Chapter 1: An Overview
As a mandatory requirement of the Masters of the Business Administration (MBA) program under Asian University, this report entitled – “HSBC Consumer Product, Credit Operation & Collection Procedure in Bangladesh” – is a connived depiction of the three months long internship program at Personal Financial Services – Consumer Credit Risk (PFS CCR) in The Hongkong and Shanghai Banking Corporation Ltd.
The organization attachment started on February 15, 2000 and finished on April 15, 2000. My organization supervisor Mr. Kamruzzaman Mamun (Credit Manager, Personal Financial Services, Anchor Tower, HSBC) assigned me the topic of the term paper & my institution supervisor at Asian University Mr. Sirker, duly approved it.
The purposes of this report cognates the internship purpose. The internship objective is to gather practical knowledge and experiencing the corporate working environment with the close approximation to the business firm and the experts who are leading and making strategic decisions to enhance the growth of a financial institution. To this regard this report is contemplating the knowledge and experience accumulated from internship program. With the set guidelines and proposal by the Asian University and with the kind advices of the organization and the internship supervisor, this report comprise of an organization part and a project part.
The prime objective of organization part is:
- To present an overview and brief introduction of HongKong and Shanghai Banking Corporation Ltd.
The prime objectives of project part are:
- Give a very brief overview of the risk analysis criteria for loan assessment.
- Analysis the demography of the skip customers.
- Find out if there is any relationship among the skip customers.
The scope of this report is limited to the overall description of the company, its services and its financial performance analysis. The scope of the study is limited to organizational setup, functions, and performances Since HSBC is still in its growth stage in Bangladesh; it has still to go a long way to achieve its destination. The report will mainly focus on what criteria HSBC Bangladesh is maintaining before approving the loan facility. And if there is relationship among the customers who are defaulting to pay the installments accordingly.
Both the primary as well as the secondary form of information was used to prepare the report. The details of these sources are highlighted below.
- Customer database and historical data of delinquent customers.
- Interviews with the approval officers as well as the sales and collection teams.
- Internal Sources
► HSBC Collection Manual
► HSBC Bank’s Annual Report
► Group Business Principal Manual
► Group Instruction Manual (GIM) & Business Instruction Manual (BIM)
- External Sources
► Different books and periodicals related to the banking sector
► Bangladesh Bank Circulars
► Website information
Data collecting instruments:
- In-depth interview
► During the exploratory research, in-depth interviews were conducted with managers, approval officers, mobile sales officers (MSO) & collection tea of HSBC.
- Being an intern of “Personal Financial Services – MIS department” of HSBC Anchor Tower, it was difficult to stay in continuous contact with other departments.
- As per Bank’s compliance, as an intern I was unable to obtain indispensable experiences of different departments.
- Details of many aspects of the services of HSBC Bangladesh Limited have been skipped in this report due to various constraints, including time and space, security reason.
One of the main barriers in writing this report was the confidentiality of data. Though I had access to lot of information regarding the performance of the bank, I am unable and not authorized to use this information due to legal restrictions.
Chapter 2: Introduction to HSBC Group
HSBC Mission Statement:
“We aim to satisfy our customers with high quality service that reflects our global image as the premier international bank”
Objectives of HSBC:
HSBC’s objectives are to provide innovative products supported by quality delivery of systems and excellence customer services, to train and motivate staffs and to exercise social responsibility. By combining regional strengths with group network HSBC’s aim is to be the one of the leading banks in its principle markets. HSBC’s goal is to achieve sustained earnings growth and to continue to enhance shareholders value.
An Overview of HSBC Group
The HSBC Group is named after its founding member, The Hongkong and Shanghai Banking Corporation Limited, which was established in 1865 in Hong Kong and Shanghai to finance the growing trade between China and Europe.
Thomas Sutherland, a Hong Kong Superintendent of the Peninsular and Oriental Steam Navigation Company helped to establish this bank in March 1865. Throughout the late nineteenth and the early twentieth centuries, the bank established a network of agencies and branches based mainly in China and South East Asia but also with representation in the Indian sub-continent, Japan, Europe and North America.
The post-war political and economic changes in the world forced the bank to analyze its strategy for continued growth in the 1950s. The bank diversified both its business and its geographical spread through acquisitions and alliances.
HSBC Holdings plc, the parent company of the HSBC Group, was established in 1991 with its shares quoted on both the London and Hong Kong stock exchanges. The HSBC Group now comprises a unique range of banks and financial service providers around the globe.
HSBC maintains one of the world’s largest private data communication networks and is reconfiguring its business for the e-age. Its rapidly growing e-commerce capability includes the use of the internet, PC banking over a private network, interactive TV, and fixed and mobile, including wireless application protocol or WAP-enabled mobile, telephones.
The HSBC Group has a history, which is unique. Many of its principal companies opened for business over a century ago and they have a history rich in variety and achievement.
Foundation and Growth:
The inspiration behind the founding of the bank was Thomas Sutherland, a Scot who was then working as the Hong Kong Superintendent of the Peninsular and Oriental Steam Navigation Company. Realizing the considerable demand for local banking facilities both in Hong Kong and along the China coast and he helped to establish the bank in March 1865. Then, as now, the bank’s headquarters were at 1 Queen’s Road Central in Hong Kong and a branch was opened one month later in Shanghai.
Throughout the late nineteenth and the early twentieth centuries, the bank established a network of agencies and branches based mainly in China and South East Asia but also with representation in the Indian sub-continent, Japan, Europe and North America. In many of its branches the bank was the pioneer of modern banking practices. From the outset, trade finance was a strong feature of the bank’s business with gold bars, exchange and merchant banking also playing an important part. Additionally, the bank issued notes in many countries throughout the Far East.
During the Second World War the bank was forced to close many branches and its head office was temporarily moved to London. However, after the war the bank played a key role in the reconstruction of the Hong Kong economy and began to further diversify the geographical spread of the bank.
The Making of the modern HSBC Group:
The post-war political and economic changes in the world forced the bank to analyze its strategy for continued growth in the 1950s. The bank diversified both its business and its geographical spread through acquisitions and alliances. This strategy culminated in 1992 with one of the largest bank acquisitions in history when HSBC Holdings acquired the UK’s Midland Bank plc (now called HSBC Bank plc). However, it remained committed to its historical markets and played an important part in the reconstruction of Hong Kong where its branch network continued to expand.
Banks under the HSBC Group
Many of the members have changed their name into HSBC, The Hongkong and Shanghai Banking Corporation Limited to introduce the whole group under one brand name.
Figure 1: Banks under the HSBC Group
Other associated Group banks are British Arab Commercial Bank, The Cyprus Popular Bank and Egyptian British Bank.
Customer Segments of HSBC Group
HSBC provides a full range of personal financial services, including current and savings account, mortgages, insurance, credit cards, loans, pensions and investments. In 2000, residential mortgages across the Group – excluding Household – grew by 15%, while non-mortgage personal lending increased by over 20%. Credit cards in issue grew by 20% worldwide. Sales of repayment protection insurance and deposit growth reached record levels. Current account balances in the UK exceeded £ 10 billion for the first time at year-end 2000. The number of customers registered for e-banking services – via the internet and telephone – more than trebled in 2000. The internet generated sales of over 2.3 million products and 87 million transactions.
Through Household International, Inc., HSBC is now a major provider of consumer finance and a top 10 issuer of credit cards in the USA. Household provides consumer loans, credit cards, vehicle finance, mortgage financing and credit insurance to middle America. During 2004, Household achieved good organic loan growth, which it supplemented with portfolio acquisitions. The strongest growth was in the real estate portfolio and the mortgage services business, and also in branch-based consumer lending. Synergy benefits with HSBC included store cards and point-of-sale financing.
The provision of services to small and medium-sized enterprises around the world is core strength of HSBC. During 2000, HSBC increased its leading position in the UK business start-up market to 21% and attracted record levels of business current and deposit account balances. Business internet banking was offered in 20 countries and territories, and the number of registered users more than doubled to 600,000. Money transmission revenues, trade finance fees, wealth, savings and insurance products all showing growth during 2000.
This customer group comprises four main business lines – Corporate and Institutional Banking, Global Investment Banking, Global Markets and Global Transaction Banking – which focus on long-term relationships with major international corporations and institutions. Record results were achieved in 2000. The Global Markets business excelled, particularly in international debt issuance, risk management and structured products, and foreign exchange. Global Investment Banking was entrusted with a number of landmark deals in capital restructuring, corporate reorganization and strategic advice.
This customer group provides world-class financial services to high net worth individuals and their families. In 2000, Private Banking posted improved financial results in all regions, led by Asia, which had a record year. New business initiatives and a general improvement in investment markets led to increased client activity across a range of products. An increase in discretionary mandates, together with a strong demand for client-tailored structured products, contributed to higher fee revenues and dealing income. Funds under management grew by 18%, reflecting both net inflows of client assets and improving market conditions.
Fig 2: HSBC’s International Networks
The HSBC Group’s international network comprises of some 7,000 offices in 80 countries. A brief list is presented below:
To ensure that the key resources (management time, capital, human resources and information technology) are correctly allocated and that the exchange of best practice is accelerated between entities, the group has classified the countries where it operates into 3 categories: the large, the major and the international.
These classifications are a function of sustainable, attributable earnings, the number of retail clients, balance sheet and size of operation. A brief presentation of this classification is shown below:
Figure 3: Map of HSBC’s Country Classifications
Large: United Kingdom, USA and Hong Kong SAR/Mainland China.
► More than one million personal clients
► Sustainable earnings greater than US$ 200 million
- Business Focus
► Concentrated group resources on wealth management
► Be a top 10 player in any market or region served
► Develop cross selling, loyalty programs and value added products.
Major: Argentina, Canada, Malaysia, India, Kingdom of Saudi Arabia, Singapore and United Arab Emirates.
► Sustainable earnings between US$ 100 – 200 million
- Business Focus
► Universal bank’s (personal, corporate, and investment banking with domestic business)
► Platforms for international group business
► Next generation of large companies
► Stable self funding entities
► Onshore HQ
International: The rest of the world.
Ø Earnings below US$ 100 million
- Business Focus
► Platforms for international group business
► Limited domestic presence
► “Nursery” for developing management
► Tomorrow’s major businesses
Supported by offshore HQ
A key part of the Group’s business strategy, announced in 1998, is the creation of a global brand featuring the HSBC name and hexagon symbol. The symbol is now a familiar sight around the world. The Group has embarked on the next phase — making the HSBC brand universally synonymous with its core values of integrity, trust and excellent customer service.
HSBC Brand & Corporate Identity:
The Hexagon logo of HSBC derives from HSBC’s traditionally flag, a white rectangle divided diagonally. The design of the flag was based on the cross of ST.Andrew, The Patron Saint of Scotland.
HSBC brand & corporate identity represents what HSBC wants its brand to mean to its customer. It is derived from the group:
HSBC is a prudent, cost conscious, ethically grounded, conservative, trustworthy international builder of long-term customer relationships.
HSBC’s basic drives are Higher Productivity, Team Orientation, and Creative Organization, & Customer Orientation.
The essence of HSBC brand is integrity, trust, and excellent customer service. It gives confidence to customers, value to investors, & comfort to colleagues.
Through the process of listening to individuals needs and then acting in partnership to deliver the right solutions, HSBC is committed to help the clients make the most of their financial assets.
HSBC operate on a global basis, but also work on a local level to ensure the cross-border differences are identified and any related benefits exploited. HSBC teams of specialists ensure that whether you need solutions across the world, regionally, or locally, and they have the skills, expertise, and resources to deliver them. They automate as many functions as possible, even as ensuring retains control.
HSBC claims that they are the people to talk to if anyone wants the following: –
- Global cash flow co-ordination
- Enhanced risk management
- Improved security and audit controls
- Minimized costs and reduced operating expenses
- Maximized liquidity, returns and interest benefits
Group Business Principles and Value
The HSBC Group is committed to Five Core Business Principles:
- Outstanding customer service;
- Effective and efficient operations;
- Strong capital and liquidity;
- Conservative lending policy;
- Strict expense discipline;
HSBC Operates According to Certain Key Business Values:
- The highest personal standards of integrity at all levels;
- Commitment to truth and fair dealing;
- Hand-on management at all levels;
- Openly esteemed commitment to quality and competence;
- A minimum of bureaucracy;
- Fast decisions and implementation;
- Putting the Group’s interests ahead of the individual’s;
- The appropriate delegation of authority with accountability;
- Fair and objective employer;
- A merit approach to recruitment, selection, promotion;
- Promotion of good environmental practice and sustainable development and commitment to the welfare and development of each local community.
HSBC’s reputation is founded on adherence to these principles and values. All actions taken by a member of HSBC or staff member on behalf of a Group company should conform to them.
The HSBC Group is represented in Bangladesh by its Head Office in Dhaka (Sonargaon Road), a second full-service branch in Chittagong (Agrabad) and two booths in Gulshan & Motijheel with a vision to satisfy its customer with high quality service that reflects its global image as the premier International Bank. The Bank has recently opened another branch in Dhanmondi. The Bank has been serving customers in Bangladesh since 1996. It has also an Offshore Banking Unit, which provides banking services for foreign companies based in the Export Processing Zones in Dhaka and Chittagong. In September 1999, it introduced ATM and telephone banking for Personal Banking. Five ATMs located at the five branches, there are five off-site ATMs located in Uttara, Dhanmondi, Banani, Shantinagar and GEC (Chittagong).
HSBC Bangladesh Overview
|Name of the Organization||The Hong Kong Shanghai Banking Corporation Bangladesh LTD|
|Year of Establishment||1996|
|Head Office||Anchor Tower, 1/1-B Sonargaon Road Dhaka 1205, Bangladesh|
|Nature of the organization||Multinational company with subsidiary group in Bangladesh|
|Shareholders||HSBC group shareholders|
|Products||Savings & deposit services|
Corporate and Institutional services
Trade services & HexagonManagementMr. Mark Humble
Chief Executive Officer
Mr. Joo Baknner
Head of Personal Financial Services
Mr. Adil Islam
Head of Corporate Banking
Mr. Syed Akhtar Hossain Uddin
Human Resource Manager
Mr. Munir Hussain
Mr. Wasim Adnan Wahed
Chief Operating OfficerNumber of Offices4 (Dhaka, Motijheel, Gulshan, Dhanmondi, & Chittagong)Number of ATM’s 06Number of employees250+TechnologyOffers full online banking from branch to branch and from Dhaka to Chittagong.Service Coverage & CustomersServes individual and corporate customers within Dhaka & Chittagong.
HSBC Bangladesh currently provides services from two of its full service branches one in Dhaka and the other one in Chittagong. Besides these offices there are two personal banking Booth offices located at Gulshan & Motijheel, and a new branch opened at Dhanmondi. There is currently nine ATM’s operating in Dhaka and 1 in Chittagong.
Different Activities in Bangladesh
As one of the largest international banks in Bangladesh, HSBC has a long-term commitment to its customers and provides a comprehensive range of financial services: personal, commercial and corporate banking; trade services; cash management; treasury; consumer & business finance; and securities, and custody services.
Personal Banking Services:
The Hongkong and Shanghai Banking Corporation Limited offers a full range of personal banking products and services designed to take care of its customers’ growing needs and requirements. HSBC in Bangladesh has launched a number of loan products during 2000. Personal Installment Loan is an unsecured loan that does not require any personal guarantee or cash security; Car Loan, also, does not require any down payment or personal guarantee. The Bank has already launched Phone banking, a state-of-the-art automated telephone banking service available 24 hours a day, 7 days a week, and 365 days a year, which allows customers to access their account from the comfort of the office or home. HSBC is the market leader in the local Auto pay service with which the company can initiate bulk Taka payments to, or Taka collections from, any HSBC current or savings accounts of counterparts for a specified sum at a specified date, regardless of the branch. HSBC also offers Power vantage, a unique all-in-one package of products and services designed to give total financial control to the customer; a unique savings account, which allows the customer to do any number of transactions without any charges being incurred or credit interest lost. To satisfy the growing needs of real estate HSBC Bangladesh recently launched Home Loan Scheme and a special type of deposit product named “Bangladesh International” for non-resident Bangladeshi.
Corporate Banking Services:
The Hongkong and Shanghai Banking Corporation Limited offers a wide range of cash financing, working capital, short and medium-term loans and guarantee facilities from its Head Office and Chittagong branch. The Offshore Banking Unit (OBU) provides US Dollar denominated working capital as well as short-term finance for capital imports to eligible businesses. Using high-speed communication links, HSBC connects customers to international payment systems.
As the leading provider of trade finance and related services to importers and exporters in Asia, HSBC in Bangladesh operates a highly automated trade-processing network and offer an Electronic Data Interchange (EDI) capability through Hexagon. The Bank also uses SWIFT, an efficient and secure mechanism for bank-to-bank global communications used for all trade related activities including fund transfers and issuance of DC’s (Documentary Credit).
HSBC provides global trade services and cash management services to local banks. HSBC’s worldwide network strength, with over 7000 offices in 81 countries and territories, coupled with a world class reputation in Trade Finance (“Best Trade Documentation Bank” – Euro money) and an unparalleled presence in Asia (“Best Bank in Asia” — Euro money), places HSBC in an ideal position to render unmatched correspondent banking services.
HSBC’s commanding presence in the USA (5th largest USD clearing bank globally), UK (largest GBP clearing bank globally), and the Euro land (largest Euro clearing bank in the UK) both in terms of network strength and clearing ability allows the Bank to provide first class cash management solutions in 3 major global currencies; US dollar, Pound sterling, and the Euro.
Payments and Cash Management (PCM):
HSBC is the pioneer in introducing electronic cash management solutions in Bangladesh, by introducing its state-of-the-art proprietary software, Hexagon, back in 1997. This was initially made available to corporate clients only but has since been expanded to include banks and retail clients.
With Hexagon, the Bank’s proprietary cash management system, corporate customers can access banking services from anywhere in the world to view account balances and statements, make transfers and international payments, and to open documentary credits, by using only a PC, a modem, and a telephone line.
Chapter 4: An Overview of Functional Departments
Management of HSBC Bangladesh
HSBC Bangladesh is such a company that has to overcome a lot of hurdles to reach the position it now holds. At present, Mr. Mark Humble is the CEO; Mr. Adil Islam is the chief of Corporate Banking; Mr. Adnan Wahed is COO, Mr. Joo baknner is the Chief of Personal Banking or as known in HSBC, Personal Financial Services (PFS) Head, and Mr. Syed Akhtar Hossain is the Human Resource Manager at HSBC Bangladesh.
These five men at the top carried out their management roles comprehensively and systematically. They equally contributed to HSBC’s superior leadership, by carrying out their unique roles. They worked well together, respecting each other’s abilities, & arguing openly, & without any resentment when they disagreed.
To maintain a close touch with the organization each man works in separate area of HSBC’s complex. Their offices are indistinguishable from all other cubicles where HSBC’s junior executives & secretaries work in. There are no office walls in HSBC and all the staff starting from the CEO to the lower operating level employees shares the same premises under one roof. There are no specialized cabins for top management and executives and also no executive dining rooms. This has created a management team that is unified, cohesive, & energetic.
Each and every employee of HSBC takes pride of being an employee at HSBC and his or her pride comes from the freedom of direct communication with the top management. The management of HSBC is supportive in the sense that the top management deliberately supports the suggestions, values, ideas, innovation, and hard work of the employees and officers. Again high amount of employee participation is encouraged in the management process. There are also systems for awards, incentives, and status for innovative ideas and hard works. Again the management style can also be termed as collegial as high amounts of teamwork and participation exists between the top and bottom parts of HSBC.
HSBC follows a 4 layers management philosophy in Bangladesh. These are Managers, Executives, Officers, and Assistant Officers. The CEO is the top most authority of all the levels. Managers are the departmental heads who are responsible for the activities of their departments. They are the heads of the department who formulate strategies for that department. e.g. Human Resources Manager. Executives have the authority next to managers. They are basically responsible for certain activities & organizational functions. e.g. Admin Executive. These two layers represent the management level of HSBC Bangladesh.
Officers are the next persons to stand in the hierarchy list. They are the typical mid-level employees of HSBC organizational hierarchy. These officers are responsible for managing the operational activities and operating level employees. The operating level employees of HSBC who are ranked as Assistant Officer fill the last layer of this hierarchy. They perform the day-to-day operational activities of HSBC. An organizational hierarchy chart is shown below:
The organizational structure of HSBC Bangladesh is designed according to the various service and functional departments. The Chief Executive Officer (CEO) heads the chief executive committee, which decides on all the strategic aspect of HSBC. The CEO is the person who supervises the heads of all the departments and also is the ultimate authority of HSBC Bangladesh. He is responsible for all the activities of HSBC Bangladesh and all its consequences. He administers all the functional departments and communicates with the department heads for smooth functioning of the organization. The HSBC Chief Executive Committee is formed with the heads of all departments along with the CEO. Besides the CEO the CEC is staffed with 6 more managers: Manager of Human Resources, Manager of Services, and Manager of Financial Control Department, Chief of Personal Banking, Chief of Corporate Banking, and Manager of Marketing.
Functional Departments of HSBC
HSBC activities are performed through functional departmentalization. So, the departments are separated according to the functions they perform (HR, Marketing, Personal Banking, etc.). There are 6 major functional departments at HSBC: Human Resources Department, Financial Control, Personal Banking, Corporate Banking and Marketing. Within these major departments there are some other subsidiary departments that allow smooth operation of their own major departmental function. A graphical presentation of all the departments (Major & minor) is shown below. Brief functional descriptions of these departments are-
Figure 6: Functional Departments of HSBC
Human Resource Department (HR)
The Human Resource Manager currently heads this department. The major functions of this department are strategic planning and policy formulation for Compensation, Recruitment, Promotion, Training, and Developments, Personnel Services, and Security. The HR department is very much concerned with the discipline that is set up by the HSBC group. HSBC group has got strict rules and regulations for each and every aspect of banking, even for non-banking purposes; i.e. the Dress Code. All these major personnel functions are integrated in the best possible way at HSBC, which results in its higher productivity. The Human resource officer monitors the employee staffing and administration activities. The Training officer supervises training, development, & rotation activities. The structure of the HR department is shown below:
HSBC activities are performed through functional departmentalization. So, the departments are separated according to the functions they perform. Within the major departments there are some other subsidiary departments that allow smooth operation of their own major departmental functions.
Personal Financial Services (PFS)
PFS is the most flourishing department of HSBC Bangladesh. This department basically deals with the management of products and services offered to the individual consumers. Within a span of only five year HSBC PFS has grown tremendously and is still growing with its innovative products and service offerings. The 3 branches and 2 booths of HSBC basically deal with the personal banking activities and provide various accounts services to individual customers. The departments under PFS are shown in the following diagram:
Manages daily operation
Plans and directs sales and marketing
Plans for service development
Top-level authority for customers’ dealings and transaction
Provides required service to the customers directly
Maintains documentation and report flow vary rapidly
Helps in planning at field level
Assists PFS Head in decision-making process and researches
Assists PFS Head day-to-day work
Keeps track and inform PFS Head in present condition of the competition in the market
There are five branches of HSBC, four situated at different locations in Dhaka and one at Chittagong. Only the Dhaka office (head office) & Chittagong branch deals with both corporate and personal banking. Other three offices only deal with the personal banking activities. Their functions are to provide various financial services to the consumers. These include customer services, sale of various PFS products, opening new accounts, providing cash, remittance, and other teller services, etc. The branches are quite decentralized for better delivery of services to customer and have their own premises and facilities. Branch managers head these branches. Each branch is staffed with its own team of employees. A great deal of teamwork is seen within these branches. ATM’s are situated with each branch premises.
The personal banking credit department deals with the consumer credit schemes such as the Personal loan, Car loan, Travel Loan, Personal Secured loan, etc. which are tailored to meet the demand of individual customers. The manager of PFS credit who approves and administers all the activities of this department. He is staffed with five approval officers, four operations officers, and two MIS officers. The approval officers mainly reject or approve the credit requests. After being checked by the approval officer, the credit requests go to the operations for further processing of the application and disbursement. This department is a member of ALCO (Asset Liability Management Committee), which coordinates in preparation of lending analysis and data on concentration of risk and identifies possible lending risks. This department is also responsible for monitoring all necessary documents and securities related to loans.
The ATM center ensures smooth operation of the ATM machines that are located at Dhaka and Chittagong. The ATM center is responsible for regular replenishment of the off-site ATM’s and servicing of all the ATMs. Currently a total 10 ATMs are in operation. The ATM center also deals with issuance, termination, and servicing of the ATM cards. On a whole, the ATM center is the department that is solely responsible for all the activities related to ATM and is the facilitating department that enables customers 24 hours banking support.
This department is under the same manager as the ATM center. They basically deal with all the buying and selling of government bonds and treasury bills as per customer instruction, i.e. BSP, PSP, and TSP etc. This department keeps under its control the transactions regarding USDB, USDIB, and WEDB.
ATB refers to Automated Tele Banking. This department deals with the back office serving the HSBC phone banking services provided to customers. This department is basically responsible for the activation of ATB, ATB pin generation, and ATB security management, ATB blocking and troubleshooting of all ATB problems. This department is fairly new and was constructed on January 2000. Currently this department is staffed with two executive and two officers.
This division if HSBC provides financial services to organizational (corporate) clients. HSBC is a worldwide leader in banking and financial services whose success is based on its relationships with its corporate clients. Whether it is locally or around the world, HSBC offers a comprehensive range of services that can be tailored to the individual needs of the company. The Head of this department is the Chief of Corporate Banking. He is also the Vice-CEO of HSBC Bangladesh. The chief of Corporate Banking manages the activities of corporate banking of HSBC Bangladesh. Two offices of HSBC Bangladesh offer corporate banking services to corporate clients. These are the Dhaka Head Office and Chittagong office. Corporate Banking of HSBC Bangladesh includes Corporate Institutional Banking (CIB), Trade Service (HTV), and Hexagon. These sub-divisions are discussed briefly in the following sections.
Corporate Institutional Banking (CIB)
As their major customers operate internationally, HSBC services them internationally. Operating through the major centers and in close liaison with HSBC Investment Bank, Corporate and Institutional Banking provides the full range of the Group’s capabilities at local and global levels, with a particular focus on payments and cash management, trade, and securities custody. HSBC also offers local financial institutions and banks access to wide range of financial services available on an international basis. The services are tailored to suit the needs of the companies. CIB has two separate wings: Relationship management department and Hexagon. These are discussed below:
Relationship Management Department:
The RM department consists of various relationship managers who are assigned to different corporate client to better satisfy their needs. These RM’s communicate with the clients and are solely responsible for the companies they deal with. Any information regarding a corporate client must be communicated through the respective RM assigned to that corporate client. A relationship manager may be assigned more than one company and this decision depends on the chief of Corporate Banking.
The Hexagon department deals with all aspects related to HSBC’s unique banking software product – Hexagon. It is the global Electronic Banking system of HSBC, which offers the customers more convenient and efficient banking than ever before. It is an innovative desktop banking system developed by the HSBC group, which operates via the group’s proprietary worldwide communications network.
HSBC Trade Services (HTV)
Trade service is known by various names in other banks, e.g. Trade Finance Foreign Exchange, Foreign Trade etc. However, the functions are the same. As the name suggests, this department is involved in facilitating trade, both international & within Bangladesh. HSBC is the leading provider of trade finance and related services to importers and exporters in Asia. Trade is considered a core business of the group. The group’s presence in 81 countries of the world gives a good opportunity to control both ends of a trade transaction and keep the business within the Group. The various awards it has won from the leading publications of the world acknowledge HSBC’s excellence in trade. The trade service department has two separate subsidiaries: Credit Administration & Foreign Exchange Division.
Credit Administration department basically deals with all the documentation, processing, administration, and disbursement of the import-export services provided to corporate clients. This department is known to be the heart of HSBC trade services that administers and manages all the trade tools and facilities provided by HSBC Corporate Banking. Some important aspects of this department are LC advising, documentation, OD facilities, guarantees, etc.
Foreign Exchange Division:
The For-ex division of trade services is solely concerned with the management of Foreign exchange inflow and outflow. The For-ex division of trade service in relation with NSC and FCD manages the foreign currency traffic of HSBC that originates from Corporate Banking and trade services.
Finance Department of HSBC Bangladesh
This is considered as the most powerful department of HSBC. It keeps tracks of each and every transaction made within HSBC Bangladesh. Manager of FCD who ensures that all the transactions are made according to rules and regulation of HSBC GROUP heads it. Violation of such rules can bring serious consequences for the lawbreaker. FCD is responsible for the preparation of the Annual Operating Plan (AOP), monitoring treasury risk limits, profit exposure, and maintaining strong liquidity. FCD is the key member of the Asset Liabilities Management Committee (ALCO), which deals with how efficiently the bank’s assets and liabilities are managed. FCD also deals with money market matters. FCD acts as a custodian of all vouchers. FCD as the name implies does all the banks monitoring of the banks internal compliance and all local regulatory requirements.
The functions of FCD are briefly discussed below along with an organogram of the department:
Foreign Correspondence (FC)
FC keeps records of all the accounts of HSBC. All the vouchers, notes, advices and transaction reports of the branches are sent to FC for record keeping purposes. FC also prepares the financial statements for the banks and decided upon banks assets and liabilities. It also deals with the returns that are submitted to the Central Bank on regular interval.
This department works under FCD. Their main job is to take decisions regarding purchase and sell of foreign currency. The purpose of treasury’s operations is to utilize the funds effectively and arrange funds at a lowest possible rate of interest, through maintaining effective relationship with other banks and following the Government rules and foreign exchange regulations
Payment and Cash Management (PCM)
PCM deals with the inter-bank payment. PCM strategies are designed to ensure efficiency, profitably, and comprehensive support.
Services Department of HSBC
This is an integral and vital part of the bank. The services department ensures smooth operation and functioning within and between all the departments of HSBC. It also provides continuous support to the core banking activities of HSBC. The Manager of Services heads this department who formulates and manages various critical issues of the services function of HSBC. He is followed by a group of executives who are the heads of various subsidiary divisions that operate within the services department. The services department is considered as the backbone of all other departments. The various subsidiary divisions within this department are Administration, IT, Internal Control (IC), Network Services Center (NSC), and HUB. A structure of the services department is presented below followed by a briefing of the subsidiary divisions:
Like any other organizations, the Admin department of HSBC makes sure that the organizations moves on with all its departments and staffs operating according to all the rules and regulations of the company. It also prevents any bottlenecks within the work process and ensures smooth functioning. The admin department has two divisions – General Administration and Business Support Services.
The general admin division is pretty much similar to the admin departments of other companies that ensure discipline and regulatory concerns. The business support services provide supports to the departments during employee leaves and sudden terminations so that the department can function without problems.
Information Technology (IT)
This department gives the software and hardware supports to different departments of the bank. As HSBC is engaged in online banking, the role of IT is very crucial for the bank. This department is the most active department of HSBC where employees always stand by to solve any problems in the system. The managers and executives of IT division work continuously to develop the total IT system of HSBC so that it can be operated with ease, accuracy, and speed.
HSBC has internal auditors who visit on regular basis and submit the report to the higher authority for audit purposes. This gives different departments the chance to know their mistakes and take necessary corrective actions. Again, the Bank annually administers a company wide audit program to evaluate the overall performance of the bank in Bangladesh.
HSBC Universal Banking (HUB)
The HSBC banking system is called HUB. HSBC does the online banking and it is HUB, which sets up the parameter for that. This HUB is linked with the HSBC group via satellite and each and every transaction made by HSBC within Bangladesh is being recorded at the HSBC Asia-pacific headquarters at Hong Kong via HUB. Thus the HUB is the most powerful and important equipment of HSBC Bangladesh that monitors and tracks any fraud and faults made with HSBC Bangladesh.
Network Services Center (NSC)
This department can be described as the ‘Power House’ of HSBC Bangladesh. NSC does the back office job for the bank. The main four jobs that are performed by NSC are Clearing, Scanning of signature cards, issuing checkbooks, and sending & receiving Remittances. NSC looks after the clearing process of HSBC and makes necessary contact with the central bank for maintaining account flows. All the customer signatures are scanned in this department and are entered into the system. NSC also issues checkbooks for new and old accounts based on requisition from various branches. ‘Remittance’ is a banking term, which means ‘Transfer of funds through banks’. When a bank remits on behalf of its customers, it is termed as outward remittance. On the other hand, when the bank receives the remittance on behalf of the bank, it is inward remittance. The following methods that NSC uses to remit money for customers: Telegraphic Transfer (TT), Demand Draft (DD), & Cashier’s Order.
The sixth major department of HSBC is the marketing department. The marketing department of HSBC play a vital role in fostering the continuos growth HSBC in Bangladesh. A manager is assigned to this department who looks after the overall marketing operation of HSBC in Bangladesh. This department is basically concerned about marketing the company’s products, services, and building a strong corporate image. The marketing department of HSBC has three subdivisions: Direct Sales, Promotion, & Marketing Administration.
Amanah Finance Department
Amanah Finance is an ethical and indigenous form of community banking that is compliant with the Shariah (Islamic law). It involves financing based on the sale or lease of assets; i.e. the bank is a selling goods for use (trade) rather than selling money itself. This facility is extended by the way of providing finance for imports. The issuance of import documentary credits and the retirement of bills are handled in compliance with the Shariah law.
The process of issuance of Amanah DCs (DCI) and handling of bills (IBR) is very similar to the existing products, except for the exceptions detailed on the following: Under this product the customer requests the Bank to buy goods which the customer will buy from the Bank at a deferred sales price. The Bank then appoints the customer as an agent (Wakala) for buying the goods so specified. The Customer opens the DC as a buying agent, and when the goods arrive, constructive delivery is made, buys it from the bank. The purchase price for the Bank is the bill value and the Bank sells the goods at a profit in consideration of the customer paying at a later date.
While the overall contract and the transaction are different, the DC itself does not differ significantly from conventional DCs. A small number of clauses are proposed to be mandatory in Bangladesh i.e. no TT reimbursement is allowed and payment is made only upon receipt of documents at counter, the goods are consigned to the order of the Bank, and the beneficiary has to notify the applicant of the shipment. These are standard clauses in Bangladesh market and are normal business practice and local norm.
Two additional documents are required for Amanah DC transaction compared to the conventional DCs, the Purchase Transaction Notice and the Murabaha Transaction Notice. In the Purchase Transaction notice the customer requests a transaction whereby they will purchase goods as the bank agent and also promises to buy the same goods from the Bank, which the Bank must accept to go ahead with the transaction. In the Murabaha Transaction Notice, the customer proposes to buy the goods on a deferred sales price, and agrees to pay a markup over the purchase price of the goods, payable at a future date.
Overview of Process
Customer executes Master Murabaha and Wakala agreement, the omnibus Trust Receipt and the Promise to Purchase documents which sets the framework along with Facility Offer Letter
Facility Set up
DC application along with Purchase Transaction Notice placed to Bank
Bank opens DC with specific set of conditions
Exporter Prepares goods and notifies applicant
Customer submits the Murabaha Transaction Notice (MTN) to Bank
Exporter ships goods and sends document to Bank
HSBC accepts MTN before or at least on the day the documents are receives. Customer is advised that documents are received.
Customer provides acceptance of documents after reviewing them at the Banks counter. A New Bill advice is sent, and if there are any discrepancies, customer must accept this or the DC amended. If documents are in order but the customer does not provide the MTN or does not wish to pay, the RM to be referred and the conventional procedures to be followed.
HSBC retires bill by creating CLI or Customer Account Debit and endorses documents in the name of the customer.
Customer retires the CLI by paying the pre agreed amount equal to Bill Value + Profit.
Trade Services Operations
New Product Codes for HSBC Amanah Import Finance are:
Discrepant documents should be treated the same as with a discrepant document for a conventional DC. All other Amanah procedures still apply.
For each DC, one DC application and one transaction notice are required. For partial shipments, a separate ‘Murabaha Notification’ must cover each shipment.
For late payment, the same charges will apply as with a conventional DC. These are generated automatically by the system. No changes are necessary in the system, however when talking to the customer interest should not be mentioned.
Communication with Customers
Under Shariah requirements the bank will have to purchase the goods before it is allowed to sell them on cash or deferred payment basis. The bank is however allowed to appoint an agent who can go in the market and source the goods for the bank. Since it is recognized that the bank is not in a position to buy the goods itself it will appoint the customer as its undisclosed agent (solely) for the purpose of sourcing the required goods and purchase them on behalf of the bank. This will also include negotiation with the seller or exporter. The bank after the purchase can sell the goods to the customer.
With the offer to buy or any time before receipt of the offer to buy, under Shariah, the customer must inform the bank if they require any financing. If the customer informs that they require any financing after the receipt of the Offer to Buy, the transaction is not Shariah compliant. Bank still can provide financing but the customer is aware that the transaction is not Shariah compliant.
Master Murabaha Agreement (MMA):
It is the equivalent to a general financing agreement or, in Trade Services case, Trade Finance General Agreement (TFGA) that has stated terms and conditions applicable to transaction under the overall agreement.
It is an Islamic-financing tool based on the idea of selling goods at a stated profit. The crucial element in Murabaha is that there must be an underlying asset involved. In other words, the bank is selling goods for use (which would be trade) rather than selling money itself (which would be interest).
MN is essentially a formal offer from the customer to purchase the goods from the Bank. It will stipulate that the customer has obtained goods and offers to buy the goods on “as it is” basis on the shipment date. This is again a Shariah requirement.
Promise to Purchase:
It is a binding agreement on the customer to unconditionally and irrevocably purchase the goods from the Bank. It is equivalent to a promissory note.
Refers to the Islamic legal tradition, which is sometimes called Islamic Law (literally it means ‘a path to life-giving water’)-
It is required by Shariah to have specific notice under each shipment. The MMA will have a general agreement and will assume that transactions will be conducted from time to time; however Transaction Notice will ensure that each party is aware of the details. Without a Transaction notice the DC will not be Shariah compliant. It should be received with the DC application.
Islamic term for agency.
Chapter 5: Products & Services
HSBC Bangladesh carries out all traditional functions, which a commercial Bank performs such as mobilization of deposit, disbursement of loan, investment of funds, financing export & import business, trade & commerce & so on. Besides it also offers some specialized services to its customers. Products & services offered by HSBC can be categorized according to the customers they serve. Thus two major groups can be identified. They are – individual customers or consumers & corporate customers or organizations. An in-depth analysis of HSBC’s product and services in Bangladesh is presented in this section. First of all, the liability products of the bank are discussed. After that the various products and services of personal banking division will be presented, followed by a brief discussion of the corporate banking services offered to corporate clients. The summary of all the products and services of HSBC Bangladesh is displayed in the following page.
Maximize wealth with daily interest-
Unlike other banks there is no ledger fee and any interest accrued is not lost
Customers can issue any number of cheque or withdraw any amount
Interest is calculated on daily credit balance (not on average credit balance) and paid half yearly
Only condition to earn interest is maintaining a minimum balance of BDT 25,000/-
Relationship fee is BDT 300/- per quarter if average relationship falls below BDT 50,000/- for three months.
This is also a depository account basically designed for various customers. This is a non- interest bearing accounts and the features of this account are as follows:
Opening balance TK 25,000
Average balance that should be maintained: TK 25,000
No restrictions on number of transactions
No yearly ledger fee
Non interest bearing
Free ATM card and phone banking service
Documentation: various kinds of documents are needed for the companies such as memorandum of association, board resolution, etc. however the requirements for individuals are same as the savings account.
Can be opened only by:
Þ Individuals (joint or single)
Þ Proprietorship companies
Þ Partnership companies
Þ Limited Companies
Þ Liaison offices
Can be linked with Savings or Current Account or both
24 Hours a day from any one of the 11 HSBC ATM outlets – DAK, DMO, DGU, DHA and CHG onsite & 5 offsite.
Maximum limit BDT 20,000/- per day per card. For PVA ATM card the maximum limit is BDT 50,000/- per day.
You can withdraw or deposit money, inquire about your balance, check last 5 transactions, transfer funds between your accounts and make payments to other accounts with HSBC
Minimum BDT 500/- can be withdrawn;
For total financial control-
Average deposit balance should be BDT 2,00,000/-
Annual fee BDT 500/-
Penalty charge BDT 500/- half yearly, if the average deposit balance falls below BDT 2,00,000/-
Free personal accident insurance coverage for BDT 1,00,000/-
Free endorsement of foreign currency against travel quota
Special Power Vantage ATM card with enhanced cash withdrawal facility of BDT 50,000/- per day
An all-in-one composite statement of all your accounts under the Power Vantage package
Special loan rages for the Personal Installment Loan
Lower processing fee for Car Loan
Fee waiver for setting up standing instructions at Auto Sweep
Minimum amount to open a TMD is BDT 1,00,000/- (Individual and Joint both)
Interest is paid at maturity
Cumulative Time Deposits (Principal + Interest) is also available
Automatic roll over at prevailing rate
Time deposit is offered in Time Period (Minimum 1 month and Maximum 12 months)
Standing instruction can be given (like credit interest to other accounts)
Personal Secured Loan – a loan facility up to 90% of the value of the LCY and 80% of FCY time deposit for a maximum period of 5 years
Personal Secured Credit – an overdraft facility up to 90% of the value LCY and 80% of the time deposit.
Short Term Deposit (STD):
These accounts are opened mostly by the organizations. Organizations normally maintain current accounts in the banks. They need to transact bulk amount regularly that’s why, current account fits with their requirements. As current accounts do not provide any interests and as the organizations cannot have savings account, they are deprived of earning any interest even though having huge deposit in their accounts. ‘Short-term deposit’ accounts enable them to earn interests from their accounts. These kinds of accounts share some properties of both current and savings accounts. The account provides interests, which are like the savings accounts, and the holder can withdraw any amount any time from his account that is a property of the current account. Individuals especially, businessmen also maintain such accounts.
It is also known as term deposits. These deposits are made in the bank for a fixed period of time. This period of time should be specified in advance. The bank needs not to maintain cash reserves against these deposits & therefore, it offers interest rates that are higher than the savings accounts.
Monthly Interest Bearing Time Deposit:
The simple, safe, and flexible way to enjoy guaranteed monthly return-
Minimum opening amount is BDT 5,00,000/- (Individual and Joint both)
Tenure: 1-2 years
Interest is paid at a monthly basis and is transferred to another nominated account
Automatic roll over for the 2nd year at prevailing rate.
Expatriates can open normal BDT current a/c as well as FCY current a/c
Expatriates can open convertible account if entitled to and subject to restrictions such as they can not deposit taka in convertible A/C
Free ATM card is provided to access to their accounts to withdraw Taka from current accounts
Expatriates can not earn interest on their BDT or FCY accounts (Regulations of Bangladesh Bank)
Expatriates can not get any credit facilities (Regulations of Bangladesh Bank)
Non-Resident Bangladeshi (NRB)
There are some other accounts for non- resident Bangladeshi
Foreign Currency Current Account
Foreign Currency Time Deposit Account
Resident Foreign Currency Current Account:
Accounts opened from funds brought in when returning from abroad
If amount exceeds USD 3,000/- or equivalent then customer must fill up declaration form FMJ at the customs.
To be opened within 30 days of return
Minimum opening balance is USD/GBP/EURO 1,000/-
An International ATM card giving access to their funds from 8,00,000/- ATMs worldwide. Withdrawal in local currencies.
The balance of the account is freely remittable but no inward remittance is allowed.
Non-chequeable account – chequebook will not be issued.
Can take out the money for further traveling without being subject to any regulations.
Foreign Currency Time Deposit Account:
Accounts opened from funds brought in when returning from abroad or by transferring from resident FCY account
To be opened within 30 days of return
Minimum opening balance is USD/GBP/EURO 1,000/-
Interest bearing time deposit account with maturities of 1, 3, 6 and 12 months
Personal Secured Credit / Personal Secured Loan – an overdraft facility up to 80% of the value of the foreign currency time deposit.
Chapter 6: Loans & Credits
Personal Installment Loan (PIL)
- Any purpose loan – no cash security
- Minimum monthly income BDT 15,000/-, 2 years service in a well reputed, stable company, minimum age 25 and maximum 56
- Valid income proof documents must be furnished, unsecured loan, & no personal guarantee required
- Minimum loan amount is BDT 50,000/- and maximum loan amount is BDT 20,00,000/- or 4 times of salary
- Interest rate will be 18% per annum
- Maximum loan tenure is 36 months. If loan amount it BDT 4, 00,000/- or above then maximum tenure is 48 months
- Auto Pay customers will get discounted interest rate: 15.5% and loan amount: 6 times of salary or 2 million whichever is lower
- CEPS customers will get discounted interest rate: 15.5% and loan amount: 10 times of salary or 2 million whichever is lower
- Personal loans will be granted at discounted rates to employees of blue chip companies against assignment of terminal benefits as per agreement with employer. Loan tenure will be up to 5 years.
- For salaried individuals additional income including rent will be considered, provided these are substantiated with requisite documentation or evidence.
- For businessmen the TIN certificate and CIB (Credit Information Bureau) report will remain a mandatory document for income verification.
- A current account needs to be opened by the customer before applying for Personal Installment loan (PIL).
Travel Loan is offered within the existing Personal Installment loan structure. The purpose of launching this product is to attract and aid customers with their travel related services.
- Loan amount is minimum loan amount is BDT 50,000/- and maximum loan amount is BDT 5,00,000/-
- Interest rate: 15%
- Tenure: Maximum loan tenure is 36 months. If loan amount is BDT 4,00,000/- or above then maximum tenure is 48 months.
- Loan processing fee: 1% of the loan amount or BDT 1,000/- whichever is higher + stamps BDT 170/-
- No personal guarantee is required
- Eligibility- minimum monthly income BDT 20,000/-, 2 years service in a well reputed, stable company, minimum age 25 and Maximum 56
- Valid income proof documents must be furnished
- No personal guarantee is required
- Minimum loan amount is BDT 50,000/, maximum is 4,00,000/-
- For both reconditioned car and new car loan amount will be maximum 70% of the car value
- Interest rate will be 14.5% per annum
- Maximum loan tenure is 60 months
- Loan processing fee is 1% of the loan amount or BDT 1,000/- whichever is higher + stamps BDT 170/-
- Car will be registered in Bank’s name (no joint registration)
- Comprehensive insurance in discounted rate from selected insurance company in Bank’s name is mandatory and automatically debited from customers account every year.
- CEPS salaried customers will get 0.5% discount in loan processing fee, i.e. 14%
It’s easier than ever to own a dream home-
- Eligibility- minimum monthly income BDT 40,000/-, 2 years service in a well reputed, stable company, minimum age 25. The loan must end before borrower’s age reaching 57 years or retirement date, which ever is earlier.
- This loan is provided for completed flats / apartments – less than 20 years of age
- No personal guarantee is required
- Minimum loan amount is BDT 7,50,000/- and maximum loan amount is 100,00,000/-
- Maximum loan tenure is 15 years, loan must be repaid prior to 57 years of age
- A maximum loan amount of 70% of the total value of the apartment costing up to BDT 50,00,000/- and 60% of the total value for the apartments over BDT 50,00,000/-. The total loan value is inclusive of the registration cost.
- Interest rate is 14% per annum
- Loan processing fee is 1.5% of the loan amount or BDT 20,000/- whichever is higher + stamp charge
- Security: Registered mortgage and original title deed
- Insurance: Fire, earthquake, flood, cyclone
Personal Secured Loan
Personal Secured Loan is a simple stand by loan against the Time Deposit and NRB Bonds and the loan is repayable in equal monthly installment.
- Standby loan against TMD and NRB bonds (WEDB/USDB)
- WEDB (Wage Earners Development Bond) or USDB (US Dollar Bond) issued from HSBC and other multinational banks are considered.
- Interest rate 12.5% for loan amount below BDT 5,00,000/- and 12% for loan amount of BDT 5,00,000/- and above
- Interest rate against LCY TMD is 13%
- Minimum loan amount BDT 90,000/-
- Maximum loan amount 90% of LCY TMD amount or WEDB and 80% of FCY TMD or USDB
- Processing fee against certificate issued from HSBC is BDT 1,000/- + stamps BDT 170/-
Personal Secured Credit
Credit facility against the investments-
Personal Secured Credit is a credit facility against Time Deposits and NRB Bonds that enables customers to have the flexibility to meet short-term commitments without unlocking their long-term investments.
- Customers can borrow up to 90% of their LCY TMD’s and WEDB value
- WEDB and USDBs issued from HSBC and other multinational banks are considered
- Minimum loan amount is BDT 90,000/-
- Maximum loan amount 90% of LCY TMD amount or WEDB and 80% of FCY TMD or USDBs.
Increase the spending power-
Product Name: HSBC – Prime Co-branded Master Card Gold Card
Card Type: Local Master Card Gold Card
Card Limit: Staff Card: BDT 15,000/- to 1, 00,000/-
Master Card Gold Normal: BDT 50,000/- to 1, 00,000/-
Master Card VIP: BDT 1, 00,000/- to 2, 00,000/-
- Primary Eligibility: Minimum BDT 25,000/- gross income from regular sources. Bangladeshi Citizen 21-65 years of age and has account with HSBC
- For Supplementary card the person has to be at least 18 years of age
- Card Life: By default 2 years for all cards new and renewed
- Billing Cycle: 7th day of the month
- Repayment Period: 26th day of every month. Maximum 50 days interest free period
- Minimum Payment Calculation
- 8% of the current balance shown on the statement or BDT 500/- which ever is higher. If current balance is less than BDT 500/-, then full payment
- For over limit account: 8% of the credit limit plus exceeded amount
Corporate Banking Services
HSBC offers wide range of cash financing, working capital, short, and medium-term loans, and guarantee facilities to its corporate customers. Its offshore banking Unit (OBU) provides US dollar denominated working capital as well as short tem finance for capital imports to eligible businesses. HSBC is a worldwide leader in banking and financial services whose success is based on its relationships with its clients. Whether locally or around the world, HSBC offers a comprehensive range of services that can be tailored to the company’s needs. Some major services provided by HSBC corporate division are Custody services, Global payment & cash management, Trade services, & Hexagon.
Global Payments & Cash Management (PCM)
HSBC’s Global Payments and Cash Management services are designed to help its clients to operate efficiently, profitably and with comprehensive support. The aim is to provide a service that takes full account of the customers’ local needs as well as regional and international requirements using our expertise and global resources of the HSBC Group. PCM provides the following services to its clients:
- Accounts & transaction management services: Structuring of bank accounts to optimize the management and flow of funds within or across national borders.
- Cash & Liquidity management services: Cash is a company’s most volatile asset and HSBC provides the best service to manage its client’s cash efficiently.
HSBC Trade Services (HTV)
HSBC is the leading provider of trade finance and related services to importers and exporters in Asia. The bank operates a highly automated trade-processing network and offers an electronic data interchange (EDI) capability through Hexagon. Some services provided by HTV are as follows:
A full range of import services handled by experienced staff is available, ensuring that clients import documents are processed without delay. Some import related services are- Import collection services, Import financing services, Import documentary advising, Processing, and advising on shipping guarantees.
HSBC provides advices on any aspect of export document preparation. It also provides working capital finance to help the sourcing of raw materials. Some other export services are- Pre-shipment Financing, Post shipment Financing, Purchase of Export bills, Back-to-Back credit, and LC, Documentary credit advising, Documentary checking.
HSBC has developed a unique range of specialized products aimed specifically to reduce a company’s exposure to international trade risk. The services in this area are-
Trade Collect Service:
A dedicated US dollar export bill collection service from HSBC.
Trade Safe Service:
A major concern for many exporters is the reliability of the LC issuing bank, particularly if shipments are going to less familiar markets. If these banks get into difficulties, the exporter may not get paid. That’s where HSBC comes in. Under the Trade Safe Service, HSBC absorb the bank and country risk, allowing clients to concentrate on growing business.
So these are some of the services provided by HSBC trade services.
Hexagon is the HSBC Group’s global electronic banking service, specifically designed for the corporate market. It gives a customer access to one of the largest banking and financial services organizations in the world – 24 hours a day, seven days a week.
Hexagon is one of the most advanced and easy-to-use electronic banking packages on the market today. It has been designed to make life easier for the customers; with Hexagon businesses can become more efficient, increase accuracy, and reduce costs.
Hexagon offers an extensive and growing range of financial services, including global cash management, trade services, foreign exchange, and securities, all from a single PC.
Hexagon uses the HSBC Group’s Global Data Network, the largest private system of its kind in the world. Additionally, it has a comprehensive range of system security, and control features together with its use of full data encryption, means the data is totally secure.
Services Provided by Hexagon:
Hexagon provides access to all the customers’ accounts. In addition to the latest available balances, Hexagon offers full statement information that can be tailored to customer requirements.
The account information can be quickly and easily printed using the flexible Report Writer Service or the information can be exported to some other formats.
Export allows account details to be exported in variety formats. This enables Hexagon to act as a true financial link between the bank’s computer systems and the customer’ own back-office accounting packages.
This service enables the customer to reconcile his/her bank accounts.
Transfers between accounts and payments to third parties are easily achieved in more than 60 currencies anywhere in the world. Both priority payments and low-value automated clearing-house payment options are available in Hexagon.
Hexagon gives the customers the ability to view outstanding documentary credits and bills in summary or a more detailed format, including interest details where financing has been requested. Coupled with account information, companies are able to track the whole export process from the point when the documentary credit is opened or bill is presented through when settlement is made.
With the import option, a customer can easily create and amend documentary credit (DC) applications and submit them online.
So these were some of the very important services provided by HSBC’s unique banking software HEXAGON.
Other Facilities Provided to Corporate Customers:
HSBC also offers some other facilities to its customers. They are Factoring, Forfeiting, Guarantees, Hire Purchase Finance, Leasing, Tender Bond, and Performance Bonds. All these services and products are designed to meet the total business needs of the corporate clients of HSBC.
Critical Functional Issues
Direct Sales (DS):
An executive is assigned to this part of the marketing department. The Direct Sales division co-ordinate & manages the sales activities of all the Mobile sales officers (MSO) of HSBC Bangladesh. The MSO’s basically makes sales of the company various Personal Banking products such as savings accounts, consumer loan, etc outside the banking premises. There are a total of more than 100 mobile sales officers (MSO) employed in the cities of Dhaka and Chittagong. MSO’s are assigned to specific branches for making sales activities more smoothly. The DS executive sets sales strategies & targets for the sales officers and manages the whole team of MSO’s in Bangladesh. The direct sales department also decides upon the commission and remuneration of the mobile sales officers as their salary structure is based on sales performances. Thus this part of the marketing division is very important for the overall growth of the Personal Banking Division.
This part of the marketing department deals with all the promotional activities of HSBC Bangladesh. Prime responsibilities of this department are: Maintaining strong public relations with various media intermediaries, advertising the company’s products, and services, building a strong corporate image of HSBC in Bangladesh.
The promotion department organizes various environmental and social activities in order to build a strong corporate image of HSBC in the minds of customers as well as in the media. Maintaining strong relationship with news media is another major duty of this department.
The promotion also coordinates all the advertising of HSBC products within Bangladesh. Some of the advertising tools that are frequently used by the company are as follows:
Newspapers Advertising: Regular advertisements of various products and services of HSBC are given in some of the countries most renowned daily newspapers.
Billboards: Huge colourful billboards with HSBC logo are found in various major areas of Dhaka and Chittagong. These billboards emphasize on the needs of customers and shows HSBC logo as solution to their needs.
Road Side Signposts: Medium sized multi colour signposts focusing on various products of HSBC are found on the roadsides of various posh areas such as, Gulshan, Dhanmondi, Baridhara, Motijheel, Banani etc.
Mails: Various product updates and new product information are regularly sent to existing customers of HSBC.
Brochures: Various colourful brochures featuring specific products of HSBC are being displayed and distributed to existing and potential customers via branch offices and Mobile sales officers.
So these are some of the promotional activities managed and coordinated by the promotion department.
Marketing Research Department:
This department formulates & executes various marketing strategies of HSBC Bangladesh. This department also administers various marketing research activities on the existing and potential customers of HSBC. Some research activities are as like mystery shopping, critical incident surveys, customer suggestion surveys etc. The results of these surveys are integrated while formulating various marketing strategies. This department also deals with the billing and invoicing of various marketing & advertising costs of HSBC Bangladesh.
These are the major departments of HSBC Bangladesh. Except the branches all other departments are situated at HSBC Bangladesh head offices located at Anchor Tower, Kawran Bazar. Most of HSBC’s operation and activities are operated centrally from the head office. But to deal with customers more completely, the branches are given considerable authority and they operate in a more decentralized manner but subject to verification of the respective departments.
Recruitment, Training and Development:
HSBC Bangladesh limited follows a standard procedure for recruitment and selection. However there is no set time period when this recruitment and selection takes place. Each departmental head places the requisition for recruitment to the Human resource officer, if any vacancy is created due to (1) Retirement, (2) Resignation (3) Death, or (4) Extra workload.
The process for the recruitment of personnel for managerial and non-managerial level differs slightly but the basic steps are same in both the cases. Before mentioning the steps of the selection process it is worth mentioning that there is a unique policy in the HR department which states that a person will not be eligible to apply for any vacancy if his or her first-cousin, brother/sister or spouse works in any of the branches of HSBC. The steps are-
ii) Initial screening
iii) Screening by departmental heads
iv) Filling of the HSBC job application form
v) Screening on the basis of SAF
vi) Initial Interviewed
vii) Selection for written test
viii) Written test
ix) Evaluation of test papers
x) Selection of final interviewees
xi) Final interview
xii) Documentation Check
xiii) Medical examination
xiv) Probationary appointment
In order to enhance the efficiency of the employees, HSBC gives emphasis on the both theoretical and practical training for its personnel. All the training and development programs are aimed at two basic reasons – (1) Skill development (2) Motivation through counselling and persuasion to change value system. For the top management or senior managers there is provision for overseeing training arranged by HSBC group. For the mid-level manager or other managerial level there is provision for regional training courses. Besides, for non-management level there are training programs arranged in different institution and also with in the organization. For the operatives, various on the job-training program are conducted within the company. Finally, HSBC Bangladesh limited follows a performance based promotion system for all levels of its employees.
The company follows both rating and descriptive systems for the performance appraisal. Although the appraisal system is non-participative, the employees are annually assessed with a joint consultation with their immediate supervisor and departmental head.
Rating is mainly done on the following factors-
ii) Knowledge of work
iii) Accuracy and reliability
v) General intelligence
vi) Sense of responsibility and duty
viii) Initiative and self confidence
ix) Readiness to work for and with others.
HSBC has many well-structured welfare policies for its employees. These include well-structured wage & salary policy, medical facility, sports & cultural facilities, provision for loans, free uniform etc. These welfare policies aim at strengthening the relationship of the employees to the organizations and make them more responsible in their respective positions. The brief description of the major welfare policies are stated below:
Wages and Salary Administration:
HSBC follows a well-defined wage structure and fringe benefits for its employees. The wage structure is updated periodically (Two years terms) by the management. The major deciding factors are-
i) Profitability of the company
ii) Average cost of living in the country due to year to year basis inflationary trend
iii) Status of wage earners in similar organization
iv) Restrictive conditions given by the government from time to time
v) Financial benefits status in the company
vi) Components of existing wage structure:
vii) Base basic structure and conveyance allowance
Chapter 8: Industry Analysis
Industry analysis builds on customer & competitor analysis to make more strategic judgment about a market & its dynamics. One primary objective of industry analysis is to determine the attractiveness of a market to current & potential participants. A second objective of a market analysis is to understand the dynamics of the market.
The need is to identify the key emerging factors, trends & threats, opportunities, & strategic uncertainties that can guide information gathering & analysis. Porter’s approach can be applied to an industry, but it can also be applied to a market or sub-market within the industry. The basic idea is that the attractiveness of an industry or market as measured by the long-term return investment of the average firm depends largely on five factors.
A complete understanding of the competitive area helps to guide strategy design & implementation.
Rivalry among Existing Competitors:
The rivalry among the competitors and the growth in the industry depends upon the intensity of competition. A high intensity of competition is observed in the banking sector of Bangladesh. There are more than 50 commercial banks in Bangladesh that fight for their own share of the market. The national banks have the highest banking network in Bangladesh. They compete against the banks with their low cost of operation and government support. Again, Standard Chartered Bank is the largest multinational banking network in Bangladesh that has its network in many metropolitans of Bangladesh. There are other international banks that also take part in the competition and aggressive in nature. This high intensity of competition makes companies difficult to sustain in the long run.
Threat of New Entrants:
The next force highlights the possibility of new competitors entering the market. Existing firms may try to discourage new completion by aggressive expansion & other types of entry barriers. The banking sector of Bangladesh seriously faces the threat of new entrants. However the threat comes from two directions. The first threat comes with the arrival of the multinational banks and their branch expansion particularly due to the booming energy sector. Secondly, the continuous entries of local banks with lower cost structure also possess a severe threat to this industry.
In the context of HSBC the various new & upcoming Banks pose a significant threat, being new entrants in the banking sector of Bangladesh. But HSBC is aware of these potential competitors. So it is trying to expand countrywide to make the sector unattractive & to create entry barrier.
Threat of Substitute Products:
This force considers the potential impact of substitutes. New products that satisfy the same customer needs are important sources of competition including alternative products in the definition of product market structure identify substitute forms of competition.
HSBC continuously faces the threat of various substitute products launched by its strong competitors in the market place. For example, the launch of premier banking by SCB poses a strong threat on HSBC’s premium customer group and HSBC is at a condition where it should launch an even better product. Moreover the various consumer credit schemes offered by various local banks with lower interest rates and cost also poses a strong threat on the HSBC personal banking products. Again the lower service charges at national banks also discourage a wide group of customers to hold account in HSBC. So these are some of the threats posed by substitute products in the market place.
Bargaining Power of Suppliers:
The fourth force is the power of suppliers that may have impact on the producers in an industry. Companies may pursue vertical integration strategies to reduce the bargaining power of suppliers. In the context of HSBC, suppliers are those customers and organizations that provide financing to the firm via depository schemes. If the cost of financing rises, then HSBC will have to increase the interest rate that it charges to its customer in order to be remain the business. This may result in severe customer dissatisfaction & as a result poor profitability. HSBC is aware of this devastating situation.
Bargaining Power of Buyers:
Finally, buyers may use their purchasing power to influence the producers or service providers. Understanding which organizations have power & influence in the distribution channel provides important insight into the structure of competition.
In the banking sector of Bangladesh, customers have a strong bargaining power since there are a large number of commercial banks providing similar services. Customers have a wide range of options in deciding either go for the multinationals or turn to new local banks for getting quality service. Others may also consider the national banks for large credit facilities. Therefore banks have to pursue the customers with attractive interest rates and provide them with tailor made customized services in order to attract the customer or hunt depositors.
In the context of HSBC, the firm is more or less free from the cope of the bargaining power of the buyers. HSBC has its own policies to carry out its operations & employees follow those rules to deal with the customers. But too much rigidity of the prevailing policies while dealing with the clients may under cut its client base as well as profitability. To overcome this worst scenario – a positive & personalized approach to the needs of customer – has become HSBC’s motto.
Strong Corporate Identity:
HSBC is the leading provider of financial services worldwide. With its strong corporate image and identity it can better position in the minds of customers. This image has helped HSBC grab the personal banking sector of Bangladesh very rapidly.
Distinct Operating Procedures:
HSBC in known worldwide for its distinct operating procedure. The company’s managing for value strategy better satisfy customers needs and also keeps the firm profitable.
Everyone in HSBC from the appraiser to the top management has to work to the same schedule toward a different aspect of the same goal, interfacing simultaneously at all level over quite a long period of time.
Strong Employee Bonding and Belongingness:
HSBC employees are one of the major assets of the company. The employees of HSBC have a strong sense of commitment towards organization and also feel proud and a sense of belonging towards HSBC. The strong culture of HSBC is the main reason behind this strength.
HSBC provides hassle free customer service to its client base comparing to the other financial institutions of Bangladesh. Personalized approach to the needs of customers is its motto.
Young Enthusiastic Workforce:
The selection & recruitment of HSBC emphasizes on having the skilled graduates & postgraduates who have little or no previous work experience. The logic behind is that HSBC wants to avoid the problem of ‘garbage in & garbage out’. & this type young & fresh workforce stimulates the whole working environment of HSBC.
Empowered Work force:
The human resource of HSBC is extremely well thought & perfectly managed. As from the very first, the top management believed in empowered employees, where they refused to put their finger in every part of the pie. This empowered environment makes HSBC a better place for the employees. The employees are not suffocated with authority but are able to grow as the organization matures.
All office walls in HSBC are only shoulder high partitions & there is no executive dining room. Any of the executives is likely to plop down at a table in its cafeteria & join in a lunch chat with whoever is there. One of the employees has said, “It’s exciting to know you may see & talk to the top management at any time. You feel a real part of things”.
No Communication Barriers:
Many organizations are trying hard to avoid communication barriers & structural bureaucracies. The little existence of authoritative barriers among the different level of management stimulates a feeling of importance as their work get priority over the position.
At HSBC, workshops are conducted periodically. On the workshops, all people participate as equals with new members free to openly challenge top managers.
Free Exchange of Communication:
At HSBC the main objective is to setting up workshops are to remove authority from an artificial spot at the top, & place it where the most knowledgeable people are, the people closest to the operations. The free exchange of ideas is reinforced by a policy of “constructive confrontation”. Each employee is expected to challenge ideas openly & aggressively but never attack an individual’s motives for presenting an idea.
HSBC also has Management by Objectives (MBO) everywhere. Each person has multiple objectives. All the employees must have to get the approval of their bosses on what they are going to do. Later they review as how well they have performed their job with their management as well as the peer group.
The MBO makes the review a communication device among various groups. The key to the system is a “one-to-one” meeting between a supervisor & a subordinate. In the meeting, the problems in dealing with customers are put forward first & every one dug it to solve.
Modern Equipment & Technology:
HSBC owns the best banking and information technology equipments in Bangladesh. Its ultra modern banking systems starting from terminal pc’s to HUB’s are based on the international HSBC group standards and are the latest. The Hexagon product is one of the best examples in this context.
Visually Appealing Facilities:
HSBC has some of the best visually appealing branches and office premises in Dhaka & Chittagong that highly attracts customer’s attentions and customers also feel the international environment while banking with HSBC.
Narrow Operating Span:
HSBC has a very narrow operating span in Bangladesh. It has only 2 full service branches in Bangladesh situated only at Dhaka and Chittagong. Various geographic segments are currently not availing the services of HSBC due to inconvenient branch location or absence of neighborhood branches.
Absence of Strong Marketing Activities:
HSBC currently don’t have any strong marketing activities through mass media e.g. Television. TV ads play a vital role in awareness building. HSBC has no such TV ad campaign.
No Investment Products:
Currently, the personal banking division of HSBC does not have investment products for its customers. Banning of investment loan by central bank posses a strong pressure to design new products.
Lack of Customer Confidence:
As HSBC is fairly new to the banking industry of Bangladesh average customers lack the confidence in HSBC and judge the bank as an average new bank.
Too Many Contractual Workers:
HSBC has contract workers who lack the commitment with superior quality service and also are pretty dissatisfied as being a contractual worker. This hampers the bank’s service quality as a whole.
Low Remuneration Package:
The remuneration package for the entry-level officers is considerable low. Since other foreign and local banks offer a more lucrative salary package, it would be difficult for HSBC to attract MBA’s in future with its current salary package.
High demand of Housing loans:
Since housing is one of the basic needs of people, there is a high demand of housing loans. HSBC personal banking division can focus on this category of products and grab these segments of customers.
Distinct operating procedures:
HSBC is noted for its distinct operating procedures. Repayment capacity as assessed by HSBC of individual client helps to decide how much one can borrow. As the whole lending process is based on a client’s repayment capacity, the recovery rate of HSBC is close to 100%. This provides HSBC financial stability & gears up HSBC to be remaining in the business for the long run.
The ultimate goal of HSBC is to expand its operations all over Bangladesh. Nurturing this type of vision & mission & to act as required, will not only increase HSBC’s profitability but also will secure its existence in the log run.
More Experienced & Managerial Know-how:
The top management team of HSBC is expert in banking activities. The operating policies established by them are unique & unified. All the members of the team carry out their management roles exhaustively. They equally contributed to HSBC’s superior leadership by carrying out their unique roles. They worked well together, respecting each other’s abilities, and arguing openly without any rancor when they disagree.
HSBC can peruse a diversification strategy in expanding its current line of business. The management can consider options of starting merchant banking or diversify in to leasing and insurance. As HSBC is one of the leading providers of all financial services, in Bangladesh it can also offer these services.
This is one of the most popular and emerging products in Bangladesh, which offers customers total financial mobility. Various other banks and institutions are currently offering this product. HSBC can also take advantage of this product and grab the market share.
HSBC is one of the experts in acquiring various firms and organizations. In Bangladesh it can also diversify quickly by acquiring various local established banks and increase its total operation within Bangladesh rapidly.
The upcoming private local & multinational banks posses a serious threat to the existing banking networks of HSBC. It is expected that in the next few years more commercial banks will emerge. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete against and win the battle of banks.
Absence of various products such as credit card, housing loans is causing various customers to detract from HSBC. This is a serious threat for HSBC Bangladesh.
Moderate Levels of Customer Satisfaction:
HSBC should continuously improve its customer service strategies and the overall service quality needs to win the customer satisfaction undoubtedly.
This is a major problem in Bangladesh. As HSBC is a very new organization the problem of non-performing loans or default loans is very minimum or insignificant. However, as the bank becomes older this problem will arise enormously and the bank may find itself in a more threatening environment. Thus HSBC has to remain vigilant about this problem so that proactive strategies are taken to minimize this problem.
Chapter 10: Work Experience at HSBC
Headquartered in London, HSBC is considered as one of the largest banking and financial services organization in the world. In Bangladesh it has made its place as the fastest growing bank. Being able to work in this world-renowned organization I find myself lucky. I got the opportunity to work in Personal Financial Service- MIS (Management Information) department of HSBC Bangladesh, DAK –main branch.
During the three months of my internship I was placed in the PFS MIS department of HSCB, DAK office under the direct supervision of Mr. Kamruzzaman Mamun, Credit Manager of Personal Financial Services. I heavily enjoyed the work of this department. The work experience gave me a good idea of the overall banking system of Bangladesh and taught me the professionalism at work place.
Job of an Intern
During the internship at DAK office, I was placed in the Management Information System (MIS) department and my prime responsibility was to maintain the database of existing customers and enter new applicant’s data in central database as well as analysis of data and generates different kinds of reports for the bank and Bangladesh Bank. During this period I learned various aspects of loan assessment criteria, customer’s nature etc. Also learnt about the various products and services of the company. Direct intervention with the customers’ database helped me a lot in preparing my project. A brief description of my job duties at PFS CCR MIS at HSBC are given below:
New Application’s Input:
- Enter in formation regarding customer name, address, profession related data, loan related data (amount, type of loan etc).
- Assigning the new application to the approval officers for assessment.
Processing Discrepancy documents:
- Allocating the discrepancies to the appropriate approval officers and update the database of that particular applicant’s database.
- In case of receiving the UDC (Undated cheque), track down status of the particular file and attached the UDC with the file.
- If the loan is approved and all other docs are updated, after the UDC attachment pass it to the Operation department to disburse the loan, which means customer will have the money in his a/c and ready to withdraw whenever as he/she wants to.
Rejected/Dropped/Deferred File Retrieve:
- Kept regular tracks of rejected, dropped, and deferred files with a particular serial number to track it down in the future.
- In case of applicant’s written request I have to return the docs of the rejected, dropped, deferred files, or the UDC (undated cheque).
Daily Loan-update & Different Queries:
- Regular loan update twice a day by Lotus-notes- bank’s personal intranet system linking all the braches of HSBC, helps the sales officers to know about their submitted application’s status and take necessary steps accordingly.
- Received regular customer calls to reschedule the tenor of the loan, or from the collection department regarding the applicant’s address, phone no., entertaining request for urgent disbursement of the loan.
Keeping Trackers & Filing of Different Reports:
- Kept regular tracks of receiving statements & other documents as the timing is very important in sense of SLA (Special Service Agreement) with different departments and branches.
Keeping Trackers & Filing of Different Reports:
- Prepared different reports according the guidelines of the Group and Bangladesh Bank.
- Report like Profit Model, ALCO graph, Delinquent customer trend analysis, and Regional delinquency report, BIM3 report, Flash Report helps to track the financial trend and condition of the bank and take necessary steps.
- Prepared report for Bangladesh Bank like CIB, SBS-3, Non-banking financial institutions report, Provisioning report etc are mandatory for compliance to the Bank Regulatory Act.
- Run and generate different queries according the requirement of other departments like Operation, Approval, Sales & Collections etc.
So these were some of the experiences I have gained during my internship at HSBC gave me clear understanding of the Central database maintenance and the personal banking system of HSBC.
Chapter 11: Credit Assessment Criteria
Approaching the bank:
The credit process starts from approaching to the bank. The customer must apply for loan fulfilling the respective loan application form either through coming to the bank or through contacting a mobile sales officer (MSO). The customer should incorporate necessary papers so that all the criteria are fulfilled and it becomes convenient for the approval officers to assess the loan.
Checking by the Customer Service Officers:
After receiving the application the responsibility transfers to the customer service department of HSBC. The customer service officers check the applications carefully. Whether all necessary information is filled in the application and whether all necessary documents are attached with the application becomes prime concern of the customer service officers. They also verify the signature of the customer in the system, or open the customer a/c before forward the applications to the MIS.
MIS Receives the Applications:
HSBC operates centralized credit system. Therefore, all the loan applications along with other cheques and documents are sent to MIS through intransit mails. MIS officers receive these mails and give primary input of the necessary information in the database. Thereafter MIS officers assign the approval officers according the type, amount, and number of application equally.
Applications Assessed by Approval Officers:
The approval officers assess the applications on a priority basis due to meet the SLA (Service Level Agreement). Usually CEPS (Corporate Employment Privilege Scheme) and Autopay loan applications are assessed by the same day. The loan of Existing (customers having banking relationship more than six months with HSBC) customers is assed within 48 hours where the loan of Non-Customers (customers having banking relationship with HSBC less than six months) is assessed within 96 hours. However, secured loans get highest priority to all the sub sections (CEPS, AUTOPAY, and Non-customer) of applications.
Based on various criteria approval officers approve or reject the loans. First of all, they see whether the applicant fulfils the parameters set by HSBC and the central bank. Thereafter, they follow the rules set by the bank to assess the applications. If any document is not provided with the application the approval officers place discrepancy, which is updated in the database, and the MSO’s are informed about the discrepancies through loan update and make proper adjustment. Approval officers recommend the applications to be approved or rejected or dropped after assessment. After that applications are sent to the credit manager for reviewing and signing the documents before forwarded to MIS for update.
Applications signed by the credit manager forwarded to MIS for updating loan status in the database. After status is updated the application is forwarded to Operation department. Operation staffs check whether all docs (CIB, TIN, Loan set-off form, undated cheques) are in order. Moreover sign on irrevocable letter of authority and demand promissory note are also checked. If everything is in order then the loan is disbursed means money is transferred to the applicant’s account. As operation officers after disbursement assign a serial number and forward the applications to the MIS to update the disbursement input. If the file lacks in any document then it is kept separately until the discrepancy is updated (special cases).
Rejected / Dropped / Deferred Loan:
Rejected files also get appropriate status. After updating the loan status the applications are assigned a serial number for future references incase of re-visit or if the customer wants to have his submitted documents back. But after a certain period of time these applications are sent to central storage and destroyed later on.
Flow of Credit Assessment Policy:
Factors Determining Loan Assessment
Approval officers in case of assessing the loan must comply with some basic requirements and criteria. The group itself determines these parameters and some of them are implied due to Bangladesh Bank’s regulations. Parameter like security type, bank relationship with HSBC and other banks, age, occupation, address, references, CIB (Credit Information Bureau) and CPV (Contact Point Verification) report, previous experience or employment history, loan repayment trend etc are considered and scrutinized before declaring a customer eligible to avail the loan. Some of the important parameters are discussed briefly to have an idea regarding loan assessment.
A person with high net worth is considered as a good candidate for loan. When a loan is backed by property (Flat, Car) the approval officers find the loan easy and secure to assess. In case of secured loan, mostly the security matters. At HSBC the Personal secured loan securities like “Protirakkha Sanchaypatra”, WEDB (Wage Earners Bond), USDB (US Bond), and TMD (Term Deposits) are needed to be lien with the bank.
Before sanctioning loan the credit officers carefully analyze whether the customer would be able to pay out the credit when due, with a comfortable margin of error. Six aspects of loan application usually determine this. They are character, capacity, cash, collateral, condition and control. All these factors should be taken into consideration before approving a loan.
The approval officer wants to know about the purpose of the loan first. They must be convinced that the customer has a well-defined purpose for requesting bank credit and serious intention to repay. If the officer is not sure exactly why the customer is applying for the loan, he may ask for the clarification and comfort ness of bank. Once the purpose is known, the approval officers must determine whether it is consistent with the bank’s current loan policy.
Every loan application form of HSBC bank consist a blank area to be filled by the customer/ borrower describing the purpose of the loan. If any kind of inconsistency arises the approval officers have the right to ask for the proper explanation to the MSO or even to the customers.
The approval officers make sure that the customer has the legal eligibility for requesting the loan and the legal standing to sign a binding loan agreement. In HSBC has a parameter like the minors (age below 18 yrs) as well as the people exceeding the age limit 55 yrs would not be eligible for a loan. At the same time in case of corporate clients the approval officers make sure that the representative from a corporation asking for loan has the proper authority from the company’s board of directors to negotiate a loan and sign the loan agreement binding the corporation. In case of partnership business, the approval officer might ask to see the firm’s partnership agreement to determine which individuals are authorized to borrow the firm. A loan agreement signed by unauthorized persons can be stated as uncollectible, insecure and therefore result in substantial losses for the bank.
While assessing the loans the approval officers concentrate mainly on the borrower’s ability to generate cash flow either from business or from salary or other income. At HSBC, the bank statements are considered as the proof of income. There is always a high chance that the loan application of a borrower with a strong bank statement (inflow to the bank account) will be approved by the credit department of the Bank. In case of unsecured loan, since no security is kept against the loan taken by the borrowers, their ability to generate cash flow becomes the main consideration of loan assessment.
Like cash inflow collateral is also important to support loan request. A person with high net worth is considered as a good candidate for a loan. When a loan is backed by some property the approval officers find the loan easy to make. In case of secured loan, the security matters mostly. At HSBC the Personal secured loans are need to be backed by the government bonds. Other requirements are negligible in this case.
The approval officer and credit analyst must be aware of recent trends in the borrower’s line of work or industry and how changing economic conditions might affect the loan. For instance, at HSBC the approval officers are not very interested to entertain the businesspeople from garments industry and buying house business since, both of these interrelated businesses are vulnerable in nature and under uncertainty. Though the papers (bank statement and tax papers) appear to be strong at present these might turn into weak in near future.
The bank wants to have control on the credit they have made to their customers. The bank watches on whether law and regulation could adversely affect the borrower. At the same time the bank sees whether the loan request meets the bank’s and regulatory authorities’ standards for loan quality. For example, previously HSBC bank used to give Investment Loan to the borrowers so that the borrowers can use that money to invest on government bond at a high interest rate. However, Bangladesh government has made the decision that no loan should be made for investing the loan amount to the government bond. Therefore, HSBC stopped the Investment Loan scheme and is making alternative loan products.
Structure of the Loan:
The approval officer is responsible to both the customer and the bank’s depositors and stockholders and must seek to satisfy the demands of all. This requires first drafting of a loan agreement that meets the borrower’s need for funds with a comfortable repayment schedule. The borrower must be able to comfortably handle any required loan payment, because the bank’s success depends fundamentally on the success of its customers. If a major borrower gets into trouble because it is unable to service a loan, the bank may find itself in a serious trouble. Proper accommodation of a customer may involve lending more or less money than asked for over a longer or shorter period than requested. It is because many customers do not know their own financial need and ability. Thus, the bank’s approval officer must be financial counselor to customer.
At HSBC, the approval officers do not sanction the amount applied for in all the cases. What the approval officers do is that, they analyze the financial need and capability of the borrower and carefully determine the amount the customer is capable to repay to the bank. In addition, HSBC has prepared a flexible repayment schedule of three, four and five years in which borrowers repay the loan through equal monthly installment. Therefore, HSBC is not only sanctioning the loan to the potential clients but also it is making sure that the borrowers able to serve the loan easily.
Chapter 12: Skip Customer’s Demography and Trend Analysis
Delinquency and skip customers
Delinquency is one of the most difficulties that banks are facing at this moment. The primary task of the collection department of bank is to reduce the delinquency level or keep it under control. As the delinquency level of a bank begin to rise it worsens the financial condition and the consequence can be fatal. As skip customers we can refer to those who have overdue or have not paid their monthly installments on time. And there is a basic difference between delinquent and skip customers. Skip customers are those who have overdue and from collection point of view the due amount is uncollectible. As example we can consider the customers who have provided false address and could not be contacted later on, the deceased customers, customers who have shifted to another country permanently, job less, job changed, fraud etc are skip customers.
Data regarding the Skip customers of HSBC shows that it still in a tolerable level but showing a increasing tendency. The main reason is that some certain groups of customers have been delinquent very often and skipping without any trace. According to the Delinquency Cycles of HSBC’s personal asset products, “Skip” customers are the defaulters who have not paid EMI (Equal Monthly Installment) regularly and its not possible to collect or repayment of overdue amount from the customers. Moreover, once a borrower is conserved as a Skip or default customer, cheques are bounced rendering the borrower criminally liable, legal notice served of defaulter to repay; failing this an arrest warrant/summons is issued by the court. Finally, on failure to repayment, those account are written off with due approval of from Manager PFS or Manger CRM. Analyzing the nature of skip customers of personal asset products will reveal whether there is any natural tendency among the skip customers or if there is any correlation among them. Moreover, analysis will help to find out the steps that should be taken to control or bring the skip customers tendency at a nominal level
In-depth interviews were conducted with credit collection officers of the department of CCR of PFS since they are responsible to follow up customers for repaying their loans. In detail conversation with them, eight groups have been sorted out based on skip customers’ characteristics.
Skip Customers Nature
LOB – Loan Overburden:
Most of these customers have taken loans not only from HSBC but also from other banks. Some of them invested the loan amount in own business or taken the loan for friends and relatives. Therefore, too much loans have created over burden on them, which results into irregular payment of loan of HSBC.
JOC – Job Changed:
This group have changed job after availing the loan. Now, they are receiving lower salary than before, this is not enough to repay the loans.
JOL – Job Less:
These customers are currently job less. They have lost their jobs somehow after availing the loan. Therefore, they are having serious problems in paying loan installments.
FRA – Fraud Activities:
Post-approval verification found that these customers have taken loans by providing false documents and information.
SAL – Salary Problem:
These customers are facing salary problems i.e. either their employers are not paying them or they are irregularly paid which results into irregular payment of loan installments.
IND – Intentional Defaulter:
These customers have no intention to pay off the loan. They do not want to maintain any kind of relationship with the bank after availing the loan.
TRA – Traceless:
Customers having invalid contact no, false references and false addresses are included in this group. Therefore, collection officers cannot contact them and force them to pay off the loan.
STC– Shifted to other Country:
Customers have intentionally escaped or permanently shifted to other country without informing the bank as well as not paying the overdue of the loan. In this situation after taking every possible step to contact customers, the loan is written-off from the book and defined as bad and loss. But bank take legal action like filing case against the skip customers.
OTH – Others:
Customers who have other reasons like serious illness, address change, family crisis, temporary financial problem etc. are included in this group.
There are 74 “Skip” customers as of February 2005 of personal asset products of HSBC. The analysis has been done on this database and each skip customer’s nature has been derived by interviewing collection officers’ of CCR, PFS, and HSBC.
Analyzing Nature of Skip Customers:
The following data have been collected from the Skip customers’ database of MIS department and comments are supported by in-depth interviews with credit collection officers, tele-collector and collection supervisor of the department of CCR, PFS.
Ratio of nature of Skip customers based on their characteristics:
From the analysis we can see that about 42% of total Skip customers are having loan over-burden problems, 4% customers are intentional defaulters, 6% customers are not paying due to job-switching or 11% of are job-less. 27% customers are totally traceless; therefore payments are not coming from them. Finally, 4% customers skipped as they move to another country without repaying the loan. Some of them found fraud (6%) or having other problems like illness, financial crisis or have passed away.
Ratio of Asset-Products of Skip Customers:
From the above table, it is found that 92% of skip customers have taken personal installment loan and 8% have taken car loan. The ratio of skip customers of car loan is very low since the vehicle; insurance and registration documentation are held as the security against the loan. If a customer reaches to Grade-6, collection officers initiate the repossession proceedings. Besides, it is noteworthy that there are no skip customers of personal secured credit and personal secured credit since these loans are given against the bonds. Normally the security is encashed if the customer misses three consecutive EMIs. Since the apartment, property insurance and documents are held as security in the case of home loan, there is no skip customer of home loan.
Ratio of CEPS/AutoPay in Skip Customers:
It is found that only 15% of total skip customers are having CEPS/AutoPay background. Since Autopay customers’ salary is deposited in HSBC’s account, their chances of becoming delinquent are very low. In addition, customers with CEPS background are from high-profile companies. Their loan repayment behavior has been good over the years.
Nature of CEPS/AutoPay Customers:
It is found that 5% of total CEPS/Autopay customers are having loan overburden problems, 22% customers are from job-changed and job-left group and 4% customers are international defaulter. Finally, 8 % of the skip customers are delinquent since they are traceless, have no intention to pay or have salary problem. It is evident that, some of these customers have availed the loan at lower interest rate using company reputation or autopay advantages. 10% skip customers have left the country without repaying the loan and have no intention to pay in future. And 4% of the customers have other reason like death, illness, mental retarded etc. However the overall ratio is satisfactory so far.
Companies in Terms of Skip Customers:
It is found that, Opex Group have been producing highest no (5) of skip customers and in the second place Dhaka Sheraton Hotel, British American Tobacco, Pathfinder Development Bd Ltd have been producing the second (3) number of delinquent customers. From interview with collection officers, it is found that those customers are lower level employees (mainly chefs and waiters) but receive high salary (16,000-25,000/=). They don’t have higher education, which is a major reason for unwillingness to pay off loans. Besides, some of them have loans with other banks or they are intentional defaulter. Whenever they get salary, they are more interested in meeting other commitments, family needs etc but not in paying loan installments. Collection officers have found them very problematic and commitment- breaker.
These reasons are applicable for KAFCO’s (2) employees also. Though, they get handsome salary but they are over-burdened with other loans, which create problems in paying loan installments.
Next, Beximco Textile Ltd (2) and Youngone (CEPZ) Ltd (2) are other riskier companies in terms of having delinquent customers. As Beximco Textile Ltd is not a financially strong and profitable company, they do not pay their employees regularly. They pay them once in every 3-4 months, which create problems for a customer in paying loan installments.
Besides, in Youngone (CEPZ) Ltd, the ratio of job-left and job-switch cases are high. More over, this company doesn’t pay its employees regularly also. Therefore, there are some delinquent customers of this company. The Ratio of rest of the companies can be ignored but have to be monitored closely as applicants from these companies might give a significant rise in skip customer’s trend.
Riskier Sectors in Terms of Skip Customers:
From the above table, it is found that 10% of total Skip customers own or work in garment factories; dying, knitting and packaging industries or fabrics manufacturing companies. It has been observed that, people, working in this sector are more likely to change the job, leave the job due to irregular salary payment from the employer. Therefore, this sector can be considered risky in giving loans.
There are about 6% skip customers in Pharmaceutical sector. From interview with credit collection officers, it is found that, most of the people, working in pharmaceutical companies, are sales officers. Their salary is mainly commission-based. When they fail to reaches their sales-target, assigned by their companies, they don’t get commissions. Therefore, they face serious problems in paying loan installments.
There are 4% skip customers in dying, knitting, and packaging sector. In this sector, the practice of job change is very apparent. Moreover it is a sensitive sector, which fluctuates simultaneously with market-demand. Some the owners, who have taken loan from HSBC, became skip customer due to financial instability of the firm. Another analysis, it is found that people, who work in hotel sector, do not have good record in loan repayment, too. Skip customers rate in this sector is like 6%, due to dependability on the market demand heavily. Other risky sectors are Developer and Construction suppliers sector (6%), Buying/Trading Houses (6%) etc.
People, who work in developing and construction businesses, always having shortage of cash in hand. Whenever they get money they invest in the business as soon as possible. Therefore, they often fail to pay loan installment due to crisis of liquid money. The ratio of leaving job or job mobility is high in trading and marketing business. Moreover, people who work in this sector often hide their actual salary and avail the loan by showing their salary much higher. In addition, these people work in sales department. Their fixed salary is very low. They totally depend on sales-commission. Therefore, it is hard for them to pay loan installment when they are in a bad situation.
In the ticketing and shipping cargo sector, is another sector where the rate of skip customers is about 4%. Primary reason for this we say about their income level which is not high and commission based. They are over-burdened with other loans taken from either friends or from other banks. Therefore, they often face financial problem or others difficulties in paying loan installments when there is downtrend in RMG, construction, food supply business. Because these are the business that uses the cargo service mostly.
Besides, some businessmen have become hardcore defaulters who work in buying or trading companies. Usually, those buying houses’ financial stability have been very poor and some of them are losing businesses. Showing false salary to avail the loan is also a common practice in this sector. In addition, in some cases, it is found that, some customers have taken loans by showing ownership of buying houses, though that house does not exist at all. Moreover, some trading houses owner have availed loan by representing false documents and information.
Finally, other risky sectors are- real estate business, cigarette manufacturing and marketing etc. The ratio of rest of the sectors can be ignored as they have very negligible percentage of total delinquent accounts.
Skip Customers in terms of Age, Service Tenure and Income Level:
Loan over Burden:
It is found that, 47% of total skip customers are due to loan over burden is from 25-35 years age group, 38% customers’ monthly income range is 15000-25000 tk, 28% customers’ service tenure is between 2-3 years. 28% of total skip customers are due to loan over burden is from 31-40 years age group, 25% customers’ monthly income range is 36000-45000 tk, 16% customers’ service tenure is between 3-5 years. We can find a trend from the analysis that those who are working more than 7 yrs in a company within income range of 15000 – 25000 tk are overburdened more than other categories.
Analysis implies that, most of the LOB customers’ work experience and income level is not very high. Moreover, they are from young age group. From interview with the collection officers, it is found that, in most of the cases, customer deliberately concealed the actual purpose for taking the loan and used vague terms like “Purchasing household appliances”, “Personal expenditure” etc. Most of these customers have personal loans with other banks or with their friends and relatives and taken loan from HSBC just to repay those loans. Moreover, they provided misinformation regarding their monthly income and expenditure to lower the DB ratio. For providing false contact number and references it was not possible for the collection team to locate or contact them.
It is found that, 67% of total IND customers have more than 3 years work experience, 83% earn more than 25000/=, 50% belong to 36-45 age group- usually all these ratio are considered as strength for a customer. However, IND customers have taken loans using this strength. Even they have provided valid phone numbers, addresses and references, but later on they found as hardcore defaulters and skipped as well. Though having the ability to pay off the loan, they are totally unconscious about payment and they took loan without having the intention to repay.
From the analysis, it evident that 50% of total JOC customers have 2-3 years work experience, 75% earn from 15000 to 25000/= and 75% belong to 25-35 age group. It seems that, the trend of job switching is high in young age group. Therefore, their service tenure is not too long. Besides, 15000 -25000/=, this income group have tendency to change job to get more salary. However, some of them have found that they are receiving lower salary or irregular salary in the new job than before. As a result, they are not paying loan installments. Some of them have availed loan by applying as service-holders, which are actually small businessmen. They do this just to avoid providing authenticated tax paper. It has been observed that people working in pharmaceuticals, trading -buying houses, insurance companies, advertising and media companies and construction – supply have higher tendency of job change.
It is found that, 75% of total JOL customers have 2-3 years work experience, 63% earn from 15000 – 25000 tk and 50% belong to 25-35 age groups. The characteristics of JOL customers are more or less similar to JOCs’ characteristics. It has been found that people working in different types of buying house, constructions – supply business, computer education centers, courier services, internet service providers (ISPs) and RMG sectors, have higher tendency of leaving or switching to another job.
In this analysis it is evident that 50% of total TRA customers earn from 15000 to 25000 tk and 64% belong to 25-35 age groups. It is worth mentioning that most of TRA customers are young and earning minimum salary to avail a loan. From interview with the collection officers, it is found that some of TRA customers permanently left the country. Some of them have left the job without notifying both employer and the bank. Some of them have provided false phone number and references or addresses. So it is too tough to contact them. Therefore, they are totally out of sight of the collection department and considered as skip customers.
Salary Problem: (Fraud)
It is found that, 57% of total SAL customers have 2-3 years work experience, 71% earn from 25000 to 35000/= and 71% belong to 25-35 age group. It seems that SAL customers earn handsome amount of money though having service tenure not too long. Actually, they have availed loans by providing false salary statement, which is much higher than original. In other cases, some companies like garments manufacturing organizations pay their employees irregularly, which make them incapable to pay loan installments.
It is found that, 75% of total fraud category customers have less than 3 years work experience, all of them earn from 25000 to 35000 tk and 67% belong to 25-35 yrs age group. It is significant that FRA customers do not have long work experience and consists of young aged people. Some of them provided misinformation regarding their employer or business concern. Post approval verification revealed that these customers’ mentioned business concerned does not at all have any existence. In most cases, the applicant mentioned their friends and colleagues as immediate relatives and cousins. Besides, some of them have provided false tax paper, LOI etc. Actually, they have taken loan from other banks also by using same techniques, for which they can be considered as professionals. So it is quite evident that these types of customers had no intention to repay the loan from the very beginning and intentionally skipped.
This group contains different types of customer like those who are temporarily job less, having financial problem, sudden death, family crisis, illness etc. A customer may be skipped for these various reasons. Since this group contains very few accounts, the analysis in terms of age, income and service tenure is not done for this group. But measures should be taken to keep this group under control.
Graphical Interpretation of Skip Customers Analysis:
Findings of Skip Customer’s Analysis
Based on the above analysis following facts have come out-
è 42% of total Skip customers are not paying loan installments due to having loan overburden problems. Either they have loan with other banks or they have taken loan from their friends and relatives. They are incapable of paying off these loans since their income have been remaining same. So they have a good reason to be skipped.
è 25% of total Skip customers are not paying for either they have changed their previous jobs or currently they are job less. People, who have changed job, are not paying loan installment since they are receiving lower salary than before. Job less people is not paying because at present they have no source of income.
è 4% of total Skip customers are intentional defaulters. They are not paying without any valid reason though they are capable enough. Form the interview of the collection officers it has come out that most of them have strong political backup and used the political influence to sanction the loan. This kind of cases the bank has not much to do even though anticipating subsequent risk is involved.
è The rest of the customers (27%) are not paying for different reasons like collection officers cannot contact them, customers have moved to another country permanently, some of them found fraud and some of them are facing salary problems or they are facing other problems.
è Among five asset-products, Personal Instalment Loans (PIL) has been facing about all of the Skip customers. This is because, no invoice, quotation, personal guarantee or cash security are required for these loans. Even no down payment is required to disburse this loan.
è Only 15% of total Skip customers have taken loan as CEPS/AUTOPAY. However, a certain group of these people, who had no intention to payback, have availed the loan using this advantage.
è In terms of delinquent accounts and skip cases, comparatively riskier companies are BAT Bd Ltd, Conversyl Departmental Store, Opex Group, Pathfinder Development Bd Ltd, Fabian Group, Newport Express Bd Ltd, Dhaka Sheraton Hotel, KAFCO, Youngone (CEPZ), and Beximco Textile Ltd. These companies have the highest number of Skip customers in terms of both CAR and PIL.
è In terms of number of skip customers’ accounts, comparatively riskier sectors are Garments Manufacturing Companies, Pharmaceuticals, Cigarette manufacturing and marketing, Construction and supply, Dying, Knitting, and packaging, Trading and marketing, Hotel Services, Ticketing and Cargo sectors. These sectors contain the highest number of Skip customers.
è Most of the LOB customers are taking loans by hiding their other loan details, deliberately mentioning higher salary, providing false address and references, contact numbers, showing very less expenditure and hiding the original purpose of taking loans. In some cases skip customers take favor of some fraud officers to conceal their actual designation, salary, date of joining in LOI (Letter of introduction) to make the sanction of the loan reasonable.
è Most of the IND customers have more than 3 years work experience, earn more than 25000/= and belong to 36-45 age group- usually all these ratio are considered as strength for a customer. However, IND customers have taken a loan using these strengths both political and social. Though having these strengths, they are totally unconscious about repayment and become traceless after taking the loan.
è A particular group, withdrawing salary 15000-25000/=, have work experience less than 3 years and belong to 25-35 age group are more likely to switch the job. It has been observed that people working in RMG, Buying House, Hotel business, Trading and marketing business, insurance companies, advertising and media companies and NGOs have higher tendency of job change.
è It has been found that people working in different types of project (UN, CARE etc), computer education centers, courier companies, internet service providers (ISPs) and garments sectors, have higher tendency of leaving job.
è A certain group of people have availed loans by providing false phone number and references or addresses. Another group provided misinformation regarding their employers or business concerns. Post approval verification revealed that these customers’ mentioned business concerned does not have any existence at all. In most cases, the applicant mentioned their friends and colleagues as immediate relatives and cousins. Besides, some of them have provided false tax paper, LOI etc.
è It is also found that, most of the SAL customers have 2- 3 years work experience, earn from 25,000 to 35,000 tk and belong to 25-35 yrs age group. It seems that SAL customers earn handsome amount of money though having service tenure not too long. Actually, they have availed loans by providing false salary statement, which is much higher than original with the help of some officers. In addition, some companies like garments manufacturing companies, buying house, hotel services, construction and supply business pay their employees irregularly which make them incapable to pay loan installments. In the future these type of customer become skip customers.
Chapter 13: Recommendations
Based on the findings following recommendations are provided:
è Customers’ expenditure-income details and loan details must be carefully verified to minimize loan overburden problems. To minimize the risk of facing JOL or JOC customers if any customer changes the job, the company should inform HSBC and present location of the customer will be mentioned too. In addition, the management must verify employments details. The collections officers to collect the loan instalments should handle intentional defaulters carefully. Since they are very sensitive customers, continuous follow up activities should be organized to create awareness about paying loan instalments.
è To minimize the risk of having FRA and TRA customers, all the applicants preferably should have land phone (PABX not applicable) and the concerned people must verify all the contact phone numbers. References must be immediate relatives and verified over phone before approvals. Customers’ address and other information must be also be verified by the concerned people.
è Personal instalment loan may be taken for any purpose but should be specific and clearly stated in the application. The bank may ask for quotation in case of CAR loan. In addition, the loan fund should be disbursed favoring the vendor for specific purposes on a case-to-case basis. This will protect the misuse of funds.
è Company approval required before receiving any application from new company i.e. financial strength, stability, and contribution to the economy. LOI signatory must be verified by authorized signature provided by the company. For Autopay /CEPS customer the financial burden, service length, previous job experience of the customer and social reputation and nature of the company should be taken into consideration with greater importance.
è Management should carefully handle the loan application from some particular companies and sectors that have been producing skip and delinquent customers. Application received from the risky sectors should be verified carefully and more authentications should be created to assess those particular applications.
è Loan applications from customers from young age group, having shorter service tenure and lower income level, should be carefully assess
è Another important thing is that HSBC should make the CIB (Credit information Bureau) report mandatory for every sort of applicants. This report provided by Bangladesh Bank will create more transparency about the comers, reveal the past repayment record of loan facility from other banks, applicants credit worthiness, integrity level would be verified by this report. Making CIB report mandatory for the applicant I think the tendency of skip customers will be reduced to a subsequent level.
è Collection efforts should be given more emphasized to ask the customers make the repayment regularly. Customers with due of 1 and 2 payments should be monitored carefully and prevent them to from reaching the in due 3 category.
è Legal actions taken against the skip and delinquent customers should be strengthen to discourage the applicants becoming delinquent or skip customers.
è Sales team can play an important role in reducing skip customers. Avoiding risky sectors as well as giving importance to banks’ interests and profits will persuade them to bring good customers and help to reduce the skip tendency at a tolerant level.
è Finally, the management should strictly follow group policy before proceeding for any loan application.
Chapter 13: Recommendations for Overall Credit Performance
Ensure Faster Credit Flow:
To ensure efficient and timely credit flow it is important to ensure effective work and output from all the subsections of credit department. Right now, there are five approval officers, five operation staffs where there is only two MIS officer. MIS officers have to do a lot of tasks (profit model, prepare loan update, different queries, monthly, quarterly returns, Bangladesh bank and group report) along with giving input to the database. Hence, it becomes very hard to perform all the tasks within the deadline and therefore bottleneck operation creates. Bottleneck operation delays the whole credit process. So, it is recommended to recruit more people in MIS to remove bottleneck and ensure smooth credit flow.
Ensure Feedback from MSO:
MSOs need to be trained up properly so that they posses a good knowledge about credit. Whenever the approval officers will contact them they are expected to give proper feedback. Though sales and credit are expected to be contradictory department, the mobile sales officers (MSO) should emphasize more on helping the approval officers with their highest effort rather interrupting their (approval officers) work for achieving sales target.
Initiation of Scoring System:
If HSBC assign score on specific loan criteria it will become easier for the approval officers to assess the loans. Scoring system will help to reduce bad applications automatically and the burden on approval officer will be reduced. On the other hand strength of a loan will be stemmed out from scoring system. However, the assessment procedure should remain same.
Reconsider Interest Rates on Savings:
The savings rates of HSBC should be redesign as most of the customers were currently dissatisfied with the savings rates. HSBC should restructure the interest schemes of its savings product to attract more valuable customers.
Introduction of House Building Credit Facilities:
House building credits & loans should be introduced to satisfy customer needs. Moreover to compete head to head with other banks HSBC should launch this product without delay. At present HSBC is financing to purchase complete flats only.
While interacting with the customers at customer service point a huge amount of customers demanded lockers services. With such demand of this service, HSBC should consider of proving locker services to its customers. This will also attract new customers from other banks who are currently offering this service.
Use of Marketing Research:
The management of HSBC should regularly administer marketing research activities in order to keep a regular track of satisfaction levels. Regular research should also be conducted to find out customer expectations about various service aspects. As customer expectations and satisfaction are not static figures regular research at sufficient intervals should be conducted.
Focus on Relationship Strategies:
The bank should focus more on existing customers in order to build strong and loyal relationship with them as satisfied customers more aptly or certainly recommends the bank to friends and relatives. Thus the power of relationship will foster positive Word of Mouth Communication and will attract new customers at a lower cost.
Employee trainings and workshops should be administered in order to give them knowledge and professionalism of customer interactions. With more professional base employees can better satisfy the customers. They should be taught about how to deal with problem customers and how to deal problematic situations. Employees- specifically sales officers should be conscious and taught about the financial aspects of the loans so that it becomes convenient for the approval officers to assess loans.
New Branches Should Be Introduced:
Customers showed a huge dissatisfaction with current locations as HSBC provides services from only 5 branches throughout Bangladesh. New branches should be constructed in Dhaka city satisfying more geographic segments. As convenience of communication to the branch location is a very important factor for the customers HSBC should consider building new branches and ATM’s within Dhaka city as well as other metropolitan cities of Bangladesh.
New Investment products:
New investment schemes should be introduced to meet customer demands. Other banks have large number of investment schemes and services. New personal savings, future investment products should be launched to stay ahead of competition and better satisfy customer requirements.
Customer defined Service standards:
A formal service blueprint should be designed with appropriate service level standards to reduce the variability of service. These standards should be customer defined and customer expectation should be considered while deciding about the service standards.
Defensive Strategy of Service Quality:
HSBC should pursue a defensive service quality strategy that is a slow going strategy rather than offensive service strategy. That is should focus on Costs of operation, increasing Volume of businesses with existing loyal customers, Segmentation of the premium customers, foster a positive word of mouth communication in its existing customers, etc. Though these strategies will take time to develop a huge customer base, they will in the long run bring more loyal customers to HSBC.
Faster Delivery of ATM cards:
HSBC should reduce the amount of time required to provide new ATM cards. Currently it takes 2 weeks while some competitors can provide the card within 2 working days. As the HSBC ATM card comes directly from Hong Kong delays are obvious. HSBC should make necessary arrangements to produce the new cards locally in order to reduce the customer difficulties faced in the absence of ATM card.
Advertising & Promotion:
HSBC should pursue an aggressive advertising campaign in order to build up a strong image and reputation among potential customers. In this context, the valuable strengths should be used for positioning the corporate image of the bank. TV ads should be aired to reach a wider array of customers. The ads should capitalize on building strong relationship, needs of customers and quality service of the bank rather than features of products. Thus and offensive marketing strategy emphasizing customer satisfaction and service quality can bring valuable business for the Bank.
Elimination of Contract Employees:
Contract employees should be eliminated from the customer service departments as they lack the commitment and willingness to serve customers. One serious mistake can take away valuable customers and years of relationship.
Control over the Mailing Network:
HSBC should strictly monitor the courier services that are engaged in delivering mails and documents. Huge amounts delivery failures are being piled up at branches. So HSBC should have some control over its couriers and ensure proper delivery of mails and documents.
Chapter 14: Recommendations for Financial Performance
Efficient Use of Asset:
From the trend analysis of Asset Utilization Ratio, it has been found that the ratio has got a decreasing trend in 2004. This means that asset is not being utilized properly. HSBC should take appropriate actions in order to utilize it assets properly.
Consulting Financial Analyst or Specialist:
On a regular basis, HSBC should consult both the local and international financial analysts. They might have in-house financial experts. But to be more accurate in finding out the problems and determining the possible valid solutions they should also hire outside financial analyst.
Maintaining a Well-balanced Portfolio:
In order to increase the profitability and reduce the credit risk, HSBC Bangladesh should maintain a well-balanced portfolio. For example, instead of focusing on just corporate banking and high profile business loan and leasing, it should also give equal importance to retail banking. The more diversified the portfolio is the lesser the risk of losses.
Reducing the Capacity Ratio to a Tolerable Level:
The Capacity Ratio has been increasing dramatically over the last four years. It means that the amount of loans and leasing has been increasing much more compared to the increase in assets. Therefore HSBC should limit the amount of loans to have better control and avoid bankruptcy.
In order to improve the Net Interest Margin and Net Operating margin, HSBC will have to focus on every element of operating and non-operating expense. If the bank can reduce the cost, it will result in the improved margins.
Chapter 16: Work Experience at HSBC
Case Study: 1
Problem Statement: Some times due to misplacement or faulty maintenance of data in the database, or not on time delivery update of the file is not delivered to the approval officers or to operation on a timely manner. Or the file simply goes missing without any trace.
Procedures to follow in this kind of situations:-
- First task is to make sure that the file was actually received at our end by tracing it in the Intransit Mail tracker.
- If not received on any tracker then we must inform the introducer about the fact that we have not received the file yet. Else if we have received the file then we must follow the later procedures.
- Then ask all the Approval officer’s one by one about the file (as some times they have to receive the file directly for some high graded customers due to top management’s decision)
- If the second phase is also a failure then we have to go for extensive search in all the cabinets and storage facility where the files from the said date on which the file was received, are stored.
- If the file is still missing then we have to inform the introducer for the last resort for this kind of problem, re-apply for the loan (this is not encouraged).
Arousal of this kind of situation is not unexpected as the volume of the files processed each day is on the increasing trend. Due to shortage of the space and improper storage facility this might happen. But the officer in charge has to be extra careful to reduce the margin of error as low as possible. If the file is not found then there is a possibility that the officer in charge might feel panic, but there is no need to panic but they must be careful that the error rate in data maintenance goes down significantly.
Case Study: 2
Reject File Missing
Problem Statement: Some times due to misplacement or faulty maintenance of data in the database, the file goes missing.
Procedures to follow in this kind of situations:
- Track in the In-Transit mail tracker to make sure that the file was actually received at our end for processing on the first hand.
- Then search the database for the file status.
- If it is still missing then we have to search at the approval officer’s cabinets for the file to find out the actual status.
- Ask the Approval Officer, who assessed the file about the file status.
- If the approval officer assures of returning the file to the MIS then we have to perform a thorough search in the rejected file bunch. This is the last step that has to be performed, as the file must be found during this process of missing file retrieval.
If the approval officers are a little more concerned about the files they have assessed then this kind of problems can be taken care of the very early stage of the problem. As every day they are receiving two loan status updates, in which if the information is not available or faulty, they can correct the information and prevent the future problems that will arise from here.
Case Study: 3
Cheque Return or Change
Problem Statement: Some times due to misspelling or some other types of technical faults the cheque’s are returned to the customer for new issuance of Cheque.
Procedures to follow in this kind of situations:
- Perform maintenance (discrepancy) on the database that the Cheque needs to be replaced.
- The introducer gets the information by the next loan update.
- Then the introducer arranges for new Cheque with all after technicality measurements is met.
- During this time the file stays with the Operations Department for the replaced cheque, on receipt of which the fund will be disbursed.
- After the cheque is received MIS is responsible for delivering the cheque to the operations department.
If the introducers become little more cautious then this kind of problems can be avoided very easily. As more or less the majority potion of the Cheque replacement problems are due to the amount or simple spelling mistakes. Being a little more cautious they can avoid this kind of situations by carefully filling up the required fields.
Case Study: 4
Write off letter
Problem Statement: Not in time delivery or not the right recipient or the customer’s social value and status is hurt, as the past record was not taken in to consideration.
Procedures to follow in this kind of situations:
- Make sure that the history of the customer is taken into consideration while performing the job.
- If the customer is a high rated customer like the CRM or Power Vantage, the process is to go through the assigned Relationship Manager (RM).
- If the customer is a hardcore defaulter then the Collection department is going to be responsible for the job to handle the customers and take necessary steps to recover the fund.
Make sure that the write offs and set offs are not interchanged, as both of them are closure from the book.
Case Study: 5
Facility Offer Letter
Problem Statement: This is the letter that is offered to the customer immediate after disbursement of the fund in the customers account. They might have not been informed in time so they can use the fund for their desired purposes.
Procedures to follow in this kind of situations:
- In loan update the introducer can know about the status, or they can check in the system of their respective branch, or can make a phone call in case of urgency to know if there is any discrepancy.
The letter has to be timely dispatched by the operation department. The introducer must carefully study the loan update so that they can inform their customers timely.
Case Study: 6
Conflict Among Different Departments and Group
Problem Statement: Some times the inter-department misunderstanding becomes really a great problem. As the communication is the key and the departments has to work in a harmony to keep the whole system working. If the flow is interrupted by any reason the entire process suffer, as it will not be able to bring out the desire output.
Procedures to follow in this kind of situations:
- This is better to go and talk to the co-workers in other departments and develop personal relationship so that they can deal with the same kind of situation in future. Personal level communication is more effective rather making it an official issue that requires the top managements’ involvement to resolve it.
- If the problem is still unsettled then the top management has to be involved and they will be responsible for settle down the dispute.
- The top management is always informed about the correspondences under taken to resolve the matter.
Development of personal level relationship is the key to deal with this kind of situations. But the involvement and acknowledgement from the top management has to be there. If the top management wants to deal with the matter in a formal way then they should be involved. If they want the matter to be solved at the root level from where the problem has arisen then in most of the cases the in charge officer is dealing with the problem. Here the Service Level Agreement (SLA) comes in handy.
Case Study: 7
Collection Problem (Defaulter customer)
Problem Statement: Some times the customer fails to meet the deadline for their installment payment. This can happen in many scenarios like the customer is willing to pay but due to some unavoidable circumstances the customer could not pay the installment on time. In other scenario the customer is not willing to pay any more amounts. In other cases the worst one is the customer goes abroad without informing. Going abroad cannot be considered as an assured defaulter of loan repayment. As the respective customer might be in an urgent situation to move out side the country. While dealing with customers, especially the 1st bucket customers’ the collection process has to be really cautious taking into consideration the past record of the customers’ repayment history.
Procedures to follow in this kind of situations:
- Carefully study the past loan repayment record of the customer.
- If the customer is in the 1st bucket and the previous loan repayment is satisfactory that means the front-end collection come into action.
- If the defaulter is a hardcore defaulter with previous track record of more than 4 EMI overdue then the hardcore collectors are in action to recover the overdue amount.
Studying the customers’ behavior carefully to make sure that he is a good customer and their reputations in the society is not hurt due to some of the misdeeds by the collectors as they might deal with something really sensitive, that can make a significant impact in the peoples mind as well as in the society.
Case Study: 8
Intransit Mail Problem
Problem Statement: In the Intransit mail applications and the required supplement documents are received by MIS for processing purposes. The timing for receiving the mail has been a major problem for a long time. This has been almost a regular problem that the mails are not arriving or receiving on time. As a result the volume of pending applications and docs goes up by a significant margin (mail packets received after cut off time according to the SLA are considered as pending for the following working day). Also some times the introducers (MSO’s) are coming carrying only their customers’ applications. As a result this becomes tough for us to keep track for the received applications. Missing applications and Cheques are worse case in terms of intransit mail.
Procedures to follow in this kind of situations:
- Follow the SLA to the point and deliver the mails on time. To do this they might have to start few minutes earlier than they usually start for the delivery towards destination from the branch.
- The Introducers (MSO’s) are requested specifically not to deliver anything directly to the MIS; rather they should deliver the applications to their respective branches. From where the initial scanning and checking is done.
- In case of some emergency they are most welcome to MIS but this has to be pre informed via other media, like Lotus Notes or Telephone. Here Lotus Notes is preferable, as this is considered as safe and secure official electronic memo writing and delivery system.
Follow the SLA as specifically as possible and be respectful to the duties and activities of the other department as the respect will earn respect.
Case Study: 9
Month End Pressure of Disbursement
Problem Statement: Disbursement pressure at the month end has been enormous for a long time. As the introducers become more active and the customers are looking for some quick funds for their urgent necessity. Also the factor of incentive comes in to action here. As the MSO’s are looking forward to make the customer avail the loan so that he or she can earn points on the basis of the volume and amount disbursed during the month as well as meets their sales target. As a result almost everybody is looking forward for the disbursement of the loan within the same month.
Procedures to follow in this kind of situations:
- From my point of view there is no solution for this problem. But to make the situation bit easier by preparing support team for the disbursement in case of this kind of situation at the month end. MSO’s can synchronize the whole work procedure by collecting the required documents that are needed to avail the loan timely and thus can reduce the pressure.
MSOs’ should be conscious more about their sales target and keep the sales effort same round the month rather than wait for the month end to come. And operation department can employ extra workforce to handle the month end pressure with more ease.
Case Study: 10
Customer letter regarding the reschedule, reduce interest, or set off loan
Problem Statement: Some times customers come with many kind of request like rescheduling of installment, reducing interest rate, or loan set off.
Procedures to follow in this kind of situations:
- The Operation’s Department is informed about this kind of applications arrives to the MIS.
- Operations Department perform the required maintenance the request if it feasible.
The respective branch should handle this kind of requests or application so that the customers can be sure about whether it is possible to perform the reschedule or change of interest rate. Here both customers and operation time will be saved.
Case Study: 11
Operational mistakes disbursing the loan
Problem Statement: Some times the Operation’s Department makes mistakes while disbursing the loan. Then in most of the cases the matter is solved at the officer in charge. But some times the client might be a highly valuable customer for the bank; in that kind of cases the top management has to be in the scene to settle the matter.
Procedures to follow in this kind of situations:
- The officer in charge doing the actual disbursement or the introducer finds out the error and informs the Operations Department. Naturally this is rectified with in a very short time after the customer receives the facility offer letter. If the introducer comes to know about the matter then it is rectified at the root level before reaching the customers.
- If the mistake is proven then the Operations’ Department has to perform reversal transaction and correct the error.
During work there will be mistakes; this is what a multinational environment teaches. It also teaches, never to make the same kind of mistakes, again and again. But In the operations department while working with lots of data that has to be maintained manually in to the system, there is always chance of error. This is why people involved in the loan process have to be very careful about the process.
Case Study: 12
Problem Statement: Some times the HUB system fails. Also this has been a major problem that the network is not providing ample support, the computers are not providing service of the expectation level and the printing (Hardware) systems are not of the standard and quality.
Procedures to follow in this kind of situations:
- Inform the IT Department with the detailed information about the error to get the best support from them
- Stop working on the problematic computer until the IT support is available.
Inform the IT for any kind of problem with the computer or the network. This has not been a standard practice to troubleshoot the system by the user only. There is a great advantage of this kind of standard practices. The IT is solely responsible for all sort of maintenance, as a trouble shooter gives them the edge as they have the idea what can be the problem with system, because all the systems are almost of the same category with similar software installed on it. Employees should be given a short overview about the problem that arises and possible solution. This might save valuable time and data.
Case Study: 13
Insufficient Fund Problem
Problem Statement: Some times the customers do not have sufficient amount available at the account to pay for the loan-processing fee. As a result the disbursement remains at hold position. As a result the loan gets the status of approved but the customer cannot avail the fund, as the system requires some extra fund available from which it deducts its charges.
Procedures to follow in this kind of situations:
- Inform the introducer about the matter
- The introducer then informs the customer to deposit some fund in the account.
- As soon as the funds are available the loan is disbursed.
This kind of situation can be easily handled or reduced if the introducer of the loan informs the customers about the fees or charges well before the disbursement. Or the introducers can inform their respective customers as soon as they come to know that the loan has been approved.
Case Study: 14
Disbursed in Different Account
Problem statement: One day a customer called the credit department and told that the sales officer informed him that his loan application was approved on a certain date. But even after the approval the loan was not disbursed to his account. And when the sales officer checked the database, he did not find any discrepancies regarding the loan application. What was the problem then?
After the objection, the operations department was looking for the cause of not disbursement. After checking the system it was found that the loan amount had been disbursed to another account. And it happened due to wrong debit authority number, which was written by the sales officer in the application. Partially the operation department was also liable for this mistake because before disbursement it was operation department’s duty to check all the necessary points of the applications for the fund transfer. If the checking was done carefully, then it would have come out that the applicants master account number does not match the debit authority number. Right after the problem identification, it was checked in the system whether the account holder had withdrawn the disbursed money or not. Luckily the account holder did not withdraw the money and a hold instruction was given on the system to hold the account for some period. After that the fund was transferred to the applicants account.
The checking should be done very minutely and carefully. It should be done in such a way that a single point of checking couldn’t be missed in any cases. The respective executives and officers should give more attention while doing the disbursement and fund transfer respectively.
Case Study: 15
Waive the Penalized Amount:
Problem statement: A customer was enlisted as Grade-5 in the database of the bank. Legal proceeding is going to be started by bank against the defaulter. One day, an officer of the default customer called the credit department and requested for reschedule of his boss’ loan according to their wish. While talking with the collection officer, the applicant’s officer misbehaved with the collection officer saying that they had harassed his boss a lot for the collection of the due EMIs. He also told that due to business problem his boss couldn’t repay the EMIs on time. His boss was then ready to repay the loan in three installments and he would also settle the loan in the next three months. But he wanted a favor. He requested to waive the penalized amount that was incurred due to legal proceedings and accrued interest. The problem was that the officials could not waive the penalized amount according to bank’s policy.
After the request pledged from the customer, the top executives of the credit department called a meeting and came to a decision agreed by all that the applicant’s request would be entertained as he could not repay the installment amount due to his business problem. As he wanted to settle the disputes so why not give him the chance of repayment by waiving him the penalty. After the decision, the customer was informed that his application was granted. After that, the customer repaid the loan in the next three months.
While assessing a loan application applicant’s business condition, integrity, credit worthiness etc should be checked very carefully.
Chapter 17: Conclusion
Consumer banking industry has been treated as a prospective financial sector in Bangladesh. More and more banks and non-bank financial companies are entering the industry. The industry became so attractive that multinational bank like HSBC has entered the market and wants to lead the market. However, the entrance of banks like HSBC has brought revolutionary changes in banking services. People get better service than ever before. It becomes lot easier for people to get loans and investing money into diversified portfolios. Sophisticated services like ATM, Phone banking etc. has been brought by this new generation banking.
As the services improved workflow of the banks has been changed dynamically as well. Banks use more sophisticated ways to assess loans. Quick assessment process pressurizes the loan officers to use sophisticated ways of loan assessment. Though HSBC use it’s own investigation along with third party investigation for loan assessment the whole procedure may be developed furthermore. Central bank may become more helpful by providing helps like hosting database (about customers) on the net.