Bank Asia Ltd

1. General Banking
The General Banking section is what keeps the overall banking going. All sorts of
day-to-day transactions are performed here as it plays a vital role in banking. The
General Banking department consists mainly of the following:
1. Customer Service Department
2. Cash Section.
3. Clearing Section
4. Accounts Department.

1.1. Customer Service:

Modern marketing concept believes that CUSTOMER IS THE KING OF
MARKET. Customer is the sole entity of any business. For a bank, customer is
definitely lifeblood. It is vital to assess the needs, wants, and interests of target
markets and deliver the desired satisfactions more effectively and efficiently than do
competitors in a way that maintains or improves the consumers and societys willbeing. Now days, Private Banking sectors, especially third generation Bank have
achieved greatest values from their clients because of effective customer service.
And customer service is solely responsible to attract new customers by promising
superior value and to keep current customers by delivering satisfaction. And
successful completion of this job ensures the bank to get the best portfolio for the
bank. Customer Service is unavoidable for the Banks. It adds fuel to the overall
profitability of the Bank. A typical customer service desk renders wide range of
services to its customers.
[Customer Service refers to the broad range of activities that a company and its employees
undertake in order to attract customers and keep them satisfied so that they will continue
doing business with the company and speak positively about the company to other potential
consumers.]

1.a. Account Opening Section:

The account opening section is a section from where the relationship between the
banker and the client begins with the opening of an account. Thus, it is vital for
bankers to take good measures in making sure that the customers are genuine since a
lot of forgery is initiated through improper identification. There are different types of
account for different purposes.
This is an era of keen competition among banks. Most of the commercial banks
compete with one another in appearing the savings of the public by means of different
kinds of deposits.

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a.1. Types of Account:

Generally Our Bank facilitates customer with the following deposit account:
Savings Bank (SB) Account:
This is an interest bearing account and only individuals can open this type of accounts.
At present, Bank Asia is offering 7% interest on its SB accounts maintaining Tk.
2,000/= or above. There are restriction of withdrawals in a month and week. Heavy
withdrawals are permitted only against prior notice. This may be considered as low
cost deposit for bank. Interest is charged to the account on quarterly basis if full fill
certain condition. The bank charges Tk. 300/= per six month.
Current Deposit (CD) Account:
It is popular known as Current Account which is generally opened by business
community for their convenience. Any individual, company, firm, may open this type
of account by its own name. This is non-interest bearing account. So it is a cost free
deposit for bank. On the other hand, customers enjoy the right to
To deposit and withdraw money as many times as they wish at any time.
Overdraft facility, and
Other facilities like collection of cheque, transfer of money and rendering
agency and general utility services.
The bank charges Tk. 500/= per six month.
Short Term Deposit (STD) Account:
This is opened and operated for short term and for specific purpose. It is also an
interest bearing account and where rate of interest is generally below the savings rate.
Normally, interest is paid on daily product basis. Individuals, Firms, Companies,
Associations may open this account. Current Interest rate of Bank Asia for this deposit
is 5%. Any withdrawals from this account require seven-day prior notice.
Fixed Deposit Receipt (FDR) Account:
Fixed deposit accounts are repayable after the expiry of the predetermined period
fixed by the customer. Individuals, Firms, Companies, Associations may open this
account. The deposit is taken for a specific fixed period of time, such as 1 months, 2
months, 3 months, 6months, 1-year etc. It is considered as high cost deposit for banks.
When a matured FDR is withdrawn, the principle amount along with the
interest amount (deducting 10% tax from interest) is paid to the client.
If the client does not withdraw the amount or given further instructions for
renewal within one month from the date of maturity then the FDR account
would get renewed for a further same period at the rate of prevailing interest.
Non Resident Foreign Currency Deposit (NFCD) Account: This account is
opened by the Non Residents. Generally NRBs (Non-resident Bangladeshi) or
foreign citizen can open this type of accounts. And this account is opened and
governed by the foreign remittance related rules and regulations. Here the deposit
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is held in foreign currency in denominated currency for say FC dollar a/c or FC

Euro A/c etc.
Resident Foreign Currency Deposit (RFCD) Account: This account is opened
by the residents who require depositing foreign currency in its own account to pay
some specific future expenditure proceeds upon proper permission from the
government on amount and purpose.
Deposit Pension Scheme (DPS Plus): It is a kind of deposit that customer can
open this account by paying installment monthly for a definite period such as
three, five, seven, ten and twelve years. Bank guaranteed a definite amount
including profit after expiry of period.
Bank Asia Sanchay Plus (BASP): Customer can open this deposit account for 6
months tenor to 36 months tenor deposit for Tk. 1,00,000/= or above having
different interest rate varying from 12.00% to 14.00% based on tenor.
Double Benefit & Triple Benefit Scheme: Deposit amount is fixed from Tk.
1,00,000/= or above. 06 years tenor deposit get double benefit & 09 Years & o6
Months Scheme get triple benefit of actual deposited amount.
Monthly Benefit: Deposit amount is fixed from Tk. 1,00,000/= or above. 03 years
and 05 years tenor deposit get Tk. 975/= and Tk. 1,000/= respectively

a.2. Classification of Customers:

i. Individual and join account
ii. Sole Proprietorship Firm
iii. Partnership Firm
iv. Private Ltd. Co.
v.Public Ltd. Co.
vi. Others: Minor/infant account, illiterate person

a.3. Procedures of Account Opening:

1. At first customer service desk want to know whether the customer has introducer
to open the account or not? If yes then give him a printed Account opening Form
along with Specimen Signature Card, Customer Transaction Profile Form, Info
form on Money Laundering. And request customer to fill up the form duly and
submit the form with required documents.
2. The prospective customer is asked to fill up and sign an application form. It
contains the rules and regulations of the bank along with the terms and conditions
of the deposit.
3. Then the customer return the Form duly filled and enclose the required
documents with it.
4. Then the responsible officer of Customer Service will scrutinize and verify the
form and attached documents accordingly.
5. Then the officer will fill up the For Banks Use Only portion in the Account
opening form and take proper approval accordingly. And upon approval he will
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open account in the name of the applicant by making posting in STELAR and
proceed to the next step.
6. Then with duly filled deposit slip, he requests customer to deposit the amount of
initial deposit in the cash counter. And upon deposit the account will be eligible to
operate.
7. Then the responsible officer will issue chequebook to the new account holder and
also give him deposit slip.
8. Then the officer files the account opening form and other attached papers in
appropriate file and preserve in file cabinet.
9. After opening of Account Bank send thanks letter to the new client expressing
thanks and gratitude to make relation with us. Another objective of this letter is to
verify correctness of the customers address

a.4. Important points/conditions

Application Form:

of

the

Account Name or Title of the Accounts and Mailing address

Name, Name of Father and Mother, Present and Permanent Address,
Profession etc.
Type of account he wants to maintain.
Currency in which he wants to operate the account
Signature instruction to operate the account
Detail of Introducer
Amount of Initial Deposit
Period of Deposit
Interest Payment Instruction
Maturity Instruction
Nominee Information
Signature of the applicant to operate the account
Specimen Signature in the signature card
Operational instruction i.e. Mandate.
Special instruction if any for operation.

Notes:
Introduction: The introduction is the initial reference about a prospective
customer that ensures genuineness of his identity, occupation, address etc.
Existing customers, respectable person and employees of the bank can be
introducer of prospective customer.
Transaction Profile: As per Money Laundering Act, Banks must obtain this
profile from all customers wherein the customer will clearly declare what
kind and volume of transaction may be conducted in the account he
opened/he will open. It is necessary to analyze the risk of account by KYC
Profile Form. It includes information like maximum size per Transaction,
type, number & total value of Monthly Transactions.
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a.5. Documentation and formalities needed

to open an account:
The Customer must observe proper documentation formalities before opening an
account with the Bank. Each account holder needs to submit the following:
Account for Individuals or in Joint name:
1. AOF and Signature Card properly filled in and signed.
2. Applicant introduced by an A/C holder of our Bank or by a respectable person
acceptable to the Bank.
3. Two copies of passport size recent photograph of each of all the applicants
attested by the introducer.
4. Name of Nominee written and photograph of the nominee(s) attested by
Applicant.
5. Any document of the following is required:
a. Photocopy of Passport (Attested).
b. Letter of Introduction by Employer.
c. Certificate issued Chairman of Union Parised or Word Commissioner
(Attested).
d. National ID card (Attested).
6. TIN (if applicable)
7. Transaction Profile form properly filled in and signed.
8. KYC Profile form (properly filled in signed and approved) for high net worth
customers falling under the following criterion:
a. New customers whose initial deposit more than Tk. 50.00 Lac (Initial
means within one month of account opening)
b. Existing customers whose total AUM (Asset Under Management) grow
to more than Tk. 50.00 Lac for three consecutive months.
9. Terms and conditions for operation of accounts with Bank Asia Limited.
Additional documentation and formalities with above to be observed before opening
the account for the following entities:
For Limited Companies:
1. Certified true copy of Memorandum and Article of Association. (This document
will reveal the objects of the company, its capital, its name, the operation of its
registered office, its directors, and their addresses its borrowing power, duties
and responsibilities of officers and so on)
2. Certified true copy of Certificate of Incorporation. (It gives as a proof for the
birth of the company).

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3. Certified copy of Certificate of Commencement of Business in case of Public

Ltd Company.
4. Copy of Resolution of the Board of Directors authorizing for opening and
specimen signatures for operation of the Account duly attested by the
Chairperson.
5. Latest audited Balance Sheet and Profit & Loss A/C.
6. Trade License.
7. TIN Certificate.
8. List of Directors of the Company certified by RJC.
For Partnership Enterprises:
1. Certified copy of the constitution of the firm.
2. Registered Partnership Deed / Notarized Partnership Deed at Will (in case of
Unregistered Firm).
For Association / Club / Society / Charity etc.:
1. Minutes of the Committee meeting authorizing the opening of an account with
the Bank duly certified by the Secretary and the Chairperson.
2. A copy of Laws and Bye-Laws / Constitution duly attested by proper authority.
3. A copy of the Resolution of the Committee authorizing specific signatories to
operate the account.
4. Certificate of Registration; where applicable.
For Proprietorship Enterprises:
1. Trade License.
2. T.I.N. Certificate.

a.6. Issuance of Cheque Book:

Customer service desk issues a cheque book on request of customer which contains 10
to 50 leafs. It is supplied to SB, CD, and STD A/C Holder for the purpose of
withdrawing money. Every cheque book contains a requisition slip for issuing a new
cheque book after the use of previous one. The client by himself or by his authorized
person can apply for the cheque book.
The officer issues the chequebook and enters leaf no. in STELER and perform other
sealing formalities in the chequebook as, Branch Seal, A/c type seal (Sav)ngs, STD,
Terms), A/c No. Seal and also give authorized signature on the requisition slip. Then
delivery the chequebooks to the client or his authorized persons when he comes to
customer desk to receive chequebook and have his signature in the Cheque issue
register.

a.7. Issuance and Renewal of ATM Service:

For new account holders, customer service desk issues new ATM card and activate
card accordingly by completing necessary formalities with the credit card department
in Chittagong Office. And usually bank charges Tk. 100 per year for New ATM card.
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And renewal charge is Tk. 100 per year. The minimum amount that can be withdrawn
is TK. 500/= and the maximum amount being TK. 20,000/=. This service is available
to the valued customers 24 hours a day, 7 days a week, and through out the year

1. b. Remittance Section:
Cash handling from one place to another is very risky and thus banks remits funds on
behalf of customers to save them from any awkward happening through the network
of their branches.

b.1. Medium of Remittance:

Three ways of remitting fund from one place to another. These are:
1.1. Pay Orders:
PO is non-negotiable instruments. It is a written unconditional order to pay a certain
sum of money, to a specified person or to his order. It is required to transfer money
within the clearing house. Unlike cheque, PO would not be dishonored. The drawer
and the drawee is the same bank/branch. In whose favour, the PO is issued is called
the payee (the beneficiary).
For issuing pay order BA charges commission on the following rate
# For upto Tk. 2,00,000/= the commission is Tk. 50/= plus 15% VAT on
commission earning.
# For above Tk 2,00,000/= , the commission is Tk. 75/= plus 15% VAT on
commission earning.
1.2. Demand Draft (DD):
DD is an order by one branch to another branch of the same bank to pay a specified
sum of money to the person named therein or to the order. It is required to transfer
money outside the Clearing House. Bank charges DD commission as 0.15% on the
total DD amount plus 15% VAT on commission earning and also Tk. 100 as postage
charge.
1.3. Telegraphic Transfer (TT):
TT is used as the method of fast fund transfer from one location to another via
telegram, telex, telephone, fax as desired by the remitter. It involves sending advice of
transfer by one branch to another branch through telegraphic message. Here fund is
transferred through the aid of Test Key Materials and SWIFT. TT can be both foreign
and local. Bank charge TT commission as 0.15% on the total amount plus 15% VAT
on commission earning and also Tk. 100 as postage charge.In order to take place this
transaction the drawer and the payee are required to have account with the bank.
b.2. Issue of DD/TT/PO:
Receive duly filled up DD/TT/PO prescribed form by the applicant.
Ensure that require amount is deposited by cash or debited from account along
with applicable charges.
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Prepare leaf for DD and PO

Prepare vouchers for charges.
Obtain signature of authorized persons.
Give posting in the register
Deliver the documents to the customer
Give posting in the STELAR and send to the Drawn on Branch .

b.3. Clearing of DD, TT & PO:

Every day DD, TT & PO advice come form other branches via STELAR and then
customer service desk takes action to release the amount of order if there is no reason
of return of the instrument. If the bank is not satisfied then it may return the Order and
held payment. Usually an Order may return due to wording mistake, over writing
cause or for any suspect of figure embezzlement.

1.c. Other Activities of Customer

Services:
1. Provide Account Statement to the customer:
Customer service desk sends monthly, quarterly statement of Accounts to the
customers. And also provide statement to the customer on request.
2. Selling of Banks deposit products:
Besides opening of various accounts, customer service sells banks own deposit
schemes as Deposit Pension Scheme (DPs +), Monthly Benefit Plus (MB +), Double
Benefit Plus (DB +), FDR and BASP.
3. Closing Account:
The closing of an account may happen if
-the customer is desirous to close the account
-If BA finds that the account is inoperative for a long duration.
-If the court orders on BA.
To close the account, the cheque book is to be returned to the bank. BA takes all the
charges by debiting the account and the remaining balance is then paid to the
customer. Necessary entries are given to the account closing register and computer.
When an account holder wants to close his account with the bank the customer service
unit asks for the following requirements:
1. Request letter by the client to close the respective account.
2. Unused cheque (if any).
3. If the a/c holder is a company then Board Resolution
Procedure of account closing (activities to be performed):
Account holder can apply with enclosing cheque book to the Manager to close
his/her account.
Concerned officer find out AOF of that customer to verify its reality &
signature.

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Officer check his/her overall history of transactions and enquire all leaves of
cheque book to know whether all active or not.
He/she sends it for taking NOC (Non Objection Certificate) from three
departments namely Accounts, Credit and Foreign Trade.
If account has fund, after deducting the due charges it is given to customer
through issuing PO or crediting the same to another account
Statement of the closed account is taken showing zero ending balance.

4. Attend customer query in desk as well as over phone: The customer service
desk attends all queries form different clients and customers over desk or over
phone like accounts balance enquiry, deposit slip issue etc.
5. Encashment of Deposit Products: Customer Service Desk provides encashment
service to the FDR and Deposit Schemes holder on maturity.
1. Request for encashment of FDR/BASP/MB+/ DPS+: It is done through:
a. By cash.
b. By issuing PO.
c. By crediting the amount to consumer account with BA.
2. Request for encashment of PO/DD: It is completed through:
a. By cash.
b. By crediting the proceed of above PO/DD to consumer account with
BA.
6. Transfer:
1. Request for transfer of interest against FDR A/C to another A/C.
2. Request to transfer the amount from one account to another account or another
persons account with BA.
7. Withdrawal Service: Request for withdraw of interest against FDR A/C: It is
done through:
1. By cash
2. By issuing PO.
3. By crediting the amount to consumer account with BA.
8. Standing Instruction:Customer service provides the following services on the
request of customer:

Stop payment against cheque of SB/CD/STD.

Changing the address of account holder
Changing the Signature
Issuance of Bank Solvency Certificate.
Issuance of Cheque Book.
Transfer the account of one branch to another one.

9. Other Services:

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It provides other services as SMS banking, Internet banking facilities and related
works regarding this. And overall marketing of Banks assets and liabilities
All the activities stated above are vital for the bank not only that those earn handsome
share of Banks income but also for building relation with the public, business entity
and the community as a whole. So we can define customer service as the window of
the bank that aid to oversee the whole world. By ensuring prompt and flawless flow of
all these services a bank can create a sound and strong base comprises with bulk of
satisfied customers. And this ensures to achieve long time vision in brighter future.
There fore, to ensure sustainable growth the bank management must give proper focus
on the arrangement of Customer Service Desk and its service team.

1.d. Modern Electronics Facilities in

BAL:
1. SMS Banking: Through SMS facility customer can access his account using
mobile phone from anywhere, anytime at his convenience. The services available are:
Balance and transaction information
Alert Messages
Promotional message
Wish message
2. Internet Banking: Through Internet Banking customer can access his/her account
for:
Balance Enquiry
Fund Transfer
Transaction Profile
Updating Personal Information
Changing User ID & Passward
Calculating Loan installment
Customer has to go to BAs web site: www.bankasia.net by typing his/her user ID &
Password (PIN).
3. ATM Banking: Through ATM booth, BA cardholder can access:
24 hours cash withdrawals
Balance enquiry
Fund transfer
Utility Bill payment
Mini statement
4. BA Credit Card Facilites:

Credit Card
BA Credit Card offers customer having an account with BA, free credit facility upto
45 days and minimum 15 days without any interest. BA Master card gives facility to
draw cash upto 50% of the credit limit against local master card. Customer can have
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access to ATMs across the country which shows Master Card/VISA logo for cash
withdrawal.
Card Cheque: BA Credit Cheque is issued in favor of credit cardholder to enable
him/her in making payment through A/C payee cheque. The bank shall accept Card
Cheque till there is enough credit limit in his/her BA credit card
5. Western Union Money Transfer:
Money transfer from anywhere in the World to Bangladesh in minutes.

The western union money transfer is the fastest money transfer service around the
globe. The fastest track of money remittance was introduced by BA. This is
undoubtedly one of the safest and fastest way people can get their fund in time of
need.

1.2. Cash Department

The cash department is the most risky department of the bank. This is the section
where tight security is required to avoid any accidents. There is a limit to be amount of
cash that each counter can carry; carrying of excess cash is avoided for safety reasons.
Cash section of a bank deals with all cash transaction of the bank. As a banker I
realized that it is a place of huge responsibility and definitely the first assignment is to
satisfy the client over counter. Cash is the most important department that is
contributing to the earning of the bank in terms of Goodwill and customer satisfaction
with their quality and prompt services.

2.a. Three types of transaction:

Bank run its day-to-day operation by 3 (Three) type of transaction.
1. Cash: All kinds of cash transactions fall under the cash. Cash transaction is
for the purpose of withdrawal and deposit etc.
2. Clearing: Clearing house is an arrangement under which member bank
agree to meet through their representative at an appointed time and place to
deliver instruments drawn on other banks and in exchange to receive
instrument drawn on them.
3. Transfer: Transaction by transfer takes place when two account holders in
the same bank may write a Cheque to another or same customer can transfer
amount from one account to another account with the same bank.

2.b. Function of Cash Section:

b.1. Receive Counter (Teller 1):
The receive counter performs the following jobs:

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b.1.1. Cash Receive over counter: This counter receives cash from the customer with
deposit slip/credit voucher through over the counter. Cash receive transaction is
performed by the following formalities:
1. Count Notes and check fake notes by fake note detector.
2. Check Deposit Slip whether its wording is correct. Here we check account
Title and number, date, amount in word and number figure, depositor sign,
etc. Here also we check Account no belongs to which branch.
3. If every thing is found correct, give Cash Receive Seal on the deposit slip,
write the amount in words and figure in red ink and give signature.
4. Take authorization sign form authorized officer.
5. Give the counter part (customer copy) of deposit slip to the customer.
6. Credit the amount to customer account by proper posting in STELAR and
write the transaction No. on the Deposit slip.
7. Give Posting in Cash Register usually maintained in XL Sheet by
mentioning denomination notes.
8. Place the cash notes in the respective drawer of teller desk.
b.1.2. Cheque received over counter: Customer usually deposit account payee
cheques by deposit slip. And here the tellers perform his job as follows:
1. Check Deposit slip and Cheque leaf whether the A/c belongs to this branch.
And also we check here the wording of the deposit slip like cash receive.
2. Give Receive seal on Deposit slip and give proper mark on the cheque.
3. Give the counter part (customer copy) of deposit slip to the customer.
4. Give Cross/Account payee seal quoted Bank Asia Ltd., on the Cheque.
5. Send all the clearing and collection cheques to the clearing section.
6. If the Cheque is for inter branch fund transfer then pass transfer entry in
STELAR to transfer the fund.
And at day end, this counter produces report to the Cash In-charge. The report
furnishes data on Cash Received (incoming cash) from customer over counter (usually
cash received for DG+, ATM, City Corporation /GP /RanksTell /IUB bill, cash from
account holder and other transfer payment i.e. Cash DD, TT & PO), received form
vault, Payment to cash payment teller and Balance in hand at the end of the day.

b.2. Payment Counter (Teller 2):

Prior payment of cash it is the tellers duty to make sure that the cheque or the
instrument has been genuinely passed. The following common precaution is
thoroughly practiced before honoring a cheque:
1. Ask to sign on the back of the cheque to presenting person.
2. We also check whether the cheque is an open or crossed cheque or the
cheque is in the name of any company or firm.
3. Check the cheque leaf whether it is worded properly. Usually this checking
is termed as Four-corner check. This check covers branch name, date (Date
must be current date or 180 days earlier), amount in figure and word, and
finally signature of the Drawer.
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4. Also check Account no belongs to which branch. For other branchs cheque
more than BDT 500,000/= is not to be paid over counter.
5. Verify the signature with the specimen signature and give verification seal
and signature of the verifier.
6. Check proper endorsement is given behind the cheque leaf in case of
Cheque Drawn on Payees in the name of any Firm. For cheques in the name
of Firm, Attestation by authorized person to draw cheque is required along
with Firms common seal to be paid over the cash counter.
7. Check the drawer account whether the account has enough balance and if
enough has, give posting in STELAR and debit drawer account and note the
transaction no. on the top of the cheque. In case, where a prior arrangement
has been made with the bank, a client may overdraw against a cheque
8. Put paid seal on the cheque & write the denomination notes on the back of
the cheqe.
9. Take receiver signature on backside and verify it with earlier one given on
backside when placing the cheque in the counter and make payment to the
client. And also write down the denomination of notes behind the cheque.
10. Return cheque is refused for refusal reason.
At the end of the day, this teller also reports to the cash In-charge providing data on
Receipt Form vault about receipt from Cash Receive Teller, payment to the customer
(outgoing cash) and balance in hand at the end of the day.

b.3. Cash Management:

Cash management deals with the management of inflow and out flow of cash of the
Branch. It forecast cash inflows and outflows and accordingly arranges sufficient cash
to meet clients cash withdrawal demand. But excessive cash holding force a negative
impact on the earning potentials of the branch. So that one important task of it is to
trade off between this two i.e. cash sufficiency and earning potentialities. Usually this
job is assigned to Cash In-charge of the Branch. The Cash In-charges responsibilities
are stated below sequentially:
a) This Agrabad Branch works as feeding branch for other branches in
Chittagong Zone. That means, it channels cash in and out to each branch of
this zone as per limit (insure amount). All branches will issue one-day prior
IBCA/IBDA, if they require cash or deposit surplus cash. And then Cash Incharge of Agrabad Branch channel fund accordingly.
b) Maintain vault register for in and out flow of cash in the vault by amount
and by denomination. Vault is a strong room under joint custodian where all
the cash are stored of a Branch. In cash register the Cash In-Charge records
each and every transaction of cash and confirms the balance after each
transaction. So any one can know the current cash status of the Branch at
any time. And here in Agrabad Branch, the Vault limit is Max. BDT 15
million that means the cash In-Charge always try to maintain cash balance
below this limit. But if sometime, cash receive overweighs cash payment
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heavily then the vault balance exceed this limit and then cash in-charge
deposit excess amount to our account in Bangladesh Bank as per the
instruction from treasury. And when vault suffers from cash shortage then
Cash In-charge as per direction of Treasury, draws cash from Bangladesh
Bank A/c.
c) Cash In-Charge give opening cash at the beginning of the day to the teller
and collect the day end cash in the hand of teller and keep it in vault.
d) And at the end of the day Cash In-Charge along with joint custodian will
check the vault cash balance with the balance in the Vault register. Daily
Cash Position Memo is prepared every day to show cash balance and signed
by him; and signed by the head official and counter signed by the joint
custodian.

Daily Cash Position Memo

By Cash Department
Cash in Hand (Opening)

****

Add:
1. Withdrawal from Bangladesh Bank
2. Receive from Tellers
3. Received from other bank

****
****
****

a. Total

*****

Less:
1. Deposit to Bangladesh Bank
2. Cash Payment
3. Payment to other branch

****
****
****

b. Total

*****

Cash in Hand (Closing) (a - b)

*****

2.c. Type of risk within Cash Department:

For Agrabad Branch1. Cash in transit: It covers risk less than Tk. 75 lac (insure amount).
2. Cash in vault: Agrabad Branch can maintain its cash vault limit upto Tk 1.5
crore daily.
3. Cash in counter: It covers risk for maximum Tk. 25 lac.

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Due care and concentration is required to perform all these activities successfully and
faultlessly and this is very crucial for smooth continuation of Bank business as cash is
treaded the most sensitive asset of any organization. And for bank it is the lifeblood
proper circulation of which result on the good health of the bank.

1.3. Clearing Section

In our country clearinghouse takes place in the Bangladesh Bank and thus all the
representative banks have account with the Bangladesh Bank. The net amount payable
or receivable is settled through the account maintained by the Bangladesh Bank. The
BA, Agrabad Branch has a separate clearing department. After receiving an
instrument, the following are examined:
Whether the paying bank is in Chittagong.
Whether the paying bank is out of the Chittagong.
Whether the paying bank is a BA, branch.
Paying bank within Chittagong: The cheque clearing department section sends inter
branch debit advice (IBDA) for instruments received to the Agrabad Branch every
day. The instrument is then taken to the clearinghouse the following data by the
Agrabad branch. If the instrument is not dishonored then the total procedures takes
three days to encash.
Paying bank out of the Chittagong: If the paying bank is out of the city then the BA,
Agrabad Branch would sent out an outward bills for collection (OBC) to the
concerned paying branch to get inter branch credit advice (IBCA) from the paying
branch.

3.a. Clearing House:

In a broader sense we may define clearing house as facilitator to the member banks to
settle down their inter bank transaction i.e. Cheques for collection from other banks.
Practically clearing house is a house (Floor) of Bangladesh Bank (BB) where every
bank has its own desk with own name plate and all the authorized official of all banks
come here within working time to settle there inter bank transaction. Usually the
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authorized official of every bank attend clearing house floor at opening time with all
collection Cheques in his hand drawn on other banks and settle down their transaction
by the arrangement of clearing house.
Usually all the collected cheques are presented in this clearinghouse. Usually each
member takes sit at around 9:00 A.M. and return house sits at 5:00 P.M or as directed
by the House Super. And then we place the Cheques collected earlier day, in
clearinghouse today for settlement. And at day end i.e. at 5 P.M. after coming back
from return house we credit the collected amount to the customer account and the
customer can withdraw money form his account on next transaction day or may draw
by ATM or through evening banking facility if provided by the Bank. That means the
customer gets money on next transaction day.

3.b. Types of Clearing:

Outward Clearing: When a particular branch receives instruments drawn on other
bank within the clearing zone and sends those instruments for collection through the
clearing arrangement is considered as Outward Clearing for that particular branch.
This branch is known as collecting branch.
Inward Clearing: When a particular branch receives instruments where drawee
branch is itself, which are sent by other member bank for collection are treated as
Inward Clearing of that branch. This branch is known as paying branch/drawee bank.

3.c. Sequential arrangement of Clearing

Operation:
Usually two houses sit for settlement named as follows:
1. Collect all collection and clearing Cheques from cash counter and clearing desk.
2. Collect collection Cheques from other branches which send OBC (Outward Bill
for Collection) vouchers for collection. (Agrabad Branch act as Clearing Branch
of remaining 6 branches of Chittagong zone along with itself ).
3. Sort out zonal cheques and outside of zonal checks prepare OBC (Outward Bill
for Collection) vouchers and send those to respective Branches for collection. And
then the local office of that region, which is authorized for clearing, place theses
checks in the clearinghouse that sits in its region, for instance, Principal Office of
Bank Asia Limited for Dhaka Zone and collects the Cheques accordingly and
sends the money to the respective branch accordingly vide issuing an IBCA (Inter
Branch Collection Advice). Some times it may happen that we received a Cheque
on a branch of a bank where we have no branch or there is no clearinghouse. Then
we send the Cheque to that branch of the Bank with OBC and request them to
make the payment to us by DD (Demand Draft) drawn on any of its branch in our
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Bank Asia Ltd

clearing region e.g. Chittagong city clearing house member branch. The bank then
debits its customer account and issue DD to us drawn on any of its member branch
in Chittagong city. And then we collect the DD by placing it in Chittagong
clearinghouse.
4. Sorting the Cheques as branch wise and classify them according to different
Banks.
5. Perform Sealing formalities:
a. Special Cross Seal: Affix cross seal on the left corner of Cheques that will be
placed on clearinghouse for collection.
Crossing: Drawing of two parallel transverse lines with or without any words
across the face of negotiable instrument is called crossing. It is a direction to
the paying bank to pay money to the bank and not to pay to the holder of the
instrument over counter in cash. Generally, crossing is done on the left-hand
top of the instrument.
i. General Crossing: When customers cross the cheques by two parallel
lines with or without word, which is called general crossing. General
crossing implies that this cheque is not eligible for payment over counter
and payment must be made by clearing basis
ii.
Special Crossing: Usually, bank use special crossing, when it
receives the cheque to clear, on the top left corner by mentioning bank
name and branch name. The purpose of special crossing cheque is that
the specific banks branch that is marked as crossed is only eligible to
clear this cheque
b. Clearing Seal: Affix this seal on all Cheques to be placed on clearinghouse
c. Endorsement Seal.
Sl

Types of Endorsement Seal

a.

Payees A/C Credited

For Bank Asia Ltd.
Agrabad Branch, Chittagong

b.

Received Payment
For Bank Asia Ltd.
Agrabad Branch, Chittagong

c.

Depositors A/C Credited

For Bank Asia Ltd.
Agrabad Branch, Chittagong

d.

Payees A/C will be Credited

after realization
For Bank Asia Ltd.
Agrabad Branch, Chittagong

RAFIA AKTHER

Causes of Endorsements
For say Payee is Mr. Karim and He is our A/c Holder in
Agrabad Branch Branch, Bank Asia Limited. This
endorsement means that we credited payees account by
this amount of Cheque.
Here Payee is Bank Asia Limited/Cash/Self/Own. This
endorsement means that Bank Asia A/c is credited for
this Cheque amount.
When Self is written on Cheque, then this endorsement
seal is used.
For OBC: This endorsement is made when Cheque is
sent to other region for collection. And this endorsement
means that payees A/c will be credited upon realization
of the Cheque amount. Here also we give OBC seal with
OBC No. & Date on the Cheque.

17

Bank Asia Ltd

e.

Our Branch Endorsement

Confirmed
For Bank Asia Ltd.
Agrabad Branch, Chittagong

For OBC: when we send Cheque for clearing to another

branch of our Bank in another region then clearing
branch gives this endorsement in Cheque to place in
clearing house. This implies that the clearing branch is
confirming that this amount will go to that branch only.
And also here the clearing branch use IBC seal along
with IBC No. & Date on the Cheque.

6. Give posting in NIKASH.

7. Then the responsible officer gives posting vide STELAR (the banking software of
Bank Asia Limited) and credit each and every customers account for outward
collection. But at this stage customer is not allowed to draw money form their
account as the account in market by Under Clearing for this credited amount.
And here the officer pass posting in his own system as follows:
For Cheques placed to other Bank for collection (outward):
Clearing Adjustment A/c
Dr.
Respective Br./Customers A/c
Cr.
8. Take print of NIKASH posting. And affix the print copy with the respective banks
Cheques accordingly. And now Cheques are ready to be placed in clearing house.
9. Take copy of NIKASH posted entries in Floppy disk.

First House:
10. Then the authorized officer of Bank go to clearing house in Bangladesh Bank (BB)
in early morning next day and give the disk to the computer division and then the
officer exchange Cheques with other banks and receive Cheques drawn on his
bank from other banks desk. Here the bank officers check errors with the cheque
amount and NIKASH entry amount and other Cheques. And in case of any errors
take initiatives to correct it with the respective banks officer. And then BB
representative cross matches the Cheques by the aid of NIKASH software. And
BB representative announces the printing of cross match posting and take print of
NIKASH posting and after print no one is allowed to place new Cheques for
clearing or make any correction or change. And then give all the banks
representative copy of NIKASH printed statement. Here BB make the following
posting to settle the transaction as follows:
For Cheques placed to other Bank for collection (Outward):
Respective Banks A/c
Bank Asia Limited A/c

Dr.
Cr.

For Cheques placed by other Bank for collection (Inward):

Bank Asia Limited A/c
Respective Banks A/c

Dr.
Cr.

11. Then the bank officer comes back to his office along with the Cheques drawn on
his bank (Inward Cheques) and the printed statement. Then he checks manually all
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the Cheques and send all the Cheques drawn on other branches to have the
confirmation on fund sufficiency in the respective customer account and to debit
accordingly from customer account.
For Cheques placed by other Bank for collection (Inward):
Respective Br./Customers A/C
Dr.
Clearing Adjustment A/c
Cr.
12. Then within 5 p.m., sort out the Return Cheques with Cheque Return Memo of
respective bank. And in return memo specific mark is given to the reason for
cheque return. Usually a bank return or dishonor Cheques for the following
reasons:
Insufficient fund.
Amount in figure and word differs.
Check out of date/post dated.
Drawers signature differs from the specimen recorded in our office.
Payment stopped by drawer.
Crossed cheque to be presented through a bank.
Payees endorsement required.
Or any other reason as written on the memo.
13. Then the respective bank officer will make posting of return Cheques in Nikash
and take print and affix the copy with return Cheques bank wise and also take a
copy of Nikash posting in Floppy disk.

Return House:
14. And then he attends Return House and places the disk to computer section and
again exchange the return Cheques and cross match the return Cheques with each
other. And then BB representative upon making announcement take print of
NIKASH posted cross match entries of return Cheques and give this print copy to
each bank representative and then the bank officer come back to his office with the
return cheques of its customer. And he makes posting in STELAR for return
cheques and debit/bounce respective customers account and now clear the under
process mark on the amount that was posted todays morning. Here BB makes the
following posting for return cheques:
For Return cheques placed to other Bank for collection (Outward):
Bank Asia Limited A/c
Respective Banks A/c

Dr.
Cr.

For Return cheques placed by other Bank for collection (Inward):

Respective Bank A/c
Bank Asia Limited A/c

Dr.
Cr.

And the Bank officer when come back his office, pass the following posting
in his system for return cheques as follows:
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Bank Asia Ltd

For Return cheques placed to other Bank for collection (Outward):

Respective Br./Customer A/c
Clearing Adjustment A/c

Dr.
Cr.

For Return cheques placed by other Bank for collection (Inward):

Clearing Adjustment A/c
Respective Br./Customer A/c

Dr.
Cr.

15. And then the clearing section of Bank collects cheques for next day settlement and
takes same arrangement as illustrated here.
All the activities as illustrated above require proper care and concentration. And this
will ensure the collection and payment of local remittance to the customer account
with in least possible time, successfully and accurately.

3.d. Special Notes on Clearing House:

Costs of Clearing House: Its important to note here that all costs incurred in clearing
house are borne by the member banks equally and BB authority debit the respective
banks account for its portion of costs and give advice accordingly.
Minimum Balance of Account to be maintained with Bangladesh Bank: Each and
every bank has to maintain a minimum balance in its account with Bangladesh Bank
which is called CLR (Cash Liquidity Reserve). At present minimum balance is 5% of
total deposit as CLR in the form of cash and 13% as SRR in the form of cash
equivalent document. And this account is maintained by head office. And if the
account face any shortage, then Treasury Division channel sufficient fund to BB
account with BB and in case of any requirement Treasury may draw excess amount
from Banks account with BB.

3.e.
A
Typical
Operation:

example

on

clearing

For Say Mr. X is an A/C holder in Bank Asia Limited, CDA Avenue Branch and this
branch is not member of clearing house. And he deposited his account by an A/C
Payee cheque amounting Tk. 100,000 drawn on Prime Bank Ltd., Agrabad Branch.
Now describe how this cheque will be collected and transaction will be settled?
Illustration:
Here CDA Avenue Branch will receive the cheque and send it to Chittagong zone
clearing house branch i.e. Agrabad Branch with OBC (Outward Bill for Collection)
forwarding and proper endorsement i.e. Payees A/c will be credited after
realization.
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Bank Asia Ltd

Then Agrabad Branch clearing section will make proper arrangement to place the
cheque in clearing house i.e. it will cross the cheque, give clearing seal and make
endorsement as Our Branch Endorsement confirmed and then give posting in the
IBC register and place this cheque in house.
And then in the house via Bangladesh Bank this cheque will be given to Prime Bank
Local Office (clearing Branch) and receive payment from Prime Bank vide BB.
And then Prime Bank Local office will send this cheque to their Agrabad Brach and
accordingly collect money of the cheque.
And upon receipt from Prime Bank via BB, Bank Asia Limited, Agrabad Branch will
credit the amount in CDA Avenue Br. A/c and send an IBCA (Inter Branch Collection
Advice) to CDA Avenue Branch and then CDA Avenue Branch will cr. Customer A/C
by the Amount.
And also note here that if the cheque is returned from Prime Bank, Agrabad Branch
then it will send the cheque with return memo to its local office. And then local office
will back us (Bank Asia Limited, Agrabad Branch) the return cheque with return
memo and debit the amount from our BB A/C vide BB. Then we will return the
cheque to our CDA Avenue Branch with the return memo and a forwarding letter and
debit the cheque amount in CDA Avenue Branch Account and then CDA Avenue
Branch will return the cheque with return memo to its respective customer.

1.4. Accounts Department

Accounts are one of the most important wings of a bank. It can also be termed as the
mirror of the organization as it gives snap shot view of all transaction at a glance at the
end of the day. The main task of this department is to record all kinds of transaction of
the branch, confirming accuracy, preparing statement etc. All the daily activities in a
bank affect two heads of accounts. Affairs of the day prepared by the account
department reflect the end result of all transactions.
Beside this accounts department performs reporting activities as it has to furnish
different reports and statements to Head office and Bangladesh Bank through
corporate office which are regulatory requirements of Bangladesh bank.
This division also ensures close monitoring of all movement of all the heads of affairs
including Income & Expenses.
In todays modern sophisticated computerized banking system jobs of accounts
department has become comparatively easier. Because now the entire posting are
made in computer by using customized software, here in our Bank we use STELAR
and hence tedious ledger recording is not required, and moreover computer adjusts all
the entries automatically. And also data are input in every desk by the office in that
desk. So we can summarize the prime task of the Accounts is to post input cheques
and vouchers and providing day end assets-liability position.

Functions of Accounting Department:

We can divide the functions of accounting department into two categories.
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Bank Asia Ltd

Daily Functions:
Preparing Daily Clean cash
Preparing the daily position of deposit, loans and advances, and cash.
Prepare statement of affairs.
Making the payment of the expense of the branch.
Recordings of inter branch fund transfer.
Checking whether all the vouchers are correctly passed.
Posting Vouchers in the system.
Filing and maintaining the total debit and total credit vouchers.
Periodical Functions:
Monthly statement of position or affairs, profit and loss etc.
Quarterly statement of position or affairs, profit and loss etc etc.
Yearly statement of position or affairs, profit and loss etc etc.
Yearly statement of classified Loans and Advances.
Statement of Affairs.
Yearly Budget of the Branch, etc.
SBS (Schedule Bank Statistics) report to Bangladesh Bank.
Other Functions:
Maintaining service file and records of the officer.
Supervising service of the guard, cleaner and messengers.
Record keeping and well maintenance of office furniture, fixtures,
computers, stationary, lights, air-conditions and other assets.
Ensure proper operation of IT/CCTV/Photocopier/Generator.
Maintenance of office garden and all other interior decorations.
Make payment for all day-to-day and other expenses including logistic
services.
Payment of salaries and bonus to the officers and service peoples.
Posting Vouchers in the system.
Balancing accounts with the systems.
Closing monthly accounts and prepare monthly report and submit to
Corporate office accordingly on due time.
A daily affair is a statement that shows the position of all the assets and liabilities at
the end of the day. The broad heads of an affair of Agrabad Branch are as follows:
Liabilities
Current Deposits (BDT)
Current Deposit (FCY)
Savings Deposit
Short Term Deposit
Fixed Deposit (BDT)
Fixed Deposit (FCY)
Interest Payable A/c
Deposit Scheme
RAFIA AKTHER

Statement of Affairs
Assets
Cash in Hand (BDT)
Cash in Hand (FCY)
Investment Prize Bond
Loan and Advances General
Consumer Credit Scheme
Bill Purchased (Local)
Bill Purchase (Foreign)
Staff Loan
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Bank Asia Ltd

Other Demand Deposits

Other Deposits
TOTAL DEPOSITS
Bank Asia General A/c
(BDT)
Other Liabilities
Contra Accounts
Income Account:
Interest Income
Non Interest Income
Grand Total

TOTAL ADVANCES
Bank Asia General Account
(BDT)
Bank Asia General A/c (FCY)
Fixed Assets
Other Assets
Contra Accounts
Expenses Accounts:
Interest Expense
Non Interest Expenses
Grand Total

Under the head of Inter Branch Account, if Bank Asia General Account shows balance
at asset sides then the branch is earning interest on the money they have lent to
corporate office and if it shows balance in liability side then the branch is paying
interest to head office against their borrowings.
As accounts department is the mirror of the branch, accurate refection of the branchs
position solely depends on the reliability of the system as well as sincerity and
flawless operation of the Accountant.

2. Credit Division
Credit department plays an important role in generating banks income. It deals with
the asset of the bank. Generally financial institutions like commercial banks collect
fund from society in terms of deposit & channel this fund in terms of credit to
different firms in business community as well as to individuals with deficit fund in the
society. And this facility is generally known as loan. So in a broader sense we infer
that bank is providing solutions to the business as well as to the individuals for their
financial problems. Schedule Bank has to deposit to Bangladesh Bank around 5% of
cash balance and 13% statutory reserve. So, bank has to earn profit from 82% of the
total deposit.

2.a. bjectives:
a. Investment at different business sector.
b. Generate Income.

2.b. Function:
a.
b.
c.
d.
e.
f.

Feasibility study of credit

Preparation of Credit Proposal.
Monitoring and follow up.
Compliance relating to different sanctioning limit.
Preparation of Statement of Credit Department.
Maintain proper documentation and checklist.

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Bank Asia Ltd

g. Adjustment of LTR, Term loan, CC (H), Staff loan.

h. Bank Guarantee issue/payment and realization of charges.

2.c. Types of Credit Facility:

Credit facilities are broadly divided under the following categories:
a. Facilities needed for temporary/seasonal/very short term requirement.
b. Facilities needed for current asset requirements.
c. Facilities needed for long term investment requirement.
Facilities covered under Category (a) above are generally required for a short period
of up to 3 to 6 months which are self-liquidating transactions. Such facilities includePacking credit, LTR, PAD, TOD, LDBP etc.
(b) are generally for a slightly longer period, say up to one year. This type of facility is
granted for financing Working Capital.
(c) are for longer than one year which are often used to finance the acquisition of
Capital Asset.
All types of credit facilities can be broadly distinguished into two groups:
a. Funded Credit
b. Non-funded Credit.

LOAN

Funded

Continuous Loan
Overdraft (OD)

Non-Funded

Import Credit

Term Loan

PAD
Bank Guarantee

LTR
Secured OD

Letter of Credit

LIM

Demand Loan

Acceptance

Cash Credit (CC)

CC Hypo
CC Pledge

Export Credit
Packing Credit (PC)
Bill Purchase/Discounting

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Bank Asia Ltd

c.1. Funded Credit: Any type of credit facility that involves direct outflow of
Banks fund is known as funded credit. Funded credit facilities may be classified into
five major types: i) Continuous Loan, ii) Export Financing, iii) Import Financing, iv)
Demand Loan, and iv) Term Loan.
i. Continuous Loan: Here the customer avails the loan facility continuously for a
specific time period. And also noted here, with in stipulated limit he can enjoys the
facility as much as he desires. Thats why this loan arrangement is also termed as
revolving loan. This is a very much popular form of loan facility in the business
community. Two most popular continuous loans are as follows:
a. Over Draft (OD): This loan is disbursed in clients present current account as
maintained with the bank. The customer may be sanctioned a certain limit within
which he can overdraw. The amount up to which overdrawing is permitted is
depend on the need of the customer, the previous conduct of his account with the
Bank and turnover in the account, average balance maintained. OD facility is
generally granted to businessman for financing working capital requirement and
high net worth individual to overcome temporary liquidity crunch. Customer can
draw money over and above his credit amount in his account up to that limit. This
loan is for one year time and renewable upon maturity. Generally on maturity the
customer clear all debit balance of this account and request the bank to renew the
facility and then bank proceed on to renew the facility.
Overdraft clean
Secured OD: When the over draft facility is secured by financial
obligation or cash equivalent i.e. FDR certificate, DPS certificate, or any
other Savings Instrument, this is called Secured Over Draft (SOD).
OD against stock of goods (Working capital)
OD against Work order/Bills Receivables.
At present overdraft facility is around 21% of total loan facility of Agrabad
Branch. And present interest rate charged on this loan ranges between 14
16% in Bank Asia Ltd. And interest on this loan is calculated on daily basis but
charged in customer account quarterly.
b. Cash Credit (CC): It is like an OD account. The borrower may operate the
account within stipulated limit as and when required. The drawing is subject to
drawing power. CC is generally given to traders, industrialist rather than individual
for meeting working capital needs. Usually this loan is provided to procure raw
materials and to complete it in finished goods. The primary security of CC is the
subject mater of loan i.e. the finished goods stock. Some other securities are also
kept for this facility like savings instruments. Cash credit depending on its nature
classified in the following types:
1. CC Hypothecation: in this arrangement the possession of goods (subject
mater of the loan) goes with the client or borrower but the ownership is in
banks hand. And client repays loan form the sales proceeds by turn. Here
primary security is the goods purchased by the sanctioned loan and

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Bank Asia Ltd

secondary security may be cash equivalent instrument or any mortgage

property.
2. CC pledge: here both ownership and possession of the goods, subject
matter of the loan, lies with the bank. And upon prior payment the client
release goods from banks custody and sale accordingly.
ii.
Export Credit: To facilitate the export trade, Bank provides following loan
facilities:
a. Loan against Packing Credit (PC): It is granted to exporters to facilitate
purchase of raw materials for the purpose of manufacturing and exporting
finished goods by the lien of Master L/C. The credit is granted after the
evidence of L/C or firm contract in favor of the borrower and against the
security of inventory, and in exportable package. This loan is also reported
under the head of continuous loan. [Pre-shipment Export Finance]
b. Bill Purchase/Discounting: Amounts advanced against the purchase/discount
of negotiable instruments (cheque, draft, and promissory note) to the business
community on its export proceeds are classified under this head. They may be
local (LDBP) or Foreign Bill (FDBP). Bills are then sent for collection. And
usually this amount is given for a specific period depending on the maturity of
the export bill. At present in Agrabad Branch of Bank Asia Ltd this loan
covers 4% of total Advances. [Post-shipment Export Finance]
iii.
Import Credit: To facilitate the import business, Bank provides following bills
portfolios as loan facilities:
Bills Portfolios: It includes the facilities such as- PAD, LIM, and LTR. This
form of credit facilities is used to financing imported raw materials/capital
machinery.[Import Financing]
a. PAD (Payment Against Documents): This is another type of demand loan.
PAD is associated with import financing. The bank issuing L/C is bound to
honor its commitment to pay for all sight import bill, when these are
presented for payment upon arrival of non-discrepant L/C documents. Then
the bank open PAD and make payment to the negotiating bank and then
within next 30 days the bank retire PAD by receiving cash from customer in
case of cash L/C or by crediting LTR or LIM when prior arrangement is made
accordingly. At present PAD covers less than 7% of total advances in
Agrabad branch.
b. LTR (Loan against Trust Receipt): This facility is extended to the importers
who import goods by opening L/c from our bank. Usually the importer, under
this arrangement obtains the documents of tittle of goods and clear the goods
from customs and arrange to sell out the goods and from the sales proceed,
the client retire LTR. This Trust Receipt is a document signed by importer
which creates the banker lien on the goods and sales proceeds until the full
payment of this loan. Usually this loan is arranged for a maximum time of
180 days. It is used to retire PAD. In Agrabad Branch LTR covers around
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Bank Asia Ltd

50% of total advances. And this loan is reported in Classified Loan Listing
under the head of continuous loan.
c. LIM (Loan against Imported Merchandise): Parties, who are not in a
position to retire the documents, they may be allowed to retire PADs through
LIM account. It is like as LTR and used to make payment of import bills. But
here the goods are held in banks godown under its possession and
ownership and bank allow the customer to discharge goods a certain portion
and make payment from the sales proceeds and so on. This loan is also
reported under the head of continuous loan.
iv.
Demand loan: These loans are short-term loans which is repayable by the
borrower on demand. That means for this loan the borrower is bound to pay back on
demand of bank. And hence this loan become due after one day of its drawing.
Usually they are made for periods of 3 month to one year to cover short term
funding requirements. There is no principal reduction during the loan term, the entire
balance becoming due on maturity.
v.
Term Loan: This loan is given for a specific term and usually repaid in Equal
Monthly Installment (EMI) or interest paid quarterly and principal at the end of
Loan tenor. Depending of the loan tenor this is classified as:
a. Short-term loan: The tenor of this loan is less then one year.
b. Mid Term loan: The tenor of this loan is between one to five years. This
type of loan is most preferred by both bank and the borrower. This loan is
comprises with consumer credit, Agro credit, Micro Credit etc.
c. Long Term Loan: the tenor of this loan is more that five years. This is not
viable for the banker as here the fund is locked up for a long period and
hence risk exposure is higher that other term loans.

c.2. Non-funded Loan: These types of credit facilities are primarily non-funded
in nature but at times it may turn into funded facilities. Liabilities against these types
of credit facilities termed as contingent liability. For instance:
i. Letter of Credit (L/C): It is an undertaking of issuing bank on behalf of the
importer favoring the exporter to pay a certain sum of money under certain
terms and conditions.
ii.
Bank Guarantee: The guarantee of the bank on behalf of
this customer to make payment to the beneficiary if the client fails to make
payment.
iii.
Acceptance: Undertaking by the bank to pay a bill drawn
on the bank on behalf of its client on maturity.

2.d. Loan Processing Procedures for a Loan

Application:
Now the question, how we will go ahead with a loan proposal received from any of
our customer. The chronological illustration is given here below:
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Bank Asia Ltd

1. Preliminary Steps (Relationship building): First of all we have to know the

customer. If the applicant is new to us then we let him to open bank account and
continue transaction for a certain time and upon good reflection of transaction we will
proceed with the loan proposal. Having an account or opening an account is must to
proceed for any loan request from any customer. What ever we want to facilitate the
customer depends on our knowledge on the client. And an account helps up to enrich
our knowledge on our client. And if the transaction in the customer account reflects
healthy and sound views then we proceed with the loan application to the next step as
follows.
2. Appraisal of credit request: It is the most vital and crucial steps in loan
procedures. Here we go through in-depth study of the credit request. The prime
motive of this study is to identify the purpose of the loan and the ability of the
borrower to implement the purpose and pay back the loan amount along with interest
to the bank. And for the study we collect various information on the applicant vide the
following Forms:

Loan Application form duly filled up

Sponsor Director Information
Personal Net Worth Statement of all Directors
Project feasibility study by the client
Annual Audited Financial Statement of the client.
Copy of land valuation report in case of property mortgage.
Papers on land and building or any other property.

And by this information available in our hand we prepare following statements:

a. Financial Spread Sheet (FSS):
This is an intensive analysis of projected financial figures of the project to assess the
financial strength and growth of project or proposal. Here we prepare
Balance Sheet.
Profit and Loss Statements.
Cost of Goods sold.
Cash flow statement of the applicant.
Projected statement of the proposed project on which loan facility is
being sought.
Ratio analysis to assess financial strength.
Calculate Z score and Y score accordingly

b. Lending Risk Analysis (LRA):

Bangladesh Bank has made it mandatory for commercial banks to exercise LRA for
granting big amount of loan. Risk analysis is very important before reaching to the
final decision of extension of credit to some certain project on the basis of the risk
scores t. Before analysis the risks involved must be delineated. Risks are mainly of
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Risk
Business Risk

Industry Risk

Supply Risk

Sales Risk

Security Risk

Control Risk

Cover Risk

Company Risk

Resilience Risk

Management

Performance Risk

LRA is an extensive analysis of risk exposed to a business that is conducted by

objective as well as subjective judgment. After analyzing all the risk, an overall
scoring is assigned to assess the risk exposure to this specific business as follows:
Business Risk
Security Risk
Scoring Interpretation Scoring Interpretation
13-19
Good Risk
-20 to -15
Good Risk
20-26
Acceptable
-14 to -0
Acceptable
27-34
Marginal
0 to +10
Marginal
Above 34
Poor Risk
Above 10+
Poor Risk
Risk Grande Score Card: we prepare another weighted risk grade score
card considering all the rations on the financial spread sheet and some
subjective judgment like Business outlook, management, personal details,
age of business and size of business etc.
c. Collect CIB Report:
And in the mean time we send the CIB form to the Bangladesh Bank CIB (Credit
Information Bureau) to have the latest credit status of this client with financial
institutions. And upon receipt of clean CIB we can only proceed with the loan
proposal and if the applicant has any repost of classified loan in any financial
institution then the application will be declined.
And all of these initiatives require predicting the financial strength of the proposed
project and its ability to repay the loan in future and it is the most vital and crucial
steps in loan procedures. Then we proceed to the next step.
3. Drafting of Proposal to Sanction Authority: Then we draft the proposal for the
loan facility to the customer and send this proposal to the Head Office through Zonal
Head. Usually a loan proposal covers information on the following areas:
Name & address of the applicant.
The level of facilities and its limit. It may be for composite comprising a
compact range of loan facility or may be for a single facility.
Background of the business house that sought for loan.

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Nature of industry and business, capacity of the business and background

and particulars of owners or directors.
Description of Management
Sister concerns or group information.
Bank relation.
Account turn over and business performance with us
Banks past earning and proposed earnings from this relation.
Business performance with other banks.
Liability with us and other banks.
Financial highlights for last three years.
Brief analysis of financial strength.
Estimation of working capital requirements.
Brief description of the project.
Specific particulars of proposed facilities.
Branches visit report
Security arrangement and documentation status
Finally comments and recommendation.
And this proposal is send to head office along with followings Risk grade score sheet,
Copy of land valuation report,
Financial Spread Sheet (FSS),
Copy of audited accounts of the applicant &
Copy of feasibility report of the project.
Then head office will evaluate the proposal and upon due approval send the proposal
to the branch.
4. Documentation after acceptance by borrower: Upon receipt of the approval from
head office we will send the approval to the customer and request this to inform us in
written his due acceptance of the approval and then we will proceed to the
documentation. It is a very important part of credit activities. Failure of proper
documentation may lead to a loss of bank in case of clients failure to repay it. If all
the charge documents are not maintained properly then bank may fail to take any legal
action against the defaulter.
Necessary charge documents for different types of loans are as follows:

Demand Promissory Note (DP Note)

General Loan and Collateral Agreement.
Personal guarantee, in form of continuing guarantee.
Letter of hypothecation
Letter of pledge
Letter of continuity
Letter of Lien
Letter of counter indemnity (For non funded loan)
Personal guarantee of all director of a limited company

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Bank Asia Ltd

Resolution of meeting of board of directors for a limited company.

Trust receipt (For LTR)
And we also perform required arrangement for collaterals. Usually collaterals are in
the following forms for a loan security:

Hypothecation of stock of raw materials and finished goods.

Lien on Export L/C contract
Duly executed trust receipt.
Lien on the documents against cash incentive receivables from
Bangladesh Bank.
Lien on Important documents.
Registered mortgage on industrial plots or land property as security.
First charge on fixed and floating assets.
Pledge of FDR or other savings instruments.

5. Disbursement of the loan: Upon completion of documentation we usually prepare

sanction letter and send the sanction letter to the borrower and disburse the loan in
customers account and loan account is opened.
6. Monitoring and recovery: After disbursement the most vital task of back is to
ensure timely collection of the loan repayment. And for this proper monitoring is
required. And we also prepare report on classified loan each month and send it to
Bangladesh Bank through Corporate office. The classified listing and provision are as
follows:
Loan Status
Unclassified
Specially Mentioned Account
(SMA)
Substandard
Doubtful
Bad Debt

Overdue
Installments
Less than 6
3 installments

Provision
percentage
2%
2%

6 installments
12 installments
18 installments

20%
50%
100%

Classified loans are non-performing assets of bank and are a matter of great concern.
Monetary authority also is cautious about these loans. So the rule is to keep certain
percentage of these loans as provision. This provision requirement varies on the basis
of the phase of classified loan as stated above.
7. Reporting: this department prepares various reports on
daily, weekly, monthly, quarterly and yearly basis and
provide those report for internal uses, head office and
to the Bangladesh Bank through Head office

2.e. Lending Principles and Selection of

Borrower:
The bankers have to follow some principles or policies or take into consideration
some factors for lending money on sound basis. In working out these
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principles, or constituents a banker is exposed to the following three

basic questions.
Is the borrower credit worthy?
Are loan terms, or in other words, loan agreements properly structured and
documented?
Has the bank been able to perfect its claim on the assets or securities?
If a banker handling a credit can find the answers to the above three basic questions in
a proper fashion lending operation carried out by him based on the same
is expected to be sound. To answer the question as to whether the
borrower has credit worthiness a banker is to have clear idea about the
following Cs concerning the borrowers.
1.
2.
3.
4.
5.

Character
Capacity
Capital
Collateral
Condition

The 5Cs reflect the following points, which should be kept in mind for sound lending:
1. Judicious selection of Customers
2. Purpose
3. Safety
4. Liquidity
5. Security
6. Adequate return (Profitability)
7. Spread.
8. Suitability.
9. National/Social interest
10. Credit Control Policy of Bangladesh Bank
It is to be always remembered that the Bank is the custodian of public money and as
such we must be judicious, careful and selective while lending out the
depositors money to ensure timely recovery. The deciding factors for
recovery of loans are selection of right type of borrowers, end-use of
credits and effective follow-up and proper supervision.

2.f. Securities:
To make the loan secured, charging sufficient security on the credit facilities is very
important. The banker cannot afford to take the risk of non-recovery of
the money lent. Bank charges the following two types of security, -

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1. Primary security: These are the security taken by the ownership of the
subject matter of loan for which bank provides the facility.
2. Collateral security: If bank ask for additional securities with the subject
matter of loan, these is termed as collateral securities. It denotes any type of
security on which the bank has a personal right of action on the debtor in
respect of the advance.
There are different Modes of Charging Security:
1. Pledge: Pledge is the bailment of the goods as security for payment of a
debt or performance of a promise. A pledge may be in respect of goods
including stocks and share as well as documents of title to goods such as
railway receipt, bills of lading, dock warrants etc. and duly endorsed in
banks favor.
2. Hypothecation: In case of hypothecation, the possession and the ownership
of the goods both rest the borrower. The borrower to the banker creates an
equitable charge on the security. The borrower does this by executing a
document known as Agreement of Hypothecation in favor of the lending
bank.
3. Lien: Lien is the right of the banker to retain the goods of the borrower
until the loan is repaid. The bankers lien is general lien. A banker can retain
all securities in his possession till all claims against the concern person are
satisfied.
4. Mortgage: Mortgage is the transfer of an interest in specific immovable
property for the purpose of securing the payment of money advanced. In
this case the mortgagor does not transfer the ownership of the specific
immovable property to the mortgagee, only transfers some of his rights as
an owner. The banker exercises the equitable mortgage.
Credit the most crucial and sensitive division of a Bank. So it must be competent
enough to chose the right place to land others money and ensure
sustainable growth of the bank as well as the society at a whole.
Otherwise it will cut long-term loss of the bank that may lead to threat to
the existence of the bank. So utmost care and sincerity must be placed in
choosing the business house to extend loan facilitate.

3. Trade Finance Division

Earlier Foreign Exchange Division used to conduct import and export related all
foreign trade related activities. The modern banking system adopted the dimension of
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Trade Finance Division upon the diversity of functional exposure. Basically this
division facilitates both the importer and exporter to settle down their transaction and
in this process, provides finance to them.
In international trade, as importer and exporter are from different global location,
problems often arise during the delivery of the goods and the settlement of payment.
Then, they want to solve these problems and secure their transaction. And at this point
both parties rely on 3rd party institution to secure the transaction and this institution is
Bank. It is known as Trade Financing. It includes any instrument drawn, accepted,
made, withdrawn or issued via foreign currency.
Only Authorized Dealer (AD) of Bangladesh Bank can involve with trade financing.
Every branch of a bank cannot involve in foreign exchange business.
And bank as a ubiquitous financial institution has been rendering financial backup for
this foreign business by its foreign trade products. This division comprises with the
following three sections:

3.1. Objectives:
1.
2.
3.
4.

Facilitate the international business.

Smooth operation of the exchange of foreign currency;
Proper documentation of for export and import.
Save the interest of the exporter and importer.

3.2. Functions:
This division performs its functions under three main sections and these are:
a. Import Business.
b. Export Business.
c. Foreign Exchange Remittance.
To do these
bank:
1.
2.
3.

activities, following types of accounts have to be maintained by any

Nostro A/C: Our account with any other bank outside the country.
Vostro A/C: Bank account of any international bank with our bank.
Loro A/C: Other Banks account with any international bank.

3.2.a. Import Section

This section provides services in import business. At this point, we must know how an
import transaction takes place and what role a bank plays in this regard. Import means
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to bring in goods from abroad that may be in the form of goods or services. Import of
goods from global market takes place in a country when the country is in a shortage of
that product or if purchasing it from abroad is cheaper. In import of goods the basic
instrument is an L/C. This import business is governed by the countrys import
policies under the practice of general business rules and regulations. Usually, import
business takes place in the form of government, commercial and industrial import.

a.1. Mechanism of Import: Transaction between importer and

exporter is settled by any way of following four ways:
1. Pay in advance: Before shipment, importer may pay to exporter in advance by
FDD or TT. It is the case for only exporter dominated trade.
2. Open Account: When importer and exporter agree to settle payment after
shipment of goods through bank account.

Importer
(In Bangladesh)

Pa
y
me
nt

Pa
y
me
nt
Do
cu
me
nts

Do
cu
me
nts

3. Documentary Collection: Here both parties use a bank as their postman to

exchange of documents and payment. Unlike L/C, both remitting bank and
collecting bank has no risk and liabilities in the settlement of transaction.
Because, both exporter and importer does not enjoy any credit facilities from it.
Here the procedures under this is as follows:

Sales Contract

Exporter
(In China)

Documents
Collecting Bank
(In Bangladesh)

Payment

Remitting Bank
(In China)

4. Documentary Credit: It is widely known as Letter of Credit. Generally L/C

settles a cross border transaction. Both parties enjoy credit facilities against
L/C to run their business and settle payment. Since importer and exporter are
from different global location, risks for both parities involve during the
delivery of the goods and the settlement of payment. Then, they want to solve
these risks and secure their transaction through third party institution. This
institution is called a bank which provides L/C facility. Now the question is
what L/C is and how it operates.

a.2. Letter of Credit (L/C):

L/C is an irrevocable documentary credit, which is an undertaking by the issuing bank
on behalf of the applicant generally importer, to pay a certain sum of money to the
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beneficiary generally exporter, if certain terms and conditions are fulfilled as stated
in the L/C. Bank deals in documents and not in goods.
An L/C may be opened against a Performa invoice, if the exporter has no agent or
otherwise against an indent if the foreign supplier has an indenting agent.

2.1. Elements of a Letter of Credit:

A payment undertaking given by a bank (issuing bank)
On behalf of a buyer (applicant).
To pay a seller (beneficiary) for a given amount of money on demand or at a
definite time.
On presentation of specified documents representing the supply of goods,
Within specified time limits.
Commitments by issuing bank to honor draft drawn by exporter.
Documents must confirm to terms and conditions set out in the letter of credit.
Documents to be presented at a specified place.
So, bank deals in documents and not in goods. L/C is issued and performed as per the
rules and regulations of the following three bases:
1. Terms and conditions of Proforma Invoice/Indent.
2. The Uniform Customs and Practice for Documentary Credits (UCPD)
designed by ICC (International Chamber of Commerce).
3. ISBP (International Standards of Banking Practices.

2.3. L/C cycle:

At first, a relationship develops between importer and exporter. When they
agree for a business through the document- proforma invoice/indent, then the
importer applies to bank for opening an L/C by presenting that document.
Then after fulfillment of all formalities and on submission of necessary
document the issuing bank issues the LC and sends it to the advising bank,
through SWIFT, Telex or mail.
Advising bank then advises the exporter about the LC and
Exporter then makes shipment of goods and submits the shipping documents to
negotiating bank. It should be mentioned here that the advising bank and
negotiating bank might be same or different.
The negotiating bank scrutinizes all documents and if there is no discrepancy
then they send these shipping documents to the issuing bank and claim to the
reimbursement bank.
Reimbursement bank reimburse by dent of reimbursement authority given to
them by issuing bank.
The process closes with the exporter realizing payment from the reimbursing
bank.
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Pay
me
nt

Doc
ume
nts
&
Draft
After
Ship
ment

Requ
est
to
open
L/C
&
L/C
Doc
ume
ntati
on

L/
C
Ad
vis
ed

Bank Asia Ltd

Communication

Applicant
(Importer)

Doc
ume
nts
&
Draf
t

Pay
me
nt

Pay
me
nt

Proforma Invoice/Indent

Beneficiary
(Exporter)

Pay
me
nt

Nominated Bank
(Beneficiarys Bank)

Reimbursement Bank

L/C Issuing Bank

(Applicant Bank)

Documents & Draft

L/C Transmit

Advising Bank

2.4. Parties of L/C:

Major Parties of L/C are:
1. Issuing Bank or LC opening Bank: It is the bank which opens/issues L/C on
behalf of the importer after an L/C opening application by an importer.
2. Beneficiary (Exporter): The party on whose favor the L/C is issued. The
beneficiary will have to present the required documents to avail payment under
the letter of credit.
3. Nominated Bank: The bank, which negotiates the bill and pays the amount to
the Beneficiary. It has to carefully examine and scrutinize the documents under
the letter of credit before negotiation in order to see whether the documents
apparently are in order or not.
Additional Parties of L/C are:
4. Applicant (Importer): The party on whose request the credit is issued.
Generally, the applicant is an importer who reaches an agreement with the
exporter before approaching the bank to issue L/C. The applicant is also
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normally obligated to reimburse the issuing bank for any payments made under
L/C. He is here an auxiliary party. Because, after contract between applicant
and issuing bank, only issuing bank is liable to pay to beneficiary. So only
exporter claim for payment from L/C issuing bank not to importer.
5. Advising Bank: It advises the L/C to the exporter at the request of the issuing
bank. It may be a branch of the issuing bank or a correspondent bank in the
beneficiarys country. It may also assume the role of confirming and/or
nominated bank. The advising bank simply advises the letter of credit without
any obligation on its part. However, the advising bank shall take reasonable
care to check the apparent authenticity of the credit that it advises.
6. Correspondent bank. It may also assume the role of confirming and /or
nominated bank depending upon the conditions of the credit.
7. Reimbursement Bank: The bank or to whom the bill will be drawn. It is
mentioned in the credit to make payments against stipulated documents
complying with the terms of the credit. It may or may not be the issuing bank.
8. Confirming Bank: The bank that adds its confirmation to the credit and it is
done at request of the issuing bank. The confirming bank may or may not be
the advising bank.

2.5. L/C Types: General LC can be divided into two broad heads:
L/C

Revocable

Irrevocable

1. Revocable LC: A revocable letter of credit may be revoked/cancelled or modified

for any reason, at any time by the issuing bank without notification. It can be
cancelled without prior discussion or consent of the exporter/beneficiary.
2. Irrevocable LC: The irrevocable letter of credit may not be revoked or amended
without the agreement of the issuing bank, the confirming bank, and the
beneficiary. It insures beneficiary that if the required documents are presented and
the terms and conditions are complied with, payment will be made.

2.6. Required document for opening an LC:

Current Deposit Account (CD).
L/C opening form is duly filled up and submitted along with the following
documents:
o Import Registration Certificate (IRC) from CCI&E (Chief Controller
of Import and Export).
o Indent/ Proforma Invoice/ Contracts applicant.
o TIN and VAT certificate.
o Trade License Copy.
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o FBCCI membership Certificate Copy.

o NOC from lien Bank.
o List of Sister Concern.
o Other Bank liability Statement.
LCAF- L/C authorization form
IMP Form.
Charge documents paper such as DP note, GLCA (General Loan &
Collateral), Letter of hypothecation, Counter guarantee etc
Credit Information Bureau (CIB) report of the client.
Credit Report of the supplier.
Insurance cover note with money receipt
Memorandum of association & articles of incorporation on case of limited
company
Registered deed (in case of partnership firm)
L/C margin, commission charges as per opening banks requirement

Proforma Invoice: When beneficiary company/exporter does not have any

agent in our country then they themselves send quotation on their company
pad. This is called proforma invoice.
Indent: If the beneficiary has agents in Bangladesh then the agent send
quotation on behalf of the company then it is called indent.

2.7. Amendment of L/C:

In some cases the importer and exporter both or any of them may be unable to satisfy
the requirements mentioned in LC within the stipulated time. Then for alteration of
actual terms and conditions, amendment is required. In a revocable LC it can be done
without any prior to the beneficiary. But in an irrevocable LC, it must be done with
prior consent of beneficiary, confirming bank and the importer.

a.3. Procedures of L/C:

1. Request from importer to open L/C:
Now assume that we Bank Asia Limited, is the Bank of Importer, i.e. we are the L/C
issuing Bank. So how we will extend our service to importer named Mr. X, when the
request comes from him for opening an L/C. Here Mr. X may be one of the existing
customers or a new one. Usually banks or financial institutions provide trade services
to the clients familiar in terms of reference or account relationship. But off course, we
consider the special consequences. Now we would illustrate the procedures of Bank
Asia regarding the opening of the L/C in case of Mr. X under the consequences of
whether the client is known or known.
2. Develop relation and collect L/C documentations:
For the establishment of a new banking relation with a new client, both the bank and
the client must know the details of each other. A very elementary process of knowing
about a customer is to open an account and serving him through the transactions of
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that very account. Then upon receipt of any L/C request, the following steps are
initiated:
i. Opening a Current Account.
ii.
L/C opening form is duly filled up and submitted along with the
following papers:
Import registration certificate
Trade license
Proforma Invoice
Tax identification certificate
Vat registration certificate
Associations membership certificate
L/C and LCA form
IMP form
The submission of all these papers gets the proposal to the next step.
3. Collect CIB Report:
The bank would ask for CIB report. At this step a formatted CIB inquiry form is dully
filled and sent to Bangladesh Bank. The term CIB refers to Credit Information
Bureau. This is the specialized department of Bangladesh bank preserving all the data
and credit status of all the customers of all Banks related to advance. Here we must
remember that without having CIB clearance about the credit worthiness of our client,
we are not supposed to issue L/C or render any other credit facility to any of our
clients. Upon receipt of a clean report from CIB, we proceed to the next step.
4. Collect Credit report:
Then the Bank collects the suppliers credit report to know the credit worthiness of the
supplier. Usually suppliers credit report is asked for in case of indent and if the total
L/C value is more than BDT. 10,00,000.00 and in case of Performa Invoice of BDT.
5,00,000.00, then SCR is required.
5. Arrangement of margin and settlement mode:
Here we usually negotiate with client for L/C margin and accordingly the clients
deposits the margin amount of money. Another issue at this stage is to negotiate with
the customer on the retirement of the L/C, i.e. how the customer will reimburse the
L/C amount due. The customer may reimburse the payment in cash or this can be
managed by any loan facility to the favor of the client agreed by the bank. Usually the
following loan arrangement is made by the commercial banks to facilitate the import
trade.
LTR (Loan Against Trust Received): This is a special type of loan
arrangement by the commercial banks to facilitate its clients to retire L/C and
clean goods. Here the client takes the loan by execution of trust receipt and
make the payment on maturity usually from sales proceeds of the imported
goods. In this process the goods remain under the possession of the client.
LIM (Loan against Imported Merchandise): In this process the possession
as well as the ownership of the goods belongs to the bank. The client cleans a
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portion of goods upon the agreement with the bank, sales them and proceeds
the payment to the bank for the retirement of the goods and it continues. This
process results to less risk exposure for the bank as compared to LTR.
6. Preparation and Submission of the Proposal to Head Office:
Upon the settlement of the margin as well as the mode of retirement, the L/C moves to
the next step. Based on all the information collected from the client, the import
division prepares a formal L/C proposal and send it to the Head office with all the
supporting documents. Usually a proposal contains the details of the applicant, the
nature & the strength of the business of the client, capital structure, particulars of the
proprietor or the directors etc. alongside the following documents in particular:
CIB status.
Business relation with the bank and the current liability position, if
any.
Liabilities with other banks or financial institutions.
Particulars of L/C, i.e. purpose, quality, name of the item, value,
country of origin, suppliers credit report, port of shipment, L/C
expiry date, landed cost, market price etc..
Present working capital structure
Particulars of proposed credit facility.
Security collateral and control over security.
Recommendation.
Then head office will evaluate the proposal and upon due approval send the proposal
to the branch
7. L/C issue and transmit:
Open the L/C and transmit the L/C to the advising Bank or confirming bank (if
confirmation is required) to advice the seller and its bank regarding the issuance of
this L/C. At the same time the importer receives the copy of L/C. Usually this
transmission procedure takes place by SWIFT or TELEX or EMAIL format.
Then upon receipt of the L/C, the supplier, first, put his promise on all the terms and
conditions and if required, undertakes necessary steps to put in the amendments and
upon satisfaction, arrange for the necessary shipment as per the agreed conditions of
the L/C.
8. Receive & scrutinize Shipping Documents:
Upon shipment of the goods, the supplier prepares documents as per the direction of
the L/C and ask his bank to negotiate with us for payment. These documents are as
follows:
Commercial invoice,
Transport Document:
o Bill of lading
o Airway Bill (AWB)
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o Courier Receipt.
o Railway/Truck Receipt (TCR)
Insurance Document
Bill of exchange
Packing List
Pre-shipment Inspection (PSI) certificate,
Certificate of origin,
Suppliers compliance certificate,
Other certificates as per the L/C terms and conditions.

Then the suppliers Bank, negotiate the documents to the ad confirming Bank to
proceed the payment. The ad-confirming bank makes the payment of the document
(off course, devoid off any discrepancy) to the negotiating bank and sends the
documents to the issuing bank for reimbursement. In case of noninvolvement of any a
confirming bank, the negotiating Bank negotiates the documents to the issuing bank
for further procedure. The issuing bank must inquire off any discrepancy of the
documents. Upon satisfaction, the issuing Bank asks its client to make necessary
payments and upon receipt of the due amount, the issuing bank reimburse the
proceeds to the ad confirming bank as negotiating bank under the concurrent
consequences. Here the significant feature is that in case of sight L/C, payment may be
made by 100% cash or by the arrangement of LTR or LIM. But in case of deferred
L/C, acceptance is given duly on maturity and payment is made accordingly.
9. Lodgment and retirement of import documents:
At this step, the issuing bank makes payment to the negotiating bank by creating a
temporary loan A/C termed as PAD. When it collects payment from the customer,
PAD is washed out. Usually the bank is to wash out PAD within 30 days of its
opening. Generally, within 5 to 10 days of negotiation, the client makes the payment
and clear documents from the bank and goods from warehouse storage. In case of any
discrepancy, the bank asks his client whether it is acceptable or not. The client may
ask the supplier to come up with necessary amendment or alternatives.
10. Collect Bill of Entry & close the file:
Issuing bank must collect the copy of bill of entry from importer who collects it from
custom authority upon the clearance of goods. When bill of entry is satisfied itself in
connection with invoice value, then international trade is deemed to be successful.
Issuing bank must report to Bangladesh Bank regarding it and L/C and close this file.
The bill of entry is mandatory for closing the file

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a.4. Import
Importer: SubmissionProcedures
of IRC , TIN, Indent/ Proforma Invoice, and
Insurance Cover Note & Application to the Bank
Bank: LCA, IMP Form & Application Agreement for confirmed L/C.
Bank: Check Sanctioning approval, creditability of Importer.

Collect CIB Report

Opening L/C by Issuing Bank

Collect Credit Report

Arrangement of Margin and
settlement mode.

Transfer L/C to the Beneficiarys Bank

Receive import/shipping documents
from Nominated/Collecting Bank of
Beneficiary.

Instruct Reimbursing Bank not to honor

the payment
Inform the Nominated Bank about
discrepancies.

Scrutinize the Shipping Documents.

Are the documents discrepant?

Yes
No

Yes

Ask Applicant/Importer to remove

discrepancies.
Does the importer agree to accept the
documents?
No

Ask the Nominated Bank to remove

discrepancies
Lodgment of Import Bills:
Cash/PAD /LTR A/CDr.
H/O A/C (Nostro A/c).Cr.

Ask exporter to remove discrepancies

Discrepancies removed

Release import documents to the

importer
Collect the proceeds from importer.
Margin A/C
Importers A/C
H/O A/C

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3.2.b. Export Section

In case of export, bank functions as advising Bank or Nominated bank or collecting
bank. Export section ensures the proper export proceeds to the exporter. Usually the
exporter may ask his importer or buyer to make payment by advance TT or L/C.
Generally proceeds come by L/C form.
The major activities of export department is involved with the procedure of sending
goods to the local or foreign purchaser with the assurance of receiving proceeds and
collection of export proceeds in favor of the exporter. In short, export procedure is just
the vice versa of the import procedure. In addition to it, export department of a bank
also process Back-to-Back L/C under the lien of Master L/C.
Now we would discuss the export activities of a bank under a real life example.
Example: Assume that Mr. X is our client and his business is RMG manufacturing
& export. Recently he has received a buying order from one of his foreign buyer of
USD 100,000 and a purchase agreement took place between those two. We would now
illustrate our role as a bank in this dealing.
Illustration: The total procedure of this export can be sequentially discussed as
follows,
1. Let us assume that Mr. X has agreed to accept the payment for export via L/C.
Then he would ask his buyer to open L/C for aforesaid amount. Then the buyer
would request his bank issue accordingly.
2. The buyers bank will open L/C upon the purchase agreement and send the L/C
copy to advising bank to advise our bank on this L/C.
3. The advising bank will advise on this L/C to our bank. We may also derive a copy
of the L/C directly from the buyer.
4. Upon receipt of the L/C, we will clarify each and every point of L/C and advise
our client regarding this L/C. Then our customer will go through the L/C and
arrange for necessary amendment.
5. Upon receipt of L/C, Mr. X will initiate to start production and for that purpose,
definitely he would be in need of raw materials, accessories and other supplies that
would put him in necessity of working capital and here comes the bank to facilitate
the necessary finance. The bank allows the exporter to open back to back L/C by
lien of the master L/C and supply required cash to the supplier. By this BTB L/C,
Mr. X will purchase required supplies and will start production and on
completion of the production, will go for the shipment to the importer.
6. Upon shipment of the goods, Mr. X will prepare all the L/C documents as per
L/C and place all these L/C documents to us to negotiate with the issuing bank for
export proceeds. Usually export L/C requires the following documents,
Forwarding letter by the exporter.
Bill of exchange.

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Shipping documents (packing list, commercial invoice, weight list, bill

of lading/AWB)
Certificate of origin from Chamber of Commerce.
Shipment advice.
Beneficiary certificate.
Export form duly filled up.
Purchase agreement or contract
7. Then his bank will check all the papers and send the documents to ad confirming
bank and seek the proceeds accordingly. Otherwise the documents would go
directly to the issuing bank for L/C proceeds. Then the ad confirming bank or the
issuing bank will check all the documents and if there is no discrepancy, it would
clear the payment. Otherwise the bank will negotiate with the client and undertake
the necessary arrangements for the rectification and then the proceeds will take
place.
8. When exporters bank receives the proceeds, it would be immediately adjusted to
the BTB L/C payment or other debit figure of this L/C and then credit the
remaining amount to the clients account.

2.b.1. Documents used in Export:

When the exporter

ships the goods he is required to furnish evidence to show that the terms and
conditions of the L/C have been fulfilled.. These evidences are provided in the form of
documents such as:
1. Commercial Invoice
2. Transport Documents.
3. Insurance documents
4. Other Documents:
a. Bill of Exchange
b. Certificate of Origin
c. Weight Certificate
d. Packing List
e. Quality certificate
f. Short Shipment Certificate
g. Inspection Certificate etc.
It is not necessary that each set of documents should contain all the above documents.
It depends on the agreement in the L/C between two parties.

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2.b.2. Export
Procedures
Exporter:
Obtaining export Registration
Certificate (ERC) from CCI&E
Exporter: Securing Export order from foreign
buyer directly or through agent.
Bank: Receive LC from the issuing bank
through an Advising Bank or from exporter
Certification of EXP Form
by Exporters Bank
Will the Exporter be allowed preshipment facilities?

Yes

Marks Banks Lien on Original LC

Provide Credit facility & obtain necessary
securities: Packing CreditDr.
Exporter A/C.Cr.

Shipment of commodities by
Exporter
Receive the export/ shipping
documents from exporter
Scrutiny of Export Documents.
Yes

Are the documents discrepant?

Ask exporter to remove

discrepancies.

No

Discrepancies
removed?

Negotiation the documents through

FDBC/FDBP:
FDBC/FDBP A/CDr.
Exporter A/c..Cr.
Forward the documents to LC
Issuing Bank with reimbursement
instruction
Send reminder to paying bank.

Yes

No

Inform Issuing
Bank about
Discrepancies
Does it allow
Negotiation?

Yes

Check whether the Nostro A/C has been

credited or not.
No

Yes

Retire FDBC/FDBP and reverse liability.

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2.b.3. Back to back L/C:

This is a special L/C arrangement. Upon receipt of any purchase order, exporter starts
production of that specific consignment. For raw materials and other necessity of
production additional working capital and packing materials is required. Then the
exporter requests his bank to issue an L/C to procure all those necessities from home
or abroad, that is called back to back L/C. Then BTB L/C is produced to the exporter
in lien to the master L/C received from the importer. Usually bank permits to open
BTB L/C amounting 75% of the master L/C invoice value at maximum and 10% for
packing credit. After production and shipment of the goods, the exporter gets the
proceeds of the master L/C and the bank adjusts the BTB L/C with that. Usually backto-back L/C is issued to be retired by the proceeds of the master L/C that is in
usance/deferred basis.
Back-to-Back Foreign: When back-to-back L/C is opened in a foreign country
supplier it is called back to back foreign and is generally payable within 120 days at
sight.
Back-to-Back EDF: When the bank is not in a position to support the amount of
back-to-back L/C, they apply for loans to the Bangladesh Bank for back-to-back EDF
(Export Development Fund). Its duration is 180 days. An interest is charged by the
Bangladesh Bank on this loan amount.
Back-to-Back Local: A back-to-back local takes place when L/C is import of raw
materials within the country (or locally). For this L/C, payment is made within 90
days at sight.
Procedure for back-to-back L/C:

Export has to apply for the back-to-back L/C.

The export L/C or the master L/C is kept under lien.
Then the back-to-back L/C is opened.

Some of the conditioners for back-to-back L/C:

Whether the time period is enough for the client to complete the order.
The unit prices of the finished Performa invoice should be considered while
allowing margin.
The expiry date and the shipment date need to be taken into account.
The issuing bank disburses the master L/C proceeds as follows:

Collection commission of master L/C 0.2% of the invoice value.

Acceptance commission of BTB (Back to Back) L/C 0.2% on L/C value.
Handling charge of BDT 1000
Postage charges for BTB (maximum 2200).
BTB payment adjustment.
Buying house commission if any.
Exchange gain
Remaining amount is credited to the customer account if any.

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2.b.4. Negotiation of Documents:

Soon after the shipment, the exporter should make arrangement for early submission
of the documents to the bank, correctly prepared in conformity with the terms of the
credit; exporter should remain in constant touch with the negotiating bank for early
negotiation of export bills. If any minor mistake is detected or any document is found
missing, the same should immediately be corrected or supplied for early settlement of
the matter. The bank negotiates the documents by any of the following two ways:
1. Foreign Documents Bill Purchase (FDBP): Export section provides bill
purchase and discounting facility to exporter before receipt of payments from
importer. Bank basically deals with purchase of bills of usually two types local
bills (such as BTB L/C) and foreign bills are purchased or discounted. After
submission of all required documents to the bank for negotiation, and officer
scrutinizes all documents. If the documents are satisfactory and in order, bank
purchase the documents up to 90 % of the value on the basis of bank-customer
relationship. This is known as foreign documentary bill purchase (FDBP). After
purchasing the documents, gives the following entries:
FDBP a/c ------------------------------Dr.
Customer a/c --------------------------Cr.
(Before realization of proceeds)
Head Office a/c ---------------------- Dr.
FDBP a/c ----------------------------- Cr
(Adjustment after realization of proceeds)
A FDBP Registered is maintained for recording all the particulars.
2. Foreign Documentary Bills for Collection (FDBC): When bank feels any
doubt regarding the documents, the bank sends documents to the L/C issuing
bank for collection instead of purchasing those bills. This process is a Foreign
Documentary Bills for Collection (FDBC).
We forward documents for collection due to the following reasons

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If the documents have discrepancies.

If the exporter is a new client.
The banker is in doubt.
Foreign documentary bills for collection signify that the exporter
will receive payment only when the issuing bank gives payment.

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3.2.c. Foreign Remittance

Remittance means sending of fund from one place to another place, which may be
within the country or between two countries. When fund in transferred to or received
from foreign country it is called remittance. Purchases of foreign currencies constitute
inwards foreign remittance and sales of freely convertible foreign currencies constitute
outward foreign remittance.
So there are two types of Foreign Remittance1. Foreign inward remittance.
Foreign outward remittance

2.

Foreign remittance section provides foreign remittance service to its customers.

Usually it collects foreign remittance through ITT (International Telegraphic
Transfer), and FDD (Foreign Demand Draft). The bank provides it customers the
facility to endorse passport for foreign currency, issue foreign demand drafts,
travelers cheque etc. Since Bangladesh falls within the group of developing countries
where the inflow of foreign currency is very low, thereby, theres a limit as to how
much a client can endorse when they make trips abroad.

c.1.Inward Remittance:

The remittances, which are received

from abroad, called inward remittance. Generally inflow of remittance in a country is
occurred for the following purposes:

Family maintenance.
Indenting commission.
Donation.
Gift.
Foreign investment.
Export proceeds.
Others.

c.2. Outward remittance: Remittance, which is made from our

country to abroad, is called outward remittance.

c.3. Mode of Remittance:

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International Telegraphic Transfer (ITT).

Foreign Mail Transfer (FMT).
Foreign Demand Draft (FDD).
Travelers Cheque (TC).
Foreign Currency Notes.

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c.4. Travelers Cheque (TC):

The AD branch under its

foreign trade activities also issues TC for the travelers who want to go abroad. But the
AD bank cannot issue TC to any walk-in-customer. Here for endorsement of dollar,
bank requires necessary papers as Original Passport, Visa duly stamped, Air Ticket,
duly filled up T/M Form.
The AD bank should ensure the followings before issuing TC:
The intending client should be a client of the AD bank or should be
sufficiently well known to the bank.
The intending traveler is in possession of a confirmed air ticket for journey
to be undertaken.
The amount released should be endorsed on the passport and air ticket with
signature and the name of the AD branch.
In each case of release of foreign exchange for travel abroad, photocopies of
first six pages of the passport and the page recording endorsement of
foreign exchange and the photocopies of the pages of ticket showing name
of the passenger, route and date of the journey and endorsement of foreign
exchange along with relative TM Form should be sent to Bangladesh Bank
along with report of the transaction in the usual monthly returns.

c.5. Foreign currency Account:

1.
Resident Foreign Currency Deposit (RFDC): Residents of Bangladesh may
open the resident foreign currency deposit account with the foreign currency brought
in at the time of their return from abroad.
2.
NON Resident Foreign Currency Deposit Account (NFCD): This account
is opened by the Non Residents. Generally NRBs (Non-resident Bangladeshi) or
foreign citizen can open this type of accounts.

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4. Conclusion
Job Rotation is one of the effective tools of Human Resources Division to make the
new employees effective and efficient at their banking job. As a fresh one, I got some
preliminary knowledge about the different sections of Branch Banking at Agrabad
Branch. All the members were very cooperative and I got immense support to learn
how to move with the job.
Banking sector plays vital role for the economic development of a country. It is
required to ensure quality banking service for flourishing the economic sector and
enhancing the overall business and manufacturing environment of the country that
will ultimately accelerate the national growth wheel. In recent times in Bangladesh
banking industry has been considered the most prospective, compared to the other
service sectors, for their quality service and transparency.
Now a days, a bank is not just selling services but we may define it as selling of
solution to the business community as a whole to the society basically solution for the
finance. So it is very important to ensure most efficient work force with innovative
ideals and proper technological back up to render such an important solution to the
society that will ensure sustainable growth of the economy.
Todays business world is dynamic and ever changing. To cope up with all these
changes and adopt with new scenario a group of skilled and talented word force is the
first requirement. Bank Asia has rightly focused on skill development of employee
and at the same time introducing technology in almost every step of its day-to-day
activities to insure prompt and quality service.
And we have to focus on the current competition level in the industry as in such a
small economy we have about 50 banks and the giant nationalized banks are operated
with private management. And this will make the competition more severe. This
severe competition can be only faced with learning process and adoption of latest
technology. This will help us to read the environment properly and adjust in the
changed environment.
Bank Asia, started its journey in 1999 for A Better Tomorrow Its friendly and
congenial environment, dedication to service and ability to proved equality, at low
cost, with high efficiency has been able to develop a reputation in market. If all the
efforts which were put forward in past, can be continued again with renovation and
increased integrity then we can hope that it will not only be able to build a Better

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Tomorrow for itself but also for the whole nation that will lead us to build a
developed and civilized nation.

4. References
1. Some Articles about General Banking of Bangladesh Institute of Bank
Management (BIBM).
2. Different articles and documents collected from branches.

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