AN INTERNSHIP REPORT ON LIQUIDITY MANAGEMENT OF IFIC BANK LIMITED

Supervised By

Prepared By

Letter of Submittal

August 17, 2010 Rafia Akhtar, Assistant Professor, Department of Management, HSTU, Dinajpur-5200 Subject: Submission of Internship Report on Liquidity Management of IFIC Bank Limited Dear Madam, I would like to thank you for assigning me this subject to prepare the internship report. In connection of my practical orientation in IFIC Bank Ltd., I would like to submit my report to you for your perusal. I have prepared this report on the basis of my practical exposure at Newmarket Branch, Management of Loans & Advances as well as General Banking activities of IFIC Bank Ltd. I will be very glad if the report can serve its actual purpose and I am ready to explain anything to you if you feel necessary. Sincerely Yours,

ACKNOWLEDGEMENT

At the very beginning, I would like to express my sincere gratitude to Allah, who has given me the chance to complete my internship report in a very comfortable manner. This is an attempt to make an analysis of liquidity Management and Loan Management of IFIC Bank Limited as a part of the internship program. However to make this I am indebted to many persons for their ideas and assistance. First of all, I would like to thank to my course teacher who forwarded for placement to carry out the Internship program in IFIC Bank Limited. I would like to thank to Mr. Mosharraf Hossain, Managing Director, IFIC Bank, to allow me for the program in this well-reputed organization. Im very grateful to Md. Mostaque Hossain Chowdhury, FAVP & Manager of Newmarket Branch of the IFIC Bank and every official and employees of that branch for their continuous cooperation, sharing their time, supplying necessary documents and giving suggestions and supervisions.

Author

Executive Summary
A bank as an institution whose debts (bank deposits) are widely accepted in settlement of other peoples debts to each other. So Deposit and Loan Management is the supreme aspect of banking activities. Loan is a lenders trust in a persons/ firms/ or

companys ability or potential ability and intention to repay. In other words, loan and credit is the ability to command goods or services of another in return for promise to pay such goods or services at some specified time in the future. For a bank, it is the main source of profit and on the other hand, the wrong use of credit would bring disaster not only for the bank but also for the economy as a whole. The objectives of The Deposit and Loan Management are to maximize the performing asset and to minimize the non-performing asset as well as ensuring the optimal point of loan and advance and their efficient management The overall success in Deposit and Loan Management depends on the banks deposits and credit policy, portfolio of credit, monitoring, supervision and follow-up of the loan and advance. Like other Commercial Bank the IFIC Bank also invests their money to earn profit. But they are differs in the manner of operation. The IFIC Bank is a customer-oriented bank. The philosophy of The IFIC Bank is to be the most caring and customer friendly provider of financial services, creating opportunities for more people in more places. The IFIC Bank is committed to ensure stability and sound growth while enhancing the value of shareholders investments by effective Deposit Management and Loan Management. As bank of new millennium IFIC Bank aggressively adopt technology at all levels of operations to improve efficiency and reduce cost per transaction. To ensure a high level of transparency and ethical standards in all business transaction it trains and equips fresh recruits for building a strong foundation and appoints skilled manpower to cope with the growing business need. To improve efficiency and effectiveness of Deposit and Loan Management they are building up infrastructure to introduce Online Banking facility, Credit Card system as soon as possible. The IFIC Bank is also working actively to set up new branches in different prime location to ensure their presence closer to their customers.

TABLE OF CONTENTS
Letter of Transmittal Supervisors Declaration Certificate from IFIC Bank iv v vi

Acknowledgement Executive Summary List of Figures List of Tables

SL. No.

vii viii xi xi

CHAPTER ONE Introduction

Background of the Study Objectives of the Study Scope of the Study Limitations of the Study

Page No.

1. 1 1. 2 1. 3 1. 4

01 01 02 02

CHAPTER TWO Methodology of the Study

2. 1 2. 2 2. 3 2. 4 2. 5 2. 6 2. 7 Introduction Selection of Study Area Population and Sample Sampling Technique Data Collection Statistical Tools Used Study Time Line and Cost 03 03 03 04 04 04 05

Overview of the Bank

3. 1 3. 2 3. 3 3. 4 3. 5 3. 6 3. 7 3. 8 Banks in our country Introduction of IFIC Bank Milestones in the Development of IFIC BANK Objective of the Bank Mission of the Bank Management Structure Human Resources Development (HRD) Activities at A glance 06 06 06 07 07 07 09 09

CHAPTER THREE

SL. No.

CHAPTER FOUR Results and Discussions

Deposit Management of IFIC Bank Limited
Introduction of Deposit Management Objectives of Deposit Management Various Deposits Accounts Served by IFIC Bank Current Deposit Account Saving Deposit Account FDR Section

Page No.

4. 1 4. 2 4. 3 4. 3. 1 4. 3. 2 4. 3. 3

10 10 10 11 11 12

4. 3. 3.1 4. 3. 3. 2 4. 4 4. 4. 1 4. 4. 2 4. 4. 3 4. 4. 4 4. 4. 5 4. 5 4. 5. 1 4. 5. 2 4. 6 4. 7 4. 8 4. 9 4. 10 4. 11 4.12 4.13 4. 13. 1 4. 14 4.15

Short Term Deposit Account Term Deposits Deposit Schemes of IFIC Bank Monthly Income Scheme Pension Saving Scheme Education savings Scheme Double Return Deposit Scheme Three Years Deposit Plus Utilization of Deposit Fund IFIC Bank Treasury Division Major Functions of Treasury Division Customer Services for the Depositors

12 12 13 13 13 14 14 14 15 15 15 16 16 17 17 18 18 24 28 28 29 30

Loan Management of IFIC Bank

Loan Management Objectives of Loan Management Loan Policy of IFIC Bank Limited Various Types of Loans, Advances and Investment Loans at a glance Loan Management Practice of IFIC Bank and Guideline of Bangladesh Bank Credit Rating of IFIC Bank CAMELS Rating of Banks- Bangladesh Deposit and Loan Management in Abroad Recent Performance of Deposit and Loan Management

CHAPTER FIVE Summary of the Findings and Discussions

5. 1 SWOT Analysis of IFIC Bank 32

SL. No.

CHAPTER SIX Conclusion and Recommendation

Conclusion Recommendations

Page No.

6.1 6.2

33 33 35 36

References and Bibliography Appendix

SL
F-1 F-2

LIST OF FIGURES
Organizational Structure of IFIC Bank Loan Approval Process of IFIC Bank

Page
08 26

SL
T-1 T-2 T-3 T-4 T-5 T-6 T-7 T-8 T-9 T-10 T-11 T-12

LIST OF TABLES
Sample Size of the Study Primary and Secondary Sources of Data Study Timeline Activities At a Glance of IFIC Bank Rate of FDR Monthly Income Scheme Education Saving Scheme Various Loans at a glance Credit Rating of IFIC Bank Ltd CAMELS Rating of Banks in Bangladesh Recent Performance of Deposit and Loan Management SWOT Analysis of IFIC Bank Ltd

Page
03 04 05 09 12 13 14 18 28 28 30 32

CHAPTER ONE Introduction

1. 1 Background of the study

Banking system occupies an important place in a nations economy. It plays a pivotal role in the economic development of a country and forms the core of the money market in an advanced country. Early banking system served mainly as depositors for funds, while the more modern system has considered the supplying of credit their main purpose. A Bank not only accepts money or deposits, but it also lends money and creates its own credit, Crowther has defined a bank as a dealer in debts- his own and of other people. Sawyers states, We can define a bank as an institution whose debts (bank deposits) are widely accepted in settlement of other peoples debts to each other The commercial bank has one important characteristic that distinguishes it from all other kinds of financial institutions. This important distinction is that it alone can hold deposits to be drawn upon by check; it has the power to create and destroy money, within limits, through the use of loans and demand deposits. Commercial banks lend money by creating demand deposits and retire loans by canceling demand deposits. International Finance Investment and Commerce Bank Limited (IFIC Bank) is a banking company incorporated in the Peoples Republic of Bangladesh with limited liability. It was set up at the instance of the Government in 1976 as a joint venture between the Government of Bangladesh and sponsors in the private sector with the objective of working as a finance company within the country. To fulfill the requirement of B.B.A program, this report has been made on the basis of Deposit Management and Loan Management of IFIC Bank.

1. 2 Objectives of the Study

There are some objectives for making this report, those are as follows: To fulfill the requirement of BBA program. To asses the different Deposits and Loan policies of IFIC Bank Limited.

 To identify and suggest the scopes of improvement in Deposit Management and Loan Management of IFIC Bank Limited.

1. 3 Scope of the Study

The study has focused on the following areas of IFIC Bank Limited: Procedure for different Deposits and Credit facilities. Loan and Credit appraisal system of this Bank. Management efficiency in Deposits, Loan and Advances. Organization structures and responsibilities of management etc. Each of the above areas would be critically analyzed in order to determine the efficiency of Deposits and Loan Management of IFIC Bank Limited.

1. 4 Limitations of the Study

Many problems appeared in the way of conducting the study. These are as follows: Time limitation is a big factor, which hinders the data collection process. Only forty five days are not enough to study deeply all types of deposit, loans and advances and their management process. The distance of head office of IFIC Bank is so far from Dinajpur Branch. Because of being private limited companies, IFIC Bank Limited keeps some information restricted. As a newcomer, there was a lack of previous experience in this concern. Many practical matters have been written from own observation that may vary from person to person.

CHAPTER TWO Methodology of the Study

2. 1 Introduction
The study has been performed based on the information extracted from different sources collected by using a specific methodology. The methods of completing the report have included some steps which are followed by one by one.

2. 2 Selection of the Study Area

The area of the study was Dinajpur Branch of IFIC Bank. The Dinajpur Branch of IFIC Bank was selected purposively because of easiest communication, comfortable workplace, fully computerized accounts maintenance, well decorated and air conditioned facilities that helped to collect the information easily. A fully operational computer network; Local Area Network (LAN) and Wide Area Network (WAN) installation having reliable and secured communication also helped to collect reliable data.

2. 3 Population and Sample

All the Branches of IFIC located in everywhere in Bangladesh has been taken into consideration as population. Sample is the representative part of the population. In case of this study the sample includes the manpower of the Dinajpur Branch of IFIC Bank Limited:

Name of the post First Assistant of Vice President Senior Manager Manager Senior officer, Librarian/Medical officer, Security officer Class- Class- v Clients Grand Total
Table: T-1: Sample Size

Number of Sample 01 01 01 10 05 05 20 43

2. 4 Sampling Technique
Here non-probability judgmental sampling has been used that attempts to obtain a sample of convenient element based on the judgment.

2. 5 Data collection
In order to carry out this study, two sources of data have been used. a) Primary data b) Secondary data

Primary Sources
Respective officer(s) and employee(s) of IFIC Bank were interviewed by an unstructured questionnaire. Direct communication with the clients Exposure on different desk of the bank File study etc Expert opinion: Head of the Department comprised of Deputy General Manager, Manger and Assistant Manager. Official records etc.

Secondary Sources
Annual Report of IFIC Bank Ltd. Periodicals published by the Bangladesh Bank Different publications regarding banking functions, deposits, foreign exchange operation, deposit and credit policies of IFIC Bank Limited. Journal Banking related text books, Newspapers, and Manuals. Research papers, training materials Internet

Table: T-2: Primary and Secondary Sources of Data Collection

2. 6 Statistical Tools Used

Tabular presentation Techniques of Percentage (In ratio)
CAMELS rating technique etc.

2. 7 Study Timeline and Cost

Date April 29, 2010 Activities Joining as internee at Dinajpur Branch, IFIC Bank Limited

May 13, 2010 May 14 to May 25, 2010 June 02-June 23, 2010 June 24, 2010 June 24 to June 30, 2010 July 01-July 30, 2010 Aug 06, 2010 Aug 08, 2010 Aug 08 to Aug 16, 2010 August 17,2010

Selection of the topic Collecting the secondary data from different sources Analyzing the secondary data Preparing a questionnaire to collect primary data Collecting primary data Analyzing both primary and secondary data to prepare the report Completion of the report Submission of the draft report Correction of the report Submission of the report Table: T-3: Study Timeline

*Cost of visiting the Bank, stationery cost etc is little in amount and are not
mentionable here.

CHAPTER THREE

Overview of the IFIC Bank Limited

3. 1 Banks in our country

There are about 48 scheduled banks in our country. The central Bank of our country is Bangladesh Bank, established in 1971. There are four nationalized commercial banks namely Agrani, Janata, Rupali, and Sonali Bank. Nine (9) foreign banks

operate their banking activities in our country. Now there are four specialized banks in our country. The number of private commercial banks in our country is thirty (30). IFIC Bank Limited is one of the leading commercial bank in our country.

3. 2 IFIC Bank Limited

International Finance Investment and Commerce Bank Limited (IFIC Bank) is a banking company incorporated in the Peoples Republic of Bangladesh with limited liability. It was set up at the instance of the Government in 1976 as a joint venture between the Government of Bangladesh and sponsors in the private sector with the objective of working as a finance company within the country and setting up joint venture banks/financial institutions abroad. The Government of the Peoples Republic of Bangladesh now holds 33% of the share capital of the Bank. Leading industrialists of the country having vast experience in the field of trade and commerce own 35% of the share capital and the rest is held by the general public.

3. 3 Milestones in the Development of IFIC BANK

a) 1976-Established as an Investment & Finance Company under arrangement of joint venture with the govt. of Bangladesh. b) 1980-Commenced operation in Foreign Exchange Business in a limited scale c) 1982-Obtained permission from the Govt. to operate as a commercial bank d) 1983-Set up a its first overseas joint venture (Bank of Maldives Limited) in the Republic of Maldives ( IFICs share in Bank of Maldives Limited was subsequently sold to Maldives Govt. in 1992) e) 1985-Commenced operation as a full-fledged commercial bank in Bangladesh f) 1987-Set up a joint venture Exchange Company in the Sultanate of Oman, titled Oman Bangladesh Exchange Company (subsequently renamed as Oman International Exchange, LLC). g) 1993- Set up its first overseas branch in Pakistan at Karachi. h) 1993-Set up its second overseas branch in Pakistan at Lahore i) 1994-Set up its first joint venture in Nepal for banking operation, titled Nepal Bangladesh Bank Ltd.

j) 1999-Set up its second joint venture in Nepal for lease financing, titled Nepal Bangladesh Finance & leasing Co. Ltd. (which was merged with NBBL in 2007) k) 2003-Overseas Branches in Pakistan amalgamated with NDLC, to establish a joint venture bank: NDLC-IFIC Bank Ltd., subsequently renamed as NIB Bank Ltd l) 2005-Acquired MISYS solution for real time on-line banking application. m) 2006-Corporate Branding introduced, Visa Principal and Plus (Issuer and Require) Program Participant Membership obtained n) 2008- Observing 25th Anniversary of Customer Satisfaction o) 2009-64 Branches offering Real Time On-line banking facility. p) 2010-All Branches of IFIC Bank is operating under state-of-art world class Real Time On-line Banking Solution.

3. 4 Objective of the Bank

o To enhance savings tendency of the people by offering attractive and lucrative new savings scheme. o To encourage and motivate new entrepreneur to establish industries and business in line with development of the national economy.

3. 5 Mission of the Bank

The mission of IFIC Bank is to provide service to clients with the help of a skilled and dedicated workforce whose creative talents, innovative actions and competitive edge make position unique in giving quality service to all institutions.

3. 6 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 is 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. (Figure: F-1)

Organizational Structure & Responsibilities (Deposits and Loan perspective):

Board Managing Director

Deputy Managing Director

Internal Audit ( Other Direct Report)

Head of Credit Risk Management

Head of Recovery

Head of Corporate/ Commercial Banking

Credit Executives

Corporate Banking Executives

Credit Approval

Credit Administration

Relationship Manager Consumer Finance Relationship Manager Team Business / Product Development

Credit Manager Consumer Finance Credit Analyst Team

Manager Credit ADMN. Consumer Finance Disbursement Team Custodian Team Monitoring Team Compliance Team

Here the Organizational Structure & Responsibilities of IFIC Bank can be depicted as follows at a glance:

Figure: F-1: Organizational Structure of IFIC Bank Limited

3. 7 Human Resources Development (HRD)

Human Resources Development is focused on recruitment and in-house training for both on the job and off the job Bank staff members through the Banks Academy. IFIC Bank Academy the oldest institution in the private sector was conceived of as an in-house training

center to take care of the training needs of the Bank internally. Academy is fully equipped with a professional library, modern training aids and professional faculty. Library has about 4941 books on banking, economics, accounting, management, marketing and other related subjects. Main training activities consist of in-depth foundation programmes for entry level Management Trainees. Specialized training programmes in the areas like general banking, advance, foreign exchange, marketing and accounts etc. are also organized by the Academy depending on need. During its 23 years of existence, Academy not only conducted courses, workshops and seminars as required by the Bank, but it also organized training programmes for the Bank of Maldives, Nepal Bangladesh Bank Limited and Oman International Exchange LLC.

3. 8 Activities AT A Glance
The IFIC Bank engages in wide range of activities from small scale lending to large industrial project financing. It involves export and import financing as well as many other services, its range of activities at a glance are as follows: Loans and dvances Project loan Working capital loan Cash credit Overdraft Packing credit & trust receipt House building finance Import finance Guarantee and so on Export Import Trade finance Deposits Current account Savings account Short term deposits Fixed deposit Bearer certificate of deposit Non resident foreign currency deposit account Resident foreign currency account Special saving scheme Table: T-4: Activities At A Glance Other services Safe custody (locker) Travelers Cheque Demand draft Pay order Telegraphic transfer Selling and buying foreign currency Standing instruction Lease financing

CHAPTER FOUR Results and Discussion

Deposit Management of IFIC Bank Limited

4. 1 Deposit Management
The managerial process involved in collecting, organizing, maintaining and utilization of the deposit schemes/deposits fund is called Deposits Management. The Deposits Management of IFIC Bank Limited involves the following aspects. Providing various Deposit Accounts & Schemes Collecting Procedures of Deposits Fund Customer Service for Depositors Utilization of the Deposits Fund Performance Appraisal of Deposits Management

4. 2 Objectives of Deposit Management

IFIC Bank Limited gives special importance on savings. The Objectives and principles of the Savings Policy of the Bank are: To encourage people to save for self and for the country as a whole. To develop a sustained savings habit among the people.

4. 3 Deposit Accounts served by IFIC Bank limited

This part covers only following types of accounts1. Current Deposit Account 2. Savings Deposit Account 3. Fixed Deposits Receivers (FDR) Accounts Short Term Deposit (STD) Account, Term Deposits.

4.3.1 Current Deposit Account

General Procedures/Characteristics: a. CD accounts are unproductive in nature as banks loanable fund is concerned. Sufficient fund has to be kept in liquid form, as current deposits are demand liability. b. Thus huge portion of this fund become non-performing. For this reason banks do not pay any interest to CD Accountholders. c. There is no restriction on the number and the amount of withdrawals from a current account. d. Service charges are recovered form the depositors since the bank make payments and collect the bills, drafts, cheques, for any number of times, daily. e. In practice of IFIC Bank, a minimum balance of Tk. 2000 has to be maintained.

4.3.2 Savings deposit Account

General Characteristics: As per BB instruction 88% of SB deposits are treated as time liability and 12% of it as demand liability. a. Interest is paid on this account. IFIC Bank offers a reasonable rate of 5% of interest for SB A/C. b. Generally, banks require a 7-day prior notice if the total amount of one or more withdrawals on any date exceeds 25% of the balance of the account unless is given, but in IFIC Bank there is no restriction about drawing money form savings account. c. Minimum Balance of Tk. 2000 is to be maintained. d. Interest will be counted on the average balance of month.
e. Service charges: Balance up to 5,000/- free for charge

Balance 5,001/- up to 25000/- charges of TK. 100/-

 Balance 25,001/- and above charges of TK. 300/-

4.3.3 FDR Section This branch maintains a separate section for maintaining fixed Deposit. FDR is an important factor for the bank and volume of FDR determines the investment base of the Bank. This section deal with the customers of short-term deposit (STD), term deposit (TD) A/C.

4.3.3.1 Short term deposit Account (STD)

General Characteristics: Customers deposit money for a shorter period of time. The interest offered for STD is less than that of savings deposit In practice. IFIC Bank offers 2-4% rate interest for STD account. Volume of STD A/C is generally high. Frequent withdrawal is discouraged and requires prior notice. .

4.3.3.2 Term Deposits

General Characteristics: Popularly, it is known as Fixed Deposit Receipt (FDR), Term deposits are made with the bank for a fixed period of time. The banks need not to maintain cash reserves against these deposits and therefore, the bank offers high rate of interest on such deposits.
In IFIC Bank, fixed deposit account is opened for only 3, 6 & 12 months. Types of FDR maintained by this branch along with their respective interest rate.

Periods

Proposed Rate Per Annum Less Than 1 Crore Above 1 crore But Less Than 5 crore 8.5 % 8.5% Above 5 Crore 9.00% 9.00%

3 months 8.25% 6 months 8.25%

12 months

8.00%

8.25%

8.75%

Table: T-5: Rate of FDR

4. 4 Deposit schemes
The IFIC Bank has already introduced 4 (four) yielding deposit scheme, which have been highly acclaimed by the depositors. These are. 1. Monthly Income Scheme (MIS) 2. Pension Saving Scheme (PSS) 3. Durable Return Deposit Scheme (DRDS) 4. Three Years Deposit Plus (3YDP) 5. Education Savings Schemes (ESS)

4.4.1 Monthly Income Scheme

Under Monthly Income Scheme any individual can keep the deposit in taka 50,000 or in multiples thereof. There is no upper limit. Deposit Benefit each month (for 3 years) Table: T-6: Monthly Income Scheme Benefits negotiable for deposit of Tk. 10,00,000 or above. Payment of benefit will start after 30 days of deposit. In case of extreme emergency if any individual make premature enactment, interest will be paid at savings rates. Depositors can also avail loan up to 90% of the deposit. Nomination is also acceptable. No photograph or introduction is required for opening this account. Bangladeshis living abroad may also open this account for providing fixed amount of income to their dependent/ families in Bangladesh.
Tk. 350 Tk. 700 Tk. 1,400 Tk. 3,500

Tk. 50,000

Tk. 1,00,000

Tk. 2,00,000

Tk. 5,00,000

4.4.2 Pension Saving Scheme

General Characteristics:

a. Interest paid on this account 9.50% and tenure is 3 or 5 years. b. A person of 18 years of age and above having a sound mind will be eligible to open an account in his / her own name. c. PSS account can not be opened in the name of minor, in joint names, or in name of any institution.
d. An account can be transferred from one branch to another branch of the bank by a written application of the account holder. A fee of TK. 200/- is payable as banks service charge.

4.4.3 Education Saving Scheme

These days providing a good education for children are really costly. To ensure bearing such costly education expenses of children every body need to start savings early. The scheme provides opportunity for meeting educational expenses of children at school, college or university. Keep deposit of Tk. 25,000 or any multiple thereof for 5 years. There is no upper limit. Children can maintain their educational cost on monthly basis for subsequent five years or lump sum at maturity. Term 5 Years 5 Years Deposit Tk. 25,000 Tk. 50,000 Monthly benefit For 5 years Tk. 980 Tk. 1,960 or lump sum payment Tk. 44,000 Tk. 88,000

Table: T-7: Education Saving Scheme Loan can allowed up to 85% of deposits. In case of extreme emergency if any one make premature enactment, interest will be paid at saving rate. The student in the merit list will be awarded special stipend/ gift. 4.4.4 Double Return Deposit Scheme Minimum deposit of this is 25,000 or its multiples. Term of this deposit is 8 and years. An order instrument mentioning the amount payable after maturity shall be issued favoring the depositors. However, if required, the instrument may be discounted at the counter of issuing Bank at 8.50% interest for the remaining period of maturity provided further that under no circumstances, the depositor shall get less than the deposit at the initial period..

4.4.5 Three Years Deposit Plus

Minimum deposit of this is 50,000 or its multiples. Term of this deposit is 3 years. An order instrument mentioning the amount payable after maturity shall be issued favoring the depositors. The instrument shall not be enchased before maturity. However, if required, the instrument may be discounted at the counter of issuing Bank at 8.50% interest for the remaining period of maturity provided further that under no circumstances, the depositor shall get less than the deposit at the initial period.

4. 5 Utilization of Deposits Fund

Basically like others Bank IFIC also carry on their business with the deposits fund. For maintaining & utilizing the deposits fund IFIC Bank Treasury Division deals with the utilization of deposit fund.

4.5.1 IFIC Bank Treasury Division

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.

4.5.2 Major Functions of Treasury

Fund Management Management of Statutory Requirement Investment Trading of F Ex. & Money Market Instruments Asset Liability Management Risk Management IFIC Treasury has four different desks, which are specialized in their own area to provide best services with respect to pricing, best possible solution for customer requirement and market information. The different Treasury Desks are as follows: Foreign Exchange Desk

IFIC Foreign Exchange Desk is one of the leading market maker in spot, swaps, and forward transactions in inter-bank market. The Bank has good sources of Foreign Currency through its own export customers, Non-residence Remittances and local & multinational corporate houses remittances/exports. The Treasury is connected to the International Market through on-line Dealing Platforms of different international banks and controls the foreign deposit funds. Money Market Desk Money market dealers arrange short and medium term deposit funds at most economical terms which are required by the bank aside from customer deposit mobilization efforts. In stress liquidity condition the desk always manages sufficient fund to provide business needs. Investment Desk Investment desk in Treasury Front Office operates within the policy frame approved by the Board of Directors of the Bank. Deposit fund invested in different securities both for maintenance of SLR & income generating activities. The philosophy is to manage and maximize income within certain parameters and limits. Asset Liability Management Desk Asset Liability Management is one of the major functions of IFIC Bank Treasury. Objective of the desk is to ensure efficient allocation of deposit and other fund within an acceptable, measurable and defined risk structure. 4. 6 Customer Services for the depositors The IFIC Bank ensures better customer services. IFIC Bank has the following arrangement of remittance within and outside the country: (a) (b) (c) Pay order Demand draft Telegraphic transfer etc.

Loan Management of IFIC Bank Limited

4. 7 Loan Management
The word Loan is directly related with Credit in Banking activities. The word
credit comes from the Latin word Credo meaning I believe. It is a lenders trust in a persons/ firms/ or companys ability or potential ability and intention to repay. In other words, credit/loan is the ability to command goods or services of another in return for

promise to pay such goods or services at some specified time in the future. For a bank, it is the main source of profit and on the other hand, the wrong use of credit would bring disaster not only for the bank but also for the economy as a whole. Credit management is a dynamic field where a certain standard of long-range planning is needed to allocate the fund in diverse field and to minimize the risk and maximizing the return on the invested fund. The overall success in loan and credit management depends on the followings: The banks credit policy, Portfolio of credit, Monitoring, Supervision and follow-up of the loans and advances

4. 8 The objective of the Loan management

The objective of the credit management is to maximize the performing asset and the minimization of the non-performing asset as well as ensuring the optimal point of loan and advance and their efficient management.

4. 9 Loan Policy of IFIC Bank Limited

One of the most important ways, a bank can make sure that its loan meet organizational and regulatory standards and they are profitable is to establish a loan policy. Such a policy gives loan management a specific guideline in making individual loans decisions and in shaping the banks overall loan portfolio In the feature, credit principles includes the general guidelines of providing credit by branch manager or credit officer. In IFIC Bank Limited they follow the following guideline while giving loan and advance to the client. Credit advancement shall focus on the development and enhancement of customer relationship. All credit extension must comply with the requirements of Banks Memorandum and Article of Association, Banking Companys Act, Bangladesh Banks instructions, other rules and regulation as amended from time to time. Loans and advances shall normally be financed from customers deposit and not out of temporary funds or borrowing from other banks.

The bank shall provide suitable credit services for the markets in which it operates. It should be provided to those customers who can make best use of them. The conduct and administration of the loan portfolio should contribute with in defined risk limitation for achievement of profitable growth and superior return on bank capital.

Interest rate of various lending categories will depend on the level of risk and types of security offered.

4. 10 Various Types of Loans, Advances and Investment

IFIC Bank Limited generally gives short-term fund to various sector of the country like industrial loan, agricultural loan, consumer credit and so on. Short-term loan is generally payable on demand or at short notice.In practice however banks allow midterm and also some long-term loan. Bank's credit creates deposit in the country. Loan on the basis of security: On the basis of the security bank credit is of two types: Clean or unsecured credit Secured credit

Clean credit: These are the advances of the bank, \\'hich are disbursed based on the personal security of the borrower. Such advances are not made to the ordinary customer of the bank, these types of credit are given to the valued customer who has a good credit standing. Secured credit: In case of the secured advances the bank has recourse to the security in addition to the personal security of the borrower. It means that the borrower is also liable for any shortfall that may arise after the sale proceeds of the security.

4. 11 Loans At a Glance
Sector wise loans provided by IFIC Bank Limited are discussed briefly as follows:

Types of Loans
Easy Loan (Personal

Terms and conditions

Loan Size: Depend on value of security.

Secured)

Tenure: 12 months as SOD, 36 months as loan General / Term loan. Rate of interest: 2% above that the FDR but not less than 10.50%. 14.50% against PSS or other financial obligation. Loan Size: Max. 1.00 lac. DER: 80:20 Tenure: Min. 12-36 months DBR: 33% Rate of interest: 16.50% Loan Size: Max. 3.00 lac without security, Max. 8.00 lac with security. DER: 70:30 Tenure: Min. 12-48 months DBR: 35% Rate of interest: 16.50% Loan Size: Max. 75.00 lac DER: 70:30 Tenure: Max. 15 years DBR: 35% Rate of interest: 15.00% Loan Size: Max. 5.00 lac without security, Max 10.00 lac with security. DER: 60:40 Tenure: Min 12 months, Max 48 months DBR: 33% Rate of interest: 16.50% Loan Size: Max. 20.00 lac DER: 70:30 Tenure: Min 12 months, Max 60 months DBR: 35% Rate of interest: 15.50% Loan Size: Max. 0.50 lac Tenure: Min.& Max. 12 minths DBR: 35% Rate of interest: 16.50% Loan Size: Max. 3.00 lac.

Consumer Durable Loan

Porua Loan (Education)

Thikana Loan (House Building)

Pheshajeebi Loan

Auto Loan

Festival Loan

Any Purpose Loan

 Marriage Loan CNG Conversion Loan Holiday Loan

Tenure: Min 12 months, Max 36 months DBR: 35% Rate of interest: 16.50% Loan Size: Max. 3.00 lac Tenure: Min 12 months, Max 36 months DBR: 35% Rate of interest: 16.50% Loan Size: Max 1.00 lac Tenure: Min 12 months, Max 36 months DBR: 35% Rate of interest: 16.50% Loan Size: Max. 3.00 lac Tenure: Min 12 months, Max 36 months DBR: 35% Rate of interest: 16.50% Loan Size: Max. 3.00 lac Tenure: Min 12 months, Max 36 months DBR: 35% Rate of interest: 16.50% Loan Size: Max. 3.00 lac Tenure: Min 12 months, Max 36 months DBR: 35% Rate of interest: 16.50%

Home Renovation / Interior Decoration Loan Medical Loan

Loans on Small & Medium Enterprise

There are 15 (Fifteen) products under Small & Medium Enterprise. Which are follows as under:

Types of Loans
Easy Commercial Loan

Terms and conditions

Loan Size: Depend on the value of security.

Tenure: 12 months Nature: OD/ Loan General. Rate of interest: 2% above that the FDR & other financial obligation but not less than 10.50%. Loan Size: Max. 2.00 lac. Tenure: Max. 24 months for TK. 1.00 lac, Max. 30 months for TK. 1.50 lac, Max. 36 months for above TK. 1.50 lac. Rate of interest: 16.00% Loan Size: Max. TK. 50.00 lac. Tenure: Max. 48 months. DBR: 60% DER: 60:40 Nature: Term Loan Rate of interest: 15.50% Legal Mortgage required. Loan Size: Max. TK. 50.00 lac. Tenure: Max. 60 months. DBR: 60% DER: 70:30 Nature: Term Loan Rate of interest: 15.00% Legal Mortgage required Loan Size: Max. TK. 5.00 lac. Tenure: Max. 36 months. DBR: 50% DER: 50:50 Nature: Term Loan. Rate of interest: 16.00% Loan Size: Max. TK. 50.00 lac. Tenure: Max 12 months. DER: 50:50 Nature: SOD Rate of interest: 15.50% Legal Mortgage required Loan Size: Max. TK. 50.00 lac. Tenure: Max 12 months. Nature: Loan Gen. (Revolving) Rate of interest: 15.50%

Retailers Loan

Transport Loan

Commercial House Building Loan

Possession Right Loan

Contractors Loan

Bidders Loan

Working Capital Loan

Loan Size: Max. TK. 50.00 lac. Tenure: Max 12 months. Nature: Cash Credit. Rate of interest: 15.50% Loan Size: Max. TK. 50.00 lac. Tenure: Max. 60 months. DER: 70:30 Rate of interest: 15.50%. Loan Size: Max. TK. 50.00 lac. Tenure: As required by borrower. Rate of interest: As per prescribed rate. DER / Margin: Banker customer relationship. Loan Size: Max. TK. 50.00 lac. Tenure: Nature of goods and as per Bangladesh Bank guideline. Rate of interest: 15.50%. DER / Margin: Banker customer relationship Loan Size: Max. TK. 50.00 lac. Tenure: Nature of goods and as per Bangladesh Bank guideline. Rate of interest: 15.50%. DER / Margin: Banker customer relationship. Loan Size: Max. TK. 50.00 lac. Tenure: As required by borrower. Rate of interest: As per prescribed rate. DER / Margin: Banker customer relationship. Loan Size: Min. TK.2.00 lac, Max. TK.50.00 lac. Tenure: Max.36 months for TK. 5.00 lac, Max. 60 months for above TK. . 5.00 lac. Nature: Term Loan. Rate of interest: 16.50% without collateral security, 15.50% with collateral security.

Project Loan

Bank Guarantee

Loan Against Imported Merchandise (LIM)

Loan Against Trust Receipt (LTR)

Letter of Credit (L/C)

Muldhon Loan

Woman Entrepreneurs (Prottashaya):

Loan Size: Min. TK.0.50 lac, Max. TK.3.00 lac. Tenure: Max. 18 months for TK. 0.50 lac, Max. 24 months for TK. 1.00 lac & Max. 36 months for loan up to TK. 3.00 lac. Nature: Term Loan. Rate of interest: 15.00%

Loans on Agriculture Sector:

There are 5 (Five) products under Agriculture Sector. Which are follows as under: Types of Loans Krishi Saranjam Rin Terms and conditions Shech Saranjam Rin Poshupokhi & Matshokhamar Rin Loan Size: Min. TK.0.50 lac, Max. TK.10.00 lac. Tenure: Min.12 months, Max. 36 months. Nature: Lease Finance. Rate of interest: 12.00% Collateral Security: Preferable but not mandatory. Loan Size: Min. TK.0.20 lac, Max. TK.10.00 lac. Tenure: Min.12 months, Max. 36 months up to loan for TK. 3.00 lac, Max. 60 months above 3.00 lac. Nature: Term Loan. Rate of interest: 12.00% Collateral Security: Above 1.00 lac required collateral security. DER: 70:30 Loan Size: Min. TK.0.20 lac, Max. TK.3.00 lac. Tenure: 12 months. Nature: Term Loan. Rate of interest: 12.00% Collateral Security: Above 1.00 lac required collateral security. DER: 70:30

Phalphosali Rin

Loan Size: Min. TK.0.20 lac, Max. TK.3.00 lac. Tenure: 12 months. Nature: Term Loan. Rate of interest: 12.00% Collateral Security: Above 1.00 lac required collateral security. DER: 70:30 Loan Size: Min. TK.0.20 lac, Max. TK.1.00 lac. Tenure: Depending on nature crops cycle, Min. 6 months, Max. 12 months. Nature: Short Term Loan / Loan Gen. Rate of interest: 12.00% Collateral Security: Personal guarantee of spouse/parent/other family member acceptable to the bank.

Phasali Rin

Table: T-8: Various Loans At A Glance

4. 12 Loan Management Practice of IFIC Bank and guidelines of Bangladesh Bank

Comparing IFIC Banks current loan management system with Bangladesh Banks guideline we see that IFIC Bank lacks some of the best practices in banking industry which can be generated in the following way Loan and Credit Policies/ Lending Guidelines: IFIC Bank Limited has no written credit policy though it follows some policy. As there is no written credit policy, branch managers sometimes get confused whether to go with a project or not. IFIC Bank Limited should have a lending guideline available in every branch so that credit officers can take quick decision whether to accept or reject a project. The lending guideline should include the following Industry or business segment focus. Types of loan facilities Details of single borrower/ group limit Lending caps Discouraged business type

 Loan facility Parameters Cross Border risk Credit Assessment & Risk Grading: Though credit is properly assessed in IFIC Bank Limited, but there is no risk grading system applied here. It should adopt a credit risk grading system to ensure account management, structure and pricing are commensurate with the risk involved. Approval Authority of the loan: In Bangladesh Banks guideline it is written that Approval authority should be delegated to individual executives and not to committees to ensure accountability in approval process. But in IFIC Bank Limited we see that every credit goes to the board via credit committee. As a result, wastage of time occurs and no one is held accountable for a bad loan. Segregation of Duties: According to Bangladesh Bank Guideline Banks should aim to segregate the following lending functions to improve the knowledge levels and expertise in each department: Credit Approval/ Risk Management Relationship Management/ Marketing Credit Administration

In small branches of IFIC Bank Limited only single loan officer do all the jobs like loan marketing, risk assessing and credit administration. Internal Audit: IFIC Bank Limited has a segregated internal audit/ control department charged with conducting audit of all departments as suggested by Bangladesh bank guideline. Preferred Organizational Structure: Currently IFIC Bank Limited does not follow the preferred management structure as suggested by Bangladesh Bank guideline. The key feature in the preferred management structure is the segregation of Marketing/ Relationship function from approval/Risk management/ Administration function. Approval process: According to Bangladesh Banks best practice guideline, the recommending or approving executives should take responsibility for and be held accountable for their recommendations and approval. The recommended delegated approval authority levels are as follows:

Head of Credit/CRM Executives__________Up to 15% of capital Managing Director/ CEO ______________ Up to 25% of capital EC/ Board _________________________ All exceed 25% of capital But in IFIC Bank Limited we see that every credit proposal goes to Executive committee i.e. board.

Loan Approval Process of IFIC Bank Limited:

Relationship Manager (RM) Assessment of credit application and preparing credit proposal

Recommended to

Head of Corporate (Marketing) Forward to

Head of Credit / CRM Team Approved/Declined as per delegation Beyond capacity recommended to

Credit Committee

Deputy Managing Director Approved/Declined as per delegation Beyond capacity recommended to Managing Director Approved/Declined as per delegation Beyond capacity recommended to

Board of Directors Approved/Declined

Figure: F-2: Loan Approval Process of IFIC Bank Limited Credit and Loan Administration: The Bangladesh Bank guidelines suggest that Credit administration be strictly segregated from relationship management/ marketing. As a result the possibility of controls being compromised or issues not

being highlighted at the appropriate level can be avoided. The credit administration has the following functions Disbursement Custodial duties Compliance requirement In IFIC Bank Limited credit officers under supervision of Branch Credit In-charge or Manager also carry out all the three functions of credit administration. But Credit Marketing and administration is yet to be segregated. Loan and Credit Monitoring: To minimize credit losses, monitoring procedures and systems should be in place that provides an early indication of the deteriorating financial health of a borrower. Early identification, prompt reporting and proactive management of Early Alert Accounts are prime credit responsibilities of all relationship Managers. An early Alert Account is one that has risks or potential weakness of a material nature requiring monitoring, supervision or close attention by management. In IFIC Bank Limited credit monitoring is also done by credit In charge or branch managers. As a result Early Alert Accounts do not get that much attention as needed. Loan and Credit Recovery: According to Bangladesh Bank guideline the recovery unit (RU) of CRM should directly manage accounts with sustained deterioration. Credit Risk Management (CRM): Oversight of the banks credit policies, procedures and controls relating to all credit risks arising from

corporate/commercial/institutional banking, personal banking, & treasury operations is called credit risk. Credit Risk management is handled by Credit approval Authority, Internal Auditors, Relationship Management/Marketing (RM), Credit Administration Department etc. Incentive Program for loan: The BBk guideline also encourages Banks to introduce incentive programs for the Recovery Unit Account Managers to bring down the NON Performing Loans (NPLs) IFIC Bank Limited currently has no incentive program as it does not have any Recovery Unit.

4. 13 Credit Rating of IFIC Bank Limited

Credit Rating Information and Services Limited (CRISL) has assigned A (pronounced as single A) rating in the long term and ST - 2 in the short term to International Finance Investment and Commerce (IFIC) Bank Limited for the year 2010. CREDIT RATING ON IFIC BANK LIMITED

Long Term Surveillance Rating 2010 Entity Rating 2009 Outlook Date of Rating A A Stable

Short Term ST - 2 ST - 3

June 29, 2010 Table: T-9: Credit rating of IFIC Bank Limited

4.13.1 CAMELS Rating of Banks - Bangladesh

Capital, Asset, Management, Earning, Liquidity and Sensitivity (CAMELS) Rating of different commercial banks in 2010 were done recently by the regulatory authority. The serial is made on the basis of performance of 2009and local banks first, then foreign banks.

Rank

Bank Name Prime Bank Ltd., Shahjalal Islami Bank Limited,

Strong or A-class banks

Commercial Bank of Ceylon, State Bank of India, Standard Chartered Bank, Citi N.A Standard Bank Limited, Exim Bank Ltd., Mercantile Bank, NCC Bank, BASIC Bank, Pubali Bank, Southeast Bank, Mutual Trust Bank Limited, Dutch-Bangla Bank, Premier

Satisfactory or B-class banks

Bank, The Trust Bank, Bank Asia, Jamuna Bank, BRAC Bank, One Bank, Dhaka Bank, Eastern Bank, Islami Bank Bangladesh Ltd., Uttara Bank, National Bank, The City Bank, Social Investment Bank, Habib Bank, National Bank of Pakistan, Bank Alfalah, Woori Bank, HSBC

First Security Bank, IFIC Bank, AB Bank, United Fair or C-class banks Commercial Bank, Al-Arafah Islami Bank, Bangladesh Shilpa Rin Sangstha, Agrani Bank Ltd, Rupali Bank Ltd. Marginal or D-class banks Unsatisfactory or E-class banks Sonali Bank Ltd, Janata Bank Ltd, Bangladesh Shilpa Bank Bangladesh Krishi Bank, Rajshahi Krishi Unnyan Bank Bangladesh Commerce Bank, Oriental Bank Ltd

Table: T-10: CAMELS Rating of Banks - Bangladesh

4. 14 Deposits and Loan Management in Abroad: Joint Ventures Abroad

Bank of Maldives Limited IFIC is the first among the banks in the private sector to have operations of deposits and loans management in abroad. In 1983, the Bank set up a joint venture bank in Maldives known as 'Bank of Maldives Limited' (BML) at the request of the Government of the Republic of Maldives. This is the only national bank in that country having branches throughout that country. IFIC Bank managed the affairs of BML from 1983 to 1992. IFIC Bank sold its shares in 1992 to the Government of the Republic of Maldives and handed over the Management of BML to Maldives Government. NIB Bank Ltd., Pakistan: IFIC Bank had two branches in Pakistan, one in Karachi and the other in Lahore. Karachi Branch was opened on 26th April 1987, while Lahore Branch was opened on 23rd December 1993. To meet the Minimum Capital Requirement (MCR) of the State Bank of Pakistan, the Overseas Branches in Pakistan have been amalgamated with a reputed leasing company in Pakistan named National Development Leasing Corporation Ltd. Nepal Bangladesh Bank Ltd. (NB Bank): Nepal Bangladesh Bank Ltd. (NB Bank), a joint venture commercial bank between IFIC Bank Ltd. and Nepal nationals, started operation with effect from June 06, 1994 in Nepal with 50% equity from IFIC Bank Ltd. Nepal Bangladesh Finance & Leasing Limited (NB Finance):

Nepal Bangladesh Finance & Leasing Co. Ltd. (subsequently renamed as Nepal Bangladesh Finance & Leasing Ltd.), another joint venture leasing company between IFIC Bank Ltd. and Nepali Nationals, started its operation on April 18, 1999 in Nepal. IFIC Bank presently holds 15% share in the company. Oman International Exchange LLC (OIE) Oman International Exchange LLC (OIE), a joint venture between IFIC Bank Limited and Oman nationals, was established in 1985 to facilitate remittance by Bangladeshi wage earners in Oman. IFIC Bank holds 25% shares, and the balance 75% is held by the Omani sponsors.

4. 15 Recent Performance of Deposit and Loan Section of IFIC Bank

Accounts Total Loans and Advances Total Deposits and other Accounts Year-2010,March 39,222,528,529 Taka 47,592,949,475 Taka Year-2009, December 37,793,886,723 Taka 50,017,960,808 Taka

Table: T-11: Recent Performance of Deposit and Loan Management From the above table it is clear that the recent performance of Loan Management is more efficient than Deposits Management of this bank.

Chapter Five
Summary of the Findings and Discussions
The following points came out while analyzing the findings of this study: 1. Total deposits amount is decreased in 2009 compared to 2008 due to economic regression and inefficiency of deposit management. 2. IFIC Bank Limited has Real time online banking activities at all the Branches. 3. IFIC Bank Limited has the website, which has not been updated and it is less informative. 4. IFIC Bank Limited has poor ATM Card/Credit card facility. Five Booths are located in Dhaka and Chittagong city. This discourages the depositors. 5. Banking operation in abroad (in Maldives, Nepal, Oman etc.) is satisfactory for IFIC Bank Limited than that of others. 6. IFIC Bank Limited has 65 Branches in Bangladesh. More branches are needed in competitive market. It has some proposed branches which going to be established as early as possible. 7. Deviation with income statement of IFIC Bank Limited was lower than that of the contestants, which shows low risk of operating results. 8. Investments and liabilities of IFIC Bank Limited appeared off-putting.. Investment in loans and advances was the highest deviating factor along with borrowings, total liabilities, and total equity. 9. Due to unavailability of local capital market, IFIC Bank Limited has been suffering from investing idle fund in liquid venture. The largest source of fund was deposit followed by a tiny portion of equity capital. 10. IFIC Bank can recruit experienced, efficient and knowledgeable work force as it offers good working environment.

11. Lack of awareness and understanding clogged the ways of credit disbursement for IFIC Bank Limited. Credit to total asset ratio has been the lowest for IFIC Bank Limited compared to other generations and industry average. 12. Loan processing time and interest rate of IFIC Bank Limited are high than that of other Bank 13. IFIC Bank Limited has performed poorly in terms of the percentage of nonperforming loans, which has increased the requirement for income cut to escalate the amount of provision against classified loans (bad loans). 14. It has a vast year of experience since its establishment in 1976. So, from this above discussion it is clear that IFIC Bank has some strengths and weakness. To overcome the weakness some policy guidelines should be taken.

5. 1 SWOT Analysis
SWOT Analysis is an important tool for evaluating the companys Strengths, Weaknesses, Opportunities and Threats. The SOWT analyses of IBBL are presented below: S W O T stands for Strength stands for Weakness stands for Opportunity stands for Threat

Strength
Foreign Exchange business Overseas joint Venture ( In Maldives, Nepal, Oman etc) Real time online Banking in all branches Vast years of experience since its establishment in 1976 Has a research division Sound financial strength Already achieved a goodwill among the clients.

Weakness Lack of well-trained human resource in some branch. lacks aggressive advertising The procedure of credit facility is to long compare to other banks. Employees are not motivated in some areas. Absence of structured marketing and credit policy Lack of coordination among the branches and Head Office. Poor ATM Card/Credit card facility Website is not updated and it is less informative.

Opportunities Emergence of E-banking will open more scope for IFIC Bank IFIC Bank can introduce more innovative and modern customer service. Many branches can be open in remote location. IFIC Bank can recruit experienced, efficient and knowledgeable work force as it offers good working environment.

Threats The worldwide trend of mergers and acquisition in financial institutions Frequent taka devaluation and foreign exchange rate fluctuation Lots of new banks are coming in the scenario with new service. Local competitors can capture huge market share by offering similar products.

Table: T-12: SWOT Analysis of IFIC Bank

Chapter Six Conclusion and Recommendations

6. 1 Conclusion
A banker can not sleep well with bad debts in his portfolio. The failure of commercial banks occurs mainly due to bad loans, which occurs due to inefficient management of the loans and advances portfolio. Therefore any banks must be extremely cautious about its lending portfolio and credit policy. So far IFIC Bank Limited has been able to manage its credit portfolio skillfully and kept the classified loan at a very lower rate. But all things around us are changing at an accelerating rate. Today is not like yesterday and tomorrow will be different from today. Given the fast changing, dynamic global economy and the increasing pressure of globalization, liberalization, consolidation and disintermediation, it is essential that IFIC Bank Limited has a robust deposit and loan management policies and procedures that are sensitive to these changes.

6. 2 Recommendations
To improve the Deposit and loan Management culture, IFIC Bank Limited should adopt some of the industry best practices that are not practiced currently. These are:

ATM Card/Credit card facility should be increased not only in Dhaka and Chittagong city but also in all over the country. More branches should be established to compete with other commercial banks. IFIC Bank Limited should have a clear written lending guideline that should include Industry and Business Segment Focus, Types of deposits and loan facilities, Single Borrower and group limit, Lending caps, Discouraged Business Types, Loan Facility Parameters and Cross boarder Risk.

It should adopt a credit grading system and the borrowers risk grades should be clearly stated on credit application.

Approval authority should be delegated to individual executives rather than Executive Committee/ Board to ensure accountability. It should has the followings: * Credit Approval / Risk Management * Reltaionship Management / Marketing Management * Credit Administration etc.

The organization structure should have to be changed to put in place the segregation of the Marketing/ Relationship Management function from Approval / Deposits and Loan Management / Administration function.

An Early Alert Account system should be introduced to have adequate monitoring, supervision or close attention by management.( An early Alert Account is one that has risk and potential weaknesses of a material nature)

There should be a Recovery Unit to manage directly accounts with sustained deterioration. To encourage Recovery Unit incentive program may also introduced.

To minimize credit loan losses, monitoring procedures and systems should be in place that provides an early indication of the deteriorating financial health of a borrower.

Timely corrective action should be taken to address findings of any internal, external or regulator inspection/audit.

Development of the standard of living of the limited income group by offering consumer credit scheme should be brought.

It is needed to boost up mobilization of savings both from urban and rural areas. Model of participatory banking should be developed. It is needed to develop competitive, most modern scientific and social welfare oriented banking institution on the country.

To ensure stability and sound growth while enhancing the value of shareholders investment.

Above all the Bank should ensure a high level of transparency and ethical standards in all operations and a congenial atmosphere which will attract competent work force. It should be socially responsible making effective contribution to national development.

References and Bibliography

o IFIC Bank Limited, Working Manual for Deposits and other accounts, 2010 o IFIC Bank Limited, Working Manual for Loan and Advances, 2010 o IFIC Bank Limited, Annual Report, 2009 o IFIC Bank Limited (1989): Memorandum and Articles of Association o IFIC Bank Limited: Central Account Deposits. o Bank Book of Instructions (General Banking) IFIC. o Bangladesh Laws on Banks and Banking. o Industry. Journal of Economic Policy-2009, Review, 1-18. o Bangladesh Bank (2009). Prudential Regulations for Consumer Financing. Ahmed, Iftekhar Uddin, Crisis of Credit Management, Ruprekha Publisher, Mirpur Dhaka. Credit Management (Planning, Appraisal and Supervision) edited by S.L.N Simha, Indian Institute of Financial Management and Research. Ministry of Finance. (2009).The Activities of Banks and Financial Institutions, 20082009. Publication No. 329 EX-1400, Dhaka, Bangladesh Government Press. Kothari, C.R. Research Methodology (Methods and Techniques) Revised edi.2nd , New Age International Publishers. Ali, A., & Howlader, R. A. (2005). Banking Law and Practice. Agami Prakashoni, Dhaka, Bangladesh o www.bangladeshbank.org o www.ificbank.bd.com

Appendix
Various questions that were used in un-structured questionnaire are mentioned below: 1. What is the background of IFIC Bank Limited? 2. Please mention some milestones of development of this Bank? 3. What are the objectives of the bank? 4. What is its mission? 5. What is the hierarchy of the organizational structure of IFIC Bank? 6. Please explain about the deposit management. 7. What are the main objectives of deposit management? 8. How many deposits account are served by IFIC Bank? 9. How many deposit Schemes offered by IFIC Bank? 10. How IFIC Bank utilize the deposited funds? 11. What is loan management? 12. For whom you provide loans? 13. Please mention some categories of loans with respective terms and conditions? 14. What is your plan to reduce bad loans? 15. What are the main problems in deposit and loan management? 16. What are the strengths of IFIC Bank? 17. What are the weaknesses of IFIC Bank? 18. What are the opportunities of IFIC Bank? 19. What are the threats of IFIC Bank? 20. What are the prospects of IFIC Bank? 21. What are the proposed branches of IFIC Bank to be established? 22. Has any plan to increase the ATM card facilities? If yes, mention please. 23. What are the present and prospected manpower of your bank? 24. Are the employees satisfied? If not, why? 25. Do you take any policy to improve the CAMELS Rate?