Banks are the most important functionary of financial system of a country. They play a dynamic role in the allocation of credit to the productive sectors. They divert and employ the funds in such avenues which are aimed to develop a country’s economy and add to national wealth. Banks transfer the funds from resigns where it is available in plenty to where it can be efficiently utilized. Banks offer necessary finance to set up and run the industries and provide finance to agriculture and other sectors which can create opportunities for the development of national resources and provide employment on a large scale. Inefficiencies in the financial market and institutions inhibit the formal financial sector from performing the proper intermediation services, which have adverse effects on the economic development of Bangladesh. Bank in general performs three basic functions valued by the overall economy.
q One of these functions is the centralization of credit evaluation and monitoring, which produces information that cannot be easily made public by the borrower. This centralization exploits cost economies and, together with diversified loan portfolio, lowers the price of credit.
q Second, Banks offer transformation services that convert claims issued by borrowers into instruments that in investors are willing to hold. These claims may be transformed with respect to their maturity, liquidity and credit risk. This special role of banks derives from the social welfare enhancements that can be realized when banks co-ordinate the funding of these illiquid assets with liquid liabilities.
q Third, banks provide access to payments system and to a clearinghouse for transactions. Public policies to attain safe and sound banking have traditionally been focused on methods to assure the continuous and efficient functioning of their transactions and payments mechanism.
For efficient operation in the banking sector skilled and talented personnel are also needed. On this point of view, this report is prepared to gather adequate knowledge about the operating procedure of the commercial banks of Bangladesh. In this regard the experiences and knowledge gathered during the period of practical orientation and working as an internee in the National Bank Ltd. Pagla Bazar Branch was manipulated.
Background of the study:
Banking sector in Bangladesh has been flourished during last few decades. It results due to the adoption of privatization policy. Until, Government sector owned, controlled and operated financial sector of Bangladesh with the objective of allocating funds to priority sectors. Loan recovery was not emphasized because the loans were ultimately collectible.
the quality of financial intermediation, judged by loan recovery rates, was dismal. But it is a matter of fact that the financial system was not efficient and failed to attain its objective. Then government decides to reform the financial sector and commercial banks now a day have proved themselves as the life blood of modern economy in Bangladesh. No business, trade, exports, imports. Production, all other economic activities can run without the aid of banking. So understanding the above circumstances, I being a business undergraduate student, become interested in the banking sector. Since internship program is the integral part of the MBA program, completed my internship program in one of the commercial bank named National Bank Limited. I was placed in the NBL, Pagla Bazar Branch and conducted practical training of banking activities for three months from 26, December 2006 to 27, March 2007. It was the requirement of MBA program to perform a study about the internship. This report is the outcome of the study.
Objective of the Report
The objective of the internship program is to familiarize myself with the real market situation, to compare them with the business’ theories & at the last stage make a report on the task. The main objective of this report is to review the General Banking Activities of National Bank Ltd. I tried my best to know how the Bank is providing facilities to its clients & to suggest remedial measure for the development of overall banking activities if required. In addition, the study seeks to achieve the following objectives:
♣ To review the present position of National Bank Ltd.
♣ To find out some problems which are faced by National Bank Ltd in customer recovery.
♣ To determine the qualitative change of customer recovery position.
♣ To determine the sectors that is responsible for increasing the better service.
♣ To familiarize with practical Job Environment.
♣ To have an exposure on the financial institution, especially on banking environment of Bangladesh.
♣ To relate the theories of banking with the practical banking activities.
♣ To present an overview of National Bank Ltd.
♣ To appraise the Trade Service performance of National Bank Ltd.
♣ To identify the problems facing by National Bank Ltd.
♣ To suggest remedial measure for the development of National Bank Ltd.
Methodology of the Study
The report was fully investigative in nature. Data have been collected from two sources:
1. Primary sources.
2. Secondary sources.
This study is mainly based on secondary data available from the various divisions and departments of National Bank Ltd, in addition to these other necessary information have been collected from the daily news papers, relevant journals, annual reports of National Bank Ltd, Bangladesh bank, Ministry of Finance and Planning and publications of other relevant institutions have also been taken into consideration.
Primary sources of data:
♣ Face to face conversation with the bank officers & staffs
♣ Direct conversation with client.
♣ Different manuals of National Bank Limited
♣ Different circulars of National Bank Limited
Secondary sources of data:
♣ Annual report of National Bank Ltd, 2005
♣ Different papers of National Bank Limited
♣ Unpublished data
♣ Different textbooks
Scope of the Study:
This report has been prepared through extensive discussion with bank employees and with the clients. While preparing this report, I had a great opportunity to have in depth knowledge of all the banking activities practiced by the National Bank limited.
Limitations of the Study:
The present study was not out of limitations. But as an intern it was a great opportunity for me to know the banking activities of Bangladesh especially National Bank Ltd. Some restraints are disclosed bellow:
♣ The main constraint of the study is insufficiency of information, which was required for the study. There are various information the bank employee can’t provide due to security and other corporate obligations.
♣ Due to time limitations many of the aspects could not be discussed in the present report.
♣ Every organization has their own secrecy that is not revealed to others. While collecting data through interviewing the employees, they did not disclose much information for the sake of the confidentiality of the organization.
♣ Since the bank personals were very busy, they could provide me very little time.
♣ Another significant problem faced during the preparation of this report was the contradictory explanation of a single subject by different employee.
♣ The clients were very busy to provide me much time for interview.
♣ I carried out such a study for the first time, so in experience is one of the main constraints of the study.
Background/History of NBL
National Bank Limited has its prosperous past, glorious present, prospective future and under processing projects and activities. Established as the first private sector Bank fully owned by Bangladeshi entrepreneurs, NBL has been flourishing as the largest private sector Bank with the passage of time after facing many stress and strain. The member of the board of directors is creative businessman and leading industrialist of the country. To keep pace with time and in harmony with national and international economic activities and for rendering all modern services, NBL, as a financial institution automated all its branches with computer network in accordance with the competitive commercial demand of time. Moreover, considering its forth-coming future the infrastructure of the Bank has been rearranging. The expectation of all class businessman, entrepreneurs and general public is much more to NBL. Keeping the target in mind NBL has taken preparation to open new branches by the year 2007.
The emergence of National Bank Ltd. in the private sector is an important event in the Banking arena of Bangladesh. When the nation was in the grip of severe recession, Govt. took the farsighted decision to allow in the private sector to revive the economy of the country. Several dynamic entrepreneurs came forward for establishing a bank with a motto to revitalize the economy of the country.
National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the private sector. From the very inception it is the firm determination of National Bank Limited to play a vital role in the national economy. We are determined to bring back the long forgotten taste of banking services and flavors. We want to serve each one promptly and with a sense of dedication and dignity.
The then President of the People’s Republic of Bangladesh Justice Ahsanuddin Chowdhury inaugurated the bank formally on March 28, 1983 but the first branch at 48, Dilkusha Commercial Area, Dhaka started commercial operation on March 23, 1983. The 2nd Branch was opened on 11th May 1983 at Khatungonj, Chittagong.
At present, NBL has been carrying on business through its 101 branches spread all over the country. Besides, the Bank has drawing arrangement with 415 correspondents in 75 countries of the world as well as with 32 overseas Exchange Companies. NBL was the first domestic bank to establish agency arrangement with the world famous Western Union in order to facilitate quick and safe remittance of the valuable foreign exchanges earned by the expatriate Bangladeshi nationals. NBL was also the first among domestic banks to introduce international Master Card in Bangladesh. In the meantime, NBL has also introduced the Visa Card and Power Card. The Bank has in its use the latest information technology services of SWIFT and REUTERS. NBL has been continuing its small credit programme for disbursement of collateral free agricultural loans among the poor farmers of Barindra area in Rajshahi district for improving their lot. Alongside banking activities, NBL is actively involved in sports and games as well as in various Socio-Cultural activities. Upto September 2006, the total number of workforce of NBL stood at 2239, which include 1689 officers and executives and 550 staff.
Since the very beginning, the Bank exerted much emphasis on overseas operation and handled a sizeable quantum of homebound foreign remittance. The Bank established extensive drawing arrangement network with Banks and Exchange Companies located in important countries of the world. Expatriates Bangladeshi wage earners residing in those countries can now easily remit their hard-earned money to the country with confidence, safety and speed.
The year 2006 marked the addition of yet another golden stair in the chronicle of NBL’s success story. Compared to 2005, Foreign exchange business of the Bank increased by 34.40% to Tk. 5186 crore, of which export, import and remittance business increased by 34.16%, 31.27% and 56.50% respectively. Total assets of the Bank stood at Tk. 4483 crore on 30.09.2006.
Our Bank invested 25% equity in Gulf Overseas Exchange Company LLC, a joint venture Exchange Company in Oman, operating since November, 1985 under the management of our Bank. The Bank received Riyal Omani 11875 equivalent to Tk.2.10 million as dividend for the year 2006.
Now NBL is on line to establish trade and communication with the Prime International banking companies of the world. As a result NBL will be able to build a strong root in international banking horizon. Bank has been drawing arrangement with well conversant money transfer service agency “Western Union”. It has a full time arrangement for speedy transfer of money all over the world.
Banking is not only a profit-oriented commercial institution but it has a public base and social commitment. Admitting this true NBL is going on with its diversified banking activities. NBL introduced National Bank Monthly Savings Scheme (NMS), Special Deposit Scheme, Consumer’s Credit Scheme and NBL Housing Loan, NBL Small Business Loan, Small House Loan Scheme, Festival Small Business loan etc. to combine the people of lower and middle-income group.
Inspired by its social obligation and commitment and responsibility, NBL has been running a School and College upto Class XII solely on its own guardianship. From the very inception, this institution has been maintaining a good track record of results at the SSC and HSC Examinations. Conducted by an well-educated and trained team of teachers, reputation of this institution has been increasing day-by-day as a result of their relentless and sincere endeavor.
Transparency and accountability of a financial institution is reflected in its Annual Report containing its Balance Sheet and Profit & Loss Account. In recognition of this, NBL was awarded Crest in 1999 and 2000, and Certificate of Appreciation in 2001 by the Institute of Chartered Accountants of Bangladesh.
A team of highly qualified and experienced professionals headed by the Managing Director of the Bank who has vast banking experience operates bank and at the top there is an efficient Board of Directors for making policies.
18, Dilkusha, commercial Area
GPO Box No. 3424, Dhaka
Cable: Nation Bank Dhaka
Tel: PABX: 9563081-5,
Fax : 880-2-9563953, 956940, 95543, 9554314
E-mail: [email protected]
Website: www. nldbd.com.
Nearly 50 Branches of National Bank in Bangladesh
Objectives of NBL
- Bringing modern banking facilities to the doorstep of general public through diversification of banking services, thereby arousing saving propensity among the people.
- Forging a cordial deep-rooted and firm banker-customer relationship by dispensing prompt and improved clientele services.
- Taking part in the development of the national economy through productive deployment of the Bank’s resources as well as patronizing different social activities.
- Connecting clients to modern banking practices by the best application of improved information technology, so that they get encouraged to continue and feel proud of banking with NBL.
- Ensuring highest use of the professional workforce through enhancement of their aptitude and competence.
- Responding to the need of the time by participating in syndicated large loan financing with like-minded banks of the country, thereby expanding the area of investment of the Bank.
- Elevating the image of the Bank at home and abroad by sustained expansion of its activities.
Business Goal of NBL
To patronize, sponsor and encourage games & sports, entertainment and other socio-economic activities, alongside providing the best services to the clients.
NBL’s core visions are given below:-
- Establishing top grade efficient bank through best application of modern information technology in business activities.
- Offering high standard clientele services and proper co-ordinate of foreign trade business.
- NBL’s Corporate Missions are-
- To provide excellent quality customer service
- To provide high quality financial services in export & import trade.
- To maintain corporate & business ethics.
- To become a trusted repository of customer’s money and their financial advisor.
- To make stock superior & rewarding to the customer’s/share holders.
- To have a sound capital base.
- Create wealth for the shareholders.
- Local Bank Global Network.
- Together Toward Tomorrow
- Together Toward Tomorrow
- In Serving Customers
- Credibility & secrecy
- In Serving the Bank
- Total commitment & dedication
- Excellence through teamwork
- In Carrying Ourselves at Work
- Honesty & Integrity
Services & facilities of NBL
National Bank provide various services to its customer/clients. Some of those services are discussed in below:
It is the abbreviation of the society for Worldwide Inter bank Financial Telecommunication. SWIFT is a bank owned non-profit co-operative based in Belgium servicing the financial community worldwide. SWIFT global network carries an average 4 million message daily and estimated average value of payment messages is USD 2 trillion.
SWIIFT is a highly secured messaging network enables Banks to send and receive Fund Transfer, L/C related and other free format messages to and from any banks active in the network. Thing SWIFT facility, Bank will be able to serve its customers more profitable by proving L/C, payment & other messages efficiently and with up most security. Especially it will be of great help for our clients dealing with Imports, Exports & Remittances etc.
National Bank limited began to make full use of the services of SWIFT right from 2002. In 2003 the software of SWIFT has been shifted from SWIFT. Alliance Entry to SWIFT Alliance Access and 5 major AD Branches of NBL have been directly connected with the SWIFT network. Up to the end of 2003. NBL have executed bilateral key exchange (BKE) with 233 banks across the world which is increasing continuously.
2. Credit Card Programme of NBL:
In this age of modern technology, millions of people across the world have been using credit card every moment as a medium of exchange and increasingly becoming more & more confident in using credit card. Master card & Visa card are the two most popular and globally used brands of Credit card. NBL has set an enviable precedence by being the first among domestic banks and financial institutions to issue internationally usable master card from `1997.
It may be mentioned that National Bank Ltd. have issued credit card from 1st July 2003. NBL use two types of credit card.
– Visa Card
– Master Card
For creating credit card in NBL people needs three things. Suppose.
– They have to provide security
– tin Number
– Passport/ Identity certificate from Union Parisad Chairman.
Visa Card & Master card may be Golden or silver. It is mainly depend on amount of dollar ($). Suppose if anyone want to create. Golden visa/Master card then he/she has to pay more than $ 2000 & for silver card has to pay less than $ 2000. By Using Master card or Visa Card, one can be purchased all necessary goods & services from their selected out lets.
3. E-BSW/ATM Service of NBL:
EBSW for electronic Banking service for windows which provides a full range of reporting capabilities and a comprehensive range of transaction initiation options.
ATM for Automated Teller machine (ATM), a new concept in modern banking. It has already been introduced to facilitate subscribes 24 hours cash access through a plastic card.
In the dynamic process of modern banking, NBL has elevated its services to the highest standard by bringing E-Banking and ATM services at the doorstep of clients. Today, the entire banking system has been undergoing a revolutionary change in providing improved services to the clients.
One of the important media in this process of client service improvement is ATM. Use of ATM has made the life style of clients much more easier and comfortable. The notable characteristics of ATM are-
1. Payments facility for 24 hours a day
2. Arrangement for payment of Bills.
3. Instant inquiry
4. Multiple location facility at Dhaka, Chittagong & Sylhet.
5. Facility for payment of instatement under the monthly saving scheme etc.
4. Tele Banking:
Tele Banking allows customers to get access into their respective banking information 24 hours a day. They can transfer any amount of deposit to other accounts irrespective of location either from home or office.
5. Western Union Financial Services:
National Bank Limited signed an agreement with the Western Union Financial Services, USA in 1993. Millions of people from different parts of the world are sending money with confidence to their near and dear ones through the Western Union. Western Union has the most modern technology for remitting money within quickest possible time from any part of the world through their more than 1.70.000 representatives in 190 countries and regions.
The Western Union is a globally reputed name in money transfer services and data exchange for over 150 years. Western Union has continued its tradition of possessing the latest technology and handling wide scale remittances.
Payment of remittances by expatriate Bangladeshis through the Western Union ace being made at 76 branches of NBL. These branches are connected with the on-line computer system of the Western Union.
NBL brought a substantial amount of foreign exchanges into the country through the Western Union in 2003. which is 44% higher than that of 2002.
6. Merchant Banking:
The Merchant Banking Division of NBL is playing an important role in merchant banking activities in the country. The context of Bangladesh, works coming under the purview of the merchant banking are.
– Banking to issues
– Under writhing
– Issue management & portfolio management etc.
Merchant Banking Division will be able to pay increasing role in development and expansion of diversified banking services including issuance of mutual fund in the private sector, expansion of micro-credit, introduction of discretionary and non-discretionary custodian service, introduction of profit and loss sharing accounts, certificate Deposit Scheme, factoring credit syndication, project syndication, pre-investment study, corporate counseling, etc.
7. Other Services of NBL:
– Rural Credit Program
– National Bank Foundation.
– Human Resource department
– Information system & Technology Division
– Sports & cultural Activities etc.
Hierarchy of NBL (Pagla Bazar Branch)
Objective of NBL in Pagla Bazar Branch
- The main objective of NBL Pagla Bazar Branch are given below-
- Provide better customer service
- Try to hold better position in Bangladesh compare than other branches & banks.
- Profit maximization compare than other than other.
- Make a effective & efficient goodwill by their activities & performance.
Limitation of NBL in Pagla Bazar Branch:
NBL, Pagla Bazar Branch has some limitation by which it may not provide better service or hold better position compare than others. Some limitation of this branch are-
- Lack of office space
- Computer has insufficient in order to their work.
- Lack of officers according to their department.
- On line facility are so limited.
Structure of Daily Affairs of NBL
National Bank Ltd
Pagla Bazar Branch
CHAPTER THREE: INVESTMENT PERFORMANCE
LOAN & ADVANCE DEPARTMENT
This department is one of the most significant departments in the bank. Loan and advance department is Warming vital role by financing the various sectors in the economy, expressing the close and intensive supervision of the project to ensure satisfactory performance of the economy.
Investment decision is one of the most import decisions that have to make by the management of the bank. A big portion of income of commercial Bank comes from investment. The bank, there are an investment committee. They shall perform and be responsible for the following to check daily deposit, investment and other advances of the bank and find out lend able surplus fund and invest in call market or in short term bonds as decided to cheque cash reserve requirement and till requirement 10 meet customers need. To check statutory liquidity reserve (Secondary Reserve) poison and its investment on the basis of maturities allowable on investment policy of the bank to check balance needed to meet claims with foreign correspondents. The committee shall continuously study market and examine existing investment; another is investment by the branches. Head office investment consists of investment in Bangladesh bank security investment and some, foreign investment and branch investment consists of interment, as loans, advances and guarantees business.
Bilks make loans and advances to general customers, trades, businessmen and industrialist against the security of some assets or on the basis of persona! security of the borrower Generally the bank lends money from our of the deposits at various rates of interest higher then those paid by him on the deposits, in is the practice te incest up to 70-75%ofihe amount of the deposit.
Principles of lending
The principle of lending is a collection of certain accepted time tested standards, which ensure the proper use of loan fund in a profitable way and its timely recovery- Every person should follow the five principles in its lending activity. This are describe given below :—
Safety should be the prior importance in the time of sanctioning the loan at the time of maturity the borrower may not willing or may unable to pay the loan amount so in the time of sanction the loan. At the time of maturity the borrower may not willing or may unable to pay the loan amount. So, in the time of sanctioning the loan adequate securities should be taken from the borrowers to recover the loan. Banker should not sacrifice safely for pro /liability.
Banker should be careful in the selection of security to maintain the safety of the loan. Banker should property evaluate the proper value of the security. If the estimated value is less than or equal to loan amount, the loan should be given against such securities. In the time of valuing the securities the Banker should be more conservative.
Banker should consider the liquidity of the loan in time of sanctioning it. Liquidity is necessary to meet the consumer need.
d) Adequate Yield:
As a commercial organization Banker should consider the profitability. So banker should consider the interest rate when go for lending. Always Banker should fix such an interest rate for its lending which should be higher than its savings deposit interest rate. To ensure this profitability Banker should consider the prospect of the project.
Banker should minimize the portfolio risk by putting its fund in the different fields. It bank put all its loan able fund in one sector it will increase the risk. Banker should distribute its loan able fund in different sectors. So if it faces any problem in any sector it can be covered by the profit of another sector.
There are two types of Loan, suppose-
(i) Short-term Loans (Time period is less than 1 year)
(a) Cash credit Hypo (CCH)
(b) Secured over draft work order
(c) Secured over Draft-General [SODG)]
(d) Secured Draft-Share [SODS]
(e) Credit Card (CC)
(2) Long Term Loans (Time period is 1 ear & above)
(a) Consumer Credit Scheduled (CCS)
(c) House Building Loan (HBL)
(d) Employee House Building Loan (HBL)
(e) Car Loan.
Short term loans:
a. Cash Credit (CC):
A cash credit is an arrangement by which a banker allows his customer to borrow money up to a certain limit. Cash Credit arrangements are usually made against the security of commodities hypothecated or pledged with the bank. This arrangement like the overdraft is advantageous from the customer’s point of view, as he required to pay interest on the actual amount used by him.
Salient feature of the cash credit:
* Cash credit is offered for helping the business people for the need of their working Capital. Sometimes there may be shortfall in their capital. So, cash credit is a credit which is arranged to finance their working capital as when they need the capital for running business as usual.
* Collateral security is required for the cash credit. It may be financial obligation
movable property, moveable property etc.
* Risk fund and service change is not required in the case of cash credit.
* Interest is sixteen percent on the cash credit. The interest is payable as quarterly basis and original amount is payable at the end of the period along with the interest due on it.
* The duration for the cash credit is for one year.
b. Cash Credit (Hypothecation):
Under this arrangement the credit facility is grantees to the borrower against the security of pledge of goods in the form of raw materials or finished products subject credit restrictions the borrower sings a latter of pledge and surrenders the physical possession of the goods pledges under bank’s effective control but retains the ownership with himself the goods are stored on bank’s store and a man are engages by the bank for taking care of the goods by the borrower’s expense. In case of outstanding amount of sale proceeds. Sometime collateral securities by way of legal or equitable mortgage of immovable properties are also obtained before disbursement of the loan.
c. Secured Over Draft (SOD) General (G):
Advances allowed to the individual. firms against financial obligation (lien on FDR) and against assignment of work order for execution of contractual works falls under this head this advance is generally allowed for a definite period and specific purpose in national bank ltd. if the financial obligation is of another bank then the interest rale is 16% and ihe financial obligation is of their own bank then the interest rate is 3% above of the financial obligation.
Charged Documents are—
• DP (Demand Promissory Note-‘Demand Note)
• Letter of Partnership/Resolution of the Board of Directors.
• Letter of Arrangement.
• Letter of Continuity.
• Letter of Lien (In case of advance against FDR, PSP/MSS etc.)
• Letter of ownership (In case of advance against Share).
d. Secured Overdraft (SOD) Share (S) :
1. Interest Rate: 16.5%
2. Security: Double of Loan Amount.
3. Condition of Share: Fresh share.
4. Maturity: I year (normally)
5. Payment Method: Any time of the period
6. Interest Charge: Quarterly
7. Guarantee Letter:
8. Sign up of charge Documents
e. Secured Overdraft (SOD) Work Order:
1. Letter of Approach/Proposal
3. Notice of the Board Meeting
4. List of Directors.
5. Letter for Genuineness of Work Order (Addressing he firm who gives the work order from) NBL.
6. Letter of Order (From the seller firm.
7. Confidential Credit Report of the seller firm maintained in NBL.
8. Confidential- Credit Report of the seller firm maintained in NBL.
9. Sanction letter under security (a) Work Order, (b) Persona! Guarantee of die Chairmen of the Company, (c) Personal Guarantee of all the Directors of the Company.
General procedures of sanction cash credit:
I will try to describe the overall process of sanctioning cash credit in a brief:—
The Clint applies to the branch in charge for sanctioning their wanted amount of loan the panr is required lo mention category of loan amount name of the loan taker and securities they want to mortgage favor of bank.
Scrutiny by an officer of loan proposal whether party has submitted the document, such—
• Debtor ownership’s information
• Trade license
• TIN (Tax identification No.) and Tax payment certificate.
• Personal net worth statement. It shows assets liabilities, net worth, Payable to bank/financial institution, real Estates (Encumbered and unencumbered) etc.) Stock report: I low many goods in their hand their quantity and worth of the goods.
• Transaction report (if necessary)
• Location map to the proposed security.
• The photo of collateral security.
• Memorandum (in case of Limited Company).
• Board of Resolution: Which describes the opinion all of the directors for obtaining the loan.
A CIB form is prepared and sends it to Bangladesh bank via head Office of NBL for their recommendations. CIB form consists of three pans and a forwarding letter these there parts are information about related nosiness information of owners only information of debtor/borrower only.
Credit Information Bureau (CIB)
Due to the irregular and insufficient flow of credit information into the banking system the proportion of classified loan in relation to the total credit is very high this proportion of classified loan generated a bad influence in the banking sector in order to eliminate the bad culture and to equip the banks with proper credit information for loan application processing, different committees and groups such as national commission put proposal for credit information bureau (CIB) forward for money banking and credit, 1986 the World Bank report. 1987 and financial sectors task force reports, 1990. In the backdrop of the above.
Proposal Bangladesh bank approved the CIB in 1992 the main objectives of the CIB are to collect all shorts of information in respect of the borrower (having outstanding balance of Tk. 10 lac and above) from the scheduled hanks. And others non banking financial institutions and creation of computer database in order to feedback the same information 10 the banks and others non banking financial institutions for quick processing of new loan applications, rescheduling etc and preparation of virus reports for MIS our poses to used in Bangladesh bank and ministry concerned.
The branch in charge issues a letter favoring credits division head office for obtaining CIB Report.
The branch in charge or an officer then take the responsibility to visit and valuate the security and make a valuation certificate.
Charging of security
A wide range of securities such as cash, goods moveable stock of raw materials finished goods/ merchandise immovable property and intangible assets are officered to banks as cover for a loan. In Case of borrower’s inability to repay the banker can fall bank upon the securities in order to make the securities available to the banker, in case default by a customer a charge should be created on the security creating a charge means making available as a cover for an advance the method of charging should be legal prefect and complete.
Importance of Security as cover for loans and advances
• Protection of interest.
• Ensuring the recovery of the money lent.
• Provision against an unexpected change.
• Commitment of the borrower.
Charge a security:
• Making it available as a cover for an advances.
• Methods of charging should be legal and perfect.
• Any laxity will affect the claim.
Methods used in charging depend on
• The type of property to be charged.
• The nature of advance.
• The degree of control required over the debtor’s property
Common method of charging securities
Methods of charging security
Attributes of goods tangible security
• Easy ascertainment of value.
• Stability of value.
• Easy to supervise
Mere tangible securities offered for a loan are not enough it should rightly choose borrower and proposal.
In the case of hypothecation an equitable charge is created in lenders favor over property or goods for the amounts of debt. The owner however as well as possession. The bank is given access to goods whenever it so desires. The borrower furnishes periodical retain of
stock with him to the bank such an advance is granted by the bank only to a person in whose integrity it has full confidences. Hypothecation is an arrangement to create floating charge over the present or future movable assets on the borrower in circumstances where possession of the goods is either inconvenient or impracticable.
Right of the creditor to retain goods or securities belonging to the debtor until the debt due from the letter is adjusted.
An implied pledge and the banker has a right to sell the property after reasonable notice, provided the property comes into his hand in the ordinary course of his business.
Transfer of an interest in specific immovable property for the purpose of securing the of debt or the performance of an obligation.
Types of mortgage:
There are two types of mortgage. Such as-
1. Simple/Legal/Registered Mortgage
A perfect from of security, she transfer of the title is affected only by a registered deed with the office of the Sub Register,
Procedure for creating-
a) An installment called “Mortgage Deed” is to be executed and signed by the mortgagor and two witnesses.
b) The instrument must be registered.
c) Original Title Deed along with up to date non-Encumbrance and valuation certificate, rent receipt etc. must be obtained.
d) Income tax clearance certificate.
Common compulsory documents:
a) Mortgage deed (certificate copy).
b) Registration receipt in original.
c) Chain of documents for title (original if available).
d) C.S.S.A. and R.S. parcha.
e) Up to date rent receipt.
f) None Encumbrance certificate.
g) Power of attorney.
h) Legal of attorney etc.
i) Valuation certificate and
j) Location plan4 set plan etc.
It is the easier and most economical and no registration. Created by a simple deposit Original title deed with an intend to create a securities thereon for the debt.
Procedures for creating:
a) The mortgagor should be deposit the original title deed together with memorandum on none Judicial Stamp.
b) Registered irrevocable Power of Attorney must be obtained.
c) Deposit of original title deeds along with latest non-encumbrance certificate, up to
date rent report, valuation certificate etc. from competent authority.
d) Legal opinion of the property.
e) An equitable mortgage register must be maintained where in the details of the documents must be recorded.
Common compulsory document:
i) Chain of original documents for the title.
ii) Original title deed.
iii) C.S.S.A. and R.S. parcha.
iv) Up to date rent receipt.
vi) Registration power of attorney.
vii) Legal opinion.
viii) Valuation certificate.
ix) Location plan.
x) Non-Encumbrance certificate.
Right of the Mortgagor:
• Right of redemption of the property on payment of mortgage money.
• Right to inspect and make copies of documents of title at his costs.
Right of the Mortgage’s:
• Right to sue for mortgaged money.
• Right of Sale.
• Right of accession to property.
• Right to send money.
• Right to possession.
• Right to claim mortgage money out of sale proceed.
- Letter of acceptance
- Demand promissory note
- Letter of arrangement
- Letter of disbursement
- Letter of hypothecation (When goods are hypothecated as security)
- Letter of authority
- Letter of continuity –
- Letter of guarantee
Long term loans: There are five types of long term loans such as –
(a) CCS (Consumer Credit Scheme):
This type of loan is issued for purchasing goods which are used in our domestic life. Such as TV. PC. AC refrigerator.
Requirements & Practices
(a) A SB Account in Bank.
(b) Fill up the application of “Consumer Credit Scheme
(c) Two copies of photograph.
(d) Fill “Guarantee Bond” by two persons:
(1) Guarantee Bond given by Spouse”
(2) Guarantee bond given by Grade 1 Officer: Requires stamp of Tk. 150
(e) Price Quotation: Letter against which pay order will be issued,
(f) Bank will verily whether the GB (Guarantee Bond is genuine.
(g) Office note including particulars,
(h) Client issues 2-1 advance cheques signed,
(i) Client’s account must have enough funds.
(j) 20% Down Payment,
(k) Interest rate 18% per year.
Charge document are:
(I) 3 set of Debit Credit Vouchers.
(m) Disbursement Letter.
(n) Letter of Arrangement.
(o) Promissory Note (2 copies): Stamp of Tk. 20
(p) Letter of Installment
(q) Letter of Undertaking
(r) Letter of Hypothecation: Stamp of Tk. 150
(s) Sanction letter of CCS (3 copies.) -‘
Payment of installment in example:
loan amount is : 50.000/-
Down payment is 20% of loan amount 50000 x 20% = 10,000.00
The client will get 40,000/-
Also, the interest 2% (as service charge) + 2% (for risk fund) = 4% will be taken over the loan amount with the down payment.
In case of sanctioning CCS loan against FDR, interest rate is not fixed, interest rate = FDR interest rate + 3%
Suppose FDR interest is 6%. then the CCS interest rate is =6%+3%=9%
(b) House Building Loan (HBL):
NBL provides loan for the purpose of building a house. Here adequate securities is required. The applicant can keep mortgage of land and building. FDR can also be lien-After completion of the house, the person can repay the loan amount from the rent received of the house. Here, interest is 16% per quarterly. Here, the procedures and needed documents are same as cash credit. Letter of continuity is nor required, but sometimes Engineer’s certificate is required.
(c) Employee’s house Building Loan (EHBL) :
The employee of NBL can take the opportunity of this loan. Here, interest is 10% pqr quarterly. Rest of the procedure are same as HBL.
(f) Car Loan:
The executive of NBL can buy car with help of car loan facility. This loan is interest free for them. Only they have to pay principle on monthly basis.
(e) Loan (General)
This type of loan is disbursed for the purpose of establishing firm, capital, and machinery. Shopping mall etc. Here the limit of loan is high. So. adequate securities are Liken before disbursement the loan. Interests are also 16% per quarterly.
Classification of Loan.
A Joan is substandard, Doubtful and Bad. Classification can be—
i) Objective judgment (Time basis)
ii) Qualitative judgment (Transaction basis).
Bank has to keep provision on the following rate—
Unclassified – 01%
Substandard – 20%
Doubtful – 50%
Bad and Lost – 100%
Guarantee Assessment of Borrower
Before accepting a guarantee as security the banker has to assess carefully the 3C”s of
the guarantor, such as—
It is the greatest asset any individual can have. The character indicates his intension to pay the amount of advance. Banker must know who the borrower is and what is the reputation of the borrower in the business? Is he sincere and honest in honoring his commitments? All these points have to be considered and a balanced opinion in regard ;o the character borrower is formed.
It means the ability to employ the funds profitable and repay the advances according to the terms and condition of the sanction. Banker must study whether the is well established in (he line of his business or is still making experiments. Has he the required
knowledge to earn in the business? This will enable the banker to arrive at a conclusive whether the borrower has the capacity to run the business.
The third deals with the capital of the borrower. The borrower must have his own stake in the business i.e. mistake part of the risk in the business. The banker must study the business risk and security risk about business of borrower. For that, banker must be collect information of risk by analysis of Lending Risk Analysis.
NBL,Pagla Bazar Branch gives following types of guarantees, which are-
i) Bid Bond (The guarantee is given for participating in lender)
ii) Performance Guarantee (It is given for various work order).
There are some other advances of NBL that are adjusted to foreign exchange, such as
Loan against Imported Merchandising (L1M)
Packing Credit (PC)
Security Overdraft (Export)
CHAPTER FOUR: SOCIAL WELFARE ACTIVITIES OF NBL
Corporate Social Responsibility
Earnings the highest level of trust requires the balanced provision of value to four constituents: customers, shareholders, market environment & society and employees. Through this process, the Bank aims to contribute to the sustainable development of the society as a whole, and to fulfill corporate social responsibility(CSR). the bank has taken strong initiative in various areas for attaining greater social goals.
To reinforce CSR activities, the bank has focused in the areas of employment, education, sports & cultural activities, and disaster relief.
NBL has been continuously creating new fields of employments every year by way of expansion of its business activities and branch networks. In 2007, the bank created employment for 238 personnel’s.
National Bank Foundation was established in 1989 for full filling responsibilities for welfare of the society. It has been running the National Bank Public School and college in Moghbazar , Dhaka. There are 826 students studying in this school section from class I to class X, while 80 students at the college section. In 2007, 80 students appeared at the SSC Examination and 64 students appeared at the H.S.C Examination, of which 94% and 84% came out successful respectively.
The Bank has been accommodating prospective graduates of recognized universities for completing their internship.
NBL also awarded stipend scholarship to the brilliant children of the employee of the bank.
The Foundation has, therefore, taken up the following programs to improve the country’s educational scenario:
a) Support to Model Forqania Maktab
b) Scholarship/lump grant for poor and Meritorious Students
c) Financial support to Educational Institutions
At the moment NBL has around 950 different kinds of running projects divided into 22 different industrial sectors. NBL believes in green Industrialization. It is a common practice of our bank to take clearance from all the concerned Government Authorities to establish each project including the clearance for any kind of environmental hazards created by the specific project. NBL takes maximum possible care to protect the environmental pollution by its projects. In this regard, NBL encourages its Dyeing & Printing Projects to establish Effluent Treatment Plants (ETP) to protect water and soil from pollution. All the Brick Fields financed by IBBL has at least 120 feet chimney to minimize the air pollution. NBL assures obtaining NOG of various Authorities such as Explosive Department, fire services department, Rupantorito Prakitic Gas Company etc. for setting up gasoline/CNG filling station.
Under the beautification program of Dhaka City Corporation, National Bank Bangladesh Limited is doing the work to enhance the beauty of the road of Dhaka City Corporation starting from Rajarbag traffic Signal to Kamalapur Railway Station by plantation of beautiful plants and trees on Road Island
Income Generating Programs
Access to required finance and other related inputs may help many to become self employed. In absence of such opportunity, the unemployed youths entangle themselves in various anti-social activities National Bank Foundation has, therefore, taken up the following Self-employment projects:
3. Poultry Keeping
4. Rural Health Work
5. Milk Cow/Goat rearing
6. Small Trade
Health and Medicare Programs
Health and Medicare facilities are the basic and fundamental rights of each individual but most of the people of our country are still deprived of it. The Foundation has, therefore, taken up the following:
programs to extend health, Medicare and sanitation facilities to the urban and rural areas:-
a) Establishment of Medical Centers
b) Supporting charitable dispensaries
c) Lump-sum help for medical treatment
d) Tube well Installation
e) Sanitary Latrine construction etc.
Such Assistance is also extended to the members of Rural Development Scheme (RDS) of NBL. Under Health and Medicare programs, preventive measures have also been taken. Special steps have been taken for construction of sanitary latrines and installation of tube wells in the villages covered under to whom National Bank Bangladesh Ltd. is providing finance for income generation activities.
Humanitarian Help Programs
These program aims at providing help to distressed people who are unable to meet their basic needs like food, clothing, shelter and medicine. The old widow and children without guardians get preference. Besides, the program extends assistance to orphanages, provide fund for the marriage of poor girls, assist indebted people, help distressed wayfarers etc.
Relief and Rehabilitation Programs
Participation in relief and rehabilitation activities in natural disasters and in emergency forms an important program of National Bank Foundation. During calamities like flood, tornado, tidal surge etc. the Foundation mobilizes its own people as well as donates to the relief fund opened at the government level. The Foundation also tries its best to extend hands of assistance and co-operation to the Muslim brethren elsewhere in the world.
Besides establishing Hospitals at the Divisional Headquarters, IBF has a plan to assist local initiatives in setting up Hospitals at District level. Establishment of Four such Hospitals is planned during 1999,
Monogram: National Bank Crafts & Fashion
The project has been taken up as a sales outlet of homemade garments, handicrafts and other items produced by the distressed women. The main objective of the project is to create conducive and healthy atmosphere in which women can contribute to the family income by working within the limits of rules. The other objective of this project is to develop designs of women-wear, which will conform, to the principles of decency and modesty as laid down by Islam and at same time compare well with the modern-day-fashions.
To save the people of coastal and river belt from natural disaster, erosion etc. a special project has been taken in the name and style of Service Centre” Under this programme pucca structure constructed in coastal areas, river belts and off shore islands would be used for integrated social development of the people as well as provide safe shelters during natural calamities. Two such Service centers (in Noakhali and Manikgonj) have already been established.
National Bank Institute of Technology
The large number of unemployed youth of, the country may be turned as assets through taking up Human Resource Development (HRD) Programme.
The youths with skills in various sectors of technology may become self-employed in the land and can also get employment opportunities abroad. Islami Bank Foundation has, therefore, established 3 Technical Institutes, two in Dhaka and another in Bogra, which are rendering training facilities in Computer, Secretarial Science, Driving, Electrical, Refrigeration and Air Conditioning, Radio & T.V, Tailoring and Garments etc.
National Bank Physiotherapy and Disabled Rehabilitation Centre
In Bangladesh there ore a great number of unfortunate disabled persons who have no other means to maintain themselves. Without resorting to beggary. The burden of the society might be lessened and these people can be helped to become self-reliant through imparting special skills. Keeping this in view, National Bank Foundation has decided to rehabilitate these unfortunate disabled persons through establishing a centre named “national Bank Physiotherapy and Disabled Rehabilitation Centre” This Centre while making temporary arrangement for food and shelter for the disabled, will arrange for health check up, physiotherapy and occupational therapy and look for job placement through internship in various factories and trading houses.
Centre for Development Dialogue
Alongside with the governmental efforts at National level and multilateral and bi-lateral institutions at the international level, Non Govt. Organizations (NGOs) in different parts of the world especially in the developing countries are playing increasing role in experimentation with Development models.
Most of the organizations unfortunately, fry with development techniques from a standpoint, which often turn antagonistic to the belief and social norms of the people. The renowned foreign and national NGOs have their established training centre(s) where they
train their own people and rent out the facilities to others. National Bank Foundation has decided to establish a training centre of its own named Centre for Development Dialogue” which will create opportunity for imparting training facilities for its own staff members as well as the staff members of other development organizations.
Besides the above-mentioned project, the Foundation runs projects like: (i) Legal Aid Project for the welfare and Legal support to victims and their family members, holding of seminars and symposium on the rights of the vulnerable (women, children, disabled etc.), opinion mobilization against various forms of social ills etc. (ii) Talimul Quran Project for propagating the teaching of the Holy Qur’an. (iii) Bangladesh Sangskritic Kendro projects for upholding and promoting the culture of the land.
Midwifery training Program
In the rural areas, the traditional birth attendants conduct the normal delivery. They do not have any formal training in this regard and therefore, a good number of mothers and babies die during the delivery. Many of them, though do not die suffer even whole the life due to wrong handling of the traditional birth attendants. Considering the above situation National Bank Foundation has taken Midwifery Training Program with the help of National Bank Hospitals and Bank Community Hospitals. In the year 2006, a total number of 275 traditional birth attendants received midwifery training.
Sports and cultural Activities
National bank has a tradition of patronizing and sponsoring sports and culture of the country. The “nation bank Volleyball league-2007” was arranged under patronizing of the bank. NBL has been arranging Annual Picnic for gathering and recreation of its executive, officers and staff.
NBL always extends its helping hands and stands by the suffering and helpless people in times of natural calamities. In 2007, NBL donated TK 40 Lac to help the victims of flood, TK 20 Lac for relief operation for landslide victims and TK 50Llac for SIDR victims to the relief fund of the Chief Advisor and the Army Chief. The Bank has also taken a pilot project for post flood agricultural rehabilitation at Sirajgonj.
CHAPTER FIVE: PERFORMANCE ANALYSIS OF NBL