Executive Summary

Banking service in Bangladesh is characterized as a highly competitive and highly regulated

sector. With a good number of banks already in operation and a few more in the pipeline, the
market is becoming increasingly competitive by the day.
With the global slowdown in the face of rising competition, the commercial banks are constantly
looking for ways to develop their market and product offers to remain ahead of others. A
significant amount of regulation by Bangladesh Bank prevents the scope of introducing newer
products into the market and thereby restricts a banks ability to outperform others with a
diversified product range.
However, recent trends have shown banks shifting away from vanilla products (basic products)
towards higher value added products that are highly structured, to meet the needs of the clients.
SIBL is an Islamic Bank based on Islamic Shariah. It follows the alternative concepts of Islamic
Banking. Which represents unique human approach to credit and banking based on profit
oriented economy devoid of interest, In this regard SIBL has introduced a number of income
generating programs for the millions of urban and rural poor. With that objective in view SIBL has
formulated a profitable live in a better society with greater security and peace. SIBL is operating
in a three sector banking system, such as formal, non-formal, and voluntary sector. In General
Banking, Investment and foreign exchange are operated under the formal sector. Development
and management of waqf and mosque properties, management of inheritance properties, and
joint venture project for management of non-profit foundations charitable trusts and organizations
are executed under the Voluntary Sector.
Social Islami Bank does not deal with money lending rather they deal with goods. They invest
money in various profitable business activities, either directly by themselves or in partnership with
other, seeking to earn or share legitimate (Halal) profit. They have provision for Qard Hasana or
beneficent loan in deserving case without any consideration of profit but return on the same.
These are returnable, if and when the beneficial is able to repay. Investment management by
Social Islami Bank and credit management by conventional interest based bank are synonymous.
But Social Islamic Bank deals with goods, which measured by money and share profit of loss with
the beneficiaries. On the other hand conventional bank directly deals with money or credit by the
contract of pre-agreed fixed interest rate.
In the banking world SIBL is performing well as it has acquired the assets and human resources
of higher quality. SIBL will be more effective in our economy by adopting modern financial
technology by extending their activities in human & social welfare.
Introduction
Background of the report.
A banking institution is indispensable in a modern society. It plays a pivotal role in the economic
development of a country and forms the core of the money market in an advanced country. In
recent times the banking sector over the world has been undergoing a lot of changes due to
deregulation, technological innovation, globalization etc. Bangladesh banking sector is lagging far
behind in adopting these changes. To thrive well in this changing environment, not only
development of appropriate infrastructure is necessary but also infusion of professionalism in to
banking service is essential. The banking sector is one of the highly regulated sectors in our
country. It is governed by the rules and regulation of Central Bank of the country i.e. Bangladesh
Bank and Security and Exchange Commission. The bank companies are forced to fulfil the best
accounting practices. It strictly follows International Accounting Standard (IAS) norms. It
publishes the financial statement every year getting it duly audited by recognized audit firms.
Every bank of our country had a division named Financial Administration Division (FAD) which
takes care of the accounting issues of the Bank. Most of the personnel who lead these divisions
are of accounting background. Among the accounting based FAD personnel who know the
banking operation better can contribute more in the banks.
Social Islami Bank Limited (SIBL) is an unconditional and specialized financial institution which is
performs most of the standard banking service and investment activities on the basis of profit-loss
sharing system conforming to the principles of Islamic Shariah. Social Islami Bank Ltd. does not
pay interest to depositors instead depositors participate in the profitability of the bank. The Bank
participates in financing long-term projects on the basis of profit-loss sharing instead of granting
credit facilities with interest. SIBL also performs various social welfare activities through its
subsidiary organ. Career in Banking has become very lucrative over the last few years
considering the work environment and remuneration package.
Objectives of the Study.
The main objective of the study is to gather practical knowledge regarding banking system and
operation. This practical orientation gives us a chance to co-ordinate out theoretical knowledge
with the practical experience. The following are of objective for this practical orientation in the
bank:
To know the different mechanism/modes of investment of Social Islami Bank Limited.
To make a study of the Islamic principles governing Investment and business, specially the
acceptable modes of Investment.
To find out the overall picture of investment of Social Islami Bank Limited.
To find out the problems regarding Instalment credit scheme of Social Islami Bank Limited.
Recommend some suggestion to solve the Problems.
Social Islami Bank Limited should given long term training for performing of good works and
services.
Accountability should be in all offers and executive level.
Efficient and well versed Islamic personnel to be appointed for proliferation of Islamic investment.
Its advertisement must set up on the target based and adequate.
Skilled employees must be recruited to provide better services.
Scope of the Study.
The Study will have focus on two specific parts of Islamic Banking:
a) Organization part and
b) The Project part.
Organization part will deal with the administrative setup and financial roles of the departments of
the Banks.
The Project part will be an enquiry into three Shariah permitted exchanges:
1. Trading.
2. Leasing.
3. Partnership.
The modes of financing based on trading are Bai-Muajjal, Bai-Murabaha, Bai-Salam and Bai-
Istisna. The definition of valid sale is clear in Shariah. Leasing in Islam is termed as Ijara, whose
spectrum is wider than the operations of leasing. Mudaraba and Musharaka are special; forms of
profit sharing and partnership which are widely used. The present study is supposed to
encompass these areas.
Methodology of the Study.
For smooth and accurate study everyone have to follow some rules and regulation. The study
impute were collected from two sources
1. I. Primary Sources.
Direct Observations.
Practical desk work.
Face to Face conversation with the Officer.
Direct lectures of honourable teacher on Banking.
1. II. Secondary Sources.
Annual report of The Social Islami Bank Limited.
Files and Folders.
Memos and Circulars.
Various publications on Bank.
Websites.
Different Circular sent by Head Office and Bangladesh Bank.
Limitations of the Study:
Although I have got the full co-operation from my colleagues, clients and other official of NBL ID
and they also gave me much time to prepare this report properly in the way of my study, I have
faced some difficulties, which made my conduction of the program little hazardous
1. Office secrecy was one of the most important problems. Disclosing of some information was
restricted.
2. It should be certainly mentioned that the time constraint is another issue to complete report on
such complex topics.
3. NBL is a private Bank and they are conservative about their data. As a result it was not
possible for the report to get all the data required.
4. Sometimes the officials has been unable to provide information because of there huge routine
work.
5. Some data could not been collected for confidentiality or secrecy for the management.
History of Bank:
A bank is a financial institution licensed by a government. Its primary activities include providing
financial services to customers while enriching its investors. Many financial activities were
allowed over time. The level ofgovernment regulation of the banking industry varies widely, with
countries such as Iceland, having relatively light regulation of the banking sector, and countries
such as China having a wide variety regulations but no systematic process that can be followed
typical of a communist system.
The name bank derives from the Italian word banco desk/bench, used during
the Renaissance by JewishFlorentine bankers, who used to make their transactions above a
desk covered by a green tablecloth. However, there are traces of banking activity even in ancient
times.
In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders would
set up their stalls in the middle of enclosed courtyards called macella on a long bench called a
bancu, from which the words banco and bank are derived. As a moneychanger, the merchant at
the bancu did not so much invest money as merely convert the foreign currency into the only
legal tender in Romethat of the Imperial Mint.
The earliest evidence of money-changing activity is depicted on a silver drachm coin from ancient
Hellenic colony Trapezus on the Black Sea, modern Trabzon, and c. 350325 BC, presented in
the British Museum in London. The coin shows a bankers table (trapeza) laden with coins, a pun
on the name of the city.
Definition of Bank:
Bank is a financial institution and intermediary, which collect deposits through its different deposit
mechanism and provide loans and advances among the loan Clients/ investors with the view to
earn profit. Thus a bank is a financial intermediary and a dealer of loans and debts. In financial
concept, banking means safe custody of money and at the same time an institution for money
transaction.
To regulate the banking business some financial laws of the government are followed, the old
ones are the British Stamp Law, 1881 and English Exchange Bill, 1882. Other laws include the
English Financial Act of 1915 and Indian Company Act of 1931 and the Indian Banking
Regulation Act of 1949.
The concept of Banking is an old civilization. Banking activities in its earliest crude form of lending
and exchange prevailed during the ancient period. The legend of huge treasure of the Great King
Solomon, the man of great wisdom, son of David (Alaihee-aas-Salam) and the activities of
taxation and banking during his reign in 1005 B.C.
The business of banking is in many English common law countries not defined by statute but by
common law, the definition above. In other English common law jurisdictions there are statutory
definitions of the business of banking or banking business. When looking at these definitions it is
important to keep in minds that they are defining the business of banking for the purposes of the
legislation, and not necessarily in general. In particular, most of the definitions are from legislation
that has the purposes of entry regulating and supervising banks rather than regulating the actual
business of banking. However, in many cases the statutory definition closely mirrors the common
law one. Examples of statutory definitions:
Banking business means the business of receiving money on current or deposit account, paying
and collecting cheques drawn by or paid in by customers, the making of advances to customers,
and includes such other business as the Authority may prescribe for the purposes of this Act;
(Banking Act (Singapore), Section 2, Interpretation).
Banking business means the business of either or both of the following:
1. 1. Receiving from the general public money on current, deposit, savings or other similar account
repayable on demand or within less than [3 months] or with a period of call or notice of less than
that period.
2. 2. Paying or collecting cheques drawn by or paid in by customers.
The Indus Valley Civilization, the Roman Civilization, the Greek Civilization, the Egyptian
Civilization, the Mesopotamian Civilization, the Babylonian Civilization, the Vedic Indian
Civilization, the Muslim Civilization played important roles in giving birth to and flourishing of
Bank.
Overview of Banking System:
Whoever, being an individual firm, company or corporation generally deals in the business of
money and credit is called bank. In our country, any institution, which accepts, for the purpose of
lending or investment deposits of money from public, repayable on demand or otherwise, and
with transferable by checks draft order and otherwise can be termed as a bank.
The purpose of banking is to ensure transfer of money from surplus unit to deficit units. Bank is
all countries work as the repository of money. The owners look for safety and amount of interest
for their deposits with Banks. Entrepreneurs try to obtain money from the banks as working
capital and for long-term investment. These entrepreneurs welcome effective and forward-looking
advice for investment. Banking sector thus owe a great to the deposit holders on the hand and
the entrepreneurs on the other. They are expected to play the role of friend, philosopher, and
guide for the deposit holders and the entrepreneurs. Since liberation, Bangladesh passed through
fragile phases of development in the banking sector. The nationalization of banks in the post
liberation period was intended to safe the institutions and the interest of the depositors. Those
handling the banking sector have borne the burden of putting banks on reliable footings. Despite
all that was done, some elements of irregularities appeared. With the assertion of the role of the
Central bank, The Bangladesh bank started adopting measures for putting banking institutions on
right track. Yet the performance of public sector management of banks left some negative effects
in the money market in particular and the economy in general. The agility among the borrowers
manipulates the banking sector as a whole. In effect, a default culture appeared on the scene.
The opening of PRIVATE and FOREIGN participants to the banking sector was intended to
obtain desirable results from banking. The authorization of private banks was designed to create
competition among the banks and competition in the from of efficiency with and the productivity in
enterprises funded by banks. Unfortunately, for the people, at large banking sector is yet to obtain
the credit for efficiency, credibility, and growth. The clever, among the user of banking services,
have influenced the management of banks, for obtaining short-term and long-term loans. They
sometimes showed inflated to get money for investment in business and industry. Few diverted
their loan money to purposes different from the loan proposals, and invested in non-profitable
units have failed to repay their loans to the banks. For this reason new entrepreneurs are not
getting capital while defaulting entrepreneurs have started obtaining either relief in the form of
rescheduling of the repayment program or additional inevitable money for diversified units.
Banking History of Bangladesh
The banking system at independence consisted of two branch offices of the former State Bank of
Pakistan and seventeen large commercial banks, two of which were controlled by Bangladeshi
interests and three by foreigners other than West Pakistanis. There were fourteen smaller
commercial banks. Virtually all banking services were concentrated in urban areas. The newly
independent government immediately designated the Dhaka branch of the State Bank of
Pakistan as the central bank and renamed it the Bangladesh Bank. The bank was responsible for
regulating currency, controlling credit and monetary policy, and administering exchange control
and the official foreign exchange reserves. The Bangladesh government initially nationalized the
entire domestic banking system and proceeded to reorganize and rename the various banks.
Foreign-owned banks were permitted to continue doing business in Bangladesh. The insurance
business was also nationalized and became a source of potential investment funds. Cooperative
credit systems and postal savings offices handled service to small individual and rural accounts.
The new banking system succeeded in establishing reasonably efficient procedures for managing
credit and foreign exchange. The primary function of the credit system throughout the 1970s was
to finance trade and the public sector, which together absorbed 75 percent of total advances. The
governments encouragement during the late 1970s and early 1980s of agricultural development
and private industry brought changes in lending strategies. Managed by the Bangladesh Krishi
Bank, a specialized agricultural banking institution, lending to farmers and fishermen dramatically
expanded. The number of rural bank branches doubled between 1977 and 1985, to more than
3,330. Denationalization and private industrial growth led the Bangladesh Bank and the World
Bank to focus their lending on the emerging private manufacturing sector. Scheduled bank
advances to private agriculture, as a percentage of sects oral GDP, rose from 2 percent in FY
1979 to 11 percent in FY 1987, while advances to private manufacturing rose from 13 percent to
53 percent. The transformation of finance priorities has brought with it problems in administration.
No sound project-appraisal system was in place to identify viable borrowers and projects.
Lending institutions did not have adequate autonomy to choose borrowers and projects and were
often instructed by the political authorities. In addition, the incentive system for the banks
stressed disbursements rather than recoveries, and the accounting and debt collection systems
were inadequate to deal with the problems of loan recovery. It became more common for
borrowers to default on loans than to repay them; the lending system was simply disbursing grant
assistance to private individuals who qualified for loans more for political than for economic
reasons. The rate of recovery on agricultural loans was only 27 percent in FY 1986, and the rate
on industrial loans was even worse. As a result of this poor showing, major donors applied
pressure to induce the government and banks to take firmer action to strengthen internal bank
management and credit discipline. As a consequence, recovery rates began to improve in 1987.
The National Commission on Money, Credit, and Banking recommended broad structural
changes in Bangladeshs system of financial intermediation early in 1987, many of which were
built into a three-year compensatory financing facility signed by Bangladesh with the IMF in
February 1987. One major exception to the management problems of Bangladeshi banks was the
Grameen Bank, begun as a government project in 1976 and established in 1983 as an
independent bank. In the late 1980s, the bank continued to provide financial resources to the
poor on reasonable terms and to generate productive self-employment without external
assistance. Its customers were landless persons who took small loans for all types of economic
activities, including housing. About 70 percent of the borrowers were women, who were otherwise
not much represented in institutional finance. Collective rural enterprises also could borrow from
the Grameen Bank for investments in tube wells, rice and oil mills, and power looms and for
leasing land for joint cultivation. The average loan by the Grameen Bank in the mid-1980s was
around Tk 2,000 (US$65), and the maximum was just Tk18, 000 (for construction of a tin-roof
house). Repayment terms were 4 percent for rural housing and 8.5 percent for normal lending
operations. The Grameen Bank extended collateral-free loans to 200,000 landless people in its
first 10 years. Most of its customers had never dealt with formal lending institutions before. The
most remarkable accomplishment was the phenomenal recovery rate; amid the prevailing pattern
of bad debts throughout the Bangladeshi banking system, only 4 percent of Grameen Bank loans
were overdue. The bank had from the outset applied a specialized system of intensive credit
supervision that set it apart from others. Its success, though still on a rather small scale, provided
hope that it could continue to grow and that it could be replicated or adapted to other
development-related priorities. The Grameen Bank was expanding rapidly, planning to have 500
branches throughout the country by the late 1980s. Beginning in late 1985, the government
pursued a tight monetary policy aimed at limiting the growth of domestic private credit and
government borrowing from the banking system. The policy was largely successful in reducing
the growth of the money supply and total domestic credit. Net credit to the government actually
declined in FY 1986. The problem of credit recovery remained a threat to monetary stability,
responsible for serious resource misallocation and harsh inequities. Although the government
had begun effective measures to improve financial discipline, the draconian contraction of credit
availability contained the risk of inadvertently discouraging new economic activity. Foreign
exchange reserves at the end of FY 1986 were US$476 million, equivalent to slightly more than 2
months worth of imports. This represented a 20-percent increase of reserves over the previous
year, largely the result of higher remittances by Bangladeshi workers abroad. The country also
reduced imports by about 10 percent to US$2.4 billion. Because of Bangladeshs status as a
least developed country receiving concession loans, private creditors accounted for only about 6
percent of outstanding public debt. The external public debt was US$6.4 billion, and annual debt
service payments were US$467 million at the end of FY 1986.
Bank in Bangladesh:
The Banking Industry is Bangladesh is one characterized by strict regulations and monitoring
from the central governing body, the Bangladesh Bank. The chief concern is that currently there
are far too many banks for the market to sustain. As a result, the market will only accommodate
only those banks that can transpire as the most competitive and profitable ones in the future.
Currently, the major financial institutions under the banking system include:
Bangladesh Bank
Commercial Banks
Islamic Banks
Leasing Companies
Finance Companies
Of these, there are four nationalized commercial banks (NCB), 5 specialized banks, 11 foreign
banks, 26 domestic private banks and 4 Islamic Banks currently operating in Bangladesh.
Chart-2.1: Scheduled Bank in Bangladesh
Generally, the commercial banks and finance companies provide a myriad of banking
products/services to cater to the needs of their customers. However, the Bangladeshi banking
industry is characterized by the tight banking rules and regulation s set by the Bangladesh Bank.
All banks and financial institutions are highly governed and controlled under the Banking
Companies Act-1993.
The range of banking products and financial services is also limited in scope. All local banks must
maintain a 4% Cash Reserve Requirement (CRR), which is non-interest bearing and a 16%
Secondary Liquidity Requirement (SLR). With the liberalization of markets, competition among
the banking products and financial services seems to be growing more intense each day. In
addition, the banking products offered in Bangladesh are fairly homogeneous in nature due to the
tight regulations imposed by the central bank. Competing through differentiation is increasingly
difficult and other banks quickly duplicate any innovative banking service.
The Banking Sector in Bangladesh:
The Jews in Jerusalem introduced a kind of banking in the form of money lending before the birth
of Christ. The word bank was probably derived from the word bench as during ancient time
Jews used to do money -lending business sitting on long benches. First modern banking was
introduced in 1668 in Stockholm as Svingss Pis Bank which opened up a new era of banking
activities throughout the European Mainland. In the South Asian region, early banking system
was introduced by the Afghan traders popularly known as Kabuliwallas. Muslim businessmen
from Kabul, Afghanistan came to India and started money lending business in exchange of
interest sometime in 1312 A.D. They were known as Kabuliwallas.
Bangladesh Bank
Bangladesh Bank (BB) has been working as the central bank since the countrys independence.
Its prime jobs include issuing of currency, maintaining foreign exchange reserve and providing
transaction facilities of all public monetary matters. BB is also Bangladesh Bank (BB) has been
working as the central bank since the countrys independence. Its prime jobs include issuing of
currency, maintaining foreign exchange reserve and providing transaction facilities of all public
monetary matters. BB is also responsible for planning the governments monetary policy and
implementing it thereby.
The BB has a governing body comprising of nine members with the Governor as its chief. Apart
from the head office in Dhaka, it has nine more branches, of which two in Dhaka and one each in
Chittagong, Rajshahi, Khulna, Bogra, Sylhet, Rangpur and Barisal.
Number & Types of Bank
The number of banks in all now stands at 53 in Bangladesh. Out of the 53 banks, 4 are
Nationalized Commercial Banks (NCBs), 28 local private commercial banks, 12 foreign banks, 5
are Development Financial Institutions (DFIs) and the rest of 4 are other bank
Sonali Bank is the largest among the NCBs while Pubali is leading in the private ones. Among the
12 foreign banks, Standard Chartered has become the largest in the country. Besides the
scheduled banks, Samabai (Cooperative) Bank, Ansar-VDP Bank, Karmasansthan (Employment)
Bank and Grameen bank are functioning in the financial sector. The number of total branches of
all scheduled banks is 6,038 as of June 2000. Of the branches, 39.95 per cent (2,412) are
located in the urban areas and 60.05 per cent (3,626) in the rural areas. Of the branches NCBs
hold 3,616, private commercial banks 1,214, foreign banks 31 and specialized banks 1,177.
Services (Accounts, FDR, PDS, Deposit Scheme)
Current Account
Generally this sort of account opens for business purpose. Customers can withdraw money once
or more against their deposit. No interest can be paid to the customers in this account. If the
amount of deposit is below taka 1,000 on an average the bank has authority to cut taka 50 from
each account as incidental charge after every six months. Against this account loan facility can
be ensured. Usually one can open this account with taka 500. One can open this sort of account
through cash or check/bill. All the banks follow almost the same rules for opening current
account.
Savings Bank Account
Usually customers open this sort of account at a low interest for only security. This is also an
initiative to create peoples savings tendency. Generally, this account is to be opened at taka 100.
Interest is to be paid in June and December after every six months. If money is withdrawn twice a
week or more than taka 10,000 is withdrawn (if 25% more compared to total deposit) then interest
is not paid. This account guarantees loan. Almost all the banks follow the same rules in the field
of savings account, except foreign banks for varying deposit. On an average, all the banks give
around six percent interest.
Special Services of Bank
Some Banks render special services to the customers attracting other banks.
Internet Banking
Customers need an Internet access service. As an Internet Banking customer, he will be given a
specific user ID and a confident password. The customer can then view his account balances
online. It is the industry-standard method used to protect communications over the Internet. To
ensure that customers personal data cannot be accessed by anyone but them, all reporting
information has been secured using Version and Secure Sockets Layer (SSL).
Home Banking
Home banking frees customers of visiting branches and most transactions will be automated to
enable them to check their account activities transfer fund and to open L/C sitting in their own
desk with the help of a PC and a telephone.
Electronic Banking Services for Windows (EBSW)
Electronic Banking Service for Windows (EBSW) provides a full range of reporting capabilities,
and a comprehensive range of transaction initiation options. The customers will be able to
process all payments as well as initiate L/Cs and amendments, through EBSW. They will be able
to view the balances of all accounts, whether with Standard Chartered or with any other banks
using SWIFT. Additionally, transactions may be approved by remote authorization even if the
approver is out of station.
Automated Teller Machine (ATM)
Automated Teller Machine (ATM), a new concept in modern banking, has already been
introduced to facilitate subscribers 24 hour cash access through a plastic card. The network of
ATM installations will be adequately extended to enable customers to non-branch banking
beyond banking.
Tele Banking
Tele Banking allows customers to get access into their respective banking information 24 hours a
day. Subscribers can update themselves by making a phone call. They can transfer any amount
of deposit to other accounts irrespective of location either from home or office.
SWIFT
Swift is a bank owned non-profit co-operative based in Belgium servicing the financial community
worldwide. It ensures secure messaging having a global reach of 6,495 Banks and Financial
Institutions in 178 countries, 24 hours a day. SWIFT global network carries an average 4 million
message daily and estimated average value of payment messages is USD 2 trillion. Swift is a
highly secured messaging network enables Banks to send and receive Fund Transfer, L/C
related and other free format messages to and from any banks active in the network. Having
SWIFT facility, Bank will be able to serve its customers more profitable by providing L/C,
Payment and other messages efficiently and with utmost security. Especially it will be of great
help for our clients dealing with Imports, Exports and Remittances etc.
Monetary & Credit Policy
The monetary and credit policy for the financial year that ended in June, 2000 was formulated
with the objective of full utilization of domestic resources and rapid economic growth through
priorities for agriculture, industry, export, and expansion and strengthening of the private sector,
at the same time keeping inflation within tolerable limits. A modern expansionary monetary and
credit policy was adopted in order to make good the losses to agriculture, industry, and
infrastructure by the devastating floods of 1998. After the flood the economy remained sluggish in
the first quarter of 1999-2000 and the private sector demand for credit shrank. In view of this, the
Annual Development Program (ADP) was expanded and development activities in the private
sector were geared up. As a result, the public sector absorbed credit at an accelerated rate.
Though credit to the private sector picked up towards the end of the year, the overall annual
growth was smaller than programmed, although gross domestic credit expanded a little faster
than projected. Money supply increased by 15.3% in 1999-2000 compared to the expansion of
8.6% in the preceding year.
Narrow Money
Narrow Money increased by Tk. 2,631.90 crores or 15.3% to Tk.19881.30 crores in 1999-2000.
Of the components of Narrow Money, currency outside banks went up by Tk.1489.40 crores or
17.2% to Tk.10176.00 crores, and demand deposits went up by Tk.1142.50 crores or 13.3% to
Tk.9705.30 crores.
Broad Money
Broad Money increased by Tk.11735.70 crores or 18.6% to Tk. 74,762.40 crores in 1999-2000
compared to the increase of 12.8% in the preceding year. Of the components of Broad Money,
Narrow Money increased by 15.3% and time deposits rose by 19.9% compared to the increase of
8.6% in Narrow Money and 14.5% in time deposits in the preceding year. The shares of currency
outside banks, demand deposits and time deposits in Broad Money stood at 13.6%, 13.0%, and
73.4% respectively on 30th June, 2000 compared to 13.8%, 13.6% and 72.6% respectively on
30th June, 1999. Expansion of credit to the private sector, government sector (net), public sector,
and other assets (net), along with a surplus in net foreign assets contributed to the expansion of
Broad Money.
Reserve Money
Reserve Money increased by Tk.2321.80 crores or 15.7% to Tk.17064.50 crores in 1999-2000
compared to the increase of 8.3% during the preceding year. Of the components of Reserve
Money, currency outside banks increased by Tk.1489.40 crores or 17.1% compared to the
increase of Tk.533.30 crores or 6.5% during the preceding year. Scheduled banks balances with
the Bangladesh Bank increased by Tk.770.90 crores or 15.3% in 1999-2000 compared to the
increase of Tk.488.20 crores or 10.8% in the preceding year. Their cash in tills increased by
Tk.61.50 crores or 6.0% as against the increase of Tk.103.60 crores or 11.2% in the preceding
year. The increase in Bangladesh Banks credit to the government (net) by Tk.1,738.10 crores
and net surplus in the foreign sector by Tk.1,262.40 crores played the main role in exerting
expansionary influence on the Reserve Money. However the decline of Tk.333.60 crores and
Tk.44.90 crores in the borrowings by the scheduled banks and other financial institutions
respectively along with the fall of Tk.300.20 crores in other assets (net) partly offset the
expansionary impact of those sectors.
Domestic Credit
Total domestic credit increased by Tk.8581.20 crores or 13.6% to Tk. 71,489.00 crores (including
adjustment of bonds issued by the government) in 1999- 2000 as compared to the increase of
Tk.7267.60 crores or 13.1% in the preceding year. Expansion of credit to the government,
private, and public sectors to the extent of Tk.3524.30 crores (31.3%), Tk.4906.10 crores
(10.7%), and Tk.150.80 crores (2.5%) respectively contributed to the expansion in total domestic
credit in 1999-2000. Credit to the government and private sector had increased by 21.3% and
13.8% respectively, while credit to the public sector declined by 3.7% in the preceding year.
Bank Credit
The outstanding level of bank credit (excluding foreign bills and inter-bank items) increased by
Tk.5,123.30 crores or 10.3% to Tk.54,646.10 crores in 1999- 2000 as compared to the increase
of 12.4% in the preceding year. Of the components of bank credit, advances increased by
Tk.4892.70 crores or 10.3% and the bills purchased and discounted went up by Tk.230.60 crores
or 11.3%.
Bank Deposits
Bank deposits (excluding inter-bank items) increased by Tk.11044.70 crores or 18.6% to Tk.70,
278.70 crores in 1999-2000 compared to the increase of 14.2% in the preceding year. Of this
increase , time deposits went up by Tk.9,103.80 crores or 19.9% to Tk.54,881.10 crores,
government deposits by Tk.723.60 crores or 14.8% to Tk.5,615.20 crores and demand deposits
by Tk. 1,142.50 crores or 13.3% to Tk.9,705.30 crores. On the other hand, restricted deposits
increased by Tk.74.80 crores in 1999-2000.
Cash Reserve Requirements (CRR)
Statutory CRR with Bangladesh Bank was lowered for the scheduled banks to 4.0% of their
liabilities (demand plus time deposits) (excluding inter-bank deposits) from 5% with effect from
1st October, 1999.
Bank Rate
The Bank Rate was lowered from 8.0% to 7.0% on 29th August, 1999 and remained unchanged
through 30th June, 2000.
Historical Perspective of Social Islami Bank Ltd.:
Social Islami Bank Limited (SIBL) started its operation on the 22
nd
November, 1995 as on Second
Generation Islamic Bank in close co-operation and assistance of some renowned personalities of
the Islamic Worked. H.E. Dr. Hamid Al Gavid, Former secretary General of OIC and Prime
Minister of Niger, H.E. Dr. Abdullah Omar Nasseef, Deputy Speaker of Saudi Shoura Council and
Ex-Secretary General of Rabeta Al-Islami, H.E. Ahmed M. Salah Jamjoom, Former Commerce
Minister of Saudi Government, H.E. Prof. Dr. Ahmed El-Naggar (Egypt) participated to this noble
Endeavour as sponsor shareholders. Targeting poverty, Social Islami Bank Limited is indeed a
concept of 21
st
century participatory three sector banking model in one: in the formal sector, it
works as an Islamic participatory Commercial Bank with human face approach to credit and
banking on the profit and loss sharing. Second is a Non-formal banking with informal finance and
credit package that empowers and humanizes real poor family and create local income
opportunities and discourages internal migration; it is a Development Bank intended to monetize
the voluntary sector and management of Waqf, Mosque properties, Non-Muslim Trust Properties
in the Country. In the formal corporate sector, this Bank would, among others, offer the most up
to date banking services through opening of various types of deposit and investment accounts,
financing trade, providing letters of guarantee, opening letters of credit, collecting of bills,
effecting domestic and international transfer, leasing of equipment and consumers durable, hire
purchase and installment sale for capital goods. Investment in low-cost housing and management
of real estates, participatory investment in various industrial, agricultural, transport, educational
and health projects and so on.
In addition, SIBL offers special services for the Bangladeshi expatriates which include managing
their foreign currency accounts, providing express home remittance services, introducing
Cooperative Investment schemes, Foreign wages earners rehabilitation scheme etc. At the
operational level, all three sectors activities would be mutually interdependent through Social
Fund, Social Assignment Schemes, thereby making all these activities economically, socially and
ethically transparent and revealed, once they are operationalzed. Islam provides us a complete
lifestyle. Main objective of Islamic lifestyle is to be successful both in our mortal and immortal life.
Therefore in every aspect of our life we should follow the doctrine of Al-Quran and lifestyle of
Hazrat Muhammad (Sm.) for our supreme sources.
Mission:
Efforts for expansion of our activities at home and abroad by adding new dimensions to our
banking services are being continued unabated. Alongside, we are also putting highest priority in
ensuring transparency, account ability, improved clientele service as well as to our commitment
to serve the society through which we want to get closer and closer to the people of all strata.
Winning an everlasting seat in the hearts of the people as a caring companion in uplifting the
national economic standard through continuous up gradation and diversification of our clientele
services in line with national and international requirements is the desired goal we want to reach.
High quality financial services the latest technology.
Fast, Accurate and Satisfactory
Optimum return on shareholders equity customer service.
Balanced & sustainable growth strategy.
Introducing innovative Islamic Banking products.
Attract and retain high quality human resources.
Empowering real poor families and create local income opportunities.
Providing support for social benefit organizations by way of mobilizing funds and social services.
Vision:
Ensuring highest standard of clientele services through best application of latest information
technology, making due contribution to the national economy and establishing ourselves firmly at
home and abroad as a front ranking bank of the country are our cherished vision. Social
Investment Bank Ltd started its journey with the concept of 21st Century Islamic participatory
three sector banking model:
i) Formal Sector- Commercial Banking with latest technology;
ii) Non-Formal Sector Family Empowerment Micro-Credit & Micro-enterprise
program an
iii) Voluntary Sector Social Capital mobilization through CASH WAQF and others.
iv) Reduction of Poverty Level is our Vision, which is a prime object as stated in
Memorandum of Association of the Bank with the commitment Working Together for a Caring
Society.
Objective:
To encourage and motivate the new entrepreneurs to establish industries and business for the
development of national economy.
To boost up investment in private sector by financing independently or under syndication
arrangement.
To financing foreign trade of the country both in export and import.
To enhance saving tendency of the people by offering attractive and lucrative saving scheme.
To develop the standard of living of the limited income group by offering consumer credit.
To boost up mobilization of savings both from urban and rural areas.
To develop the model of participatory banking.
To develop competitive, most modern scientific and social welfare oriented banking institution of
the country.
To finance the industry, trade and commerce through conventional way as well as by offering
various customer friendly credit product.
Create shareholder wealth.
Make the stock as being superior long term investments so that investors come forward to buy
SIBL stocks.
Through commitment to the bank and the customers whom SIBL serve, National Bank should
become the best in Bangladesh providing a very efficient customer service at a competitive price.
Functions of Social Islami Bank Ltd:
Some general function of National Bank are given below -
To maintain all types of Deposit Accounts.
To make investment.
To conduct of reign exchange business.
To conduct other Banking services.
To conduct social welfare activities.
To work for continues business innovation and improvements.
To bui1d up strong-based capita1ization of the country.
To ensure the best uses of its creativity, well disciplined, well manages and perfect growth.
Organization Structure:
Functional oriented structure Organization structure plays an important role on the profitability of
any organization. Social Islami Bank Ltd is a centralized organization and operates in a. That is,
its activities are designed on the basis of traditional banking business, such as credit,
international division, investment, administration, and operation etc. SIBL has a formal
organizational structure that is highly specialized and centralized.
Organizational setup of the Social Islami Bank Ltd is consisting of three organizational
domains. Firstly the central top management, which contains Board of Directors, Managing
Director, Additional Managing Director and Deputy Managing director, Major responsibilities of
this are to take central decision and transmit it to the second step. Secondly, Central executive
level management, which contains executive vice president, senior vice president, vice president
and Assistant vice president. Major responsibilities of this part are to supervise and control
division/ department. Thirdly, branch operation management, which contains branch manager
and other mid/ lower level management. Major responsibilities of this part are to the 107
branches of this bank and report to the Head office from time to time.
Management Structure of Social Islami Bank Ltd.:
In 2008 Social Islami Bank Ltd made commendable progress in all business, like deposit, credit,
fund management, investment, foreign remittance, credit card & foreign exchange related
business. Bank has expended business activities as holding previously & parallels by
diversification its investment to a new product, as a major financier remarkable portion of total
exports of the country.
Planning:
The strategic planning approach in SIBL is top-down. Top management formulates strategy at the
corporate level, and then it is transmitted through the division to the individual objectives. Board
of directors or Executive committee usually takes the decision. In this process lower level
manager are detached in making process, even brainstorming of lower level manager is absent in
decision-making and planning process.
Organize:
Organizing of the Social Islami Bank Ltd is based on Departmentalization. The organization is
divided into twelve departments headed by Executive vice President or Senior Vice President. In
the Social Islami Bank Ltd the whole operation is centralized and authority is delegated by written
guidelines. These guidelines are:
Operational manual approved by Head Office, where each aspect or banking operation is
elaborately defined.
Advance manual including advances limit for different management level.
Bad and doubtful recovery manual.
Code of conduct.
Foreign banking guidelines.
Central bank directives.
Different management position holders in departments and branches practice their authorized
power in different cases with administrative loophole.
Staffing:
Entry-level recruitment process of the Social Islami Bank Ltd is conducted in three ways. One
way is recruitment of probationary officer. Each probationary officer has one year probation
period. After completion of probation period the officer joins as officer grade III (b). The career
path of probationary officer is headed toward different management positions. Second way of
recruitment is to recruit non-probationary officer who joins as an assistant officer. The career path
of an assistant officer is lengthier than probationary officer. The third way of recruitment is
recruitment of staff and sub-staff such as typist, messenger, driver, guard, attendant, cleaner and
other lower level positions. Promotion policy of SIBL is basically based on seniority basis.
Sometimes, employees are promoted to the higher position for their outstanding performance.
However, it is found that the average length of a position held by an employee is around five
years.
Controlling
The bank has strict control over its all-organizational activities. The Bangladesh Bank directives
indicate some control measures. The central bank conducts credit inspection by a team. The
Social Islami Bank Ltd has audit and inspection department to take controlling measures in
internal operations. Audit and inspection team send to the branches now and then and is
responsible for preparing report that will be submitted to the chief Administration to take
necessary actions.
Hierarchy of the Bank:
Management Committee:
SL No Name Position
1 Major (Retd.) Dr.Md. Rezaul Haque Chairman
2 Mr.Md. Humayun Kabir Khan Vice Chairman
3 Alhaj Nasiruddin Vice Chairman
4 Alhaj Sultan Mahmud Chowdhury Director
5 Mr. Abdul Awal Patwary Director
6 Mr. Anisul Haque Director
7 Mrs. Nargis Manana Director
8 Mrs. Zohra Alam Director
9 Mr. Kamal Uddin Ahmed Director
10 Mr. Ahmed Akbar Sobhan Director
11 Alhaj Sk. Mohammad Rabat Ali Director
12 Mr.Md. Sayedur Rahman Director
13 Mr. Munshi Akhtaruzzaman Director
14 Mr. K.M. Ashaduzzaman Managing Director
Functional Departments of SIBL:
The functional departments of SIBL can be divided into two wings. It is shown below:
Division of SIBL:
Audit & Inspection Division.
ATM Card Division
Board Secretariat
Budget & Monitoring Division.
Credit Division-1.
Credit Division. -2.
Credit Card Division.
Classified Loan Recovery Division.
Financial Administration Division.
General Banking Division.
Human Resources Division.
International Division.
Information System & Technology Division.
Law & Recovery Division.
Marketing Division.
Merchant Banking Division.
Public Relations Division.
Protocol Division.
Reconciliation Division.
System & Operations.
Head Office & Branches
The Head office of the bank is situated at 15, Dilkusha C/A, Dhaka-1000, Bangladesh. There are
49 branches of the bank situated in different locations of Bangladesh. The principal branch of the
Bank is also situated at 15, Dilkusha C/A, Dhaka-1000, Bangladesh.
SI.
No.
Name of the Branch
& Date of Opening
Address Telephone No.
1.
Principal Branch
22-11-1995
15, Dilkusha C/A, Dhaka,
Bangladesh
9559241, 9550195, 01713018779
2.
Agrabad Branch
10-04-1996 .
103, Agrabad C/A,
Chittagong, Bangladesh
031-714041 Fax: 031-710084
3
Khulna Branch
20-06-1996
2 Sir Iqbal Road, Khulna,
Bangladesh
041-722133,041-730533
4
Sylhet Branch
27-06-1996
CentralPlaza,
Ambarkhana, Sylhet,
Bangladesh
0821-
711282,01711946325
5
Rajshahi Branch
10-08-1996
219 Shaheb Bazar main
Road, Rajshahi,
Bangladesh
0721-812317,0721-812452
6
Gulshan Branch
22-04-1998
HosnaCenter, 106,
Gulshan Avenue, Dhaka,
Bangladesh
8829137,8813793, , 01819-
215161
7
Babu Bazar Branch
26-04-1998
Sultana Super Market, 18/4
Armenian Street, Dhaka.
7395118-9

8
Moulvi Bazar Branch
30-09-1998
77/7 Wahid Center
(1
st
Floor), Moulvi Bazar,
Dhaka.
7316225, 7315323, 7312911
9
Bogra Branch
25-10-1998
Tin Potty, Borogola, Bogra,
Bangladesh.
051-65833, 051-63943
10
Sirajgonj Branch
26-10-1998
Zaman Complex, S. S.
Road, Sirajgonj,
Bangladesh.
0751-63203
11
IDB Bhaban Branch
23-09-1999
E/8a, IDB Bhaban, Rokeya
Sarani, Sher-e-Bangla
Dhaka.
8115789, 8141671
12
Khatungonj Branch
19-12-1999
96, Khatungonj,
Chittagong, Bangladesh
031-639014, 624682-3, 636358
13
Panthapath Branch
17-12-2000
BasundharaCity, Level-2,
Dhaka, Bangladesh
9135229, PABX: 9143517
14
Chandaikona Branch
19-12-2000
Pabna Bazar, Roygonj,
Sirajgonj, Bangladesh
07526-56122, 01715805435
15
Sonargaon Branch
09-06-2001
Mogra Para, Sonargaon,
Narayangonj, Bangladesh
0189-251709, 01819251709
16
Foreign Ex. Branch
04-02-2002
141-143 Motijheel C/A,
BIWTA Bhaban, Dhaka-
1000
9571254,9571100, 01817530004
17
Halishahar Branch
09-02-2002
VIPPlaza, Plot # 5/A, Road
# 2, Block #G, Halishahar
031-717201,031-815702
18
Hasnabad Branch
17-04-2002
Hasnabad Super Market,
Suvadda, Dhaka
01711565893
19
Dhanmondi Branch
14-05-2002
House #84 (old 176), Road
# 7A, Dhanmondi, Dhaka
9120088,9144682, 01819274072
20
Nawabpur R. Branch
26-07-2003
82, Nawabpur Road
(1
st
Floor), Dhaka
7174994-5, 7174921
21
Jubilee Road Branch
30-07-2003
610/11, Jubilee Road
(1
st
Floor), Chittagong
031-628288,031-627155
22
Uttara Branch
07-12-2003
Latif Emporium 27, Uttara,
C/A, Road#7,S#3, Dhaka
8959731-33,8961124
23
Fatullah Branch
23-12-2003
Fatulla Bazar, Narayongonj 7602144, 01911358157
Five Years Performance at a Glance:
(Taka in million)
Particulars 2004 2005 2006 2007 2008
Authorizes Capital 1000.00 1000.00 2450.00 2450.00 2450.00
Paid-up Capital 516.33 619.59 805.47 1208.20 1872.72
Reserve Fund 1345.99 2115.03 2468.79 3360.18 4253.55
Deposits 28973.39 32984.05 40350.87 47961.22 60195.25
Loans And Advances 23129.65 27020.21 32709.68 36475.74 49665.07
Investment 4374.17 3564.82 6239.83 7760.38 10162.81
Import Business 22028.30 31648.20 42458.50 62759.00 78226.32
Export Business 17105.30 21344.10 28019.20 31824.00 36284.44
Remittance Income 9035.50 13618.20 21353.90 27560.80 39877.80
Profit Before Tax 484.21 581.13 1058.73 2035.10 2828.82
Profit After Tax 170.02 271.67 507.49 1238.11 1517.43
Fixed Assets 895.35 1431.23 1627.29 1842.28 1981.60
Total Assets 35127.30 38400.37 6796.04 56526.96 72212.86
Net Assets Value Per Share 360.68 441.36 406.50 378.12 327.13
Market Value Per Share 475.25 756.50 760.50 1494.00 1014.25
Earning Per Share 27.44 43.85 63.01 66.11 81.03
Dividend Per Share 20% 30% 50% 55% 52%
Credit Deposit Ratio 79.83% 81.92% 81.06% 76.05% 82.51%
Cost of Fund 5.47% 5.31% 6.15% 6.35% 7.76%
Yield on Loans And Advances 10.32% 10.02% 12.28% 12.13% 12.94%
Return on Assets 0.48% 0.74% 1.19% 2.40% 2.36%
Return on Equity 18.26% 11.82% 16.89% 31.57% 28.38%
Debt Equity Ratio (Times) 10.88 7.55 8.13 6.77 6.99
Number of foreign Corresponds 410 391 400 405 405
Number of Employees 2133 2183 2270 2432 2737
Number of Branches 76 76 91 101 106
Capital & Reserve Fund:
Taka in Million


Stock Dividend of 55 percent was declared for the year 2007 which increased the paid-up capital
of the bank from Tk. 1,208.21 million to Tk. 1,872.72 million in 2008 while its authorized capital
was Tk. 2,450 million. The statutory reserve enhanced by Tk.565.60 million in 2008 after
maintaining 20 percent pre-tax profit. The total equity of shareholders of the bank stood at Tk.
6,126.30 million at the end of the year 2008.
Loans and Advances: Taka in Million
Year 2004 2005 2006 2007 2008
Loans and advances
23129.65 27020.21 32709.68 36475.74 49665.07
Social Islami Bank Ltd designed appropriate credit risk
management criteria and strategies for balanced lending mix commensurate with sound capacity
to finance in the short term and long term credit. SIBL succeeded to increase its loans and
advances despite the current wave of global recession registering a growth of 36.16 percent with
total loans and advances portfolio of tk. 496651 million in 2008 compared to tk. 36475.7 million of
2007. The growth was due to injecting significant amount of fund in new ventures of Syndicated
loan, project loan, Lease finance, SME, Agriculture loan, etc. and usual growth in Foreign Trade.
Year 2004 2005 2006 2007 2008
Authorized capital 1000 1000 2450 2450 2450
Paid up capital 516.33 619.69 805.47 1208.2 1872.72
Reserve fund & Surplus 1345.99 2115.03 2468.79 3360.18 4253.55
SIBL was cautious in the later half of the year when the global economy started to meltdown into
a possible recession. Financing trade and commerce remained a strong focus on multi-
dimensional industries in textile, telecommunication, and pharmaceuticals sectors. To uplift the
base further export growth financing on RMG sector was given extensive support.
eposit & Advanced: Taka in Million
Year 2004 2005 2006 2007 2008
Deposit
28973.39 32984.05 40350.87 47961.22 60195.25
Advances
23129.65 27020.21 32709.68 36475.74 49665.07
The deposit base of the bank registered a growth of 25.51 percent it the reporting year over the
last year and stood at Tk. 60,195.20 million. Expansion of branch network, competitive interest
rate and innovative deposit products contributed to the growth. The customs of the bank were
individuals corporations, financial institutions government and autonomous bodies etc.
Import & Export:
Year 2004 2005 2006 2007 2008
Import 22028.30 31648.20 42458.58 62759.06 79226.52
Export 17125.30 21344.10 28019.20 31824.00 35284.44
The Bank opened a total number of 21,210 LCs amounting USD 1,130.96 million in import trade
in 2008 with a growth of 25 percent over the previous year. The main commodities were scrap
vessels, rice, wheat, edible oil, capital machinery, petroleum products, fabrics & accessories and
other consumer items. The Bank has been nursing the export finance with a special attention
since its inception. In 2008 it handled 16,234 export documents valuing USD 531.03 million with a
growth of 14 percent over the last year. Export finances were made mainly to readymade
garments, knitwear, frozen food and fish, tanned leather, handicraft, tea etc.
Investment:
Taka in Million
Year 2004 2005 2006 2007 2008
Investment 4374.17 3564.82 6239.83 7760.38 10162.81
Domestic savings GDP ratio decreased from 20.4 percent of FY07 to 20.1 percent FY08 and
investment GDP ratio also decreased marginally from 24.5 percent to 24.2 percent during the
same period. Savings investment gap as percentage of GDP remain static. The banking system
showed improvement during the year under report. Non-performing loan to total loan ratio of the
banking sector decreased. The interest rate spread also narrowed down. Countrys banking
sector remained shielded from the global financial turmoil mainly due to low level of global
integration, prudent regulation and sound management. Though there was a bullish trend in
capital market in the first half of 2008, all the indicators slightly declined in the last part of the
year. In view of the present global crisis the important issue is to ensure good risk management
for capital market institutions enabling them to take risk and reap returns.
Net Profit after Tax:
Year 2004 2005 2006 2007 2008
Net profit
after tax
170.02 271.67 507.49 1238.11 1517.43
Stock Dividend of 55 percent was declared for the year 2007 which increased the paid-up capital
of the bank from Tk. 1,208.21 million to Tk. 1,872.72 million in 2008 while its authorized capital
was Tk. 2,450 million. The statutory reserve enhanced by Tk.565.60 million in 2008 after
maintaining 20 percent pre-tax profit.The total equity of shareholders of the bank stood at
Tk.6,126.30 million at the end of the year 2008.
Capital Management of the Bank is to maintain an adequate capital base to support the projected
business and regulatory requirement. NBL always maintain a prudent balance between Tier- 1
and Tier-2 capital.The Bank has maintained overall capital adequacy at 13.42 percent in 2008 of
which 10.83 percent and 2.59 percent as Tier-1 and Tier -2 capital respectively against
Bangladesh Banks requirement of 10 percent.
The deposit base of the bank registered a growth of 25.51 percent it the reporting year over the
last year anc stood at Tk.60,195.20 million. Expansion of branch network, competitive interest
rate and innovative deposit products contributed to the growth.The customes of the bank were
individuals corporations, financial institutions government and autonomous bodies etc.
The Bank opened a total number of 21,210 LCs amounting USD 1,130.96 million in import trade
in 2008 with a growth of 25 percent over the previous year. The main commodities were scrap
vessels, rice, wheat, edible oil, capital machinery, petroleum products, fabrics & accessories and
other consumer items. The Bank has been nursing the export finance with a special attention
since its inception. In 2008 it handled 16,234 export documents valuing USD 531.03 million with a
growth of 14 percent over the last year. Export finances were made mainly to readymade
garments, knitwear, frozen food and fish, tanned leather, handicraft, tea etc.
Domestic savings GDP ratio decreased from 20.4 percent of FY07 to 20.1 percent FY08 and
investment GDP ratio also decreased marginally from 24.5 percent to 24.2 percent during the
same period. Savings investment gap as percentage of GDP remain static.The banking system
showed improvement during the year under report. Non-performing loan to total loan ratio of the
banking sector decreased. The interest rate spread also narrowed down. Countrys banking
sector remained shielded from the global financial turmoil mainly due to low level of global
integration, prudent regulation and sound management. Though there was a bullish trend in
capital market in the first half of 2008, all the indicators slightly declined in the last part of the
year. In view of the present global crisis the important issue is to ensure good risk management
for capital market institutions enabling them to take risk and reap returns.
Social Islami Bank Ltd generated an operating profit of Tk.3, 123.80 million in 2008 which was
Tk.2, 215.10 million in 2007 registering a growth of 41.02 percent. Net Profit after tax grew by
22.56 percent to Tk.1, 517.40 million in 2008 after making provision for loan loss and income tax
for Tk.295.00 million and Tk.1, 310.00 million respectively.
Sources of Fund:
Paid up capital
2.59
Reserve & Surplus
5.59
Deposits & other Accounts
83.36
Borrowings
1.74
Other Liabilities
6.42
Total liabilities increased by 27.19 percent to Taka 66,086.60 million as of 31 December, 2008.
This was mainly due to increase in customers deposits and keeping provision for income tax,
gratuity and loan loss, etc.
General Banking Department:
General banking department is the Heart of all banking activities. The division of general
banking plays an important role in a bank. Its mainly a liability side.
Account Opening:
To become the client of the bank a person need to open an Account. After opening of an account
a person becomes a client of a bank. It is a legal contract between the bank and the client. All
kinds of deposit and saving schemes are accepted on the Mudaraba principle of Islamic Shariah.
Under the above principle the clients is the Shaheb-al-mal and the bank is Mudareb. Through
this contract a client is ready to deposit any amount of money with purchasing the belief from the
bank. Therefore it means the bank is selling their belief and always ready to pay any amount of
deposited money to the client. An account opening form is the contractual document. It is the
legal basis of Banker-Client relationship.
Prerequisites for opening an Account of Individual
Photocopy of Passport or National ID Card or Word Commissioner Certificate
Passport size 2 (two) copies color photograph attested by the introducer.
Introducing the account by a client who maintaining a current account with this bank.
Photocopy of Employee ID Card (in case of service holder)
Nominee form and photo duly attested by account holder.
Prerequisites for opening a Private/Public Limited Company
Board resolution regarding opening of Account & mentioning authorized persons for
Operation A/C duly certified by the Chairman..
Valid & up to date trade license.
Memorandum & articles of association duly signed by the registrar of joint stock
Certificate of incorporation.
Certificate of commencement (in case of public company)
Certificate of Registration
TIN & VAT certificate.
List of all directors along with Designation and specimen signature on the companys letter head
pad.
Photocopy of latest certified copy of Form-XII
Passport size 2 (Two) copies color photographs of all the directors.
Prerequisites for opening a J oint Account
Photocopy of Passport or National ID Card or Word Commissioner Certificate
Passport size 2 (two) copies color photograph attested by the introducer.
Introducing the account by a client who maintaining a current account with this bank.
Photocopy of Employee ID Card (in case of service holder)
Nominee form and photo duly attested by account holder.
Joint Declaration
TIN certificate (if any)
Prerequisites for opening a Partnership Accounts
Photocopy of Passport or National ID Card or Word Commissioner Certificate
Passport size 2 (two) copies color photograph attested by the introducer.
Introducing the account by a client who maintaining a current account with this bank.
Partnership Deed
Updated Trade License.
TIN & VAT certificate.
Board resolution/ Meeting Minutes
Prerequisites for opening a Societies Account
Photocopy of Passport or National ID card or Word Commissioner Certificate.
Board resolution.
Passport size 2 (two) copies color photograph attested by the introducer.
List existing Managing Committee.
Registration (if any).
Bye Laws/Constitution.
Updated Trade License.
TIN & VAT certificate.
Permission Letter from Bureau of NGO (in case of NGO).
Procedures of opening an Accounts
Before opening an account, the following formalities have to be completed by the customer:
Apply on a prescribed form.
An acceptable introduction by an introducer which is acceptable by the bank is required prior to
opening of any account.
Two copies of recent photograph of the account holder(s) duly attested by the introducer must be
produced.
The customer has to give three specimen signatures in the Specimen signature card.
The minimum balance has to be maintained in the current is Tk. 1,000.00 and in Saving Account is
Tk. 500.00.
The particulars of the application form for opening Current or Saving Account are as follows:
Type of the account
Name of the applicant(s)
Father/Mothers name
Present address
Permanent address
Passport no (If any)
National ID card no (If any)
Date of birth
Nationality
Occupation
Telephone/Mobile/E-mail
Nominee(s)
Special instruction for operation of the A/C
Initial deposit
Specimen signature of the applicant
Introducers Information.
Name.
Account number.
KYC Profile.
Transaction Profile.
In case of joint account, the following additional headings are in the form:
Operational instruction of the A/C and signatures or Board resolution
In case of partnership account the following additional headings must be added:
Partners name and signature.
Transaction Profile
The person who wants to open an account have to fill a transaction profile-
Bank Products Required No. of
Transactions (Monthly)
Maximum Size (Per
transaction)
Total Value (Monthly)
Outgoing FCY Transfers
Outgoing LCY Transfers
Drafts/ Travelers Checks
Cash withdrawals
Check Payment
Pay Link Payments
FX products
MM Products (Deposits)
Letter of credit/Guarantee
Loan Facilities
Investment Transactions
Payroll Cards
Others (Specify)
Expected Sources of Fund
Incoming FCY Transfer
Incoming LCY Transfer
Cash Deposits
Check Deposits
Cash Collection
Other station Cash Collections
Other station Check Collections
FCY Check Collections
Export Proceeds
Other (Specify)
Note: Please use Additional sheets if required.
I/We, the undersigned, hereby confirm that this: Transaction Profile truly represents the
transactions arising out of the normal course of business of our organization. I/We also confirm to
inform you any revision in the Transaction Profile, if necessary, from time to time.
01. SIGNATURE: 02. SIGNATURE:
NAME: NAME:
TITLE: TITLE:
DATE: DATE:
Types of Accounts:
There are different types of account in Bank. SIBL has the following types of accounts:
A. Deposit
1. Al-Wadiah Current Account.
2. Mudaraba Short Notice Deposit
3. Mudaraba Saving Deposit
4. Mudaraba Term Deposit Receipt
b. Deposit Scheme:
1. Mudaraba Pension Deposit scheme
2. Mudaraba Hajj Deposit scheme
3. Mudaraba Lakhopati Deposit scheme
4. Mudaraba Millionaire Deposit scheme
5. Mudaraba Monthly Profit Deposit scheme
6. Mudaraba Marraige Deposit scheme
7. Mudaraba Bashasthan Deposit scheme
Al-Wadiah Current Account
Al-Wadiah Current Account facilitates the account holder to draw money at any times but no profit
is given to this account. These accounts can be of five types. They are:
1. Individual Account
2. Proprietorship Account
3. Partnership Account
4. Limited Company Account
5. Cooperative Account
RULES OF AL-WADIAH CURRENT ACCOUNT
1. A minimum initial deposit of Tk.1000/= shall be required for opening a Current Deposit Account.
2. Withdrawal of money by the customer from the account shall be allowed only through the leaves
of the cheque book issued by the Bank.
3. Signature of the customer on the cheque leaf for withdrawal of money shall have to be tailed with
the specimen signature recorded with the bank.
4. Payment, in no way, shall be allowed against advance/ post dated and torn cheque.
5. The statement of account as furnished by the Bank shall be presumed as correct, if no objection
to the same is raised by the customer within a week of receipt of the statement.
6. Bank shall accept order of the customer for stop payment of a cheque.
7. Bank may, at the instruction of the customer, collect proceeds/ money of the cheque etc. for credit
into the account but the same shall be accomplished at the risk and responsibility of the customer.
Bank shall always take efforts for early collection but shall not be responsible for any delay or loss,
if caused in the process of collection. Cheque/ instruments will require to be crossed by the
customer before depositing the same in the account. No withdrawal will be allowed against any
proceeds not yet collected.
8. Bank shall take maximum care and remain alert to record exactly all the transactions of both credit
& debit in the Ledger with no fault. However, in case of any mistake/ lapse Bank shall reserve the
right to rectify the same and recover the money from the customer without any reference/ notice to
the customer. Bank shall not make liable for any loss/ inconveniences caused to the customer due
to such error/ mistake/ lapses.
9. Any change/ alternation of address/ constitution of the customer must be intimated to the Bank
forthwith. In the matters relating to mailing and remittances, Bank shall consider the post office and
other courier agencies as representatives of the customer and the Bank shall not be responsible
for any delay or no delivery of mails or remittances served through such agents.
10. Receipt against any cheque /money/ instruments/ book securities duly signed by the authorized
official of the Bank shall be considered as legal one.
11. Bank shall reserve absolute right to alter / amend its own rules, regulations as well as rate of profit.
This revised rule/ rate of profit shall be applicable upon the customer forthwith. Bank will as per
Govt. directives/ notification, realize VAT/ Advance Income Tax/ development surcharge/ other levy
at fixed rate at the end of each calendar year on the basis of balance of 30
th
December or
otherwise as decided by Govt. from time to time.
12. Bank shall reserve the right to close down any account, if the operation of the same appears to be
unsatisfactory. Moreover, Bank may close any account on other genuine grounds without
assigning reason thereof.
Mudaraba Short Notice Deposit (MSND)
SIBL offers 5.50% profit on MSND account, which is less than that of saving deposit. Normally
various big companies, organizations, government departments keep money in MSND account.
For this type of account frequent withdrawal is discouraged. Deposit should be kept for at least
seven days to get profit. Prior notice is required for the withdrawal of money from MSND account.
The account holder must give notice seven days before the withdrawal that is why MSND is
called Seven-Day-Notice Current account. The rules of Mudaraba Short Notice Deposit (MSND)
Account are same as the rules of Al-Wadiah Current Account.
Mudaraba Saving Account
The saving account is bearing profit. The saving account allows one to have profit income on
his/her deposit while the account can be used for transaction purposes. Withdrawal of deposit
can be made twice in a week in case of this account. Exceeding this number will forfeit the profit
for the month. The SIBL offers 6% profit rate on the account. Profit is applied to the account on
half-yearly basis.
RULES OF SAVING ACCOUNT
1. Any person/ persons of the age of majority and sound mind can open account singly or jointly.
The balance shall be payable to him/ her/them or the survivor of the joint account. A guardian can
open such account on behalf of a minor.
2. Introduction is necessary when opening Saving Account.
3. Every Savings Account shall have a separate account number.
4. Withdrawal of money shall be allowed only through the leave of the cheque book supplied by
the Bank.
5. A minimum initial deposit of Tk.500/= shall be required for opening Savings Bank Account.
6. A Depositor shall not be allowed to withdrawal more than twice a week.
7. Profit payable on minimum balance shall be in June and December every year.
8. Signature of the client on cheques for withdrawal of money must tally with the specimen
signature recorded within the Bank.
10. In case of closure of any account within 6 months from the date of opening of the same, the
Bank shall deduct Tk.100/= from the account as closing charge.
11. The Bank reserves the absolute right to alter/amend these rules of Saving Account as well as
rate of profit from time to time.
12. The Bank reserves the right to close any account if the operation appears to be unsatisfactory
or on other genuine grounds without assigning any reason thereof.
Mudaraba Term Deposit Receipt (MTDR)
Mudaraba Term Deposit Receipt (MTDR) is a different type of account. Any body can open this
account there is different amount of profit on the time schedule. At the time of opening the deposit
account the banker issues a receipt acknowledging the receipt of money on deposit account. It is
popularly known as MTDR.
Necessary documents for opening a MTDR in SIBL are as follow.
MTDR Form
Nominee information
Photographs of applicant & nominee
Photocopy of National ID card of Applicant & Nominee
After fill up the MTDR form the party deposits the amount. The party can pay the amount in two
ways-
A) By Cash-
When the party pays the money in cash then the MTDR is issued immediately.
B) By Cheque-
When a party gives the Cheque then at first the cheque is send to the clearing house
then when the cheque comes from the clearing house successfully then the MTDR is issued.
After fulfilling the MTDR Form and depositing the amount, MTDR Account is opened and MTDR
receipt is issued and it is recorded in the MTDR Register. The MTDR Register contains the
following information:
Issued date
MTDR Account Number
Name of the MTDR holder
MTDR Amount
Mudaraba Deposit Receipt Number
Maturity Period
In case of Mudaraba Term Deposit Account, the bank need not hold a cash reserve to repay
money to the customer. The payment will be made after completion of a certain period of time.
The Profit rate offered by SIBL for Mudaraba Term Deposit Account is as follows:
Time Period Rate of Profit
1 month
3 months
6 months
1 year & above

8.00%
10.00%
10.00%
10.00%

Normally a customer is not allowed to withdraw money before the maturity of the fixed period in
case of MTDR. If any customer withdraws money before maturity date, the customers will not get
any profit.
Excise Duty
The excise duty for MTDR is different for different amount of MTD. These are as follows-
EXISE DUTY
Amount (Tk.) Charge (Tk.)
Tk.10, 000/= to Tk.1, 00,000/= 120
Tk.1, 00,001/= to Tk.10, 00,000/= 250
Tk.10, 00,001/= to Tk.1, 00, 00,000/= 550
Tk.1, 00, 00,001/= to Tk. 50, 00, 00,000/= 2500
Above Tk. 50, 00, 00,001/= 5000
Profit payment procedure
For 3 months or 6 months
If a person make a MTDR for 3 (three) months or 6 (six) months then the profit will be
charge compound basis. That is if the person make a MTDR on 01/05/09 for three months then
the MTDR will be mature on 01/08/09. At the end of the maturity if the person do not withdraw the
profit and give the instruction To be renewed automatically Then after the end of another three
months the person will get profit on Principal +Profit. It means the profit will be charge on the
current balance.
For 1 year, 2 year, 3 year
Under these MTDR, profit is charged on simple basis. If a person make a MTDR for 1
year and at the end of the 1 year if the person do not withdraw the profit amount then after the
end of another 1 year he/she will get profit only on the principal + profit amount.
Encashment procedure of MTDR
When the party wants to encash the MTDR then the MTDR slip have to be submitting. Then a
credit voucher is made-
Amount of profit paid to Mr. X against MTDR no# Cr.
Accounting Procedure
Most of the days some MTDR become matured. So, at the end of the day which MTDR are
mature vouchers are made for them. These are as follows-
Exp A/C Profit paid on MTDR Dr.
Exp A/C Profit paid on MTDR (broken days)Dr.
Profit payable on MTDRCr.
MTDRDr.
Tax on profit....Cr.
Excise duty.....Cr.
Client A/C/ P.O ...Cr.
Calculation of broken Days Profit
1. For 3 (Three) months:
Principal x Rate x No of days x Quarter 90
(360 x 100) or 36000 x 90
2. For 6 (Six) months:
Principal x Rate x No of days x Half year 180
36000 x 180
3. For 1 (One) Year:
Principal x Rate x No of days x 360
36000 x 360
Important factors of MTDR Account
Some other important factors of MTDR Account are as follow
MTDR is not a negotiable Instrument.
The legal position of a banker regarding a fixed deposit is that of a debtor which bound to repay
the money only after the maturity of the fixed period.
Cheque books are not issued for MTDR Account
Transfer of an Account
An account holder can transfer his account from one branch to another branch of Social
Investment Bank Limited. For this, he/she must apply with proper reason to the manager of the
branch where he is maintaining the account. There are some rules and regulation and some
charge have to pay for transferring the account from one branch to another branch of Social
Investment Bank Limited.
Closing of an account:
A client can close his account any time by submitting an application to the branch. There must be
a signature of the client in the application and the account-opening officer will verify it. The
account officer then checks the clients account position. The client is then asked to draw a final
cheque for the credit amount in the account excluding account close charge Tk. 100.00 for saving
and Tk. 200.00 for current account. The client then surrenders remaining cheques to respected
officer who will tear off these cheques. Vouchers are then issued with debiting the particular
account and crediting Incidental charges account.
Incidental charge Dr.
Account No .Cr.
In case of joint account the application for closing the account should be signed by all the joint
account holders, even if the account is operated by either of them. The last cheque for withdrawal
of the available balance in the account should also be signed by all the joint account holders.
Revised Profit Rates on Deposits:
The management of Social Investment Bank Limited has approved revision of Profit Rates on
deposits of the Bank with effect from April 16, 2009. The revised profit rate structure is set
beneath for information, record & necessary actions
SL NO. Types of Deposits Period Rate of Profit P/A Remarks
01. Savings - 6.00% Profit will be calculated on half yearly basis
on available balance.
02. Mudaraba Short Notice Deposit (MND)
2. A)


Mudaraba Short
Notice Deposit


-


5.50%



Profit will be paid @ 5.50% pay to the
accounts having average balances minimum
balance of Tk. 500 during the month.
03. Mudaraba Term Deposit Received (MTDR)
3. A)
3.
B)
3.
C)

MTDR

3 m
6 m
1 year

10.00%
10.00%
10.00%

In case of pre-mature encashment of fixed
deposit, profit to be paid at the rate equivalent
to the prevailing Savings Profit Rate, provided
the deposit has been kept with the Bank for a
minimum period of 01 month.
Issuing Cheque-Book:
After the completion of above formalities, the bank provides the client a Deposit Book and cheque
book. The cheque book can be of 10 or 25 pages. It will depend on the type of the account. The
10 pages cheque book is issued to the Saving A/C holder and 10, 20, 25 pages cheque book is
issued to the Al-Wahdia Current or MSND A/C holder. The client has to fill up the Requisition Slip
for cheque book. Then the officer will take a new cheque book with filling up account number of
the client and the branch name in each page of the cheque book. The name and the account
number of the client are then registered in the Cheque book issue register. The serial number of
the cheque book is also entered in the computer for proper maintenance of records.
Cash Counter Section:
Cash department is the most important part of General banking. Cash is the key instrument of all
financial transaction. The cash section plays a significant role. It is a very sensitive part of the
bank because it deals with most liquid assets. Social Investment Bank Limited, Banani Branch
has a well-equipped cash section. This section receives cash from depositors and pays cash
against cheques, Demand Draft, Pay Order and Pay-in-Slip over the counter. This section deals
with all types of negotiable instrument and it includes Vault, used as the store of cash and
instruments. Operation of this section begins with the banking hour. The cash officer begins
transaction with taking money from the Vault, known as Opening Cash Balance. Vault is kept in
most secured place. The amount of opening cash balance is entered into a register. After whole
days transaction, the money remains in the cash counter is deposited back into the Vault, known
as the closing balance. The main functions of this section are cash receipt and cash payment.
Some register books uses in the cash department are mentioned bellow:
Receiving Cashiers Book
Payment Cashiers Book
Cash Balance Book
Vault register
Key register
Remittance Register
Cash Receipt
Cash is the blood of a branch. It is the life of a bank.
At first depositor fills up the deposit amount in slip.
After filling the required deposit amount in slip, depositor deposits the money.
Officer of the cash counter receives the money, counts it, enters the amount of money in the
scroll register, makes seal the deposit in slip and sign on with the date.
Then this slip is passed to another officer for counter sign in the deposit slip.
Then the cash officer keeps the banks part of the slip. Other part is given to the depositor.
The cash in charge gives posting through computer from the deposit slip in the clients account
and write a transaction number.
Cash Payment
When a client comes to the bank to cash a cheque, he/she gives it to the cash counter.
The cash officer receives the cheque and checks it very carefully.
The cash officer checks the date of the cheque, name, the account number of the cheque,
amount in ward in figure and also verifies the signature through computer.
If the instrument is free of all kinds of errors the respected officer will ask the cheque bearer to
sign on the back of it.
He/she will then put his/her initial beside the bearers signature.
There must be two signatures in cash payment cheque. If it is a big amount, cheque must be
verified in front of the cash officer.
The cash officer will then enter the scroll number in his/her register and will pay the money to the
bearer.
Then the cash in-charge gives posting of the cheque through computer and writes a transaction
number.
Every employee in the cash counter maintains register. After receiving payment they fill up the
following particulars-
Serial No
Account Number
Amount
Initial
After giving the payments they fill up the following particulars-
Serial No.
Account Number
Cheque Number
Amount
Initial
Cheque Counter
There is also a counter called Cheque counter. Under this counter three types of Cheque are
received-
1) Transfer-
Transfer means inter Bank transfer that is same bank same branch.
2) Clearing-
When Cheque comes from the different Bank located in same clearing zone then it is send to the
Bangladesh Bank Clearing House for clearing. Normally it takes 2 to 3 days for clearing a
Cheque.
3) Collection-
When A Cheque is collected which are from different bank located in different district then it is
sending for collection. The Cheque is then send to that bank. From that Bank it is verified and
than checked that if there are available fund or not. If there is available fund then it is send to
Social Investment Bank Limited.
Counter Limit
There is a counter limit in every Bank. The SIBL can keep in the counter only Tk. 25.00 Lac. The
Bank can not keep more than that amount.
Vault Limit
Social Investment Bank Limited can keeps in the vault only Tk. 60.00 Lac.
Remittance
Remittances represent transfer of funds one place to another through official channel. Remittance
facilities are very well known and popular service. The word Remittance means sending of
money from one place to another through Courier service and Telegraph/Telex. A bank provides
this facility to its customers by receiving money from one branch of the bank and making
arrangement for payment to same/another bank within the country. For giving this facility, the
bank uses some instruments, which are used instead of liquid cash. To transfer the cash from
one place to another is very much risky that is why; this department uses some transferable
instruments instead of cash.
Remittance department uses the following transferable instruments:
Pay Order (PO)
Demand Draft (DD)
Telegraphic Transfer (TT)
Outward Bill for Collection (OBC)
In ward Bill for Collection (IBC)
Pay Order (PO)
Pay Order means Payment Order. Pay order is an instrument that contains an order for payment
to the payee only in case of local payment whether on behalf of the bank or its constituents. Like
cheque, there is no possibility of dishonoring PO. The Pay Order is only en-cashed through the
issuing branch that means in case of PO the issuing and paying branch are the same.
Pay Order Issuing Process
In the beginning stage, PO was issued only to effect the local payment of
banks own obligations. But at present, it is also issued to the customers, which they can
purchase to deposit as security money or earnest money. PO is in form of receipts and issued by
joint signature of two officers. It ensures payment to the payee as the money is deposited by the
purchaser of PO is kept in a temporary account named Pay Order A/C. For issuing a Pay Order,
following formalities are to be maintained:
Carefully filled up the Pay Order application form by the customers.
Deposit money either in cash or by cheque with necessary charges. That is commission and VAT
on remittance 15%.
Prepare the instrument where the pay order number, payees name, date, amount in number and
amount are written.
Before delivering the instrument to the customer, customers signature to be taken on the back of
the counter part and to be properly scrutinized.
Pay Order Working Procedure
Purchaser purchases the pay order by filling up pay order application form.
Purchasers can purchase pay order in favor of a person or a company.
The beneficiary then can deposit the pay order in his account wit SIBL or any other bank.
Accounting Entry for PO Issue
If the customer purchases the PO by depositing cash in the counter then the procedure
are as follows:
Cash A/C Debit
Pay Order A/C-Credit
Commission A/cCredit
Vat on Remittance A/CCredit.
If the customer wants to transfer the pay order amount from the beneficiarys account with
SIBL by debiting his account then the procedures are as follows:
Party A/C -Debit
PO A/C Credit
Commission A/C Credit
Vat on Remittance - Credit.
Pay order is a current liability on the part of bank, which is required to be discharged by the
beneficiaries against payment in cash or through an account.
Payment of pay order
Payment of PO is made from the branch it has been issued. It is not transferable and therefore it
can only be paid to:
The payee on identification.
The payees banker, who should certify that the amount would be credited PO to the payees
account.
The payee must authenticate a person holding a letter of authority from the payee.
As the bank issues the pay order, it is crossed when it is paid over to the customer. On
the other hand the amount is transferred to the payees account. To transfer the amount the
payee must duly stamped the pay order. The account entries will be:
PO Payable A/C Debit
SIBL General A/C Credit
Before the payment is made, it is the duty of the issuing bank to examine whether endorsement
was given or not. Payment procedure of PO is described bellow:
The payee deposits it to the collecting bank.
Collecting bank sends the PO to the issuing bank through clearing house arrangement.
Payment is given and registered in PO register.
The PO is passed and cancelled in the deposit section.
Demand Draft (DD)
Demand Draft is an instruction payable on demand. It is a negotiable instrument issued by a
particular branch of a bank containing an order to another branch of the same bank to pay a fixed
sum of money to a certain person or order on demand. This instrument can be purchased by a
customer from a particular banks branch for himself or for beneficiary and can be handed over to
the purchaser for delivery to the beneficiary. The payee or the beneficiary will claim the amount of
money in the instrument by producing the same to the concerned paying branch. Demand Draft
may be paid in cash to the payee on proper identification of the amount may be credited to his
account (In case of A/C holder of the bank). Bank issues Drafts for a nominal commission.
Issuance of Demand Draft
While issuing a Demand Draft an officer must be confirmed about the existence of the
branch where the DD is to be issued or drawn as asked for by the applicant or purchaser. The
applicant fills up the Demand Draft Application Form. After that the commission is computed
correctly and applicant is asked to deposit the amount mentioned in the DD. On receipt of cash, a
voucher is passed and scrolled by at least two officers. Then the DD is issued and recorded in
the Demand Draft Issue Register filling the appropriate columns. The accounting treatment will
be as follows:
Cash/ Customer A/C Debit
SIBL General A/C -Credit
Commission A/C Credit
Vat on Remittance A/C -Credit
After giving this entry an Inter Branch Credit Advice (IBCA) is prepared which contains the
controlling number, depicted that the branch is credited to whom it is issued.
Payment of Demand Draft The paying bank as and when it responds to the relative
advice receive proceeds so Demand Draft. On receipt of the DD advice from the different
branches, the paying bank will verify the genuineness of the advice by way of verifying test
numbers and signatures. After receiving the instrument, the IBCA lodgment is done by the
branch. Necessary entries are given in DD Inward Register. The controlling number of the IBCA
should match with the serial number of this register application. Issuing branch then sends an
Inter Branch Credit Advice (IBCA) to the drawn branch against previously issued IBCA. After that
the following entries are given below:
SIBL General A/C. -Debit
Clients A/C Credit
The payment of DD is made with following two procedures. Procedures are as under:
Before getting Advice (IBCA)
When the paying branch of DD receives the DD before receiving the IBCA then the accounting
procedures are:
DD Payable without Advice A/C Debit
Party A/C Credit
After receiving the advice, the accounting will be:
SIBL General A/C -.Debit.
DD Payable without advice A/C Credit.
After getting Advice (IBCA):
When the DD paying branch receives the DD and IBCA at a time then the accounting procedure
will be:
SIBL General A/C Debit.
Party A/C Credit.
Stopping Payment of the Draft
The banker cannot stop the payment of draft. Then on receiving instruction from the
purchaser after delivery of the draft. This is for simple reason that issuing a bank draft the banker
takes upon himself a commitment in favor of third party (the payee) to pay a certain amount of
money. This is because a bank draft is as good as a promissory note issued by a banker and it is
accepted by all because of the goodwill and the reputation of the banker.
Loss of the Draft
A bank can stop payment of a draft in those cases where either the purchase of the draft
or the payee of the draft has reported about the draft being lost or stolen. However in such cases
bank should maintain extreme caution. It should immediately inform the drawee branch about the
loss and enquire whether the draft still remains unpaid and also request the drawee branch to
exercise caution if and when the draft is presented for payment.
Issue of Duplicate Draft
In case a draft is reported lost and a duplicate draft is required to be issued, the banker
should take some steps.
Demand Draft Charge
Bank charges a commission on DD. SIBL, charges 0.15% commission on DD Amount
Their minimum commission is Tk. 25.00. The bank charges 15% Vat on Commission Amount.
Before making the payment of DD, the paying branch will ascertain the genuineness of its
issuance as well as the genuineness of the payee. Open draft may be paid on proper
identification of the payee and crossed drafts can never be paid in cash over the counter.
Telegraphic Transfer (TT)
Telegraphic Transfer is another widely used instrument for remittance of fund from one branch to
another. TT is quicker than a transfer of amount by DD. Sometimes the customer wants to
transfer his money from one branch to another within a very short time. In that case the TT
issuing branch uses telephone to transfer the order of paying a certain sum of money
immediately to the TT paying branch to its (TT paying branch) clients account. Telegraphic
Transfer is the most rapid and convenient but expensive method. The TT issuing branch takes
the telex charge from its customer. It also charges commission and vat from its customer. The
drawer and the payee should have accounts with SIBL. After all the formalities of TT are done by
the TT issuing branch with its customer, it prepares an Inter Branch Credit Advice (IBCA) for the
confirmation of the TT and the bank posts that IBCA to the TT paying branch by Post office at the
end of that particular working day.
In case of issuing a TT the following procedures must be considered:
The customer fills up the TT application form.
The officer then prepares Credit vouchers of Commission, VAT on Remittance, Telex charge
based on the TT amount.
Then the customer goes to the cash counter for depositing the TT amount along with commission,
Vat and telex charge.
After receiving the cash, the cash officer puts Cash Receive seal on all the vouchers and gives
back all the vouchers to the customer.
Then the customer submits all the vouchers to the Remittance officer.
The customer gets cost memo containing serial number, date, to which branch the TT amount will
be remitted, TT amount, commission, and Vat and Telex charge.
Then the officer makes sure all the necessary entries in the TT Issue Register
Finally, the remittance officer gives Test No and sends the TT form to the manager of that branch.
Then the manager gives the Test Number again.
After getting all the test numbers the remittance officer makes a phone call to the TT paying branch
and sends the TT massage containing the following information:
TT serial number
TT Payment date
TT Amount in word and in number
IBCA No
Test Number
Partys account name and number
It is important to mention here that SIBL, Principal Branch uses Telephone for sending TT
massage instead of Telex.
Accounting Entry for TT Issue
Cash A/C / Clients A/C Debit
SIBL General A/C Credit
Commission A/C Credit
Vat A/CCredit
Telex A/C Credit
Procedure of Incoming TT
After receiving the Telex it is recoded on the TT Receiving Form. The TT serial number, test
number are verified. Makes sure all the necessary entries in the TT Payable Register. Finally,
Credit Voucher in favor of the beneficiarys account is prepared and passed.
Accounting Procedure of Incoming TT
SIBL Gen. A/CDebit
TT Payable.Credit
TT Payable.Debit
Party account .Credit
Telegraphic Transfer Charge
Bank charges commission on TT.SIBL, charges 0.15% commission on TT Amount Their
minimum commission is Tk. 25.00. The bank charges 15% Vat on Commission Amount. Tk. 30 is
taken as Telex Charge.
Outward Bills for Collection (OBC)
If the bill is beyond the clearing range, it is collected by outer bill collection mechanism. Customer
deposits cheques, DD, PO etc. for collection, attaching with their deposit slip. Instruments outside
the clearing range are collected through OBC. As for example, a customer of SIBL Banani
Branch deposits a cheque of a bank, Agrabad Branch, Chittagong, as a collecting bank. Now,
SIBL, Banani Branch will perform the following tasks:
Cash department receives the cheque, DD, PO with deposit slip. Then they verify the received
cheques, DD or PO. If the instruments are dishonored, those will be returned back to the
customers. If the instruments are OK then the cash department will send them to the Local
Remittance Department (LRD).
The officer concerned of LRD first keeps the necessary entries in the OBC register.
Endorsement Payees Account Will Be Credited on Realization is given.
Collecting bank can collect it either by its branch in Agrabad or by the drawers bank. They will
forward the bill to that particular branch. OBC number is given in the forwarding letter. At the time
of preparing OBC forwarding letter, the LRD officer keeps a carbon copy of that particular
forwarding letter. He also keeps the deposit slip with the carbon copy of the forwarding letter.
At last, he/she attached the cheques /DD/PO with the original OBC forwarding letter and sends
them by curare service.
Collecting branch will receive an IBCA from SIBL Agrabad branch.
When ever, the IBCA of the collecting branchs OBC comes then the following procedure should
be undertaken:
Entry out the bill from the OBC Register.
Respond the IBCA.
Write an statement Credited to A/C No..on 2004 on the carbon copy of
previously kept OBC forwarding letter.
Makes a debit advice for the party.
Makes three credit vouchers like commission A/C, Vat on remittance A/C and
postage charge A/C.
Inward Bills for Collection (IBC)
There is a vice versa relationship between OBC and IBC. A branch of a bank sends OBC for
collecting their bill from its branch. Then OBC getting branch responds that OBC and considers
that OBC as IBC for them. The procedure of responding OBC (IBC) is as follow:
Credit Voucher of SIBL General A/C
Write down the IBC number and other information in the IBC register.
To prepare IBCA.
Give posting to the computer.
Accounts Department
Accounts Department is one of the most important departments in a bank. Each and every
department is closely related with this department. Accounts Department maintains all the
records of transactions and all types of statements. At the end of the transaction hour all
concerned departments send all kinds of vouchers of transactions to this department. This
Department compares all the figures, amount and contains of transaction with supplementary
statements automatically arranged by the computer. If any discrepancy arises regarding any
transaction then this department reports to the concerned department to repair the mistake. Then
Accounts Department does another important task, which is called Voucher Sorting. In this task,
the account officer rearranges all the vouchers department wise and divides all the vouchers in to
Debit and Credit. After rearranging all the vouchers, the officer concerned counts the vouchers of
various departments and ensures that the numbers of the vouchers are equal to the number of
vouchers shown in the supplementary statements. Another vital task of this department is to
prepare the extract. The extracts statement shows the Inter Branch Transactions during the end
of a particular day. The Officer concerned then separates the Inter Branch Transaction Vouchers
as Originating and responding basis. The responding IBCA and IBDA have a duplicate sheet for
each of them. These duplicate sheets must be separated from the originals and must be kept
individually as Extract. Then the next task is to divide all the Inter Branch Transaction vouchers
in to Debit and Credit. Except voucher sorting, Account Department does some other vital tasks.
This Department records its accounts daily, weekly and monthly. We can divide these daily tasks
in to two types. They are:
Before End of the Day:
Recording the daily transaction in the cash book.
Recording the daily transaction in general and subsidiary ledgers.
Preparing the daily position of the branch comprising of deposit and cash.
Preparing the statement of Originating and Responding.
Making payment of all the expenses of the branch.
Making Trial Balance.
Taking Backup through computer.
After End of the Day
Preparing Statement of Affairs.
Statement of back page of affairs.
Statement of provisional income.
Statement of provisional expenditure.
Preparing Monthly Report:
Individual account balance statement.
Preparing profit and loss report.
Periodical Tasks:
Preparing the monthly salary statements for the employees publishing the basic data of the
branch.
Preparing the monthly position for the branch, which is sent to the Head Office to maintain the
Statutory Liquidity Requirement (SLR)
Preparing and Extract which is a summary of all the transactions of the Head Office account with
the branch to reconcile all the transactions held among the accounts of all the branches.
Statement of Affairs
Account section prepares the Statement of Affairs for finding the profit/loss as well as amount of
assets and liabilities of concerned branch per day. Theoretically m it is called financial statement.
It has following two parts:
Income and Expenditure Account.
Statement of Assets and Liabilities.
Depreciation
Depreciation is the process of cost allocation of assets, not a process assets valuation.
Fixed asset have been shown at cost less accumulated depreciation.
Depreciation has been charged on straight line method or reducing method at the following rate on
cost of assets for the full year irrespective of their date of purchase.
Particulars of Assets Percentage
Furniture and Fixture 10%
Office Equipment 20%
Office Decoration 12%
Automobile 20%
Besides the above, the accounts department has to prepare some internal statements that are
submitted to the central bank.
Clearing Department
Clearing stands for mutual settlement of claims made in among member banks at an agreed time
and place in respect of instruments drawn on each other. Clearing House is an arrangement
under which member banks agree to meet through their representatives, at the appointed time
and place to deliver instruments drawn on the other and in exchange to receive instruments
drawn on them. The net amount payable or receivable as the case may be, is settled through an
account kept with the controlling bank (Bangladesh Bank/ Sonali Bank).
Social Investment Bank Limited, Banani Branchs cheques are collected through Clearing.
Social Investment Bank Limited is a scheduled bank. According to the article 37(2) of the
Bangladesh Bank Order, 1972, the banks that are members of the Clearing House are called
Scheduled Banks. The scheduled banks clear the cheques drawn upon one another through the
Clearing House. This is an arrangement by the Central Bank where everyday the representatives
of the member banks sit to clear the cheques. The place where the banks meet and settle their
dues is called The Clearing House. The Clearing House sits for two times in a working day.
Everyday the first hour starts at 9.30 AM and returns house at 5.00 PM. If the cheque is
dishonored, it is returned with the prescribed Return Memo showing the cause for dishonoring
the cheque and for necessary action. SIBL, Banani Branch clears its cheques as well as cheques
of other banks.
The Social Investment Bank Limited, Banani Branch cheques of its client are received for
collection from other banks. In case of receiving cheques the following points should be checked
very carefully:
They should not carry a date older than the receiving date for more than six months. In that case it
will be Stale cheque and it will not be allowed for collection. Again the date of cheque should not
be more than one days forward than the receiving date that is the cheque should not be Post
Dated one.
The amount both in words and figures in deposit slip should be same and also it should be
inconformity with the amount mentioned in words and figures in the cheque.
The name mentioned both in the cheque and the pay-in-slip should be the same.
The cheque must be crossed.
The collection bank must check whether endorsement is done properly or not.
Foreign Exchange:
Social Islami Bank Ltd. Continued to be very active in international trade through financing export
import business and mobilizing wage earners remittance. In 2008, the bank opened 21210
imports LCs worth USD 1130.96 million and handled 16234 Export documents worth USD 531.03
million. The bank has also expanded its external business by undertaking export bill negotiation,
realization of export proceeds, foreign remittance, etc.
Import:
To bring in, from abroad, something in kind of goods or services (to behave lawfully) is import.
Import trade finance by SIBL rose to USD 907.08 million (Tk. 6,275.91 crore) in 2007 compared
with USD 606.26 million (Tk. 4,245.85 crore) in 2006. The growth in USD increased by 49.62%
and in Taka by 47.81%.In reporting year 2008 the Bank opened a total number of 21210 LCs
amounting USD 1130.96million in import trade with a growth of 25 percent. Large LCs were
opened mainly for importing old ships, rice, wheat, edible oil, fertilizer, capital machinery, fabrics
and accessories, petroleum products and other consumer products.
Import procedure of SIBL:
Import means purchasing products from other countries for further process or to sell in local
market. Social Islami Bank Ltd plays a vital role in import financing system. There are some
different steps in whole import process. These are as follows:
1. LC Opening
2. Document Negotiate
3. Payment Clear
4. Bill of entry
5. File closed
LC Opening:
A letter from one banker to another authorizing the payment of a specified sum to the
person named in the letter on certain specified conditions commercially. Letter of Credit are
widely used in the international import and export trade as a means if payment, the exporter may
require the foreign importer to open a letter of credit at the exporter may require the foreign
importer to open a letter of credit at the importers local bank (issuing bank) for the amount of the
goods. This will state that it is to be negotiable at a bank (negotiating bank) in the exporters
country in favors of the exporter; often, the exporter will give the name of the negotiating bank.
On presentation of the shipping documents (which are listed in the letter of credit) the
beneficiarys will receive payment from the negotiating bank.
The rules of LC are established by ICCI (London). The guidelines are provided by UCP 600
(Uniformed Customs & Practice for Documentary Credit). UCP 600 is the latest revision of the
Uniform Customs and Practice that govern the operation of letters of Credit. LC is nothing but a
guarantee from a bank in favor of a party to pay certain amount in case of transaction.
Conditions of LC:
There are some necessary conditions and documents are required to open L/C for import goods
and services from exporters as fallows:
A. The party must have current account which is treated as a business account.
B. Trade license (valid)
C. Application to the Bank by the importer.
D. TIN Certificate is compulsory.
E. VAT Certificate
F. IRC and IMP
G. Performa Invoice or Indent is needed.
H. Insurance Cover Note
I. Letter of promissory note
J. Letter of Disbursement
K. Letter of Agreement
L. Letter of guaranty
M. Letter of continuity
N. National certificate.
Opening of LC is the first requirement of import. The importer must have account in the certain
bank. Some of the most essential documents of LC are described as follows:
A) IRC:
IRC is the first essential of LC opening. The meaning of IRC is Import Registration Certificate. It is
issued by the Chief Controller of Import & Export. The IRC is compulsory for the trading
company.
Trading is a continuous process. It is not for own purpose rather for business purpose. The
trading importer imports products, bring into our country and sells into the local market. For this
reason IRC is compulsory. The IRC can be renewed by some authorized bank. The authorization
is given by Bangladesh Bank. SIBL has this authority. However, in case of industrial purpose like
purchasing industrial equipment, IRC is not necessary. Instead of IRC here a permission letter is
issued by the Board of Investment.
B) Invoice:
Invoice, quotation, contract all these codes contain same meaning and purpose. This document
is issued by the exporter. In the invoice, some important items must be presented. There are
major items and additional items.
i. Major items: Quality, quantity, price, description of goods etc.
ii. Additional items: Shipment date, expiry date, code of loading etc.
C) Bank charged documents:
Bank charges some documents to the exporter on behalf of the party or importer. These
documents are:
i. LC Application form
ii. IMP from
iii. DP Note/ Promissory Note
iv. Additional guarantee letter etc.
2. Document Negotiate
3. Payment clearing
4. Bill of Entry
5. File closed
Document Use in Foreign Trade:
As foreign trade involves transaction in between the country, the formalities attached are
complicated and multifarious. The documents used in foreign trade are following:
1. Bill of Exchange: The bill of exchange is a particular through which payment is effected in
internal and international trade. The payment for the goods is received by the seller though the
medium of a bill of exchange (commonly) called draft or bill drawn on the buyer for the amount
depending on the contact. It is a negotiable instrument. Negotiable instrument act 1881 (section -
5) define the bill of exchange as an instrument in writing containing an unconditional order
signed by the maker, directing a certain person to pay a certain sum of money only to, or the
order of a certain parson, or to the bearer of the instruments.
2. Bill of Lading: It is a document issued by the shipping company or its agent acknowledging
the goods mentioned therein on board the carrying vessel in apparent good order and condition
unless otherwise indicated therein, for shipment to the consignee on terms and conditions as
agreed upon as to their carriage. Bill of Lading is a document of title to goods entitling the holder
to receive the goods as beneficiary on endorsee and it is with help of this document on receipt
from the exporter that importer takes possession of the goods from the carrying varying vessel at
the port of destination.
3. Invoice/Commercial Invoice: It is sellers bill for merchandise. It contains a description of the
goods, the price per unit, total value of the goods, packing specifications, terms of sale, letter of
credit, bill of lading number, etc.
4. Marine Insurance Policy: In the international trade marine insurance policy is must to cover
the risk of loss on consignments while they are on seas. The marine insurance is the
responsibility of the buyers (consignee) under FAS, FOB and CFR contacts and the seller
(consignor/shipper) under GIF contact. The policy must be of the type as specified in the relative
contact. It must be properly stamped, negotiable and be endorsed where it is payable to order.
5. Packing List: The exporter must prepared an accurate packing list showing item by item, the
contents of the consignment to enable the receive of the shipment to check the contents of the
gods, number and marks of the packages, quantity, per package net weight, gross weight,
measurement etc.
6. Inspection certificate: Inspection certificate by an established inspection authority is needed
under some contracts or by some country.
7. Bill of Entry: A bill of entry is a document which contains the particulars of the imported goods
as well as the amount of customs duty payable.
8. Certified Invoice: Is an invoice bearing a signed statement by someone in the importers
country that has inspected the goods and found that the goods are in accordance with the
specific contact of the Performa invoice and the goods are of a specific country of origin.
9. Exp Form: All exports must be declared on EXP Form. These forms will be supplied by the
Authorized Dealers for use of the exporter. The Authorized Dealers should, before certifying any
export form, ensure that the exporter is registered with the CCI & E under the Registration
(Importers and Exporters) Order 1952. The registration number should be quoted on the relative
EXP Form.
10. Trust Receive: At times, the documents of title to goods (not the bill) are delivered by the
banker to the importer against trust receipt. This is done in exceptional cases to valued
customers.
Import Financing:
Loan against Imported Merchandise (LIM):
Loan against Imported Merchandise (LIM) is a facility provided by the Bank to the importers who
are in shortage of fund to retire the import bills and thus to clear the goods from the post
authority. In other works it may be referred as an advance against merchandise.
LIM Accounts may be created in the following two cases:-
A) LIM Account on importers request.
B) Forced LIM Account.
LIM Account on importers request:
After lodgment of documents, the importers concerned to be intimated for early retirement of the
documents by paying outstanding bill amount including other charge. If the importer is not in a
position to retire the bill out of his own sources at that moment may request the bank to clear the
goods by creating LIM Account. On receipt of the importer request the official of the import bills
section will prepare an office note by calculating the total landed cost of the consignment.
To ascertain the landed cost the following points to be considered.
1. Bill amount i.e. invoice amount : Tk.
2. Customers duty % : Tk.
3. VAT % : Tk.
4. Development surcharge % : Tk.
5. C & F Agents bill (approx) : Tk.
6. Miscellaneous (approx) : Tk.
Total landed cost of the goods : Tk.
(-) Margin retained at the time of opening L/C : Tk.
(-) Farther margin to be realized from the importer : Tk.
Bankers Liability will be : Tk.
Efforts should be taken so that at least 20% to 30% margin of the landed cost may realize from
the importer. Realization of margin will depend on the banker customer relationship and also on
the marketability of the goods.
The following charge documents have to execute by the importer:-
i) DP Note (Demand Promissory note).
ii) Letter of Arrangement.
iii) Letter of Disbursement.
iv) Letter of pledge.
v) Any other document of necessary.
The Bank will send the documents to the port city branch by indorsing the bill of lading in favor of
them with certification of invoice for clearance the goods through importers nominated as well as
Banks approval C & F agent. In the forwarding letter clear instructions to be given for dispatching
the goods either by train or by truck duly insured Branch Managers will have to take prior
approval from International Division, Head Office to create LIM Account in favor of importers.
Before sending the documents to the port city branch and under taking on prescribed from with
special adhesive stamp of Tk. 180/- (Flexible) regarding the stipulated period sanctioned to the
importer to be obtained.
The following accounting entries and vouchers are generally to be passed in the set of
Retirement Vouchers on the same day at the branch:-
Customers A/C. Dr
LIM. Dr
IBTA / Pay Order.. Cr
PAD Cr
The particulars of LIM A/C must be entered and voucher to be posted in the LIM Register.
After clearance, the goods should be stared either in Banks go down or in importers go down
under banks lock and key and the particulars of goods to be entered in the space provided in the
LIM Register. At the same time insurance of goods cover fire and other risk to be made. Go down
staff salary, go down rent (if the goods stored at the Banks go down) and other miscellaneous
charges in connection with the LIM A/C will be paid by debit to partys LIM A/C under advice to
the importer.
Forced Lim Account:
Immediately after lodgment of documents, the branch incumbent and concerned dealing official
shall vigorously peruse importers far retirement of bills. PAD should not remain outstanding fare
more than 30 days from the date of lodgment on as per norms.
If the party fails to retire the documents within 30 days or within the date of arrival of ship which
ever is earlier the branch should sent the documents for clearance the goods.
Other formalities in connection with the forced LIM A/C will be the same as in the case of LIM A/C
created on importers request. No further L/Cs of the party for whom the Bank was forced to
clean the consignment and the party failed to take delivery of the goods within the time specified
below under the head disposal of LIM stocks should be opened without prior approval from Head
Office even if the same is within the discretionary power of branch Manager.
Disposal of LIM Stocks:
a) The LIM liability should be adjusted within a maximum period of 45 days from the date of
storage for commercial importer and 60 days for industrial importers. (It may very as per circular)
b) Part delivery against payment may also be allowed if so desired by the party to clear the LIM
liability within the aforesaid time, after recovering 30% margin over the landed cost if possible, but
such payment should be proportionate with outstanding LIM liability taking into account the
interest, go down rent and other charges up to eventual date of final delivery. This should be so
arranged that with the last delivery the entire LIM liability is fully adjusted. Special care should
however be taken to protect banks interest in case where all the packets/bundles are not of
equal size, quality and price.
c) Additional 30 days may be allowed to both commercial and industrial imports, if so
approached by them for final adjustment. In the event of importers failure to lift the goods on
payment of banks dues in full even within the extended period of 30 days, the following steps
shall be taken by the branch incumbent:
1) Final notice shall be issued on importers giving 15 days time for payment.
2) In case of response is received from importer, legal notice shall be served on the bay giving
another 15 days time for payment.
3) In such cases branch incumbents may allow further 30 days time only provided he is satisfied
that importer will be in position to repay the outstanding dues within the extended period.
Loan against Trust Receipt (LTR):
By executing the standard letter of trust (or trust receipt) the customer acknowledges receipt of
the documents of title to the goods, as the case may be and agrees to hold them and the relative
goods, when delivery thereof is taken by him, in trust as agents for the bank until the goods are
sold or used for the express purpose for which they were released to him. The customer also
undertakes to keep the transaction separate and assign and deposit with the bank the sale
proceeds immediately realization but in any case not later than time period stipulated in the letter.
Further, the customer undertakes to keep the goods insured and in the event the goods or may
part thereof cannot be used by him for the declared purpose or on demand being made by the
bank for the return of the documents to the banks custody. The trust receipt, thus, enables the
importer customer to take re-delivery of the documents pledged to the pledge bank.
Export:
SIBL successfully handled export documents of USD 465.78 million (Tk. 3,182.37 crore) during
the year 2007 compared to USD 405.33 million (Tk. 2,801.92 crore) in the year 2006. The growth
rate was US Dollar in 14.91% and in Taka 13.58%. In 2008 it handled 16234 export documents
valuing USD 531.03 million (Tk. 3690.65 crore) during the reporting year with a growth of 14.01%
over the last year. Readymade garments, Knitwear, foreign food, fish, tanned lather, handicraft,
tea etc were the major export finance sectors.
Export Procedure:
After receiving the original letter of credit, The Advising/Confirming Bank sends the original letter
of credit, under their own letter of advice or confirmation, to the sellers (Beneficiary). The next
steps are as follows:
1. The seller ships the goods, obtains the relevant shipping documents and collates all the
documents required by the letter of credit.
2. The seller presents the documents, together with the letter of credit itself, to the
Advising/Confirming Bank or any other Bank.
3. The Advising/Confirming Bank checks the documents against the requirements of the letter of
credit and, if the documents comply strictly with the terms therein, will pay, undertake to pay at an
agreed future date or, if the credit is not confirmed, apply to the Issuing Bank for reimbursement to
pay the seller, which it will do on receipt of funds.
4. The Advising/Confirming Bank sends the documents presented to the Issuing Bank.
Documents Required under Letter of Credit:
Typically, the documents required for presentation by the exporter under a documentary credit
are the documents issued in respect of the export of the goods:
1. A commercial invoice to represent the goods and the agreement.
2. A transport document to evidence shipment of goods.
3. A certificate of origin to verify the origin or place of manufacture of goods.
4. An insurance certificate to evidence that the goods have been insured against loss or damage
during transport.
Export Financing:
Export of services and goods constitute an important part for long-term development prospect of
a country. Exports are, therefore, listed in priority sector and government always provides
different sorts of incentive or subsidies for growth of export. The Government and Banks give the
financing support to the exporters through the following channels:
I) Pre-shipment Financing,
II) Post-shipment financing,
Pre-shipment Financing:
In order to assist the exporters to ship the goods to foreign buyers, the Banks make pre-
shipment finance to the exporters in the following ways:
1. A. Export Cash Credit (ECC): Export Cash Credit is allowed to the exporters to
procure/produce exportable goods and raw materials from the local market. This credit is given in
local currency with reduced rate of interest, which is again re-financed by Govt. through
Bangladesh Bank with certain terms and conditions. Tanneries mainly use these sorts of financing
for purchasing raw hides. At present allowing ECC by the Banks are very rare as the repayment of
loan is not satisfactory.
1. B. Packing Credit (PC): Packing Credit is a short-term loan allowed by the Banks to the
exporters. This credit is given to the exporters for the purpose of processing, manufacturing,
payment of salaries, packing of finished goods, payment of electricity bills etc. This credit is given
when the exporters have the confirmed export order by way of firm contract and irrevocable L/C
issued by a first class foreign bank. This credit is adjusted from the export bill received from the
said export of commodity. Bangladesh Bank by way of circular has instructed to realize interest
@7% only as an incentive to the exporters. As per SIBL guidelines, the PC limit will be 10% of the
valid export L/C (On FOB basis) and allowed when the exportable goods are under process/after
acceptance of the export bill. In case of export made on C&F basis FOB value of the exportable bill
will be arrived at by deducting freight charges by obtaining a certificate from the shipping agent.
PC Entitlement = [{(ABP+EDF)-S/D} x 75%] 10%.
Post-shipment finance:
The advance given to an exporter after the shipment is made is post-shipment finance.
They are given in the following manners.
A) Negotiation of documents under L/C: After shipment of goods against L/C, the exporter
presents the shipping documents as per condition (Of L/C) to his bank for negotiation. If the
documents are all in order/clean, bank purchase the bill and make payment to the exporter. But if
the export L/C calls for submission of the documents to a particular bank, only that bank can
negotiate the document. If otherwise it is freely negotiable, any bank can negotiate the bill. In
order to negotiate a shipping document, a banker must confirm that,
i) The documents must be presented for negotiation before expiry date of the credit
ii) The amount of bill must not exceed the amount available in the export L/C.
iii) All the documents called for in the L/C are submitted and these are prima facie in order.
When the bank is satisfied that the documents submitted are in order, they may negotiate and the
bill amount is paid to the exporter on the rate quoted (Export bill buying rate) in the exchange rate
circular.
B) Negotiation under reserve or guarantee: If the customer presents a discrepant document
but the customer has high ranking in the bank and bank is sure that in the event of discrepant
document is non accepted by the L/C opening bank, they may recover the overdraft with full
interest from the exporter, Bank may purchase the export bill under reserve. If the customer has a
high ranking in the bank but the bank has little doubt about recovery of the purchased bill value,
they go for more realistic method by obtaining an indemnity from the exporter. Under this method,
the exporter execute an indemnity bond in favor of the bank under which he promises to
reimburse the bank for any loss that the bank may be put to on account of negotiation of the
document with discrepancy.
C) Purchase of D/A, D/P Export bill. Some times the export L/C or firm contract contains the
clause that the bill has to be drawn on D.A or D.P basis, say for 30, or 60 or 90 days from the
date of B/L. For such type of bill bank may allow purchase of the bill after careful scrutiny of the
export document, credit worthiness, business experience and integrity of the exporter. The bank
for such kind of facility considers the customer of undoubted integrity and creditworthiness. For
the safety of the bank advance, it is very common in our country that such type of bills are
purchased by the banks after obtaining of acceptance of the shipping document by L/C opening
bank and confirmation of due date of the bill. While purchasing such bill, appropriate exchange
rate is applied as per exchange rate circular.
Advance against bill under collection:
It sometime happens that the exporter has sufficient financial support of his own and presented
the document against exports L/C to bank for collection. But all on a sudden he may require fund
for meeting emergency need. In such a situation the exporter may approach bank for finance
against bill sent for collection awaiting remittance. In such a situation, bank may allow overdraft
up to a certain percentage (Say maximum 80%) of the value of the bill under collection. In
addition to the export bill as security, bank may ask for collateral security by way of third party
guarantee or mortgage of property.
In the event of export failure of exporter for rejection of the manufactured goods for late
shipment or inferior quality of the goods, or any other reason, payment of the BTB L/C
commitment is made by creating forced loan in the name of exporter, which is known as SOD
(Export) in SIBL. This loan is adjusted by deduction from the future export bills and export of
stock lot. Creation of forced SOD export loan is very common in the RMGI and special care is
taken for early adjustment of the loan as it carries normal interest rate prevailing in the market. A
detail instruction in connection with creation of SOD (Export) is given in our ID Circular No. 139
dated March 05, 1994 and all officials are advised for meticulous compliance of the above
circular.
Export Procedure:
The general framework for control of exports is similar to that of imports but the objectives of
import and export control are quite different. While import control is aimed at curbing imports to
the extent possible, export control mainly aims at regulating the flow of foreign exchange into the
country. The objective of the government is to encourage exports t the extent possible so as to
earn valuable foreign exchange for the country. All efforts have to be made to boost up exports of
the country. Therefore, export control is exercised over for less a number of items as compared
to import control. The control on such items which are essentially needed in the country whose
indiscriminate exports may affect the domestic economy.
For obtain export registration certificate (ERC) form CCI & E, the following documents are
required:
1. Application form.
2. National certificate.
3. Partnership deed (Registered).
4. Memorandum & Articles of Association & Incorporation Certificate.
5. Bank Certificate.
6. Income Tax Certificate.
7. Valid Trade License.
8. Copy of Rent Receipt of the business firm.
9. Free paid as treasury challans.
Checking and Advising of Export L/C:
On receipt of Export L/C is to be recorded in the Banks inward Register and then the signature o
the Export L/C or test number for telex L/C is to be verified by an authorized officer of a bank and
finally it is to be forwarded to the beneficiary under forwarding schedule.
Processing and Opening of BB L/C:
An exporter desired to have an import L/C limit under Back to Back arrangement. In that case the
following papers and documents are required:
1. Full particulars if Bank account
2. Balance sheet
3. Statement of Assets & Liabilities
4. Trade License
5. Valid Bonded were House License
6. Membership certificate
7. Income tax declaration
8. Memorandum & Articles of Association
9. Partnership deed
10. Resolution
11. Photographs (All Directors)
On receipt of above documents and papers the back to back L/C opening section will prepare a
credit repot. Branch must obtain sanction from Head Office for opening of BB L/C.
Predation of Export Documents:
1. Bill of exchange or Draft.
2. Commercial invoice.
3. Bill of Lading.
4. Inspection certificate.
5. Packing List.
6. Export License.
7. Shipment advice.
8. Certificate of Origin.
9. Weight certificate.
10. Phytosanitary certificate.
11. Quality certificate.
12. EXP form.
Disposal of Documents:
Before dispatch:
Rubber stamp must be affixed on all the documents.
Endorse the draft, B/L, Insurance policy in favor of Foreign correspondent as per L/C terms.
Steps for Export:
There are some steps for export is as follows:
1. Goods ready for shipment.
2. Inspection of the goods from the competent authority as per L/C.
3. Prepared invoice and packing list and vessel booking particulars.
4. Papers to be sent to C & F agent for shipment.
5. C & F agent will do the custom formalities.
6. C & F agent will take permission for shipment/handover the goods to shipping co.
7. After completing of all customs finalities, the nominating shipping co. received the
goods for sail/load in the ship and issues a receipt which is known as mates receipt.
8. C & F Agent handover the shipping receipts to the exporter or they can take the
original B/L in payment of freight and other expenditure etc.
9. Export may dispatch the shipment advice to the importer directly as par L/C terms.
10. C & F Agent receive the original B/L form the relative shipping co. and dispatches the
same to the bank for negotiation or receives the (exporter) from the shipping co. directly.
11. Exporter submits the original and duplicate sets of document to the bank for
negotiation.
12. After negotiation bank should dispatch the documents to the opening bank for
delivery of the goods from the port.
13. Opening bank lodges the documents and makes payment to the negotiation bank as
per L/C terms.
Foreign Remittance:
Social Islami Bank Ltd has remittance arrangement with different banks and exchange homes in
various countries through out the world. The bank has earned the confidence and reputation as a
reliable organization of paying hard-earned money of the expatriate Bangladeshis to their
beneficiaries in the country safely and quickly.
The bank handled USD 582.47 million remittances in 2008 showing an increase of USD 179.90
million the previous year 2007which registered an attractive growth of 45%.
Introduction of products like Home Delivery Scheme, Electronic Fund Transfer (EFT) and
different instant payment system and modern technologies like SWIFT and inline services have
strengthened the position of the bank in channeling remittance proceeds. The remittance cell at
the Head Office is working for smooth and speedy delivery of remittances to all the branches
through online system. Beneficiaries are also informed through SMS regarding their remittances.
All these efforts have propelled our bank to a higher position with the support of 106 branches at
home, 38 Exchange Companies/Banks abroad and a vast network of Western Union all over the
world.
SWOT Analysis
SWOT analysis is a tool for auditing an organization and its environment. It can provide
information that is helpful in matching organizations resources and capabilities to the competitive
environment in which it operates. The following SWOT analysis of Social Islami Bank Ltd is done
to have a better understanding of its position. This SWOT analysis will provide an insight of what
they can do in future to improve its standing and also how they can compete with their existing
competitors.
6.1 Strengths
Social Islami Bank Ltd is considered as a very reliable for its long presence in the region. Their
continuous and sound profitability track record created a good brand image among at all level. In
their history they never faced any big disaster which effected customer interest.
One of the largest Islamic Banks inBangladesh
o Social Islami Bank Ltd has the large pool of loyal customer who very much constant at
availing service forms the bank.
o Social Islami Bank Ltd human resource comprises of expert qualified and committed
employees.
o Dedicated and professional staff.
o Social Islami Bank Ltd always comes up with innovative products which are designed to
provide more quality service.
o Healthy working environment
Social Islami Bank Ltd is the only one which has been able to capture a wide
customer base at a very short time through its extensive marketing efforts.
Social Islami Bank Ltd owns the best banking and information technology
equipments in Bangladesh. It ultra modern banking systems starting from terminal
pcs to HUBs are based on the international Banking group standards and are the
latest. The Hexagon product is one of the best examples in this context.
Effective MSO department create Social Islami Bank Ltd product effective in market.
Social Islami Bank Ltd has the global electronic banking system Hexagon which woks
globally.
Weaknesses
Social Islami Bank Ltd has more and high fees and charges compared to its rivals. Such as
minimum balance fee, ledger fee etc. As a result BASIC Bank is loosing its customers.
Social Islam Bank Ltd has rigorous credit screening policy and it is over conservative. This
approach may lead it to lose opportunist business ventures.
Procedure of availing service from Social Islam Bank Ltd is quit lengthy and costly other then the
competitors. It restricts the flexibility of the service at some extent and hampers customer
satisfaction.
Weak marketing strategy, Target market not identified
Some branches of Social Islam Bank Ltd situated in commercial area do not have adequate facility
to serve the rush and thus creating dissatisfaction among a major portion of the customer group.
Promotional strategies of Social Islam Bank Ltd are rather reactive and defensive. And as most of
them are designed globally, those fail to attract consumers entirely.
Social Islam Bank Ltd weaker distribution channels then that of other competitors. Where as other
national private bank like The City Bank have branches in most of the district cities.
The high charges and bound facility discourage the mid level businessman.
Customer service has some dissatisfaction to the client.
Opportunities
Regularity environment favoring private sector.
Increased broad money supply in the Bangladesh market, which in turn increase the investment.
Growth in export, import and remittance will definitely increase the business opportunity for Social
Islam Bank Ltd.
Newly targeted market for Social Islam Bank Ltd is the upper middle class sector, which is growing
recently? Again this sector more aware about financial services and understand the significance
better.
The population of Bangladesh is continuously increasing at a rate of 7.3% per annum. The
countrys growing population is gradually and increasingly learning to adaptation of consumer
finance. As the bulk of our population is middle class, different types of products have very large
and easily pregnable market.
The activity in the secondary financial market has direct impact on the primary financial market.
Investment is a national socio- economic activity and such activity in the national economy controls
the bank.
Bangladesh has a huge consumer base for maintaining several accounts. So Social Islam Bank
Ltd has the opportunity to keep these customers by reducing its current fees and charges and
positioning attractively in middle class segment.
o More Branches around Dhaka and all over Bangladesh will enable Social Islam Bank Ltd to
capture more market share, hold a stronger competition against local banks.
Threats
Increased competition for market share in the common banking area and other financial institution
and quasi-banking services, followed by the emerging trend of leasing companies.
Competitive rivalry within industry.
Increased provisioning requirement and increased paid up capital maintenance requirement.
Price-cutting due to the unfair and hostile competition, i.e., market pressure for lowering of lending
rate.
Deep and frequent exchange rate fluctuation negatively impacting on import and export business
of all the clients.
Political acrimony and frequent strike and pervasive nature of corruption.
Inefficient and unstructured legal system.
Social Islam Bank Ltd should continuously improve its customer service strategies and the overall
service quality needs to win the customer satisfaction undoubtedly.
Multinational banks may merge with local banks to provide good services.
Large network of the established local banks.
Recommendation
The total picture of mobilizing and recovering loans and advances are very poor for the NCBs in
our country. But Social Islam Bank Ltd, state owned bank has changed the scenario remarkably.
The amount of classified loans is reducing year after year. Now it is little over 4.5% that are within
the world standard. Foreign Exchange Branch has also a noted picture for the same. Only one (1)
loan is defaulted (Outstanding amount is about 14 Lac.) out of Tk. 26 crore loan outstanding. The
percentage is 0.53%. Even after there are some loop holes in disbursing and monitoring loans
and advances. These are as follows
1. 1. Interest rates for different types of loans and advances vary to different customers. A
prospective customer is allowed to take credit facilities at a lower interest rate. Again, the interest
rate is charged at a higher rate to a customer who is not so prospective. So, the bank officials to
create positive attitude to the clients should ban discriminatory attitude.
2. 2. Lending Risk Analysis (LRA) is done in the Head office, it is not given due weight in case of
loan disbursement. They think it is not such a helpful method to judge the client because of its
subjectivity. But it is not true. Actually this comes from ignorance to some extent. So, LRA should
be done in appropriate considering the importance of the same.
3. 3. Sensitivity analysis is an effective method in appraising the project. HO does so by
considering lowering capacity utilization as well as sales price. Market is very sensitive. At any time
product price may increase due to increasing cost of raw materials, unavailability of supplies, and
so on. So, it should do the same by increasing the sales price.
4. 4. Loan monitoring & follow-up is a continuous process. But it is not followed in due manner.
Monitoring the loans by on-site as well as off-site supervision helps the banker to build banker-
customer relationship. So, it should give importance on the same.
Conclusion
During the three months practical orientation program at Foreign Exchange Branch, almost all the
desks have been observed more or less. This Practical orientation program, in first, has been
arranged for gaining knowledge of practical banking and to compare this practical knowledge with
theoretical knowledge. Comparing practical knowledge with theoretical involves identification of
weakness in the branch activities and making recommendations for solving the weakness
identified. Though all departments and sections are covered in the internship program, it is not
possible to go to the depth of each activities of branch because of time limitation. However,
highest effort has been given to achieve the objectives the internship program. After evaluating
the whole company thoroughly and by considering the overall industry and competitors I would
like to conclude that Social Islami Bank Ltd has been successfully created a brand image in the
market and is maintaining a strong position in the market. I had the opportunity to work for this
banking giant during my internship program. I was placed at the Foreign Exchange Department of
Social Islam Bank Ltd Foreign Exchange branch Office, Mothijil, Dhaka. During this time I got an
opportunity to observe the overall service process of Social Islam Bank Ltd corporate banking
division. I also got the scope to interact with customers and reveal their expectations and
perceptions about the banks services.
Being the current market leader of local commercial bank Social Islam Bank Ltd has much more
potential to explore the existing market and utilizing intelligent promotional campaigns they can
come over the obstacle of limited loyal customer base and can increase growth of the profit
successfully. So to be the number one forever they have to be very perfect in their business and
not allow the customers to find any weakness in their service. So they should always be
competitive, technologically advanced and be creative in the business to maintain this position or
to do even better then this Finally, I would say that this internship at Social Islam Bank Ltd has
increased my practical knowledge of Business Administration and made my BBA education more
complete and applied. In this report I got the opportunity to apply various tools and concepts I
learned in my BBA courses. Some such courses were Strategic Marketing, Strategic
Management, Services Marketing, Consumer Behavior, etc. I look forward to work as a
permanent employee of the local banking giant.
Bibliography
Annual Report of Social Islami Bank Limited, 2007.
Social Islami Bank Limited working manual for Foreign Exchange Departments.\
Books:
Theory and Practice of Banking (B-101), BangladeshInstitute of Bank Management, Dhaka,
2000.
Andley, K. K & Mattoo, V. J., Foreign Exchange Principles and Practices, Sultan Chand & Sons,
New Delhi, 1996.
Balchandran, P., Foreign Exchange: A Mannual for Managers, Skylark Publications, New Delhi,
1991.
Chakraborty, P., The Negotiable Instrument Act, 1881, Swarna Prokashani, Dhaka.
Choudhury, T. A., An Overview of Banks and Their Services, Reading Materials on Banking
Service.
Web Site:
www.sibl.com.bd/
www.scribd.com/
www.privatebanking.com/bangladesh/banks/social-sislam-bank-ltd.