A Comprehensive

Report
On
Job Rotation

Program
In
 Report on

Job Rotation Program

Prepared for

Shahrukh Ahmed
Executive Vice President & Head of HR
Human Resources Division
Bank Asia Limited
Corporate Office
Tea board building (1st floor)
111-113, Motijheel C/A
Dhaka-1000
 Prepared by
Mst. Farhana Akhter
Management Trainee
Employee ID# 1000
Bank Asia Limited

Date of Submission
6th October 2008
6th October, 2008

To
Shahrukh Ahmed
Executive Vice President & Head of HR
Human Resources Division
Bank Asia Limited
Corporate Office
Tea board building (1st floor)
111-113, Motijheel C/A
Dhaka-1000

Subject: Submission of report on “Job Rotation Program”

Dear Sir,
I, the undersigned, would like to present enclosed report on “Job Rotation
Program” as a part of training on the job, arranged from 31st August.2008 to
30th September,2008. Arranging this report was an enormous incident for
me, as it brings me to the real working field.
I have benefited while preparing this report as it assisted me to learn the
technique of report writing and to experience the practice of real life
banking.
Expectantly the findings through the job rotation program give me the
insight into the operational activities of the bank. If there is any problem or
requirement for any amplification, please feel free to ask me any question
regarding this report. I will try my best to elucidate any material if required.
Thanking You

Sincerely Yours

………………….
Mst. Farhana Akhter
Management Trainee
Employee ID# 1000
Bank Asia Limited

PREFACE
Job rotation program is an effective technique used hugely in various
institutions as on the job training program. This program enables a new
employee to gain the insight into the operational activities of the
organization. I was assigned in job rotation program in MCB Sk Mujib Road
Branch to have an exposure of real life banking program. I visited every
department in the branch and tried to touch every desk to gather available
information and to have an exposure of activities carried out in every desk at
my level best. I enriched my knowledge form day-to-day operation of bank’s
different department. And accordingly I prepared this report and here my
emphasis was on precision, accuracy and eagerness of learning.

It is necessary to mention that this report just contain the ABC of various
banking activities, terminology and mechanism. So this may not present
much significance to a banker, but help the newcomer to be familiar with the
banking arena.

While preparing this report I freely took help from various book and articles
which enables me to get theoretical knowledge to understand the operational
activities of the bank.

I am thankful to all superior employees of MCB Sk Mujib Road Branch for

their inspired words, incessant support and heartiest co-operation, which has
guided me and spurred me all the time.

ACKNOWLEDGEMENT

At first, I would like to express my gratitude to Almighty Allah, who has

brought me in this world and made me able to accomplish various activities.

I am really indebted to the Managing Director, Company Secretary and other

members of top management for their decision of such an on the job training
program. The report would not have been written if I hadn’t been given the
opportunity to learn by rotating to different branches.

Human Resources Department of Bank Asia Limited deserves some word of

appreciation for arranging such a planned training program, which has made
me acquainted with day-to-day activities of bank. I express my heartfelt
gratitude to Human Resources department for such a kind initiative

My heartiest gratitude Mr. Swapan Dasgupta, EVP& Manager, MCB Sk

Mujib Road Branch, for his helping hand towards me and provided all
psychological and logistic support. I also concede the kind coordination of
Mr. Kazi Samsul Hoque , FAVP and Sub-Manager of the branch. I express
my gratitude to all the Divisional In-chage i.e. Mr. Mahmud Alam, Foreign
Exchange Department, Mr.Md. Zakir Hossain, In-charge of Credit
Department , Mr. Md. Jamal Uddin, In-charge General Banking & Accounts
Department and Mr. Santosh kumar Bhoumik, In-charge of Cash
Department for their kind cooperation, monitoring and coordination of my
activities when I was in these departments during my rotation.

I am also indebted to all officers and unit heads for their relentless co-
operation. It has been a great pleasure working with all the officials and
stuffs of every department. Without their cordial help it would never be
possible for me to prepare such a report. I acknowledge their support with
immense adherence.

CHAPT
ER 1
INTRODUCT
ION

INTRODUCTION…………………………………….
To make an effective on the job training program it is necessary to conduct a
Job Rotation Program for the newly recruited employees. With the help of
the program we can build ourselves confident that we can handle the
practical job life

After successful completion of our Induction Ceremony, we were assigned

for Job Rotation Program. This rotation is a compact of four weeks package
for the newly recruited Management Trainees & Probationary Officers to
expose an overall activity of the Bank at a glance. We 24 MT’s & 18 PO’s
were assigned in different branches of the Bank located in different districts
of the country. I was assigned in MCB Sk Mujib Road Branch, Agrabad,
Chittagong. As an MT, my Job Rotation Program in this branch arranged
from 31st August, 2008 to 30th September, 2008.

After completing the program, we are instructed to submit a comprehensive

report on whole program. This program has different phase those are as
follows:
• Orientation with the organization
• Working in different departments
• Completing the Internship Program
• Finally writing a report regarding designated topic

OBJECTIVES:
Though the main objectives to prepare myself in such a manner that I can
equip myself with the practical field as well as to be able to know the
different aspects of the bank, however there are various other objectives that
are as follows –
• To know about the Bank in brief,
• To be familiar with the mission & vision of Bank Asia Limited.
• To know about the general Banking activities of the bank.
• To know about the foreign exchange system.
• To know about the involvement of the bank in import & export
finance.
• To know about the remittance of funds.
• To gain an understanding on the working environment of the branch
of Bank Asia Limited.
• To adopt with banking as a different service industry.
• To make reconciliation between the theoretical knowledge they have
and practices carried out in the bank

SCOPE:
This report covers all the operational areas of MCB Sk Mujib Road Branch
comprise with General Banking Department, Accounts Department, Foreign
Exchange & Credit Department. This program confined itself in
understanding with the basic activities of the bank rather aiming to the
extensive analysis of all operational areas of Bank Asia Limited. Its scope is
also subject to time constraints. As a result, focus on other Department of a
bank like Treasury, International Division, Information Technology
Division, Human Resources Division etc is beyond its scope.

METHODOLOGY:
This report is completely based on practical experience gathered in the job
rotation program. Here the emphasis is on observation of all the operation of
all desks rather learning by doing. It is an orientation to bridge the
theoretical knowledge with the day-to-day practice. Here information is
gathered by conversation, interview and discussion with the officers of
different divisions in the respective branch and questioning of respective
officers on relevant issues. And the whole process was supervised by the
divisional in-charge and coordinated by the branch manager.

LIMITATIONS:
During the job rotation period, I had to face some problems which could
have affected my report. The limitations were:

• The time frame was very short to gather in depth knowledge about all
the jobs related to banking activities.
• Workload of the employees acted as another barrier while gathering
data.
 CHAPTER 2
COMPANY
OVERVIEW

BANK ASIA LIMITED……

……………………
Incorporated as a public limited company on 28th September
1999 Bank Asia started its operation on 27th November 1999
with equity participation from 22 promoters and board of
director comprising of 14 members including the Managing
director. Bank Asia conducts all types of commercial banking activities.
The core business of the bank comprises of import, export, working capital
finance and corporate finance. The bank is also rendering personal credit,
services related to local and foreign remittances. The “Personal Credit”
scheme of the bank, which is designed to help the fixed income group in
raising standard of living is competitively priced and has been widely
appreciated by the customers. The bank’s strategy is to gradually cover the
total arena of banking. The objectives of Bank Asia are to provide high
quality service to its customers, to participate in the growth and expansion of
our national economy, to set high standards of integrity, to bring total
satisfaction to our clients, shareholders and employees, and to become the
most sought after bank in the country, rendering technology driven
innovative services by the dedicated team of professionals.
Bank Asia Limited came into the headlines and drew attention of everyone
when it acquired the operation of the Bank of Nova Scotia, a Canadian
Bank. This was the first time in the history of Bangladesh that a local private
bank has taken over the operation of a foreign bank. This unparallel event of
acquisition of multi-national Bank can be accredited to its highly
experienced and dedicated decision-makers and team of professionals who
are persistently putting in their sincere efforts to settle the bank as one of the
leading Private Commercial Banks in the country.
Bank Asia has been able to maintain a highly satisfied group of customers
with its high quality services, as well as continuing its extension activities to
reach to the doorstep of more people around the country.
CORPORATE INFORMATION:

 Letter of Intent received : 24/02/1999

 First meeting of the promoters : 15/04/1999
 Certificate of Incorporation received : 28/09/1999
 Certificate of Commencement of business : 28/09/1999
 First meeting of the Board of Directors held : 01/10/1999
 Banking license received : 06/10/1999
 First Branch license received : 31/10/1999
 Inauguration of Bank : 27/11/1999
 Date of publication of Prospectus : 29/06/2003
 Date of IPO subscription : 23/09/2003, 24/09/2003
 Date of first share trading in bourse :08/01/2004
 Date of agreement with CDBL : 20/12/2005
 Date of first scripless trading : 30/01/2006
  Number of promoters : 22
 Number of Directors : 11
 Number of Branches : 32
 Auditors : S.F. Ahmed & Co.
Chartered Accountants
House –25, Road-13A
Block-D, Banani,
Dhaka-1213
 Legal Advisor : Lee, Khan & Partners
City Heart ( 4th floor)
67, Nayapaltan
Dhaka-1000
 Registered Office : Tea board building (1st floor)
111-113, Motijheel C/A
Dhaka-1000
Bangladesh
Phone: (880 2) 7177031,
7177032,
7177034,
7160938
Fax: (880 2) 7175524
SWIFT: BALBBDDH
WEB:www.bankasia-bd.com
E-mail:bankasia@bankasia.com.bd
Internet Banking:www.bankasia.net

Memorandum of understanding with Muslim Commercial Bank Limited

(MCB) a Pakistani bank was signed on September 2001 for taking over the
local operation comprising of two branches at Motijheel and Agrabad and a
booth at Banani, Bank Asia formally took over these in January 2002.
MISSION:

• To assist in bringing high quality service to our customers and to

participate in the growth and expansion of our national economy.
 • To set high standards of integrity and bring total satisfaction tour
clients, shareholders and employees.
• To become the most sought after bank in the country, rendering
technology driven innovative services by our dedicated team of
professionals.

VISION:
Bank Asia’s vision is to have poverty free Bangladesh in course of a
generation in the new millennium, reflecting the national dream. Our vision
is to build a society where human dignity and human rights receive the
highest consideration along with reduction of poverty.

ORGANOGRAM OF BANK ASIA LTD.:

The organogram of Bank Asia Limited is shown as follows:

President & Managing director

Senior Executive Vice President

 Executive Vice President

Senior Vice President

Officer

Vice President Junior Officer

First Vice President Assistant Officer

Asst. Vice President

Banking Officer
First Asst. Vice President

Training Officer

Senior Executive Officer

Teller
Executive Officer

Senior Officer

PRODUCTS OF BANK ASIA:

Deposit Pension Scheme Plus: Deposit monthly installment ranging from

Tk. 500/ to Tk. 5000/ and on maturity depositor receive a handsome amount
as per table below.
Bank Asia Sanchay Plus: Investment increases with bank Asia’s 3 years
deposit scheme having attractive returns with easy encashable.
Locker Service: Bank Asia provides locker service that is a fine blend of
security and confidentiality.
Monthly Benefit Plus: MB+ is a 5-year scheme that lets you earn monthly
benefit of Tk. 850/ or its multiple by minimum initial deposit of Tk.
100,000/ or it’s multiple.
Medical Support: Medical support offers financial assistance to meet
borrower medical expenses.
Fixed Deposit (FDR): A lump sum amount need to deposit for a certain
period usually 1 year. Highest interest is provided in this scheme.
Double Benefit Plus: DB+ is a 6 year scheme. Your deposit doubles in 6
years. Minimum initial deposit for the scheme is Tk. 100000/ or it’s
multiple.
Marriage Support: The marriage support offers the flexibility to avail loan
facility ranging from Tk. 25000/ to Tk. 200000 to suit needs.
Online Banking by Bank Asia:
Any Branch Banking:
 Cash Withdrawal
 Cash Deposit
 Cash Transfer
Internet Banking:
 View the balance & withdrawal amount of account through Internet.
 Print necessary information from Internet.
 Watch the balance of account from any part of the world.
ATM Facilities:
 24 hours cash withdrawal facilities.
 Pay utility bills.
 Available at 20 places in three main cities of the country.
SMS Banking:
 Know the account latest position through SMS using mobile.
 Alert messages.
 Wish messages.

ABOUT MCB SK MUJIB ROAD BRANCH:

To cope the market with its quality service and to reach the doorstep of the
people of the country, Bank Asia Ltd adds new branches in urban as well as
rural areas in every year. Memorandum of understanding with Muslim
Commercial Bank Limited (MCB) a Pakistani bank was signed on
September 2001 for taking over the local operation comprising of two
branches at Motijheel and Agrabad and a booth at Banani, Bank Asia
formally took over these in January 2002.And by this way, in January 2002
a branch is came into operation in Agrabad of Chittagong. This branch is
named MCB Sk Mujib Road Branch. In later, this branch operation has
moved to a new premise on 26th December, 2005. The address of the new
premise is – Ayub center, 1269/B, Sk Mujib Road, Agrabad C/A,
Chittagong. The total number of employees is 24. There are four
departments in this branch including General Banking Department,
Accounts Department, Foreign Exchange Department & Credit Department.
Branch Position in 2007:

Total Loans and Advances 1869.357 Million

Total Deposit 2017.002 Million
Profit 128.468 Million

Performance up to Aug 2008

June 08 July08 August 08

Total Loans and 2434.351 M 2366.753 M 2247.805 M
Advances
Total Deposit 1855.555 M 1922.713 M 1991.633 M
Profit 11.332 M 11.002 M 11.536 M
Cumulative Profit 69.904 M 80.906 M 92.442 M

Cumulative Profit growth is 15% as compared to Cumulative Profit of July.

 CHAPTER 3
GENERAL
BANKING

GENERAL BANKING

I was assigned in the general banking department in the first week of my job
rotation program. This department consists of three coordinating sections:

• Customer Service Section

• Accounts Section
 • Clearing Section.
• Cash Section

All these three sections are coordinated with one another and perform their
best in achieving branch’s objectives.

CUSTOMER SERVICE:
Customer service is very important department for bank. For clients it is the
entrance. Courtesy is the key to customer service. From customer service
clients can know different products, services and policies. Banks impression
mainly depends on performance of the customer service. Its function is to
develop relationship with customer.
Customer service mainly provides the following services:
• Account opening
• Account closing and editing
• Issuing cheque book
• Providing account statement
• Issuing solvency certificate
• Stop payment
• Posting transfer entry
• Issuing Pay Order & Demand Draft
• Other Services
Opening an account:
Account opening is one of the most important tasks for customer service.
Different rules and procedure need to maintain for different types of
account.

Types of Accounts:

• Savings Bank (SB) Account:

This is an interest bearing account and only individuals can open this type of
accounts. Interest rate may differ from bank to bank. At present, Bank Asia
is offering 7% interest on its SB accounts. This may be considered as low
cost deposit for bank. Interest is charged to the account on quarterly basis.
 • Current Deposit (CD) Account:
It is popular known as Current Account. Any individual, company, firm,
may open this type of account in its own name. This is non-interest bearing
account. So it is a cost free deposit for bank, On the other hand, customers
enjoys the right to wiredraw money as many times as they wish.

• 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 6%.

• Fixed Deposit Receipt (FDR) Account:

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. Interest rate depends on amount and
period and ranges from 10% to 13.50%. In case of premature encashment
generally no interest is awarded. In special consideration interest at saving
rate or STD rate may be allowed. It is considered as high cost deposit for
banks.

• Non Resident Foreign Currency Deposit (NFCD) Account:

This account is opened by the Non Residents. Generally NRB’s 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 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.

Documents Needed To Open An Account:

To open an account customer service department asks for different papers
and documents are as follows:
• 2 copies of passport size photograph attested by the introducer.
• Signature card duly signed.
• A/C opening form duly filled up.
• Nominee signature card duly signed and 2 copies of passport size
photograph attested by account holder.
• Copy of passport/National Identity Card/ Voter ID Card/
Certification from Word Commissioner or Union Parishad
Certificate
• Transaction Profile Form duly filled in and signed
• Any other documents required by time to time.

Documents vary depending on the types of applicants. Additional

documentation and formalities to be observed before opening the account for
the following entities:

For Limited Company:

• Certified true copy of memorandum and Article of Association
• Certified true copy of certificate of Incorporation
• Certified copy of Certificate of Commencement of Business
• Copy of the Resolution of the Board of Directors authorizing for
opening account and specimen Signatures for operation of the Account duly
attested by the Chairman.
• Latest audited Balance Sheet
• Trade License
• Tin Certificate

For Partnership Enterprise:

• Certified copy of the constitution of the firm.
• Registered Partnership Deed/duly Notarized Partnership deed at will
(incase of unregistered firm)

For Associate/Club/Society/Charity:
• Minutes of the Committee meeting authorizing the opening of an
account with the Bank duly certified by the Secretary and the
Chairperson.
• A copy of Laws and Bye-Laws/Constitution duly attested by proper
authority.
 • A Copy of the resolution of the Committee authorizing Signatories to
operate the account
• Certificate of Registration; where applicable.

How to open a bank Account:

The following procedure is maintained to open an account

 Filling up the application form properly
 Preparing signature card containing two signature verified by the
introducer and two copies of photos attested by the same.
 Preparing nominee card containing two signature verified by the a/c
holder and one photo attested by the same.
 Collecting a lump sum amount as cash deposit.
 Ensuring all necessary documents are produced by the applicant

Customer service is completely responsible for any types of fraud,

misrepresentation, money laundering of funds etc. It is the duty of the
customer service to protect Bank from any types of misuse of funds, banking
service etc. So customer service may ask for any documents which may
require. They must apply their proper judgment. In this regard, the guiding
principles of this unit should be:
• Conduct business transaction with reputed clients whose character,
integrity and business dealings are sound.
• Efforts should be made to determine the true identity of the clients,
client’s verbal statement is not enough.
• Know enough of clients and client’s business to predict with relative
certainty about the transactions that the clients can or is able to
undertake.

Issuing chequebook:
Chequebook is issued only for CD, SB and STD a/c holder. For new A/C
holder thanks letter is required for issuing chequebook. Thanks letter is
nothing but a means of verifying the address of a/c holder. For existing A/C
holder Chequebook requisition slip is needed. Chequebook register is
maintained with serial number of the Chequebook, A/C number and
signature of the receiver. Only 10-leaf Chequebook is issued for savings
(SB) A/C and 25-leaf, 50-leaf Chequebook is issued for current deposit (CD)
A/C and short-term deposit (STD) A/C.
Closing an account:
An account is being closed in two ways:
1. Forced closing: An account is made closed forcefully when it is
observed that:
 There is no transaction during last 6/12 months
 Balance is zero
 The a/c holder is accused of money laundering
 There is other illicit activity on the part of a/c holder.
2. Closing upon a/c holder’s request: In each case, a minimum charge of
Tk. 200.00 plus incidental charges is deducted from the a/c balance.

Issuance of Demand Draft (DD) & Pay Order (PO):

For transferring fund from one location to another in safe and secured way
banks provide the above services to its customer. The sequential illustration
of each transfer is given below:
 Receive duly filled up DD/PO prescribed form by the applicant.
 Ensure that require amount is deposited or debited from account
along with applicable charges.
 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 advice to the Drawn on
Branch

Demand Draft (DD):

It is drawn on other branch of our bank outside clearing region. It is safe,
secured & popular method of sending money from one place to another for a
long time. Usually the beneficiary deposit the DD in his Bank where he has
account may be our bank or other bank and then the bank collect the
remittance by placing the order in his clearinghouse. And also note that DD
is issued by issuing branch but payment is made by Drawn on Branch. Bank
charge DD commission as 0.15% on the total amount plus 15% VAT on
commission earning and also Tk. 100 as postage charge.
Payment Order (PO):
Payment order is encashed in the same counter where from it was issued. PO
is drawn in favor of an Organization/Party known as beneficiary. Usually
PO is issued with in the clearing region. Bank charge PO commission of Tk.
58 for amount not more than BDT 200,000 and Tk 87 for amount above
BDT 200,000 plus 15% VAT on commission earning.

Other Services:
It provides other services as Issuing ATM card, SMS banking, Internet
banking facilities and related works regarding this and overall marketing of
Bank’s assets and liabilities.

ACCOUNT SECTION:

In banking business transactions are done every day and these transactions
are to be recorded properly and systematically as the banks deal with the
depositors’ money. Any deviation in proper recording may hamper public
confidence and the bank has to suffer a lot. Improper recording of
transactions will lead to the mismatch in the debit side and credit side. To
avoid these mishaps, the bank provides a separate department whose
function is to check the mistakes in passing vouchers or wrong entries or
fraud or forgery. This department is called Accounts Department.
Besides these, the branch has to prepare some internal statements as well as
some statutory statements, which are to be submitted to the Central Bank
and the Head Office. This department prepares all these statements.

Functions of Accounts Department:

We can divide the functions of accounting department into two categories.
One is day-to-day task and another is periodical task.

Day to day functions:

Here day-to-day function refers to the every day tasks. Accounting
department of MCB Sk Mujib Road Branch performs the following day to
day functions:
• Recording of transaction in the cashbook, general and subsidiary
ledger.
 • Preparing the daily position of deposit and cash.
• Making the payment of the expense of the branch.
• Recordings of inter branch fund transfer.
• Checking whether all the vouchers are correctly passed.
• Recording the voucher in the voucher register.
• Packing and maintains the total debit and total credit vouchers.

Periodical functions:
Periodical functions of accounts department include the preparation of
different weekly, fortnightly, monthly, quarterly and annual statement. The
accounts department prepares the following statements:
• Monthly statement of deposits, loans and advances, profit and loss etc.
• Quarterly statement of deposits, loans and advances, profit and loss
etc.

• Yearly statement of deposits, loans and advances, profit and loss etc.
• Yearly statement of classified Loans and Advances.
• Statement of Affairs.
• Yearly Budget of the Branch, etc.

CLEARING SECTION:

What is 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. checks for collection
from other banks. Practically clearing house is a house (Floor) of
Bangladesh Bank (BB), central Bank of Bangladesh, where every bank has
it’s 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.
At present there are 52 desks for 52 banks. Usually Bangladesh Bank
provides clearinghouse facilities to its member in different region and where
BB branch is not available, Sonali Bank, on behalf of BB, arranges clearing
house. Usually the authorized official of every bank attend clearing house
floor in opening time with all collection checks in his hand drawn on other
banks and settle down their transaction by the arrangement of clearing
house.
Sequential arrangement of Clearing Operation:
1. Collect all collection and clearing checks from cash counter and
clearing desk.
2. Collect collection checks from other branches
3. Sorting the checks as in zonal checks and out zonal checks and
classify them according to different Banks.
4. Give posting in NIKASH for In Zonal checks and for outside
zone
checks prepare OBC (Out ward 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, Agra bad Branch of Bank
Asia Limited for Chittagong Zone and collects the checks 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 check on a branch of a bank where we have no branch or there is
no clearinghouse. Then we send the check 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 clearing region e.g. Dhaka 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 Dhaka city. And then we
collect the DD by placing it in Dhaka clearinghouse

5. Perform Sealing formalities:

Cross Seal: Affix cross seal on the left corner of checks that will be placed
on clearinghouse for collection. Bankers imply two types of crossing, i.e.
General Crossing and Special Crossing. Usually the crossing means two
parallel lines on corner of the checks, given by the customer who is issuing
the check; this general type is termed as general crossing. General crossing
implies that this check is not eligible for payment over counter and payment
must be made by transaction or clearing basis. And bank use special
crossing, when it receives the check to clear, on the top left corner by
mentioning bank name and branch name. The purpose of special crossing
check is that the specific bank’s branch that is marked as ‘crossed’ is only
eligible to clear this check.
Clearing Seal: Affix this seal on all checks to be placed on clearing house.
Endorsement Seal: Affix endorsement seal if the check is endorsed.

6. Take print of NIKASH posting for In Zonal checks. And affix

the
print copy with the respective bank’s checks accordingly. And now checks
are ready to be placed in clearing house.

7. Take copy of NIKASH posted entries in Floppy disk.

8. 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 checks with other banks
and receive checks drawn on his bank from other bank’s desk. Here the bank
officers check errors with the check amount and NIKASH entry amount and
other checks. And in case of any errors take initiatives to correct it with the
respective bank’s officer. And then BB representative cross matches the
checks 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 checks 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 checks placed to other Bank for collection (Outward):

Respective Bank’s A/c Dr.

Bank Asia Limited A/c Cr.

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

Bank Asia Limited A/c Dr.

Respective Bank’s A/c Cr.

9. Then the bank officer comes back to his office along with the
checks
drawn on his bank (Inward checks) and the printed statement. Then he
checks manually all the checks and send all the checks drawn on other
branches to have the confirmation on fund sufficiency in the respective
customer account and to debit accordingly from customer account.
10. Then the responsible officer gives posting vide STELAR (the
banking
software of Bank Asia Limited) and credit each and every customer’s
account for outward collection. But at this stage customer is not allowed to
draw money form their account as the account is marked by “Under
Process” for this credited amount.
And here the officer pass posting in his own system as follows:

For checks placed to other Bank for collection (outward):

Clearing Adjustment A/c Dr.

Respective Br./Customer’s A/c Cr.

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

Respective Br./Customer’s A/C Dr.

Clearing Adjustment A/c Cr.

11. Then within 5 p.m. all the branches send bank the return checks
with
return memo. And in return memo specific mark is given to the reason for
check return. Usually a bank return or dishonor checks for the following
reasons:

 Insufficient fund.
 Check out of date/post dated.
 Amount in figure and word differs.
 Drawer’s signature differs from the specimen recorded in
our office.
 Payment stopped by drawer.
 Crossed check to be presented through a bank.
 Payee’s endorsement required.
 Or any other reason as written on the memo.

And then the respective bank officer will make posting of return checks in
Nikash and take print and affix the copy with return checks bank wise and
also take a copy of Nikash posting in Floppy disk. And then he attends
return house and places the disk to computer section and again exchange the
return checks and cross match the return checks with each other. And then
BB representative upon making announcement take print of NIKASH posted
cross match entries of return checks and give this print copy to each bank
representative and then the bank officer come back to his office with the
return checks of its customer. And he makes posting in STELAR for return
checks and debit/bounce respective customer’s account and now clear the
under process mark on the amount that was posted today’s morning. And
now customers can withdraw money form his or her checking account.
Here BB makes the following posting for return checks:

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

Bank Asia Limited A/c Dr.

Respective Bank’s A/c Cr.

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

Respective Bank A/c Dr.

Bank Asia Limited A/c Cr.

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

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

Respective Br./Customer A/c Dr.

Clearing Adjustment A/c Cr.
For Return checks placed by other Bank for collection (Inward):

Clearing Adjustment A/c Dr.

Respective Br./Customer A/c Cr.

12. And then the clearing section of Bank collects checks 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.

CASH SECTION:

Cash department is very important and sensitive department. It is that

department through which services regarding cash transaction are given to
the customer. Banks goodwill mainly depends on cash management. Clients
are likely to judge banks performance through cash department. Banks need
to have sufficient fund to meet customers demand. So the roll of cash
department is very important in achieving the goal of keeping the customers
satisfied all the time.

Functions of Cash Department:

It mainly supports cash deposits and withdraws by customer. Details
functions of cash department (Teller Operation) are as follows:
1. Opening days with previous ending balance.
2. Ensure there is the correct amount of cash.
3. Greets customers.
4. Ensure that the deposits and withdrawals slips are correctly filled.
5. Check customer identification, customer signature and ensure that
fund are available in case of payment against cash.
6. Accept deposits, pay withdrawals and cash cheque.
7. Record all cash in and cash out in teller register
8. Sort and file account records.

Opening Balance : 000000

Add, Cash Receipts : 000000
-----------------------------------------------------
Total cash available : 000000
Less, Cash Payment : 000000
--------------------------------------------------
Closing Balance : 000000

In MCB SK. Mujib Road Branch there are three counter.

 1. Bills Receipts
2. Deposits Receipts
3. Payment

General Functions:

• At the start of the day preparatory activities include bringing out the
money detector machine, changing the date of the seals etc.
• Four types of seals are used here – cash received, cash paid, transfer
Received for clearing and received for collection.
• Accounts are debited for payment and accounts are credited for
receipts.
• At the end of the day total amount of the receipts and payments
counter are counted to prepare daily cash position .

Some Precautions:

For proper maintenance and to protect fraud and misrepresentation payments

limitation are imposed for staffs. According to the system cash in-charge is
allowed to pay up to taka 100000, sub manager up to tk 500000, manager’s
approval is required for payment over tk 500000. On line limit for payment
tk 50000 for which sub manager’s approval is requied and cash in-charge
can pay up to tk 20000 through on line .

Different types of register are maintained for record such as –

• Vault register
• Cash balance book
• Daily cash position
• Teller register
• Clearing register (in MCB Sk. Mujib R. branch)

Cheque : cheque is a negotiable instrument. A large number of cheque for

cash and clearing are deposited. Officer should be cautious in receiving
cheque. Important points in a cheque are as follows .
• Date (both post-dated and stale cheque are not accepted)
• Bank and branch
• Payee
 • Amount in figure and words
• Signature
It is strictly recommended that if everything is correct as mentioned above,
bankers should honor cheque. But in some cases bankers should dishonor
cheque. The following are the reasons:
• Where the customer countermands the payments
• On receipts of a notice of the customers death
• On receipts of a notice of the customers insanity.
• On receipts of Garnishee order.
• Where the banker believes that the person presenting the cheque is
not entitled to receive the payment thereon.

Cash management deals with the management of inflow and outflow of cash
of the Branch. It forecast cash inflows and outflows and accordingly
arranges sufficient cash to meet client’s 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-charge’s responsibilities are
stated below sequentially:
• 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 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.
• Also 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.
• This section also provides foreign remittance service to its customers.
Usually it collects foreign remittance through ITT (International Telegraphic
Transfer), and FDD (Foreign Demand Draft).

Vault Limit:
is a critical issue for the cash department. It defines the limit that is insured
by an insurance company. That means the limit of cash reserve covered by
the insurance premium. The vault limit of MCB SK.Mujib Road branch is
Tk.1.5 crore.
Counter Limit and Carrying limit:
Counter limit is the highest amount which can maintain in cash at a time. In
MCB SK. Mujib Road branch insurance coverage is TK. 35 Lacks.
Carrying Limit is the highest amount insured in transit. One branch need to
transfer money from one branch to another branch and also to Bangladesh
Bank.
Cash Transaction Report (CTR): Monthly report on customers’ every
day’s transaction equivalent to or over five lac during the month concerned.
Suspicious Transaction Report (STR): Report on transactions not
consistent with KYC (Know Your Customer)
Due care and concentration is required to perform all these activities
successfully and flawlessly 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
 CHAPT
ER 4
FOREIGHN
EXCHANGE
FOREIGN EXCHANGE:
In banks, the foreign exchange refers to the general mechanism by which a
bank converts a currency of one country into that of another. Foreign trade
gives rise to the foreign exchange.
The bank deals in foreign exchange when it is so authorized by the
Bangladesh Bank under Section 3 of Foreign Exchange Regulations Act
1947. And is then known as Authorized Dealer. The MCB SK Mujib Road
Branch is an authorized dealer that has been operating the foreign exchange
business effectively for a long time.
The activities of foreign trade department of this branch can be categorized
into three main sections:

• Import
• Export
• Foreign Remittance
Foreign trade of a country refers to its imports and exports of merchandise
from and to other countries. This trade happens among the foreign countries
through foreign exchange.
IMPORT:
One of the salient functions of the commercial bank in the world is to
undertake import of merchandise into the country and payment of foreign
exchange towards the cost of merchandise of the foreign suppliers or
beneficiaries.
An importer always intends to build up a business relation with the best-
suited suppliers for him for the goods he wants to procure from global
market. Upon selecting the right one sales agreement takes place between
these two parties. And in sales contract two parties come in agreement on
the payment of the transaction. As importer and exporter are from different
global location, they want to secure their transaction. And at this point both
parties rely on 3rd party institution to secure the transaction and this
institution is Bank.
The payment methods of international trade are as follows:
• Cash in Advance
• Open Account
• Documentary Collection
• Documentary Credit(L/C)
In the above first three methods i.e. Cash In Advance, Open Account &
Documentary Collection by their nature have failed to protect mutual
interest between Buyer & seller. During that time, an inevitable objective to
mitigate the mentioned gap between Buyer and seller, as well as amplify the
confidence among them in a single international trade mechanism, the
modern commercial letter of credit practice has been evolved as a panacea
for the international trade practitioners. Now it’s considered as most reliable
international payment mechanism all over the world, which is discussed in
the next.

Documentary credit

What it is:
Generally, L/C or letter of credit or documentary credit is a conditional,
definite undertaking of the issuing bank at the request and instruction of the
applicant in favor of the beneficiary to make payment provided that term and
conditions of the credit complied with.
According to Article-2 of the uniform Customs and Practices for
Documentary Credit (UCP-600)-
“Credit means any arrangement, however named or described, that is
irrevocable and thereby constitutes a definite undertaking of the issuing bank
to honor a complying presentation.”
In order to determine complying presentation in a particular letter of credit
transaction, the following three conditions has now been satisfied. i.e.
“A Presentation that is in accordance with the terms and conditions of the
credit, the applicable provisions of these rules and international standard
banking practice.”
Why Bank Involve:
The following are the prime reasons for involving bank in L/C transaction:
 For expediting the international trade.
 To act as a media between applicant and beneficiary.
 To secure the beneficiary’s payment.
 To protect money laundering.
 To compliance with laws of international, importer & exporter’s rules
and regulations.

Brief history regarding irrevocability of credit:

All of the previous versions of UCP except UCP 600 contained reference to
revocable and irrevocable credits. Users have moved from one to the other,
from UCP 82 to UCP 500, depending on the type of transaction required.
Finally, UCP 600 has shaped every letter of credit transaction under one and
unique umbrella, the irrevocable credit.
According to UCP 290, article 1:
a) Credits may be either (i) revocable, or (ii) irrevocable.
b) All credits, therefore, should clearly indicate whether they are
revocable or irrevocable.
c) In the absence of such indication, the credit shall be deemed to be
revocable.
Article 7 of UCP 400 incorporated the same principle. Clearly, during the
early years of the UCP the revocable letter of credit was relatively more
important in trade finance than the irrevocable L/C.
However, with the expansion of international trade and the involvement of
more and more people in the trading process, the limitations of the revocable
L/C became evident to traders, bankers and other practitioners. In time, it
fell into relative disuse, and the irrevocable L/C as an instrument of
international trade settlement, with its own features, received recognition in
UCP 500, giving it more importance than a revocable credit. According to
UCP 500, article 6,
(a) A credit may be either (i) revocable, or (ii) irrevocable.
(b) The credit, therefore, should clearly indicate whether it is revocable or
irrevocable.
(c) In the absence of such indication, the credit shall be deemed to be
irrevocable.
UCP 600
Due to very limited use of the revocable L/C, the Banking Commission of
the ICC decided to remove it from UCP 600. Now, unless otherwise
specified, a credit is irrevocable. The principle of irrevocability is further
emphasized in article 3: “A credit is irrevocable even if there is no indication
to that effect”, and is maintained in other articles and sub-articles: 7 (b), 8
(b) 10 (a), (b), (c), etc.

Parties of a L/C:
• Applicant: Applicant means the party on whose request the credit is
issued.
• Beneficiary: Beneficiary means the party on whose favor the credit is
issued.
• Issuing Bank: It means the bank that issues a credit at the request of
an applicant or on its own behalf.
• Advising Bank: Advising Bank means the bank that advises the
credit at the request of issuing bank
• Nominated Bank: The bank with which the credit is available or any
bank in case of a credit is available with any bank.
• 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.
• 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.
Local Required document for opening an LC:
 The applicant must have a CD account with the bank.
 Formal LC opening application.
 Must have the import Registration Certificate (IRC), TIN and VAT
certificate.
 Credit Information Bureau (CIB) report of the client.
 Charge Documents such as DP note, GLCA, Letter of hypothecation,
Counter guarantee etc.
 Duly filled up and signed LC application from, IMP (Import
Permission) Form, LACF (L/C authorization form)
 Indent/ Proforma Invoice/ Contracts applicant *1
 Credit Report of the supplier * 2
  Insurance cover note with money receipt
*1 Proforma Invoice: If the beneficiary company/ exporter do not have any
agent in our country then them they send quotation en their company pad.
This is called proforma invoice.
*1 Indent: If the beneficiary has agents in Bangladesh then the agent send
quotation on behalf of the company then it is called indent.
*2 Credit Report of Supplier: If pro forma invoice is submitted with LC
opening application then credit report is mandatory is applied LC amount is
TK 2 lac or above it. In case of indent credit report of supplier is mandatory
if it is equal to taka 5 lac or above.
IMP Form: For the reporting to the Bangladesh Bank, Bank Asia fills in the
prescribed IMP form and sends it to Bangladesh Bank describing all the
information regarding the letter of credit.

L/C Mechanism:
The following diagram brings out clearly the operation of letter of credit:

Contract for
sale (1)

Beneficiary Ship goods to Applicant

(5)

Receive L/C Recovers

Applies for
Amount from
opening of
Present doc. & (8)
L/C (2)
Obtains payment
Beneficiary’s
from (6)
Bank
Issuing Bank
Obtains
Forwards
Reimbursement
L/C to (4)
from (7)

Advising/
Confirming
Bank
 Open L/C &
Sends to (3)

Description of L/C Mechanism: Description of L/C Mechanism:

The various steps involved in the operation of a letter of credit are described
as follows:

1. The importer and exporter have made a contract before a letter of credit
has been issued.
2. The importer applies for a letter of credit from his banker known as the
issuing bank. He may have to use his credit lines.
3. The issuing bank opens the letter of credit that is channeled through its
overseas correspondent bank, known as the advising bank.
4. The advising bank informs the exporter (the beneficiary) of the arrival of
the letter of credit.
5. Exporter ships the goods to the importer or other designated place as
stipulated in the letter of credit.
6. Meanwhile, the exporter also prepares his own documents and collects
transport documents or other documents from relevant parties. All these
documents will be sent to his banker, which is acting as the negotiating
bank.
7. Negotiation of export bills happens when the banker agrees to provide
him with finance. In such case, he obtains payment immediately upon
presentation of documents. If not, the documents will be sent to the
issuing bank for payment or on an approval basis as in the next step.
8. Documents are sent to the issuing bank (or reimbursing bank, which is a
bank nominated by the issuing bank to honor reimbursement from
negotiating bank) for reimbursement or payment.
9. Issuing bank honors its undertaking to pay the negotiating bank on
condition that the documents comply with the letter of credit terms and
conditions.
10.Issuing bank releases documents to the importer when the latter makes
payment to the former or against the latter’s trust receipt facility.
11.The importer takes delivery of goods upon presentation of the transport
(usually shipping) documents.

Bank Activities Regarding Issuing L/C:

1. On receipt of credit application along with the importer’s requisite papers
the bank takes into consideration of the following points:
• The amount of proposed credit which should not exceed the total limit
sanctioned for opening a letter of credit.
• The financial standing, reputation of the customer.
• The nature of commodity to be imported.
• The Exchange & Import Trade controls are supplementary &
complementary to each other.
• The marine insurance for transaction is adequate.

2. Then the bank, after completing the above formalities proceeds for
opening the credit. Usually bank opens the credit through the SWIFT
(Society for Worldwide Inter-bank Financial Telecommunication)
message and sends it to the advising bank containing the relevant
information.
Usually the bank keeps 10% margin of total L/C value depending on the
banker customer relationship.

3. Advising a Letter of Credit:

The letter of credit duly signed by two authorized officers whose specimen
signatures already recorded with advising bank must be addressed to the
beneficiary. It is situated in the exporting country and may be the branch of
the opening bank. The advising bank has to verify the signatures of the
officers of the opening bank and ensure that the terms and conditions of the
credit are not in violation of regulation relating to export. While advising the
advising bank does not undertake any liability.

4. Add Confirmation:
At times beneficiary of letter of credit does not accept letter of credit (issued
by issuing bank) as he is not assured of the credit worthiness of issuing
bank. The beneficiary therefore insists that such letter of credit be further
confirmed by a bank in seller’s country. The advising bank can do so if there
is prior arrangement between advising and issuing bank. When the advising
bank in the seller’s country adds it confirmation to the credit and advises the
letter of credit to the beneficiary (seller), the correspondent bank becomes
both confirming as well as advising banker.

5. Amendment / Modification of Letter of Credit:

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.
6. Shipment of Consignment & Lodgment of Documents:
After satisfying with terms and conditions the seller proceeds to the
shipment of required goods to buyer. The exporter will ship goods and
obtain full set of Bill of Lading etc from the carrier company and submit the
same to the negotiating bank along with other documents that are called for
in the credit. The shipping documents usually obtained are:
• Bill of Lading or Airway Bill or Truck Receipt.
• Bill of exchange.
• Commercial invoice.
• Certificate of Origin.
• Packing list.
• Weight Certificate.
• Consular Invoice.
• A copy of declaration of shipment made to the insurance company.
• Pre-shipment Inspection Certificate from internationally reputed
surveyor.
• Analysis certificate where specification of commodity is given.
After receiving all the documents the negotiating bank checks the documents
i.e. insurance policy, invoice, etc. against credit. If the documents meet the
required conditions of credit, the bank will pay or accepts the documents or
negotiate the drafts according to the terms of credit and forward the original
documents by airmail to the issuing bank with duplicate copy by subsequent
airmail.

7. Settlement:
If the documents are found as per credit requirement, settlement in fulfilling
the commitment of issuing bank in regard to effecting payment may be done
under three separate arrangements:
• Settlement by payment:
Documentary bills can be either DP (Documents against Payment) or DA
(Documents against Acceptance). Under DP the seller presents the
documents to the paying or negotiating bank and the bank then scrutinizes
the documents & then it makes payments to the beneficiary by debiting the
issuing bank account with it or claim reimbursement from the designated
bank as instructed by the issuing bank in the reimbursement clause of letter
of credit.
The issuing bank on receipt of the documents, duly negotiated by the foreign
bank, will carefully check the documents in accordance with the terms &
conditions of credit. On being satisfied the issuing bank will lodge bill by
responding the debit advice initiated by negotiating bank in PAD (Payment
against Documents) by converting foreign currency representing the bill
amount and foreign correspondents charges into Taka by applying the BC
rate on the date of lodgment.
After lodgment the issuing bank will ask the importer to retire the bill, if it is
a sight bill, by sending cost memo indicating amounts payable by him under
different heads. As soon as the import bill is retired against payment the
entire deal against the credit stands closed. Bank then reports this transaction
on usual form of Bangladesh Bank.
• Settlement by Acceptance:
All documents under acceptance are usance bills. Documents against
Acceptance bills are released to the drawee on mere acceptance of the claim.
The drawee is deemed to have accepted the claim when he signs his name
across the bill. In usance or time bill there is maturity period which is called
tenor.
The seller submits the documents evidencing the shipment to the accepting
bank accompanied by a draft drawn on the bank at the specific tenor.
Accepting bank is the bank nominated in the letter of credit to accept usance
bills drawn under the credit. When the accepting bank is other than the
issuing bank, the accepting bank sends the documents to the issuing bank
stating that it has accepted the draft. At maturity reimbursement is obtained
in the pre-agreed manner, subject to satisfying the credit requirements of the
documents.
• Settlement by Negotiation:
If there is discrepancy in the documents, the bank should immediately
advice the importer to seek his acceptance of the documents despite the
discrepancy. The bank may be prepared to negotiate documents and the
amount for the documents negotiated is held under reserve. This means that
the bank puts the fund at the seller’s disposal against an acceptable letter of
indemnity whereby the exporter agrees to reimburse the negotiating bank
with the amount and other charges in case of documents are rejected by the
importer.

EXPORT:

Export plays an important role in regulating the flow of foreign currency

into the country. The export is normally executed against letters of credit
opened by overseas buyers. This section ensures the proper export proceeds
to the exporter.
Required Documents for Export:

1. Registration: Any firm or party desirous of undertaking export trade is

required to obtain Export Registration Certificate (ERC) from CCI&E (Chief
Controller of Imports and Exports), Government of Bangladesh. For getting
ERC followings are submitted along with the application for ERC.
2. Nationality Certificate.
3. Trade License from Multiple Authorities
4. Bank Certificate.
5. Income Tax Certificate.
6. Registered partnership deed in case of partnership.
7. Memorandum & Article of Association & Certificate of Incorporation for
Limited Company.
Steps of an Export:
Export Order: On receipt of registration the exporter will proceed to
contract the buyers directly through correspondence or business visit to
different foreign countries.
Contract: When sale is agreed a contract between buyer and seller is
executed specifying the detail terms about sale, such as full description of
quantity of merchandise, value of commodity quoting its FOB, CFR, CIF
etc. with provision for payment at sight, DP or CAD or usance terms,
whether inspection before shipment is necessary if so who will bear the cost
etc.
Export Letter of Credit:
The export is normally executed against letters of credit opened by foreign
buyers. The following terms of L/C are examined to avoid the future
complicity:
• The terms and conditions of L/C are definite, clear and explicit.
• The L/C should be an irrevocable one & be confirmed by the
advising bank.
• The L/C is transferable.
• The L/C should provide sufficient time for shipment & a
reasonable time for negotiation.
Shipment:
On conclusion of the contract securing the sales order of the exporter should
sent goods to importer on time. There are various terms of delivery at
international level CIF, FOB, CFR etc. Export from Bangladesh mostly
takes place by sea. The goods to be shipped should be packed in suitable
container with packing list inside describing the weight, quantity etc. The
steps of shipment are complex and so exporter may require Clearing &
Forwarding (C&F) agent for smooth delivery with the following documents:
 ERC
 Commercial invoice
 Packing list
 Copy of sale contract/Export L/C.
To export goods, air, sea or other modes can be used. The exporter is to
collect the Airway bill, Bill of lading, Truck Receipt which is drawn only to
the order of an authorized dealer designated for this purpose by the
respective exporter and delivery to the AD.
The AD then to whose order the relative Railway Receipt, Bill of Lading etc.
are drawn shall endorse the same to the order of their foreign
correspondents.

Preparation of Export Documents:

As soon as the Bill of Lading, Airway Bill or Truck Receipt is received the
exporter would prepare the relevant documents and submit the same for
early repatriation of export proceeds. The following documents are normally
required for negotiation:
1. Bill of Exchange: This is sent by the exporter in two or three sets and
includes the amount of L/C, date, sight or usance etc.
2. Commercial Invoice: A statement prepared by shipper containing full
details of goods shipped. It gives description and price of merchandise,
quantity, quality, packing details, name & address of the buyer and seller,
name of vessels, date of shipment, number of bill of lading etc.
3. Bill of Lading: The document evidencing the carriage of goods by sea is
the bill of lading and is issued by the shipping company or its agent and
contains brief description of goods accepted for transport. It is used
usually two or three sets. It also includes general description of the
goods, marks numbers, gross & net weight. Exp numbers should be
correctly mentioned in the bill of lading.
4. Airway Bill: The documents evidencing the contract of carriage of goods
by air are known as Airway Bill.
5. Packing List: A packing list prepared by the exporter serves to indicate
the exact mature, quantity & quality of the contents of each package in a
shipment. Clearance of goods through customs is also facilitated by
packing list.
6. Certificate of Origin: It is document certifying the country of origin of
the goods that is it describes where the goods originally produced or
manufactured.
7. Other Certificates: Some other certificates such as Weight Certificate,
Inspection Certificate by supplier or an independent inspection agency,
Certificate of Analysis may be required in the chemical & drugs etc.
Export Proceed Realization:
Usually it takes 21 days to payment the export proceeds if there is no
discrepancy. The issuing bank credits the nostro account through its head
office account. The branch then debit Head Office General Account for the
export proceeds realization and credit the party account deducting all kinds
all kinds of charges.

EXP form:
All export must be declared on EXP form. These forms will be supplied by
Authorized Dealer for use of the exporter. The authorized Dealer should,
before certifying any export form, ensure that the export is registered with
CCI&E under the Registration (Importers & Exporters) order 1952. The
registration number should be quoted on the relative EXP forms.
The exporter should take the preparation for exporter arrange for delivery of
goods as L/C & incoterms, prepare & submit shipping documents for
payment/ acceptance/ negotiations in due time.
International Commercial Terms:
In international trade a variety of cost involved namely merchandise cost,
carriage cost, insurance cost, customs & duties, and other charges and
commission for banking facilities. Among them only merchandise cost is
covered through L/C. Other expenses are beard either by the exporter or
importer. In international business some internationally recognized terms are
used to denote who will bear how much of the cost beyond merchandise
cost. These terms are known as Inco-terms grouped in the following chart:

Name
Group of Annotations
Terms
Ex- Goods will be delivered at the premises of the supplier’s
E Works factory meaning that exporter’s responsibility ends at his
factory premises.
FAS Free Alongside Ship, which means that exporter will bear
the cost incurred in carrying the merchandise to the ship at
the port of loading.
 F Free On Board, which means that exporter, will bear the
FOB cost incurred in carrying the merchandise to the board/ deck
of the ship.
Free carrier, which means that exporter, will bear the cost
FCA incurred in carrying the merchandise to the board of the
carrier in the airport.
Carriage & Freight meaning that exporter will bear the cost
CFR involved in carrying the invoice goods to the port of
destination.
Carriage, Insurance & Freight meaning that exporter will
C CIF bear the insurance cost in addition to the cost involved in
carrying the invoice goods to the port of destination.
Carriage & insurance Paid meaning same as CIF and used
CIP in road transportation.
Carriage & Insurance Paid To meaning same as CIF&CIP
CPT and used in airway transportation.
Delivered at frontier/border meaning that exporter will bear
DAF the cost involved in carrying the invoice goods to the
frontier of importer’s country.
Delivered Ex-ship which means that exporter will bear all
D DES the cost incurred in carrying the merchandise to the port of
destination.
DDU Delivered duty unpaid.
DDP Delivered duty paid.
DEQ Delivered exquay which stands at the opposite of Ex-works.

Increasingly, exporter are quoting more inclusive terms, such as CIF or

DDP, as this makes it easier for the overseas buyer to compare the price of
the goods on offer with the price already being paid or quoted by other
potential sources of supply. The overseas offer is more attractive if the seller
assumes responsibility for the goods until they are delivered to the buyer,
and the buyer is not burdened with extra administration because the goods
are being supplied from overseas rather than from local sources.
The point of delivery determines the point at which the risk shifts from seller
to buyer as shown in the table. The closer the point of delivery to the buyer’s
operation, the lower the risk for the buyer and the further the point of
delivery from the buyer, the lower the risk for the seller.
FOREIGN REMMITANCE:

The foreign exchange department of MCB Sk Mujib Road Branch provides

a variety of Foreign Remittance facility. To enjoy the facility the person
should have an account with the bank.

Following are the three types that are provided:

• Issuance of Travelers Cheque
• Endorsement of Passport
• Issuance of Foreign Demand Draft

Bill purchase and discounting:

This section 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 shipment of goods exporter comes to the bank with shipments papers,
then all these documents, are sent to the opening bank in prescribed form. If
everything is in order then the opening bank send us an acceptance, for
acceptance verification the acceptance documents are sent to the zonal office
of the opening bank. If the exporter needs money immediately then he can
offer the bank to purchase the bills. Then proposal of bill purchase goes to
the zonal office is achieved then the bill may be purchased up to 90 % of the
value @ OD sight rate. Later we get the payment from opening bank and can
realize the total amount. By these bills purchased bank can add to its income
and can increase it.
CHAPTER 5
CREDIT
DEPARTME
NT
CREDIT DEPARTMENT:
This division deals with asset selling of the bank. Generally financial
institutions like commercial banks pool 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.

Section of Credit Department:

There are two sections in credit department. These are-

Credit Relationship Department:

• Credit Administration Department

These departments are divided as to make ease of accomplishing the

different functions of the credit department

Functions of Credit Department:

The core functions of Credit Department are given as follows:

• Selection of borrower:
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.
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:

Financial Spread Sheet (FSS):

This is an intensive analysis of projected financial figures of the project to
assess the financial strength of project or proposal. Here we prepare Balance
Sheet, Profit and Loss Statements, Cost of Goods sold, and Cash flow
statement and fund flow statement of the applicant or the projected statement
of the proposed project on which loan facility is being sought.

Credit Risk Grading (CRG):

Credit risk is the primary financial risk in the banking system. Identifying
and assessing credit risk is essentially a first step in managing it effectively.
In 1993, Bangladesh Bank as suggested by Financial Sector Reform Project
(FSRP) first introduced and directed to use Credit Risk Grading system in
the Banking Sector of Bangladesh under the caption “Lending Risk Analysis
(LRA)”. The Banking sector since then has changed a lot as credit culture
has been shifting towards a more professional and standardized Credit Risk
Management approach.
Credit Risk Grading system is a dynamic process and various models are
followed in different countries & different organizations for measuring
credit risk. The risk grading system changes in line with business
complexities. A more effective credit risk grading process needs to be
introduced in the Banking Sector of Bangladesh to make the credit risk
grading mechanism easier to implement.
Keeping the above objective in mind, the Lending Risk Analysis Manual
(under FSRP) of Bangladesh Bank has been amended, developed and re-
produced in the name of “Credit Risk Grading Manual”.
The Credit Risk Grading Manual has taken into consideration the necessary
changes required in order to correctly assess the credit risk environment in
the Banking industry. This manual has also been able to address the
limitations prevailed in the Lending Risk Analysis Manual.
All Banks should adopt a credit risk grading system outlined in this manual.
Risk grading is a key measurement of a Bank’s asset quality, and as such, it
is essential that grading is a robust process.

Risk Grade Score Card:

We prepare another weighted risk grade score card considering all the ratios
on the financial spread sheet and some subjective judgment like Business
outlook, management, personal details, age of business and size of business
etc.
And all of these initiatives require predicting the financial strength of the
proposed project and its ability to service the loan in future and it is the most
vital and crucial steps in loan procedures.
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. Then we
proceed to the next step.

• Preparation of proposal:

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 limit that
comprises a compact range of loan facility to the business or may be
for a single facility.
• Background of the business house that sought for loan.
• Nature of industry and nature of 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.

This proposal is send to head office along with Risk Grade Score Sheet,
Copy of Land valuation report, 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.

• Send proposal to higher authority:

This proposal is send to head office along with Risk Grade Score Sheet,
Copy of Land valuation report, 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.

• Documentation:
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 client’s 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.

• Disbursement and operation:

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.

• Monitoring & 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 Bank
also prepares report on classified loan each month and sends it to
Bangladesh Bank through Corporate office.

• Reporting:
This department prepares various reports on daily, weekly, monthly,
quarterly and yearly basis and provides those reports for internal uses, head
office and to the Bangladesh Bank through Head office.

• Performance evaluation:
To control the total activities performance evaluation is done and by this the
actual performance can be compared with the standard performance. Credit
is 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.

Portfolio of Credit:
Commercial banks make advances in different forms. All types of credit
facilities can be broadly classified into the following groups:

Loan & Advances

Continuous Loan Demand Loan Term Loan

1. Continuous Loan: Here the customer avail the loan facility continuously
for a specific time period. And the customer can enjoy the facility at any
time with in the period. And also noted here that with in stipulated limit he
can enjoys the facility as much as he desires. That’s 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:

Over Draft (OD): This is a loan arrangement between bank and customers
by which the customer can draw money over and above his credit amount in
his account up to a certain limit as approved by the bank. 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. Usually
collaterals secure this facility and also guarantee as the bank ask for. This
loan is termed as Secured Over Draft (SOD) when the facility is secured by
cash equivalent i.e. FDR certificate, DPS certificate or any other Savings
Instrument. This type of loan i.e. overdraft crafts the major portion of total
loan portfolio of the bank. This loan is disbursed in client’s present current
account as maintained with the bank. And interest on this loan is calculated
on daily basis but charged in customer account quarterly.
2. Demand loan: This loan 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 becomes due after one day of its drawing. Bank
provides a wide range of loan under this head as follows:

Bill Purchase: May be local (LDBP) or Foreign Bill (FDBP). In this

arrangement bank facilitates the client to channel cash flow to the business
houses by purchasing or discounting its bill on its export proceeds. And
usually this amount is given for a specific period depending on the maturity
of the export bill.

Force Loan: Some time the bank is forced to create some loan for some
specific purpose for instance to wash out PAD (describe later on here) with
in 21 days of its creation if there is no LTR or LIM arrangement and the
customer fails to pay in cash. Another one may be claim on Bank guarantee.
In this situation the bank is forced to create a loan and make payment to the
beneficiary.

PAD (Payment Against Documents): This is another type of demand loan.

This is a special arrangement of bank to settle the L/C payment for all sight
L/C upon arrival of non-discrepant L/C documents. Then the bank open
PAD and make payment to the negotiating bank and then with in next 21
days the bank washed out PAD by receiving cash for the customer in case of
cash L/C or by crediting LTR or LIM when prior arrangement is made
accordingly.
3. 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 than 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.

Beside these there are some other funded facilities as follows:

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 title of goods and
clear the goods from customs and arrange to sell out the goods and from the
sales proceed the client retire the documentary credit LTR. LTR is executed
by a trust receipt means that the customer will held the subject matter i.e. the
goods or its sales proceed in trust of the bank until the full payment of this
loan. This trust receipt creates the banker lien on the goods and sales
proceeds. Usually this loan is arranged for a maximum time of 180 days.
And the sales proceeds of the goods held in the trust must be deposit in the
bank to repay the LTR outstanding irrespective of the period of the trust
receipt.

LIM (Loan against Imported Merchandise): It is like as LTR and used to

make payment of import bills. But here the goods are held in bank’s go
down 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.

Packing Credit: Some times by the lien of Master L/C bank may extend
loan amounting 10-15% on Master L/C value to the exporter to complete
packing formalities and ship the goods to the importer. And upon receipt of
Master L/C proceeds this loan is adjusted.

Beside these funded facilities, means those loan for which bank already
channeled this fund, there are some no funded arrangement for which bank
don’t lock its fund immediately but will make it in future time. For instance:

Letter of Credit (L/C): It is an undertaking of issuing bank on behalf of the

importer favoring the exporter to pay a certain some of money under certain
terms and conditions.
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.

Acceptance: Undertaking by the bank to pay a bill drawn on the bank on

behalf of its client on maturity.

Mode of creating charge:

• Lien: Lien is the right of a person to retain that which is in his

Possession and which belongs to another, until the demands of the person in
possession are satisfied. Lien gives a person only a right to retain the
possession of the goods and not the power to sell unless such a right is
expressly conferred by statue or by custom or usage.
• Pledge: Pledge is the bailment of goods as security for payment of a
debt or a performance of a promise.
• Hypothecation: It a mode of creating an equitable charge against a
property, for a payment of debt which continues to be in the possession of
the debtor. It is different from pledge because there the asset pledged
remains in the possession of the lender.
• Mortgage: A mortgage is the transfer of an interest in specific
immovable property for the purpose of securing the payment of money
advanced or to be advanced by the way of loan, existing or future debt or the
performance of an engagement with which may give rise to a pecuniary
liability.

Product Program Guideline:

Bank Asia has a detailed Product Program Guideline (PPG) of its several
products. This PPG covers the guideline for the following products:
• House Finance
• Auto loan
• Consumer Durable Loans
• Loans for Professional
• Unsecured Personal Loans
• Senior Citizen Support
• Consumer Credit under Corporate Agreement
These products program guideline are described briefly in the following:

Product Program Guideline - House Finance

This product will facilitate the customer to have financing for the purchase
of flat, house, construction of new house, extension of existing house etc.

Customer Segment- Any Bangladeshi individual who has the means and
capacity of to repay bank loan can be customer. In specific terms, these
could be salaried executive of multinational and middle to large size local
corporate, Government officials, Officials working in reputed NGOs,
international aid agencies and UN bodies, any tax paying businessmen of
repute, any employed/ self- employed/ tax paying individual having a
reliable source of income.

Loan Size: Minimum – Tk. 3,00,000

Maximum – Tk. 50,00,000

The financing of this is up to maximum 80% of cost and tenor is maximum

15 years including maximum 01-year grace period.

Interest rate: It is to be prescribed time to time by the management. Now

the rate is 16% p.a. with quarterly rest.

Product Program Guideline – Auto Loan:

This product will allow car financing to the customer segment. Under this
scheme, the vehicle is hypothecated to the bank only. In addition to this
registration requirement, on a case-to-case basis, bank may also secure the
loan partially by the commonly acceptable form of cash/quasi cash securities
available in the market.
Customer segment is same as the house finance.

Loan Size: For both reconditioned & new cars, the loan size is maximum
Tk. 2.0 million.The loan amount cannot exceed 80% for recondition & 90%
for new cars of the vehicle price. Maximum tenor of loan for new cars is 72
months and for reconditioned cars is 60 months.
Interest rate: It is to be prescribed time to time by the management. Now
the rate is 16% p.a. with quarterly rest.

Product Program Guideline – Consumer Durable Loans:

It is a personal loan scheme that support purchase of various consumer
durables such as Television, Refrigerator, Air Conditioner, Audio-Video
Equipments, Washing Machine, Personal Computers, other household
furniture/ appliances etc. Under this scheme, the item purchased is
hypothecated to the bank only. In addition to this registration requirement,
on a case-to-case basis, bank may also secure the loan partially by the
commonly acceptable form of cash/quasi cash securities available in the
market.
Customer segment is same as the house finance

Loan Size: Minimum – Tk. 50,000

Maximum – Tk. 5,00,000
The financing of this is up to maximum 70% of cost. Minimum tenor of loan
is 6 months & maximum tenor of loan is 48 months.

Interest rate: It is to be prescribed time to time by the management. Now

the rate is 17% p.a. with quarterly rest.

Product Program Guideline – Loans For Professionals:

A personal loan scheme meant for professionals only to support their small
scale purchase of different equipment, tools and small machineries for
installation at their business sites / offices. Under this scheme, the item
purchased is hypothecated to the bank. In addition, on a case-to-case basis,
bank may also secure the loan partially by the commonly acceptable form of
cash/quasi cash securities available in the market.

Loan Size: : Minimum – Tk. 50,000

Maximum – Tk. 5, 00,000
The financing 80% of the cost of the item is allowed.
Interest rate: It is to be prescribed time to time by the management. Now
the rate is 16% p.a. with quarterly rest.

Product Program Guideline – Unsecured Personal Loans:

Unsecured Personal Loans (UPL) is a terminating facility offered Bank’s
Retail Banking Division to individual salaried persons living in the cities/
towns where Bank has its operations. It is a clean or unsecured loan in the
sense that only security in this type of loan product is: a) Letter of
Introduction from employer; and/ or b) Transfer of monthly salary and
assignment of Terminal Benefits; and/ or c) Personal Guarantee taken from
specific section of people.
Customer Segment
Employees of reputed MNCs, large local corporate, commercial bank, UN
bodies, reputed NGOs, Government Employees etc can avail this loan.
Loan Size: a) Minimum – Tk. 25,000
b) 10 times of gross salary or maximum – Tk. 0.50 million

Tenor: Minimum – 12 months

Maximum – 48 months
Interest rate: It is to be prescribed time to time by the management. Now
the rate is 17% p.a. with quarterly rest.

Product Program Guideline –Senior Citizen Support

Senior Citizen Support is a terminating facility offered by Bank’s Retail
Banking Division to the Senior Citizen in the society living in the cities/
towns where Bank has its operations. It is a special loan package to the
Senior Citizen having repayment capacity. It is an unsecured facility.
Loan Size: Minimum – Tk. 25,000
Maximum – Tk. 2,00,000
Tenor: Minimum – 12 months
Maximum – 36 months
Interest rate: It is to be prescribed time to time by the management. Now
the rate is 16.50% p.a. with quarterly rest.
CONCLUSION:
This report has been prepared to fulfill one of the requirements of probation
period. It is an effort to cover the banking activities in general which has
been observed during the job rotation in the MCB Sk Mujib Road Branch.
This report tries to identify the major tasks of different sections of the branch
namely General Banking, Credit, Foreign Exchange and Credit. The major
finding of this report is to provide a broad & general overview of banking
activities. It has been observed that through the activities of different
departments how Bank Asia is providing and maintaining pleasant working
environment for delivery of better quality services to maintain edge over the
competitors. At the same time it has been also found that Bank Asia Limited
is participating in the growth of our national economy with quality
technology driven innovative services to its clients by its own dedicated
team of professionals.
BIBLIOGRAPHY:
1. Banking – law & practice, by S.N. Maheshwary

2. Foreign Exchange, by L.R. Chowdhury

3. International Money and Finance, By Michael Melvin

4. Prudential Regulations for Banks, From Bangladesh Bank Web site.
5. Different articles and documents collected from branches.
6. Web site of Bank Asia.