORTUNITY THREAT The SWOT analysis comprises of the organizations internal strength and weaknesses and external opportunities and threats. SWOT analysis gives an organization an insight of what they can do in future and how they can compete with their existing competitors. This tool is very important to identify the current position of the organization relative to others.
STRENGTH
Banking Experience of 12 years provides EXIM Bank Ltd the strength of being one of the market leaders in the sector as the long-term success of a bank heavily depends on its reputation while dealing with every sensitive commodity like money. EXIM Bank Ltd focus strongly on remittance business and with that aim they opened rural branches where remittance business concentrates.
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In Bangladesh EXIM Bank Ltd has wide range of customer base and is operating efficiently in this country. EXIM Bank Ltd has a bulk of qualified, experienced and dedicated human resources. Strong network throughout the country.
Installation and use of highly sophisticated system enables the Bank to have on time communication with all branches. Online banking gave this bank a better position among private banks. All the branches are computerized. Having goodwill in the banking sector.
WEAKNESS
EXIM Bank Ltd has fewer branches than their competitors. Such as EXIM Bank Ltd have only 62 branches whereas Uttara Bank Limited has 205 branches and 12 regional offices. EXIM Bank Ltd does not provide any ATM facility to the customers. This is one of the major weaknesses of EXIM Bank Ltd. Some lengthy papers work and documentation for investment. Lesser investment products in comparison to other Islamic bank.
OPPORTUNITY
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The activity in the secondary financial market has direct impact on the primary financial market. Investment is a national socio economic activity. And activity in the national economy controls the bank. EXIM Bank Ltd is now focusing on lending to SME and Retail sector. The bank is not only providing investment but also decided to popularize the SME sector by participating in various trade shows organized in the country. Government full support to banking sector will facilitate the long-term vision of EXIM Bank Ltd. Prospect of divers banking product and branch network E banking gets priorities. Banking on profit and loss sharing. Local demand oriented deposit and investment product. Prospect of SMEs and Agro based investment. Experienced top and mid level management. Large number of people earning foreign exchange within and outside the country (RMG sector and NRBs)
THREAT
Increased competition with existing and upcoming banking business is also another threat to EXIM Bank Ltd. The central bank exercises strict control over all banking activities in local banks like EXIM Bank Ltd. Sometimes these restrictions impose barriers in the normal operations and policies of the bank. Competitors can easily copy the product offering of EXIM Bank Ltd.Therefore the bank is in continuous of product innovation to gain temporary advantage over its rivals. Cost of client satisfaction as well as banks performance.
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Frequent change in govt. policy.
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Conclusion and recommendation
Conclusio n
The last 3 months was quite intriguing to do my internship at EXIM Bank Limited, fenchugonj Branch, sylhet. This three months internship orientation with EXIM Bank Ltd. undoubtedly will help me a lot to understand and cope with any future typical corporate culture. The study of the report refers to the fact that people are aware of Investment facilities in our country but they are not fully aware of the services or features of the Investment process and its rules and regulations especially in case of individual or consumer loans. From the study it seems that EXIM Bank focuses on the corporate sectors for the Investment facility. In case of consumer loans there are lots of restrictions created by the bank. But for the benefit of the bank also provide investment in agricultural and small & cottage enterprise (SME) and always department of investment officers monitor their client for the best return. The reason is that both sector is very risky and uncertain and depends on natural climate. Best return from short-term investment is very good and also proves to be very safe to finance. Investment Division of EXIM Bank has a very qualified and dedicated group of officers and staffs who are always trying to provide the best service to the clients. Before
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providing the Investment they analyze whether the Investment will be profitable and whether the client is good enough to repay the loan within the given period of time. The EXIM Bank philosophy Together towards Tomorrow to be upheld always for its successes. Here, all the employees are very much cooperative with their customers, colleagues and simply visitors. I do believe that these will assist me in my banking career. I wish EXIM Bank and everybody therein zenith success.
RECOMMENDATION
The motto of EXIM bank is together towards tomorrow. This says that EXIM is in the business for increasing the financial ability of the customer and for positive upward change in the overall social economic conditions. But the thing is that like other local bank this bank cannot gain enough profit. Obviously there are some reasons behind this. To overcome these problems I have tried to search following points: To set up attractive signboard at visible place(s). Emphasis may be given for local requirement of personnel for rapid business development. As other banks, granting of stipend to internees would add to EXIM image Corporate social responsibility (CRS) activities through EXIM foundation to be intensified especially in the field of education, healthcare, employment generation. Close monitoring and end-use of investment to the furthered. Continues updating of software Complain of the customer should be decreased on zero level To create better client the bank should increase the amount of consumer investment in a short-term basis.
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As we see that, Media coverage of EXIM Bank Ltd is not so strong. To attract new clients, they should go to mass media coverage. Improve and maintain a consistent relationship with customers, especially retailing. Even though EXIM Bank Ltd is running online business very successfully they should open more ATM booths to meet customer needs and to meet the competitions.
Reference:
General banking Manual of EXIM Bank Limited. Annual Report of the Bank-2009-2010 Daily Statement of Affairs of Fenchugonj, Branch. Several Booklets from EXIM Bank. Several Newsletters from EXIM Bank. www.eximbankbd.Com EXIM Bank Limited prospectus. Web page of EXIM Bank limited Their regular circulars Bangladesh Bank Credit Policy Office files Working papers Annual Reports of other Banks CSE and DSE Listings
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ABBREVIATION
EXIM Bank Ltd = Export Import Bank of Bangladesh Limited
HO BTB CIB SWIFT BB L/C ROA BBA EOD LBC OBC VAT CC OD NCB
= Head Office = Back to Back = Credit Information Bureau. = Society for Worldwide Inter-bank Financial Telecommunication = Bangladesh Bank. = Letter of Credit. = Return on Asset = Bachelor of Business Administration = End of the day = Local Bill Collection = Outward Bill Collection = Value Added Tax = Cash Credit = Overdraft = Nationalized Commercial Banks 68
IT LDBP FDBP RU KYC MD FSV FY ATM
= Information Technology = Local export bill payment = Foreign documentary bill payment = Recovery Unit = Know Your customer = Managing Director = Force Sale Value = Fiscal Year = Automatic Teller Machine
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Modes of Investment in EXIM Bank Ltd.

Procedure, problem and recommendation

Introduction of the report

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

1.1 Origin of the report:

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

1.3 Objective of the report:

1.4 Scope of the report:

1.5 Rationale of the study:

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

1.6 Methodology of the report:

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

1.7 Potential problems of this report:

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

Organizational overview of the EXIM Bank Ltd.

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

Export Import Bank of Bangladesh Limited

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

2.2 Key Statistics

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

2.5 Core Values:

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

2.7 Corporate Social Responsibility

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

2.8 Business Areas Of EXIM Bank Ltd:

2.9 Board of Directors:

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

2.10 Shariah Council

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

2.11 Organizational Hierarchy:

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

2.12 Highlights on the Overall Activities As at 31st December 2010

2.13 About Islamic bank:

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

2.14 Main condition for Islamic mode of transaction:

2.15 Superiority of Islamic banks over conventional banks:

predetermined rate of interest.

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

03. 04. 05. 06. 07.

2.16 Objective of EXIM Bank as a shariah based Islamic Bank:

2.17 Client Commitments of the bank

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

2.18 Existing Products & Services of EXIM Bank Limited

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

Exim Buniyad. Exim Kishan.

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

Overall Banking and credit Management procedure of Private commercial banks.

3.1 History of Banking

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

3.2 Origin of Bank

3.3 Definition of Bank:

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

3.4 Banking operation in Bangladesh:

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

3.5 Current Structure of Banks in Bangladesh:

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

01. 02. 03. 04.

Sonali Bank Rupali Bank Janata Bank Bangladesh Krishi Bank

Modes of Investment in EXIM Bank Ltd. Procedure, problem and recommendation

3.6 About Credit