Chapter 1: Introduction

Bank plays an important role in the development of any country. Bank works as a life blood of an economy. From securing personal fund to investment and industrialization, bank plays an important role. Bank takes deposit from the individual person, pools the money in one place, provides loan to meet other person/business need, invests in productive sector, helps business client in foreign transaction, and reduces the risk of everybody. Without the banking system all sort of these activities would not be possible. We can not even imagine the country economic system, without the bank. So, the role of bank can not be express in a few words. Since, bank do business with others money, a proper guidance is necessary to mitigate the risk. If the banks fall in problem, total economy will be in the problem. So, the banking activities should be operated in a proper ways. Government and central bank should monitor the activities of the bank regularly. Seeing the importance of the bank in countrys economic development, Bangladesh government has given the permission to establish new private commercial bank in the country after the liberation war. After then, one by one private bank has established in the country. As a BBA student, to fulfill the requirement of degree I have to an internship in an organization to come into an exposure in real working condition. Seeing the importance of the bank, I have chosen to do my internship in bank. As IFIC bank is one of the pioneer and oldest private bank in our country, I have chosen this bank to do my internship. Throughout the three month of my internship period, I have worked in several department of IFIC bank and learnt through observing and working with the bank officers. Throughout the whole report, I have tried to focus on the total baking operation of IFIC bank.

1.1 Time Period of Internship:

My internship period is limited to three months. Within these three months I have worked in several department of IFIC bank. Through
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extensive rotation from one section to another, I have tried to catch up all the basic operations of bank. My internship started in 31st May and ended in 29th august.

1.2 Objectives
The primary objective of the study is to the orientation of the practical working condition which is one of the requirements of BBA degree. The main objective of the study is to be acquainted with the practical banking knowledge and learn about banking rules and regulations. The objectives of the study are summarized below: To make a bridge between the theories and practical procedures of banking day to day operations To have some practical exposures that will be helpful in my practical life To comply with the entire branch banking procedures To analyze the performance of the branch as well as IFIC Bank

1.3 Importance of the Report:

This is report is important for the completion of BBA degree. Throughout the report I would like to focus on the Banking system of Bangladesh, Banking system of IFIC bank, problems of IFIC bank. So, it can be use as a guideline for the person who are doing internship on bank and who are interested to do job in the bank. I will also help the IFIC authority to find out the problems of their bank, their financial performance, their strength, weakness, opportunities and threats.

1.4 Methodology:
This report is prepared on the basis of the practical experience that I have gathered during the period of three month of my internship on IFIC
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bank, Dhanmondi branch. Within this three month I have worked in the several department of the bank and learned many things. To prepare this report I have use both the primary data and the secondary data. The things that I have learned within the tenure of my internship, is the primary data of these report. The secondary data about the banking system of Bangladesh and IFIC bank, are collected from websites, annual reports and from past internship report. The summary of both primary data and the secondary data sources are in the following: Primary data sources: Observation while working in different desks and department Informal discussion with professionals Secondary data sources: Bangladesh Bank websites: www.bangladesh-bank.org Annual report of IFIC bank IFIC bank website: www.ificbank.com.bd Wikipedia: www.wikipedia.org Past internship report

1.5 Organization of the Report:

This report has been prepared in different parts and chapters in order to explain my experience in the easiest way. Introduction is presented in the part A; in the part B, I have given a general overview of IFIC bank. Again, I have divided this part into many chapters for easy understand of everybody. Part D, is all about the banking operation of IFIC bank. It is also divided into many chapters to give you the idea of banking operation of IFIC bank. In part E, I have shown the financial performance of IFIC bank. And in part F & G I have discussed my learning as a student in IFIC

bank and I have made some recommendation to develop the services of IFIC bank.

1.6 Limitations of the Study:

A bank has many activities. Three month time is not enough to learn all the activities about the bank. But, I have tried my level best to focus on every activity that I have observed. Please forgive me, if anybody finds any lacking in the report.

Chapter 2: At a Glance
2.1 Incorporation History:
IFIC Bank (International Finance, Investment and Commerce Bank Limited) originally named as International Finance and Investment Company, was formed in October 1976. It obtained certificate of commencement on 28 February 1977 as an investment banking company. The company was established mainly to carry out banking and other financial business outside Bangladesh (especially in the oil-rich Middle-Eastern countries) either singly or in collaboration with other companies, banks and financial institutions. Bangladesh Bank allowed IFIC to transform itself into a banking company and accordingly, it was renamed and after completion of required legal formalities, it started fullfledged commercial banking operations on 24 June 1983.

2.2 Title, Logo and Slogan:

Title: IFIC BANK LIMITED

Logo:

Slogan: Your Satisfaction First Founder: Chairman) Mr. Mohammad Lutfar Rahman (Founder & Former

Chairman: Salman F Rahman Number of Employee: At present there are 2,315 numbers of

employees working at IFIC Bank.

2.3 Mission statement

Our Mission is to provide service to our clients with the help of a skilled and dedicated workforce whose creative talents, innovative actions and competitive edge make our position unique in giving quality service to all institutions and individuals that we care for. We are committed to the welfare and economic prosperity of the people and the community, for we derive from them our inspiration and drive for onward progress to prosperity. We want to be the leader among banks in Bangladesh and make our indelible mark as an active partner in regional banking operating beyond the national boundary. In an intensely competitive and complex financial and business environment, we particularly focus on growth and profitability of all concerned.

2.4 Customer Satisfaction:

IFIC bank give more importance to its customer. It tries to give superior facilities to its valued customer with in its capability. Employees of IFIC bank are working hard to satisfy customer. In general, banking transaction hour ended in 4:00 PM, but, IFIC bank provides services to its customer s till 5:00 PM sometimes even in 6:00 PM. This is showing their services quality.

2.5 Sponsors:
The sponsors of IFIC Bank Limited are successful leading entrepreneurs of the country having stakes in different segments of the national economy. They are eminent industrialist and businessman having wide business reputation both at home and abroad.

2.6 Ownership Structure

The ownership structure of IFIC bank is as follows:
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No. 1 2 5

Party Government Sponsor/Director Public

Percentage 32.75 8.37 58.88

2.7 Capital and Reserves:

The authorized capital of the IFIC bank was Tk. 5,350.00 million and the paid-up capital stood at Tk. 2,179.83 million as on December 31, 2010. The reserve of the Bank stood at Tk. 3,585.61 million in 2010 against Tk. 2,453.60 million in 2009. A break-up of the capital & reserves inclusive of statutory reserve are furnished below:
Nature of Capital & Reserve Share Capital Statutory reserve Other Reserve Retained Earnings Total Shareholder's Equity 2006 (mn) 406.3 9 659.0 6 139.2 9 166.0 2 1370. 75 2007 (mn) 670.7 2 952.0 4 153.0 6 837.9 6 2613. 78 2008 (mn) 1341. 43 1215. 50 82.71 561.0 9 3200. 74 2009 (mn) 1743. 86 1545. 41 179.9 1 728.2 8 4197. 46 2010 (mn) 2179. 83 2182. 23 83.81 1319. 58 5765. 44

2.8 Five Year Financial Summary:

2006 2007 2008 2009 1,60 1,60 5,35 500 0 0 0 5350 1,34 1,74 406 671 1 4 2180 1,22 1,94 1,85 2,45 9 3 6 4 3585 28,6 29,9 36,0 50,0 5591 21 00 92 18 8 25,4 28,3 33,0 37,7 4882 91 61 18 94 6 3,54 3,85 5,23 9,08 5 6 0 3 9635 608 1,46 1,31 1,65 3184 201 0

Authorized Capita Paid up Capital Reserve Fund Deposits Loans & Advances Investments Net Profit before

taxation Import Business Export Business 3,67 6 4,90 1

5 4,43 5 5,48 7

7 5,03 4 6,65 6

0 4,37 2 6247 5,42 4 5598

2.9 Credit Rating:

The Credit Rating Agency of Bangladesh Limited (CRAB) rated IFIC Bank during 2009. The CRISL also rated the Bank for preceding 3 (three) years. The CRAB rated the Bank A1 in the Long Term and ST-2 in the Short Term in 2009 2009 (CRAB) A1 ST-2 2009 (CRAB) A ST-2

Status Long -term Short-term

2.10 Branch network:

IFIC bank is one of the leading banks in Bangladesh. It has 100 branches (including SME and krishi branch) spreading all over the country. Without these branches in Bangladesh, it has some foreign branches operating in abroad. The summary of it branches are as follows: Area Dhaka Chittagong Sylhet Rajshahi Khulna Barishal Head Office Total No of Branches 46 19 8 15 10 1 1 100

2.11 Management of this Bank:

The management committee of IFIC bank includes the following members:

1. Mr. Mohammad Abdullah, Managing Director 2. Mr. Mati-ul-Hasan, Deputy Managing Director 3. Ms. Zaitun Sayef, Deputy Managing Director 4. Mr. A.K.M. Mozharul Hoque, Senior Executive Vice President & Company Secretary 5. Mr. Syed Zahidul Islam, Senior Executive Vice President & Head of Human Resources Division 6. Mr. S.M. Abdul Hamid, Senior Executive Vice President & CFO & Head of Finance and Accounts Division 7. Mr. Narayan Chandra Roy, Senior Executive Vice President & Head of Internal Control and Compliance Division 8. Mr. Fariduddin Al Mahmud, Senior Executive Vice President & Head of Corporate Banking & Marketing Division 9. Mr. Wakar Hasan, Senior Executive Vice President & Head of Credit Risk Management Division 10.Mr. Md. Abul Hossain, Executive Vice President & Head of Corporate Communication and Support Service 11.Mr. A.K. M Shafiqul Alam, Senior Vice President & Head of Remedial Asset Management 12.Mr. Gopal Chandra Guha Roy, Senior Vice President & Head of IT

2.12 Management Structure:

The thirteen members of the Board of Directors are responsible for the strategic planning and overall policy guidelines of the Bank. Further, there is an Executive Committee of the Board to dispose of urgent business proposals.

Besides, there is an Audit Committee in the Board to oversee compliance of major regulatory and operational issues.

The CEO and Managing Director, Deputy Managing Director and Head of Divisions are responsible for achieving business goals and overseeing the day to day operation.

The CEO and Managing Director are assisted by a Senior Management Group consisting of Deputy Managing Director and Head of Divisions who supervise operation of various Divisions centrally and co-ordinates operation of branches.

Key issues are managed by a Management Committee headed by the CEO and Managing Director. This facilitates rapid decisions.

There is an Asset Liability Committee comprising member of the Senior Executives headed by CEO and Managing Director to look into all operational functions and Risk Management of the Bank.

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Chapter 3: About Dhanmondi Branch

IFIC Bank, Dhanmondi Branch is one of the oldest branches of IFIC bank. When IFIC bank started banking operation in Dhanmondi there was no bank in that area. IFIC authority found that that opening a bank branch in Dhanmondi would be helpful for the business person of Dhanmondi area as well as it can gather more customers. That is why it has got some advantage.

Location: Royal Plaza, 2nd and 3rd floor, house 8-A, Road #4,
Dhanmondi, Dhaka-1205

Department: IFIC Bank, Dhanmondi branch provides all kind of

banking facilities for the clients. It has the following departments and sections:
1) General Banking Department:

a. Account Opening b. Clearing c. FDR d. Pay Order e. Remittance f. Cash g. Credit Card
2) Foreign Exchange Department:

a. Import b. Export c. Foreign Remittance

3) Credit Department

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Number of Employee:
IFIC bank, Dhanmondi branch has 46 numbers of employees, who are working to serve the customer.

Manager: Md Sharifur Rahman, Executive Vice President and Manager

Important Customer:
The customers o IFIC Bank, Dhanmondi Branch includes:

Bangladesh Export Import Limited BEXIMCO Holding Limited Bextrade limited BEXIMCO Securities Limited The Independent Independent Publishers Lab Aid Specialized Hospital Lab Aid Properties City College Popular Specialized Hospital Anwar Khan Modern Hospital Blessing Agrovet Industries Limited Hakkani Publishars Fibina properties etc.
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Chapter 4: Product and services of IFIC Bank

Products and services:
IFIC Bank provides the following banking services to its customers:
4.1

Corporate Banking:

IFIC Bank is providing a wide range of financial services, offering specialist advice and products to corporate clients to meet diverse demands of changing market scenario. IFIC Bank has customized products & services to meet specific requirements of clients. Products and services for commercial and business customers include: a. b. c. d. e. f. Working Capital Finance Project Finance Term Finance Trade Finance Lease Finance Syndication Finance

4.2

Retail Banking:

Retail Banking is mass- banking facility for individual customers to avail banking services directly from wide branch network all over the country. IFIC bank provide one-stop financial services to all individual customers through its innovative products & services to cater their need. With a view to provide faster and more convenient centralized online banking services, most of IFIC branches have been brought under the real time online banking system. IFIC Bank offers a wide
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variety of deposit products, loan product & value added services to suit everyones banking requirements. Products and services for individual customer include: a. b. c. d. e. f.
4.3

Consumer Finance Deposit Product Card NRB Account Student File SMS Banking

Treasury & Capital Market:

a. Capital Market: IFIC Bank Limited offers brokerage services for

individual and institutional investors. The Bank is responsible for origination of sales, buy and trading of securities of Capital markets. It aims to provide relevant support to its customer with sophisticated and innovative financial solutions and delivering the highest quality of services. It has a seat in Dhaka Stock Exchange Limited. Capital Market and brokerage services include: Brokerage Services i. ii. Trade Execution Dedicated and Skilled Dealer exclusively for your trade iii. iv. Exclusive arrangement to safe Keeping of Securities Capable to verify and register your securities

- Margin Loan Facilities

- Services as Full Services DP:

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1. BO (Beneficial Owner) accounts opening 2. Dematerialization of shares 3. Re-materialization of shares 4. Transfers and multiple accounts movement 5. Pledging, Un-pledging and confiscation 6. Corporate Action Inquiry 7. Bo ISIN Balance and master maintenance inquiry
- Phone/Fax/ E-mail Services trading facilities

b. Treasury: The Treasury Division of IFIC Bank is engaged with

Cash Management, Liquidity Planning and Liquidity Protection. It is also conscious to protect all the banks Assets and Profits against loss due to domestic as well as global financial realities, particularly Interest and Exchange Rate fluctuations. The Treasury Department is also regarded as a Profit Center, which generates income by trading instruments in the Financial Market. The Treasury is constituted with well setup Front Office, Mid Office and Back Office. Major Functions of Treasury: a) Fund Management b) Management of Statutory Requirement c) Investment d) Trading of F Ex. & Money Market Instruments e) Asset Liability Management f) Risk Management

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4.4

SME Banking:

The growth of Small and Medium enterprises (SMEs) in terms of size and number has multiple effects on the national economy, specifically on employment generation, GDP growth, and poverty alleviation in Bangladesh. At present, Small & Medium Enterprise sector is playing a vital role in creation of new generation entrepreneurs and 'Entrepreneurs Culture' in the country. Experience shows that borrowers of small enterprise sector prefers collateral free loan since normally they cannot offer high value security to cover the exposure. To facilitate SME sector of the country, IFIC Bank provides collateral free credit facilities to the small & medium entrepreneurs across the country whose access to traditional credit facilities are very limited. IFIC bank is offering 15 different products for selected target groups, such as Easy Commercial Loan, Retailers Loan, Muldhan Loan, Women Entrepreneurs Loan (Protyasha), Transport Loan, Working Capital Loan, Project Loan, letter of Contractor's Loan, Bidder's Loan, Letter of Guarantee, Letter of Credit Loan against Imported Merchandize (LIM),
17

 Loan against Trust Receipt etc.

4.5 Agriculture Credit:

Our country is an agricultural country. Most of the people are involved in agricultural business. In order to achieve desired growth in agriculture sector of the country, IFIC Bank is offering Agriculture Loan products namely: a) Krishi Saronjam Rin - for Agriculture Equipments b) Shech Saronjam Rin - for irrigation equipments c) Poshupokkhi & Motsho Khamar Rin - for Live Stock & Fish Culture & d) Phalphasali Rin - for Fruit Orchard for individuals & group at micro level.

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Chapter 5: SWOT Analysis

What is a SWOT? SWOT analysis is a process to identify where we are strong and where we are vulnerable, where we should defend and where we should attack. It tells us our strengths, our weaknesses, the opportunities which prevail in the market and the threats which we may face from our competitors and other from other potential factors.

Strengths:
Strong Financial Position
Govt. Support and Encouragement (32.75% own by Govt.)

Huge customer base Qualified management team

Computerized working environment Online branch banking services

Weaknesses:
Inexperienced and unskilled workforce Work Overload on Employees

Small number of ATM booth

High procedural and paper works that de-motivate customer No Islamic Banking services

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Opportunities:

Rapid Growing Economy Huge Demand for Consumer Financing Providing Islamic Banking services Investment in Capital market Micro credit financing through its broad branch

network

Threats:
Political instability High competition from others private bank Permission to incorporate new private bank Changes in central banks policy regarding interest

rate, operational procedures

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Chapter 6: Deposit Product of IFIC Bank

Different Types of Deposit Product:
IFIC Bank has the following deposit products for its customers: 6.1 Current Account (CD A/C) 6.2 Saving account (SB A/C) 6.3 FDR Account 6.4 Short term Deposit Account (STD A/C)
6.5 Monthly Income Scheme (MIS)

6.6 Special Notice Deposit (SND) Account 6.7 Pension Savings Scheme (PSS) 6.8 Others: a. Double Return Deposit Scheme (DRDS) double in 6 years b. Three Years Deposit Plus c. More money d. School Savings Plan - A Plus

6.1 Current Account:

This is a popular type of account in Bank. Generally, the number of current account in bank is higher comparative to other types of account. Business person, organization generally open this accounts to operate the daily transactions. The terms and condition of this account are as follows: i. Required minimum 2000 taka to open account
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ii. iii.

Can deposit and withdraw any amount without any notice Have to maintain minimum 2000 taka to run the account, if account goes down to less than taka 2000, an additional amount of taka 200 will be charged

iv.

To stop payment instruction, a charge of taka 100 will be deducted from account

v. vi. vii. viii. ix. x. xi. xii.

No interest will be provided to this account holders Debit Card facility ATM facility Online Banking facility SMS Banking Facility Utility payment service Transfer of fund from one branch to another Opportunity for availing locker facility

6.2 Saving account:

This is a popular type of account to the general people. condition for opening this account are: i. Initial Deposit: Tk. 500.00 at rural branches & Tk. 1000/- for urban branches which should be considered as minimum balance.The depositors are allowed to withdraw twice a week without any notice ii. iii. To withdraw more than two times, a notice is required A charge of 200 taka will be charge to this account holder in every half quarter
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People with

limited income, opens this income to save money. The terms and

iv.

The account holder will be given interest rate of 5% on the monthly minimum balance

v. vi. vii. viii. ix. x. xi.

Debit Card facility SMS Banking Facility ATM facility Online banking facility Utility payment service Transfer of fund from one branch to another Opportunity for availing locker facility

6.3 FDR Account:

It is an investment for a specific time period. Within the specific period the account holder can not withdraw the money, if do he or she will not get interest. In IFIC bank the minimum amount for opening a FDR account is 50000 taka and minimum period is one month. The interest rates in this account are as follows: Month 1 month Amount of FDR Less than Tk. crore Interest rate 1.00 10.50% and 12.00% 12.00% 12.00% 12.00%

crore Tk. 1.00 3 Months 6 Months 12 Months

above Any Amount Any amount Any amount

6.4 Short term Deposit Account (STD A/C):

STD account is a very important class of account. An initial amount of 25000 taka is required to open this account. The account holder is to
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required to maintain a minimum balance of taka 25000 to avail for interest. Interest is given on the monthly average balance. Depositor is allowed to withdraw any amount without any notice keeping minimum balance of 25000 taka.

6.5 Monthly Income Scheme- Protimash (MIS):

A person of 18 years of age and above will be eligible to open an account in his/her own name. The applicant will require to open/have a CD/SB Account with the branch. A person can open more than one account in his/her/their name in the same branch or at any branch of the Bank. A person can Deposit once and Enjoy Higher Return on Monthly basis as below: Deposit Term Term Tk. 50,000 or 3 Yrs. multiple Gross Monthly Income Tk.500.00 (i.e Tk.1000.00 per lac)

There is a loan facility against this type of account as per the Banks prescribed rates and rules.

6.6 Special Notice Deposit (SND) Account:

Special Notice Deposit (SND) Account is opened for any individual/ firm/ company/ Financial Institutions/ societies/ clubs/ Trust/ NGOs/ Banks/ Corporations/ Autonomous bodies/ government organizations. Initial Deposit required to open this account is 25000 taka. Also, the account holder has to maintain a minimum balance of 25000 taka. Interest rates on the account are as follows: Amount Less than Tk. 1.00 crore Tk. 1.00 crore and above but less than Tk.25.00 crore Tk. 25.00 crore and above but less than Tk. 50.00 crore Interest rates 2.00% 2.50% 4.00%

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Tk. 50.00 crore and above but less than Tk. 100.00 crore Tk. 100.00 crore and above

2.00% 2.00%

6.7 Pension Savings Scheme (PSS):

IFIC Bank offers 3(three) / 5(five) Years Monthly Savings. Monthly Installment option and Payment after maturity, now being offered under the scheme, are shown in below:
Monthly Installment Tk. 500 Tk. 1,000 Tk. 2,000 Tk. 3,000 Tk. 5,000 Tk.10,000 Tk.15,000 Tk.20,000 Tk.25,000 Tk.50,000 3 years Terms 5 years Terms Amount payable After Amount payable maturity After maturity Tk. 20,781 Tk. 38,134 Tk. 41,562 Tk. 76,268 Tk. 83,125 Tk. 1,52,536 Tk. 1,24,687 Tk. 2,28,804 Tk. 2,07,812 Tk. 3,81,340 Tk. 4,15,624 Tk. 7,62,680 Tk. 6,23,435 Tk. 11,44,020 Tk. 8,31,247 Tk. 15,25,360 Tk. 10,39,059 Tk. 19,06,699 Tk. 20,78,118 Tk. 38,13,399

The Account holder can avail loan / Secured Overdraft (maximum 80% of the deposited principal amount but not less than Tk.20,000/-) against lien of the PSS account to meet the personal need, educational expenses of his/her children or for medical treatment.

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Chapter 7: General Banking

General Banking department performs the core functions of Bank, operates the day to day transactions. They take the deposit from the customer and meet their demand for cash honoring their cheques. They pass entry of every transaction within the day. They open new accounts, remit funds, issue bank draft and pay order etc. Since Bank is confined to provide these services everyday, general banking is knows as Retail Banking. To meet the general banking needs IFIC Bank has the following section in general banking department: 7.1 Account opening 7.2 FDR 7.3 Checks clearing 7.4 Cash 7.5 Remittance
7.1

Account opening section:

1) 2) 3)

Account opening section responsible for: Opening different types of bank account, Inputting the account data in computer, Issue check book,

4) Account Checking 5) Providing account statement to customer

6)

Transfer money from one account to another:

When someone

deposits check of the IFIC bank account, they transfer the money to the payees account. They maintain salary account and transfer the salary from the company account to employees account. These are all the responsibilities of account opening section. The types of accounts open in these section are already discussed in chapter 6.

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7.1.1 Account Opening Procedures:

To open account a person has to fill up an account opening form, have to provide required document and deposit initial amount of money. details procedures of opening an account are as follows:
Step 1: Receiving account opening application from bank officer Step 2: Fill up the form, providing the required data

The

Step 3: Sign on specimen signature sheet

Step 4: Provides introducer account number and signature Step 5: Submit the form with required document

Step 6: Bank officer receipt the form and provide the

Step 7: Deposit the initial amount in cash

Step 8: Account is opened and a Cheque book and pay-in-slip book is given

7.1.2 Requirement for Opening Account:

General requirement for all account: 1. Two passport size photographs of account holder(s)/nominee duly attested 2. Signature of account holder, introducer etc. duly admitted /verifies

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3. Photocopy of voter ID Card/Passport for individual account holder 4. Personal Information forms 5. Know Your Customer (KYC) profile 6. Transaction profiles

Proprietorship concern:
Copy of trade license

Partnership Concern:
Copy of partnership deed List of partners with their addresses Certificate of register of firm in case of registered firms only

Limited Company:
Memorandum and articles of association Certificate of incorporation Resolution of board of directors authorizing opening of the account with the bank Certificate of commencement at business List of directors with their address Copy of trade license

Association/Club/Charitable institution/Trust/Society:
Certified true copy of the constitution/By-laws/Trust/Dees/ Memorandum and Articles of Association

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Certificate of registration List of members of the governing body/executive committee List of directors with address Certified true copy of the resolution of the governing body/executive committee

7.1.3 Closing Procedure of an account:

An account can be close by bank or by the account holder. Bank can close the account when transaction does not occur in that account and the account balance become less than the minimum level. A customer can close the account if he/she does not feel requirement of the account or open a new account in another bank. To close the account, account holder required to apply to the bank. Account holder need to return back the deposit slip and the cheque book. The bank will charge a 100 taka to close the account.

7.2 FDR (Fixed Deposit Receipt) Section:

This section only opens and maintains the FDR account. The main responsibilities of this section are: 1. Opening FDR account 2. Inputting is to computer 3. Renew FDR account
4. Calculate the daily money requirement FDR payment 5. Maintain good relation with the customers etc.

7.2.1 Liquidation of FDR:

i. Only the account holder himself and the authorized person can liquid the FDR after maturity.
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ii. iii. iv.

In case of joint name, authentication from both is necessary. In case of Either of Survivorship clause any one can liquid. In case of Death, the survivor cannot encase the FDR even if there exist the either or survivor clause succession certificate from the court is needed.

v.

If demanded before the maturity the last expired duration is considered to pay interest.

FDR section provides another service on behalf of the government. These services this bank issues and encash the following two government securities: i. ii. Five Years Bangladesh Sanchay Patra Pratirakha Sanchay Patra

This section of this branch is also fully computerized. No ledger, no other subsidiary books are maintained separately in this section. All entry is given directly in the computer and then necessary information is printed when required.

7.3

Checks Clearing:

This section receipts all kind of cheque for clearing in favor of the account holders. After receiving, cheques are divided into two primary groups
1. Inward Cheques 2. Outward Bills for Collection (OBC)

7.3.1 Inward Cheque: This cheque is also divided into three parts:
I. Transfer cheque

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II. III. I.

Clearing cheque Bangladesh bank government cheque

Transfer cheque:

Cheques from other branch of IFIC Bank are called transfer cheque. It is settled instantly. Because of the online banking facility, it is become easy to settle this cheque. There is no need to send this cheque to clearing house. It is just a transfer from one account to another account. Bank officer just debit the payer account and credit the payee account.

II. Clearing cheque: Cheques from other Bank in clearinghouse area are called clearing cheque. Cheques which are from the following areas are called clearing cheque: 1. Dhaka 2. Chittagong 3. Shylet 4. Rajshahi 5. Barishal With these area, the cheque from other online bank are called clearing cheque. These cheques are sent for clearing to the clearing house. Clearing cheque are also divided into two parts:
a)

Same Day clearing: The cheque which contain the

amount 500000 taka or more are called same day clearing cheque or high value cheque. This cheque is settled in one day.

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b)

Regular value clearing: The cheques which contain

less than 500000 taka are called regular value clearing cheque. This cheque required two days to clear and transfer to the account. III. Bangladesh bank government cheque: Bangladesh bank, government cheque is not presented in clearing house. Cheque money is collected from Bangladesh bank directly. For this, IFIC bank use special software, called NIKASH software, which is supplied by Bangladesh bank. Bank clearing officer input cheque data into computer using the software and supplied the data to Bangladesh bank in floppy with cheque leaf.

7.3.2 Outward Bills for Collection (OBC):

The cheques other than the above five area are called OBC cheque or Outward Bills for Collection. This cheque can not be cleared from clearing house. OBC cheque money is collected from the respective bank directly by IFIC bank local branch or to request the respective payee bank to supply a draft against the cheque money to order its another branch which is located nearest to the IFIC bank. In case of collection by IFIC bank local branch, a request is sent to the local branch to collect cheque money from the respective payee bank branch. Then, the local branch collects money from the payee bank branch and deposits the money in IFIC bank Pool account. After then, the depositor branch credit the account holder account and debit the Pool account. In the way money is collected in faster ways, but, if there is no IFIC branch nearest to the payee bank branch, it require long process and also long time to collect money. In these case, IFIC bank send a letter to the respective payee bank to issue a draft in the name of IFIC bank ordering its another branch nearest to IFIC bank to payee the cheque money. After getting the draft, IFIC bank send it to clearinghouse to collect money. After

33

collecting the money is deposited to the account holder account. It requires 5 days to 10 days to deposit the money in account holder.

7.4 Cash:
Cash department is the most important department of the bank. It receives cash from customers and then deposits it into the accounts of the customers and maintained their balances. The officers in this department are called teller and there are five tellers at the counter. This department involves in two activates:I. II. Deposit cash in customers account Make payments from customers account

I. Deposit Cash in Customers Account; When the customer want to deposit amount in his account at opening of account or after that then he has to fill a deposit slip that shows the amount and the account in which the cash will be deposited. Then teller will receive amount and credit the customers account II. Make Payments: When the customer draws a cheque on the bank to pay a certain amount then teller will debit the customers account that shows reduction in his account balance. Cheque encashment are made in the following steps and procedures: Receiving Of Cheques Verification Of Signature Match the signature of the cheque with the computer

Computer Terminal Process

Checking the balance Checking any instruction like stop payment

34

Debiting the customers account

Payment Of Cash

7.5 Remittance and Locker maintenance:

Remittance is transfer of funds from one place to another or from one person to another. A Remittance is an important service provided by banks to customers as well as non-customers. In this section foreign remittance are receipt and local remittance are issued. Another additional responsibility of the officers of this section is maintenance of locker.

7.5.1 Parties involve in remittances:

1. Remitter: One who initiates, or requests for a remittance. The

remitter comes to the issuing or originating branch, asks for a remittance to be made, and deposits the money to be remitted. The bank charges him a commission for this service. He may or may not be the branchs customer.

2. Remittee: A Remittee is also called the beneficiary, or the payee.

The person in whose name the remittance is made. A remittee is also the one who receive the payment.

3. Issuing Bank: The bank that sends or affects the remittance,

through demand drafts, telegraphic transfers, or Mail Transfers.

4. Paying Bank: Paying Bank also knows as the drawee branch. The

branch on which the instrument is drawn. It has to make the payment (usually located in a different city country).

7.5.2 Instruments used in Local remittances:

Demand Draft (DD)
35

Pay Order (PO) Pay Slip Call Deposit Receipt (CDR) Cancellation of PO, DD & CDR

7.5.3 Process of issuing Pay Order:

Of the above local remittance, mostly issued instrument of local remittance is Pay Order. Pay order is a negotiable instrument made by the bank, on account of a customer, to pay on order the specified amount to the directed person (payee). Pay orders are used to make payment or to transfer money, with in the same city. Pay order is always drawn on the bank that has issued it. The main advantage of pay order is that it cannot be dishonored by the bank. The processes of issuing pay order are as follows:
1. Collect form of pay order from the respective 2. Fill up the form and signed by Applicant

3. Cash Deposited or gives Cheque in favor IFIC Bank 4. Pay the charges

5. Entry in Bank Account by bank officers

6. Fill up the Pay Order Slip by the bank Officer

7. Take Signature of Applicant at the Place of received Instrument 8. Copy of Pay Order is given to Customer 36

7.5.4 Charges of Issuing Pay Order:

Amount (taka)
1000 or less 1001 to 100000 100001 to 500000 500001 or more

Commission (taka)
10 25 50 100

Vat (taka)
2 4 8 15

7.5.5 Cancellation of DD/PO:

1. Application in written to the Manager of the account maintaining branch 2. Verification of the specimen signature 3. Computer entries
4. Sending letter to the paying Bank

**Bank will charge tk 50 to cancel the pay order.

7.5.6 Remittance Agent:

IFIC bank has the affiliation with the eight agents of foreign remittance. The bank only receipts payment from these eight agents. The agents are: 1. MoneyGram Payment System, Inc.-global company 2. Xpress Money Services Ltd., UK 3. Oman International Exchange LLC, Oman 4. Coinstar Money Transfer (CMT)-global company 5. Placid NK Corporation, USA (global company) 6. Al Fardan Exchange, UAE 7. Multinet Trust Exchange LLC, UAE
37

8. Asia Exchange Centre, UAE If anyone sends money from foreign country through any of the seven agents, people can withdraw money from IFIC bank. To withdraw money they only require money transfer control number and the National ID card photocopy or photocopy of passport.

7.5.6 Locker:
Locker service is another important service of the bank. IFIC bank, Dhanmondi bank offers the locker service. There are three size lockers which are rent to the customer to keep the valuable document and ornaments on the locker. The three size locker and their yearly fee are shown in the following:
1. Large size - Taka 3500 2. Medium size - Taka 2700 3. Small Size Taka 2000

38

Chapter 8: Foreign Exchange

Foreign Exchanged Department deals within exports and imports. IFIC Bank, Dhanmondi branch has a separate department to deal with foreign exchange. The bank acts as exporter as well as importer bank for different parties who are in the business of export and import.

8.1 Import Operation

Import of merchandise essentially involves two things, bringing of goods physically into the country and remitting foreign currency for the cost of the merchandise and services. The first part is regulated by the ministry of commerce while Bangladesh Bank regulates the payments for these imports. Import section helps business and other people to import goods. In international environment, buyers and sellers are unknown to each other. So seller always seek guarantee for the payment for his goods exported. Here is the role of bank. Bank gives export guarantee that it will pay for the goods on behalf of the buyer. This guarantee is called Letter of Credit. Thus the contract between importer and exporter is given a legal shape by the banker by its Letter of Credit. When a buyer goes to import some goods from a foreign buyer, he request his bank makes payments to the exporter of goods. And the bank recovers the amount from the importer.

8.1.1 Parties involved in Letter of Credit:

There are mainly four parties involved in L/C process, but, these parties can be more. The parties involved in a letter of credit process are:

39

1. Applicant: Applicant is the buyer of the goods or services

supplied by the seller. Letter of credit is opened by the issuing bank as per applicant's request.
2. Exporter/Seller (Beneficiary): Beneficiary is the seller of

the goods or the provider of the services in a standard commercial letter of credit transaction. Letter of credit is opened by the issuing bank in favor of the beneficiary.
3. Issuing Bank: Issuing Bank is the bank that issues a letter

of credit at the request of an applicant or its own behalf. Issuing bank undertakes to honor a complying presentation of the beneficiary without recourse.
4. Advising Bank: Advising bank is the bank that advises the

credit at the request of the issuing bank. An advising bank that is not a confirming bank advises the credit and any amendment without any obligation to honor.
5. Confirming Bank: Confirming bank is the bank that adds its

confirmation to a credit upon the issuing bank's authorization or request. Confirming bank may or may not add its confirmation to a letter of credit. This decision is up to confirming bank only. However, once it adds its confirmation to the credit confirming is irrevocably bound to honor or negotiate as of the time it adds its confirmation to the credit. Even if the issuing bank fails to honor, confirming bank must pay to the beneficiary.
6. Nominated Bank: Nominated bank is the bank with which

the credit is available or any bank in the case of a credit available with any bank.
7. Reimbursing Bank: Reimbursing Bank shall mean the bank

instructed and/or authorized to provide reimbursement

40

pursuant to a reimbursement authorization issued by the issuing bank.

8.1.2 Types of Letter of Credit:

There are several types of letters of credit. Those are: 1. Revocable: A revocable LC can be cancelling or modified without the consent of all the parties. The issuing bank can inform the advising bank for any change in the LC. The seller can face the problems of obtaining payment directory form the buyers.

2. Irrevocable: Irrevocable credit cannot be altered or modified without the consent of all the parties i.e. the opener, the opening bank, the confirming bank and the bank beneficiary. This type of LC is issued under terms and conditions of sales contract. 3. Confirmed LC: Letter of Credit, issued by a foreign bank, with validity confirmed by a bank of origin. A seller who requires a confirmed Letter of Credit from the buyer is assured of payment by the origin bank even if the foreign buyer or the foreign bank defaults.

4. Unconfirmed LC: In case of an unconfirmed LC the bank through whom the credit is negotiated, the advising bank does not give any guarantee to the exporter that the bill drawn will be honored by the issuing bank. The unconfirmed LC is a commitment of the issuing bank to honor the draft.

41

5. Transferable Letter of Credit: Letter of Credit that allows all or a portion of the proceeds to be transferred from the original beneficiary to one or more additional beneficiaries.

6. Documentary LC: A documentary LC is one which provides for bills to be accompanied by the documents of title to goods. Such as bill of lading, invoice and the marine insurance policy of insurance etc.

7. Clean letter of credit: If there is no condition attach to the bill and the issuing bank makes payment up to a limit of credit, the letter of credit is called clean or open letter of credit.

8. Standby LC: A standby letter of credit is used as support where an alternative, less secure, method of payment has been agreed. A standby letter of credit is an assurance from a bank that a buyer is able to pay a seller. The seller doesn't expect to have to draw on the letter of credit to get paid.

9. Revolving LC: The revolving credit is used for regular shipments of the same commodity to the same importer. It can revolve in relation to time or value. If the credit is time revolving once utilized it is re-instated for further regular shipments until the credit is fully drawn. If the credit revolves in relation to value once utilized and paid the value can be reinstated for further drawings.

10.

Back-to-Back LC (BBLC): Two letters of credit used

together to help a seller finance the purchase of equipment or services from a subcontractor. With the original LC from the buyer's bank in place, the seller goes to his own bank and has a
42

second LC issued, with the subcontractor as beneficiary. The subcontractor is thus ensured of payment upon fulfilling the terms of the contract. 11. Red LC: Letter of Credit that allows the exporter to receive a

percentage of the face value of the Letter of Credit in advance of shipment. This enables the exporter to purchase inventory and any other costs associated with producing and preparing the export order.

8.1.3 Steps in the Letter of Credit Process:

1. Buyer and seller agree to terms including means of transport, period of credit offered (if any), and latest date of shipment acceptable. 2. Buyer applies to bank for issue of letter of credit. Bank will evaluate buyer's credit standing, and may require cash cover and/or reduction of other lending limits. 3. Issuing bank issues LC, sending it to the Advising bank by airmail or electronic means such as telex or SWIFT. 4. Advising bank establishes authenticity of the letter of credit using signature books or test codes, then informs seller (beneficiary). 5. Seller should now check that LC matches commercial agreement and that all its terms and conditions can be satisfied. 6. Seller ships the goods, then assembles the documents called for in the LC (invoice, transport document, etc.). 7. The Advising bank checks the documents against the LC. If the documents are compliant, the bank pays the seller and forwards the documents to the Issuing bank. 8. The Issuing bank now checks the documents itself. If they are in order, it reimburses the seller's bank immediately.

43

9. The Issuing bank debits the buyer and releases the documents (including transport document), so the buyer can claim the goods from the carrier.

8.1.4 Settlement under a Letter of Credit:

All commercial letters of credit must clearly indicate whether they are payable by sight payment, by deferred payment, by acceptance, or by negotiation. These are noted as formal demands under the terms of the commercial letter of credit.

1) In a sight payment, the commercial letter of credit is payable when the beneficiary presents the complying documents and if the presentation takes place on or before the expiration of the commercial letter of credit.

2) In a deferred payment, the commercial letter of credit is payable on a specified future date. The beneficiary may present the complying documents at an earlier date, but the commercial letter of credit is payable only on the specified future date.

3) An acceptance is a time draft drawn on, and accepted by, a banking institution, which promises to honor the draft at a specified future date. The act of acceptance is without recourse as it is a commitment to pay the face amount of the accepted draft.

4) Under

negotiation,

the

negotiating

bank,

third

party

negotiator, expedites payment to the beneficiary upon the beneficiarys presentation of the complying documents to the negotiating bank. The bank pays the beneficiary, normally at a discount of the face amount of the value of the documents, and
44

then presents the complying documents, including a sight or time draft, to the issuing bank to receive full payment at sight or at a specified future date.

8.1.7 Steps of import LC Operation in Details:

1. Contract between the exporter and importer:

At first the, the buyer and seller come to a consensus to buy and sell specific amount of good in a specific price. The set the require terms and condition of the payment and transfer of the goods. In this stage they determine the terms of credit. The terms of the credit specify the amount of credit, name and address of the beneficiary and opener, tenor of the bill of exchange, period and mode of shipment and of destination, nature of credit, expiry date, name and number of sets of shipping documents etc.

2. Application by importer to the banker to open letter

of credit:
When terms of credit are determined and importer and exporter make a contract; importer applied to the bank with required document to open a Letter of Credit in favor of exporter. The importer needs to fill up the prescribed form which is supplied by bank.

3. Opening of LC by the bank for the opener:

i.

After taking filled up application form from the importer, issuing bank match it with the import policy of Bangladesh government.

45

ii.

If everything is in accidence with the import policy, issuing bank, then, opens L/C in favor of beneficiary and informed to the advising bank of beneficiary through air mail or cable.

iii.

The advising bank advises the credit to the beneficiary on his own form where it is addressed to him or merely hands on the original credit to the beneficiary.

4. Shipment of goods and submission of documents by

exporter:
The exporter, then: i. ships the goods to the destination of the importer country
ii.

Sends the documents to the LC opening bank through his advising/negotiating bank. Generally the following documents are sent to the Opening Banker with LC:

Certificate of beneficiary Certificate of origin Commercial Invoice Weight and measurement list Packing list
Certificate of quality

Bill of lading/airway bill/ truck receipt etc

5. Payment against documents by the opening Bank:

After receiving the documents, the opening banker inspects the documents. If any discrepancy found, it informs the importer. If importer accepts the fault, then opening bankers call importer

46

retiring the document. At this time many thing can happen. These are indicated in the following:
-

Discrepancy found but the importer accepts - no problem occurs in payment.

Discrepancy found and importer not agreed to accept - In this case, importer protest and send back all the documents to the exporter and request his to make in the specified manner. Here banker is not bound to pay because the documents send by exporter is not in accordance with the terms of LC.

Documents are OK but importer is willing to retire the documents - In this case bank is obligated to pay the price of exported goods. Since importer did not pay for bill of exchange, this payment by bank is one kind of credit to the importer and this credit in banking is known as FORCED PAD.

Everything is O.K. but importer fails to clear goods from the port and request bank to clear - In this case banks clear the goods and takes delivery of the same by paying customs duty and sales tax etc. So, this expenditure is debited to the importers account and in banking it is called LIM.

8.1.9 Requirements of an Importer to open LC:

a. LC application

b. IRC- Import Registration Certificate c. TIN certificate (Tax payers Identification Number) d. VAT certificate e. Memorandum and article of association f. Trade license g. National ID card
47

h. Harmonized System Code No (H.S code)

i.

3 (three) sets indent or Pro-forma Invoice

j. Beneficiarys bank name, address and Telex number k. Insurance cover note with original money receipt
l.

Copy of Bangladesh bank permission for issuing indent in favor of Beneficiary

m. Undertaking to retire the document in cash n. In case of limited company following information are required: a. Chairman, managing director and all other directors BioData b. Permanent, business and factory address o. If partnership company, partnership deed is required p. Income Tax Return or evidence of payment of income tax (last year)
q. Credit repot of Beneficiary

r. Resolution for signing authority

The buyer require all the above document to open a letter of credit for the first time, but, these requirement are less for the second time as he has already provided some document. He/she does not require providing the document for the second time.

8.1.10 Guide Lines of opening LC:

Import policy & export policy Foreign Exchange Regulation Act Foreign Exchange Circular
48

Public Notices

8.1.11 LC Application SET:

1. 2. Demand promissory note-02 copies LC application-01 copies (Application & agreement for confirmed irrevocable without recourse to drawers L/C) 3. LCA form 6 copies make a set (LCA application form in lieu of import license) 4.
5.

Insurance cover note with money receipt Request letter for opening LC- 01 copies Declaration of an importer 01 copies Authority to debit account 01 copies Request letter for amendment 01 copies Pro-forma invoice

6. 7. 8. 9.

10. IMP form (Foreign exchange regulation act 1947 04 copies make a set) 11. Debit voucher (corresponding credit) 12. LC copy (06 copies) i. 02 copies to advising bank, 01 for advising bank & other for exporter ii. 02 copies to importer, 01 copy as officer advising copy & other customs clearance 13. LC forwarding letter 01 copies 14. Reimbursement authorization 03 copies

49

8.1.12 LC application form:

A LC application form includes the following information: 1.

LC No. Name & full address of openers Name & full address of beneficiary Amount of foreign currency Nature of goods imported Name of indentor Document accompanied Name of insurance company Shipment information

2. 3. 4. 5. 6. 7. 8. 9.

10. Approval (for use of bank only) 11. Terms and conditions (overleaf)

8.1.13 Letter of Credit includes:

An issued letter of credit includes the following information: 1.

ILC no (Irrecoverable documentary credits No.) Name of advising bank Beneficiarys name Name of Applicant Amount specified Shipment: i. Shipment from ................ to ................... ii. Partial shipment allowed/prohibited iii. Transshipment allowed/prohibited

2. 3. 4. 5.
6.

7.

Expiry
50

8.

Accompanied documents: i. ii. Invoice Full set of (Shipped on board/ocean bill of lading/truck receipts) iii. Insurance cover

9. 10. 11.

Special conditions Instructions for negotiating bank Other terms and conditions

51

8.2 Export Operation

Export is an important for any countrys economic development. Import decreases the reserve of foreign currency. Export brings the foreign currency in the country. To make balance in foreign currency reserve, export plays important role. Growth of an economy is directly related to exports. If exports increase at a faster pace as compared to imports, nothing can stop an economy from being a developed one. On the other hand, the instability in exports can adversely affects the process of economic development. Bangladesh is an export oriented country. Bangladesh exports a large quantity of goods to foreign households. Readymade textile garments (both knitted and woven), Jute, Jute-made products, frozen shrimps, tea are the main goods that Bangladeshi exporters exports to foreign countries. Garments sector is the largest sector that exports the lion share of the countrys export. Bangladesh exports most of its readymade garments products to U.S.A and European Community (EC) countries. For supporting exporter IFIC bank, Dhanmondi branch has separate export management section. IFIC bank works as a advising bank and negotiating bank to help the exporter. The role of IFIC bank as advising bank and negotiating bank are described as followed:
a. As an Advising bank: It receives documents from the foreign

importer and hands it over to the exporter.

b. As Negotiating Bank: It negotiates the bills and other shipping

documents in favor of the exporter. That is, it collects the proceeds of the export-bill from the drawee and credits the exporters account for the same.

52

c. Opening Back to Back LC: the export department of IFIC bank

open BB LC to help the exporter procure the raw materials and accessories required to manufacture exporting goods.

8.2.1 Back to Back letter of Credit:

One of the main tasks of export department is to issue Back to Back Letter of Credit (BB LC).here, one LC is open against the another LC. Sometimes, exporter produces the goods and then makes shipment. For the production, they need raw materials and accessories. Sometimes, these raw material and accessories are needed to import. For the import of the raw materials and accessories exporter open a LC using the back up of the importer LC. Here master LC uses as the back up of the new LC. That is why is called back to back LC. Opening BB LC is the regular activities of the export department. Back to Back LC process is as like the usual LC process. Here, some additional documents and arrangement are required.

8.2.1 Requirements for BB LC:

Back to Back LC process is as like the usual LC process. Here, some additional documents and arrangement are required. The requirements of BB LC are as follows:
1) Master LC: Importer LC against which new LC will be opened

2) Application: Exporter has to apply to the bank to open BBLC.

3) Collateral: In case the importer of master LC issuer fails to pay,

then from where the bank pays to BB LC beneficiary? For this

53

reason, bank requires some additional collateral. This collateral can be financial securities like FDR or registered mortgage like building or property.

4) Proforma invoice

5) Trust Receipt etc.

54

Chapter 9: Credit
Credit department is an important department of the bank. Generally, bank collect money from depositor and give those money to creditor in higher rate. Interest income is the main sources of bank income. Credit is also important for country development. It encourages the entrepreneur and helps them to do business successfully. As like other bank, credit department is also an important department of IFIC bank. For credit management IFIC bank, Dhanmondi branch has 5 officers, who always deal with customer. IFIC bank credit services and other things related to credit service are described details in below:

9.1 Functions of the Credit Department:

Lending money is one of the main functions of a commercial bank. In addition, objectives of the credit department are managing credit exposure of the bank, maintaining credit risk, compliance of Central Bank, recovering or collecting dues of retail loans or advances. At present credit division performs following activities: Credit Approval Processing o Corporate Credit o Retail Credit Collection and Monitoring Activity o Recovery o Risk management Loan is an asset to any financial institution. That is why it is very much necessary to ensure that a loan does not become bad. The first step in ensuring that is to ask for proper documentation of the loan applicant. A default loan might be very hard to recover due to lack of proper charge documents.

55

9.2 Why the bank provides advances?

Bank provides advances, because of the following reasons: To earn interest from the borrowers and give the depositors interest back To accelerate economic development by providing different industrial as well as agricultural advances To create employment by providing industrial loans To pay the employees as well as meeting the interest groups

9.3 Sources of fund for lending:

1. Own fund: a) b) c) Paid up capital Reserve Undistributed profit/ Retained earning

2. Outside source: a) Deposit (up to 80%) b) Borrowings from other banks c) Refinance

9.4 Credit product of IFIC Bank:

IFIC Bank is providing a wide range of financial services, offering specialist advice and products to corporate clients and retail customer to meet their diverse demands. IFIC Bank provides the following credit products for corporate and retail customer: 56

1. CORPORATE Finance:

l. IFIC Auto Loan 3. SME Banking: a. Easy Commercial Loan b. Retailers Loan c. Transport Loan d. Commercial House Building Loan e. Possession Right Loan f. Contractor's Loan g. Bidder's Loan h. Working Capital Loan i. Project Loan j. Letter of Guarantee k. Letter of Credit l. Loan against Imported Merchandize (LIM) m. Loan against Trust Receipt n. Muldhan

a. Working Capital Finance b. Project Finance c. Term Finance d. Trade Finance e. Lease Finance f. Syndication Finance 2. Consumer Finance a. IFIC Easy Loan b. Consumer Durable Loan c. Parua (Education Loan) d. Thikana (Home Loan) e. Any Purpose Loan f. IFIC Marriage Loan g. CNG Conversion Loan h. IFIC Home Renovation Loan i. IFIC Medical Loan j. IFIC Holiday Loan k. IFIC Peshajeebi Loan

57

o. Women Enterpreneur's Loan (Protyasha) 4. AGRICULTURE CREDIT: a. Krishi Saronjam Rin (for Agriculture Equipments) b. Shech Saronjam Rin (for Irrigation Equipments)

c. Poshupokkhi & Motsho Khamar Rin (for Live Stock & Fish Culture) d. Phalphasali Rin (for Fruit Orchard) e. Phasali Rin

9.5 Lending Rate of IFIC Bank:

IFIC bank lend it customer in the following rate:
SL. 1 Sector Agriculture (loans to primary producers only) (Includes Farms, Fish Culture, Forestry & Livestock) Large & Medium Industry (Terms Loan) (Loans to manufacturing units* only) Working Capital Industries: (Loans to manufacturing units* only) (Large/medium and small firm) Exports Commercial Lending Housing Small Scale Industry (Term Loan) (Loans to manufacturing units* only) IFIC Bank & other Banks FDR Consumer Credit Scheme Lending to Non-Banking Institutions (NBFIs) Interest Rate 13.00% (Max)

13.00%(Max)

14.50 & 15.00%

4 5 6 7 8 9 10

7.00% 15.00% 15.50% 13.00% (max)

2.00% above FDR rate 15.5% -17% Financial 15.50%

11. Small Enterprise Financing: Retailers Loan

16% 58

Transport Loan Possession Right Loan Working Capital & Contractors Loan Project Loan Muldhan Loan (1.00% above without any security) Protyasha Krishi Saronjam Rin, Shech Saronjam Rin, Poshupokkhi Rin, Phalphasali Rin, Phashali Rin Easy commercial loan

16% 16% 15%&16% 13% 16% 15% 13.00% (max) 2.00% above underlying security

Others for Large Enterprise Financing Purpose Term Loan (Industrial) Term Loan (Others) House Building Loan SOD (Agt Other Financial Obligation) OD (Others) Working Capital SOD (Agt FDR of IFIC Bank) SOD (Agt FDR of Other Banks) CC (Hypo) CC (Pledge) PAD (Cash) PAD (Forced) PAD (Others) LTR Lease Finance

Interest rate 13.00% (Max) 15.00% (Midrate) 15.50% (Midrate) 4.00% 14.50% (Midrate) 13.00% 14.00% 14.50% (Midrate) 14.50% (Midrate) 15.00% (Midrate) 16.00% (Midrate) 16.00% (Midrate) 14.50% (Midrate) 16.00% (Midrate)

Other for Medium Enterprise Financing Purpose Interest rate Term Loan (Industrial) 13.00% Term Loan (Others) 15.00% House Building Loan 15.50% SOD (Agt Other Financial Obligation) 14.00% 59

OD (Others) Working Capital SOD (Agt FDR of IFIC Bank) SOD (Agt FDR of Other Banks) CC (Hypo) CC (Pledge) PAD (Cash) PAD (Forced) LIM LTR Lease Finance

14.50% 2.00% above the FDR rate 2.00% above the FDR rate 14.50% 14.50% 15.00% 16.00% 15.00% 14.50% 16.00%

Consumer Financing Purpose Consumer Durable Loan Parua (Education Loan) Thikana Peshajeebi Loan Auto Loan Festival Loan Any purpose Loan Home renovation Loan Emergency Medical Loan CNG conversion Loan Marriage Loan Easy Loan (SOD, Loan General) Agt FDR of IFIC Bank Easy Loan (SOD, Loan General) Agt FDR of Other Banks Easy Loan (SOD, Loan General) Agt other FO

Interest rate 17.00% 15.50% 15.50% 16.00% 16.50%

17.00%

2.00% above the FDR rate 2.00% above the FDR rate 2.00% above the FDR rate

9.6 General principle of good lending:

1. Safety-Safety is the first

2. Liquidity 3. Purpose 4. Profitability

60

5. Security 6. Diversity/ spread 7. National interest

9.7 General criterion for selection of borrower:

1) Character:
a. Is the borrower personal character, market standing and

reputation impeccable? b. Has he met his part commitments? 2) Capacity: a. Capacity or the capability of the borrower to manage his business profitably and the capacity to repay the advances and service the facilities according to agreed terms.
b. Is the borrower in a capacity to borrow? Or is there any

legal complication? 3) Capital: a. The capital & resources of the borrower. b. The capital structure of the borrower and the gearing ratios. 4) Condition:
a. General business condition

b. Are the economic conditions feasible generally and for the business, in particular? 5) Collateral: a. The security provided against the facilities.
b. Is

the

security

provided:

Adequate,

Realizable,

Marketable, Valuable, Storable, Non-perishable and Durable?

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9.8 Types of Loans offered by IFIC Bank:

In general, IFIC Bank provides two types of loan. Those are: 1. Term loan
2.Continuous loan

1. Term loan: Loans to an organization, with a fixed maturity and

often featuring amortization of principal. Bank made only one time payment of the loan. The borrower may pay the loan in a installment or pay in maturity date depending on the loan type.

2. Continuous loan: In this case, the bank provides a credit limit of

the borrower to withdraw money and within the limit the borrower can withdraw money, although he does not have positive balance in the bank. When the limit is over, the borrower can not withdraw money. Again, when the borrower deposits money in the bank, he will get the credit again. The borrower has the right to withdraw and deposit any amount with in the limit. Interest on the loan is charge on the basis of the monthly credit amount. Continuous loan can be two types:
a) Secured Overdraft (SOD): This is a secured loan for short

term. This is given against FDR of IFIC bank or other bank. Bank grant overdraft for maximum of one year. After one year the loan has to be renewed. Bank grant credit limit to the borrower. Within the limit the borrower can withdraw any amount. If the borrower needs the money, he can withdraw it from bank, if he does not require he may not withdraw. If the borrower uses the credit, he will be charged interest, unless he will not be charged. But, the borrower will be charged a service fee.
b) Cash Credit (CC): Cash Credit is the working capital provided

to the business. For which the borrower have to provide mortgage. The mortgage can be FDR or registered assets. The bank will give a limit to the borrower according to his need. The
62

bank asks the stock summary of the business in every month and calculates the borrower working capital requirement using that. As like the SOD the borrower can withdraw as his requirement. If, borrower uses the limit he will be charge interest, unless not.

9.9 Process to grant loan:

1. Application by the borrower: At first the potential borrower meets with the bank officer and expresses his necessary of loan. The bank officer will ask the purpose of the borrower loan, his sources of income and mortgage type. If everything meets the requirement of bank, bank provides an application form to the borrower. Then, the borrower fills it up and submits to the officer. 2. Collect the CIB report of Borrower: When the bank got the loan application, the first things the bank do is taking the undertaking from applicant that the applicant has no other loan in any other financial institutions without informed loan. Then the bank sends a letter to Credit Information Bureau of Bangladesh bank to get the information about the borrower. The process takes at least three weeks. 3. Analyze the borrower financial position: When the bank got the CIB report from Bangladesh Bank about the applicant present borrowing and find everything is ok as informed by the applicant, it then analyze the applicant financial position. The bank, then, asks several information and documents from the applicant about his income like salary certificate, trade license, TIN certificate, financial position of the applicant, background information of applicant etc. In analyzing financial condition bank measure the borrower repayment condition.
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4. Contract Point Verification by bank: If the applicant is unknown, a bank officer visit the applicant given address to justify that the information given by the applicant is true and correct. 5. Document Submission: If everythings are ok and perfect, the bank then decides to grant loan to the applicant. Before sanctioning the loan, the bank takes some document from applicant and takes his/her signature in some document like promissory note and form of lien, letter of disbursement etc. Promissory note will help the bank to collect the loan money, in case the applicant denies to pay. Form of lien is the certificate through which the bank gets the applicant permission to hold the certificate (FDR, deed of properties) of mortgage. 6. Grant loan: After doing the above formalities, the bank transfers the loan money to the applicant loan account. Then the borrower can withdraw the money from the bank. The process is short in case of loan against FDR or other securities. But, the process also can be brought in case of project loan. For loan against FDR, it takes 1 or 2 days to grant loan; for consumer credit, it takes 20 to 30 days to grant loan, for project loan, it takes 2 to 4 month to grant loan.

9.10 Requirement of borrower:

General requirement: 1. Bank Account 2. Application be the borrower 3. Mortgage
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4. Tax Identification number For Consumer loan: 1. National ID Card

2. Letter of Introduction from the employer

3. Salary Certificate 4. Financial Statement of Applicant 5. Financial statement of guarantor 6. Estimated cost of borrower 7. Background information of father, mother, wife/husband 8. Personal Net worth statement For Business: 1. Trade License 2. TIN number
3. Financial Statement of Business

4. Credit Rating report 5. Memorandum & Articles of Association/Partnership deed

Document required when granting loan:

1. Demand promising note: a. Single: For individual b. Joint: For company c. Single and several: For Partnership business 2. Letter of Disbursement

3. Letter of Lien

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4. Authentication to debit account for realization of cost of

registration, renewal etc. charge 5. Letter of installment

6. Signed Post dated cheque etc.

9.11 Evaluation of loan Proposal:

When IFIC bank get new loan proposal, it analyze the proposal to make decision whether the loan should be granted or not. When it analyzes the proposal, it considers the following things:
1) Financial Statement Analysis:

This is the main source to evaluate the business client. Annual Reports of last 2 to 3 years are obtained from enterprise, which is requesting for credit/loan. These are examined by various techniques like; Horizontal Analysis, trend analysis, ratio analysis are conducted to get true and fair view of the final statements of that concern. The entity is sometimes rated using the Bangladesh Bank prescribed format.
2) Nature of Business to be Considered:

Nature of business is important. It should be considered because if businesses to which we are giving loan related with that industry which is not growing and declining and sanctioning loan to that concern would lead to definite bad debts. That is why, bank examines the nature of business properly and make sure about its in growing trend and there is no chance to turn into bad debt.
3) Plant Visit:

This is another source of evaluating client. In this technique credit department team visit the plant of the applicant to assure that plant is actually in a position to get market value as which mentioned in Balance Sheet. To get real picture of that business is obtained through personal visit.
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4) Credit Rating:

Sometimes entity are rated using professional rating agency. If the applicants entity is rated by any agency, the bank will examines it. The bank examine whether the entity gat the good rating or bad; Is the rating support to grant loan? If the rating indicates well, the bank decides to grant loan to the entity.

9.12 Mortgage Requirement:

Mortgage is collateral to secure the payment of debt. It is first and foremost important factor of bank. It plays the main role in granting a loan. Bank always requires security of its loan. If the borrower fails to repay the loan, bank will collect its money by disposing the mortgage. Banks will provider more loans against good mortgage. As like other banks, mortgage is also important for IFIC bank. IFIC bank accept only two types of mortgage as loan collateral. These are:
1. Financial Instrument: Financial instrument includes FDR of

IFIC bank or FDR of others bank and the ICB unit certificate.
2. Registered

Property: Registered property includes land,

building, apartment etc registered property.

3. Others: In case of export financing advance is provided against

LTR & LIM.

9.13 Important Credit Product of IFIC Bank:

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9.13.1 Home Loan (Thikana):

The product is a term financing facility to individuals to aid them in their purchases of apartment or house or construction of house. The facility will become affordable to the clients as the repayment is done through fixed installment as commonly known as EMI (equal monthly installment) across the facility period. Depending on the size of the loan, the maximum period of the loan would be 180 months (15 years). Loan amount and repayment schedule are given below:
Monthly installment (Tk.) 14 13 12 15 years 1,401/11 years 1,553/07 years 1,932/Tk.1,00,000/- or Multiple @ 15.00% p.a 03 years 3,469/years 1,429/10 years 1,615/06 years 2,117/02 years 4,851/years 1,462/09 years 1,694/05 years 2,381/01 years 9,029/years 1,503/08 years 1,796/04 years 2,785/-

Interest Loan Amount Rate

Restrictions and client eligibility: 1. Loans are restricted to Bangladeshi nationals falling in the categories mentioned below: The minimum age for any borrower will be 21 years with a maximum age 50 years (at the time of application). The minimum verified Gross Family Monthly Income of the applicant should be BDT40,000.The family income will include only the income of the applicant and spouse. 2. The maximum permitted Equal Monthly Installment (EMI) paid by the borrower should be no more than the 33% of the Family Monthly Disposable Income (FMDI) of the borrower per month.

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9.13.2 Auto Loan

The product is a term financing facility to individuals to aid them in their pursuit of has a car of their dream. The facility becomes affordable to the clients as the repayment is done through fixed installment commonly known as EMI (equal monthly installment) across the facility period. Depending on the size and purpose of the loan, the number of installments varies from 12 to 60 months. The bank provides maximum 50% loan of the car price. The maximum amount of loan in taka is 20 lacs. Loan amount and repayment schedule are given below:
Monthly installment (TK.) 48 36 24 12 month s 2,810/56,200 /month s 3,493/69,860 /month s 4,874/97,480 /month s 9,051/1,81,02 0/

60 Interest Loan Amount Tk.1,00,000/- or Multiple Tk.20,00,000/maximum Rate month s

15.50% 2,407/48,140 15.50% /-

Restrictions and client eligibility:

Loans are restricted to Bangladeshi nationals falling in the categories mentioned below The minimum age for any borrower will be 25 years and the maximum age 52 years with a minimum verified Gross Family Monthly Income of BDT 45,000.

9.13.3 Any Purpose Loan

Any Purpose Loan is a term financing facility to individuals to meet their immediate requirements. With minimum formalities any one can get a loan for an amount upto Tk.3.00 lac to be repayable at 12 to 36 monthly installments. Any Purpose Loan Repayment Schedule is shown in the following table:
Monthly installment 24 12 months Tk. 4,922/months Tk. 9,099/69

Loan Amount Tk. 100,000/-

Interest Rate @16.50%

36

months Tk. 3,542/-

9.13.4.1 Import Financing:

1. Pre-import financing: a. Letter of credit 2. Post import financing: a. Loans against Imported Merchandise (LIM) b. Loans against Trust Receipt (LTR)
Loans against Imported Merchandise (LIM):

Loan against the merchandise imported through bank maybe allowed pledge of goods retaining margin prescribed on their landed cost. The branch shall also obtain letter of undertaking and indemnity from the customer before getting goods cleared through L.I.M. account. Clearing should be taken by approved clearing agent of the bank. Merchandise should be insured with specific risk clauses. The following matters must consider while allowing L.I.M. against secured of goods. The landed cost of the merchandise is measured before the goods are delivered the client against proportionate payments. The landed cost is determined by taking following items: Invoice value if the merchandise including freight Customs duty Sales tax Warfare Derange agents charges Railway freight Insurance premium Other charges

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Loans against Trust Receipt (LTR):

Advances against a Trust receipt obtained from the clients are allowed when the documents covering an import shipment are given without prior payment. This type of facility is given only to first class and reliable clients. The customer holds the goods or their sale proceeds in trust for the bank till the loan allowed against Trust Receipt is fully paid off.

9.13.4.2 Export Financing:

Export finance can be allowed in two types or stages, namely: Pre-shipment: o Packing credit o Back to Back L/C Post- shipment: o Through negotiation of documents
PACKING CREDIT:

Packing credit is a short-term credit granted by a bank to exporter to help him to purchase, process, pack and ship the goods. Generally, for the movement of goods from hinterland areas to the port of shipment, the bank provided interim facilities by way of packing credit.

BACK TO BACK Letter of CREDIT:

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It is nothing but a secondary letter of credit by the advising bank in favor of a domestic/foreign supplier on behalf of the beneficiary of original foreign L/C.

NEGOTIATION OF DOCUMENTS:

Negotiation of documents under letter of credit is the usual method of financing exports at the port shipment stage. In this system, after the shipment of goods, the exporter presents the relative documents to the Negotiating bank for negotiation. Normally, an exporter is required to submit following documents drawn in terms of the credit to the bank for negotiation of the bills: o Bill of exchange or draft o Bill of fading/Airway Bill o Invoice o Packing list o Certificate of origin o Insurance policy o Inspection certificate o Shipping advice o Other documents as per terms of Letter of Credit.

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Chapter 13: Duties Accomplishment & Learning

My internship at IFIC Bank Limited started on May 31st, 2011 and it ended on August 31st, 2011. During these 3 months I was assigned at the Dhanmondi Branch. I had a lot of fun, but more importantly I finally understood working by actually being there. This practical orientation is necessary for the development and preparation of a person in the job world.

13.1 Duties accomplished: General Banking:

I have done a variety of work at General Banking. Those are: 1) Receiving cheque books for the customers, verifying them, putting receiving seal 2) Putting Crossing on the cheque 3) Putting Endorsement and clearing seal on the cheque 4) Sometimes inputting cheque details in computer 5) Fill up the account opening form 6) Help customer to fill up the account opening form 7) Checking the account opening form 8) Checking the document requirement 9) Preparing the Debit/Credit voucher

Credit:
1) Fill up the credit application form
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2) Preparing CIB application form 3) Preparing forwarding letter for CIB 4) Photocopying the different type of document 5) Helping client to fill up the application 6) Preparing the Debit/Credit voucher

Foreign Exchange:
1) Making L/C file 2) Preparing the Debit/Credit voucher 3) Filling up the IMP form 4) Arranging L/C file 5) Filling up the CIB report to send Head Office and 6) Photocopying was a major activity in this departments

13.2 Observation and Learning:

By doing internship in IFIC bank, the things that I have learned by observing and helping the respective officer of different department are:

General Banking:
Here I have learned1) How to open a bank account? 2) What are the necessary documents are needed to open a bank account? 3) Different types of Bank account in IFIC bank 4) Cash Deposit and withdrawal procedures
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5) Cheque receiving procedures 6) Cheque clearing procedures 7) Preparation of debit and credit voucher 8) Accounting treatment of different transaction 9) Pay Order issuing procedures 10) Bank officers responsibilities

Credit:
Here I have learned1) What are the different types of credit product of IFIC bank? 2) What are the credit approval procedures? 3) How to prepare CIB application and forwarding letter? 4) What are the necessary documents required to apply for credit?

Foreign Exchange:
Here I have learned about1) L/C opening procedures 2) L/C settlement procedures

Moreover, I have learned how to deal with customer and how to cope up with the corporate life? It is a great experience for me. I believe, this experience will help me in my future life.

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Conclusion and Recommendations

Doing internship in IFIC bank was an excellent experience of me. I have learned many things about banking activities from there. All of the employees of IFIC bank, Dhanmondi branch have helped me much to be acquainted with the banking operation. All that I have shown in this report is based on the banking activities of IFIC bank limited. IFIC bank, Dhanmondi branch is doing well, as it has first mover advantage in Dhanmondi area. It has a large customer base. Employees of this branch are working heard to serve customers. But, this branch has some lacking that I want to include here and recommend IFIC bank authority to correct that and make the bank more popular to the customers. My observations about IFIC bank and recommendations are cited in below:
1) Hire more Employees: It is observed that the employees were

overburdened so they have to stay at branch till late at night. It is particularly happened for the foreign exchange department. Because of work overload, their efficiency level is decreasing. Hiring more employees for this branch, specially for foreign exchange department can reduce their work load.

2) Employee Training: Another thing, I have noticed about

employee of IFIC bank while I was doing internship in Dhanmondi branch is employee inefficiency. Almost fifty percent of the employees are not much efficient to handle their job in efficient ways. Some of them have the lack of knowledge of banking system. Some of them even do not know how to behave with customers? So, the IFIC bank authority should take care of the problem. They should arrange more training session for employees to make them efficient. Training should be based on job specific and also for behavioral change.
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3) Office Decoration: IFIC bank, Dhanmondi branch decoration is

not much good as compared to others private bank. The decoration of bank should be more beautiful.

4) More Branches: Although IFIC bank has a good number of

branches all over the country, but, it is not sufficient to be a market leader. IFIC bank authority should take the initiative to establish more branches.

5) More ATM Booth: One of the important banking products of IFIC

bank is card product, but, it has not the sufficient number of ATM booth to withdraw money. For this service, it has to depend on the other bank ATM booth, which is costly for the service receiver. So, the bank authority should take more initiative to establish more and more ATM booth.

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