Assignment Banking

Evaluation of performance of specialized banks

in

Bangladesh

AssignmentOn

Evaluation of performance of specialized banks in Bangladesh

Date of Submission: November 06, 2010

East West University

Assignment No. – 1

Course Name: Principles and Practice of Banking

Submitted To

Nazir Ahmed KhanCourse Instructor Submitted By

Enayet Ullah MajumderID- 2010-1-90-004

Mohammad Omor KhaiamID: 2010-1-90-002

Joyanta SarkerID: 2010-2-90-006

Rais-Ur-RubbiID: 2010-2-90-010

43, Mohakhali C/A, Dhaka-1212

Assignment No 1

Table of Contents

Sl No. Particulars Page No.

1 Executive Summary 1

2 Basic Bank Limited 2-12

3 Bangladesh Krishi Bank 12-21

4 Rajshahi Krishi Unnayan Bank 22-24

5 Bangladesh Development Bank Limited 25-34

6Evaluation of Performance of Specilized Banks in Bangladesh

35

7 Bibliography 36

EXECUTIVE SUMMARY

The banking sector is considered to be an important source of financing for most businesses.

The common assumption, which underpins much of the financial performance research and

discussion, is that increasing financial performance will lead to improved functions and

activities of the organizations. The subject of financial performance and research into its

measurement is well advanced within finance and management fields. It can be argued that there

are three principal factors to improve financial performance for financial institutions; the

institution size, its asset management, and the operational efficiency. To date, there has been

little published studies to explore the impact of these factors on the financial performance,

especially the commercial banks. The performance of the state-owned banks has been under the

scanner of various stakeholders since long. Government interference in the day-to-day

management and loan disbursement, corruption of bank officials and highhandedness of the

trade unions had reached their peaks in the seventies and eighties, leading to a decline in the

financial health of these institutions. The situation had become so bad that more than 40 per cent

of the total outstanding loans of the public sector banks were classified as non-performing. The

state of affairs with the state-owned specialized banks was even worse. Nearly 70 to 80 per cent

of the loans that they had extended to a new class of entrepreneurs in the eighties turned bad.

The Bangladesh Shilpa Bank and the Bangladesh Shilpa Rin Sangstha, the two development

financing institutions (DFIs), had to suspend new financing because of fund shortage. These two

DFIs have now been merged into a single entity, known as the Bangladesh Development Bank

Limited (BDBL). In most cases, the so-called entrepreneurs managed loans from the state-

owned commercial banks and DFIs either through bribing the bank officials or using their

political connections. Even the leaders of trade unions in these financial institutions having their

allegiance to the parties in power could manage long-term loans for others and influence

management decisions on transfers and promotions of officials and employees of the public

sector banks.

BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited) registered under the Companies Act 1913 on the 2nd of August, 1988, started its operations from the 21st of January ,1989. It is governed by the Banking Companies Act 1991. The Bank was established as the policy makers of the country felt the urgency for a bank in the private sector for financing small scale Industries (SSIs). At the outset, the Bank started as a joint venture enterprise of the BCC Foundation with 70 percent shares and the Government of Bangladesh (GOB) with the remaining 30 percent shares. The BCC Foundation being nonfunctional following the closure of the BCCI, the Government of Bangladesh took over 100 percent ownership of the bank on 4 th

June 1992. Thus the Bank is state-owned. However, the Bank is not nationalized; it operates like a private bank as before.

BASIC Bank Limited is unique in its objectives. It is a blend of development and commercial banks. The Memorandum and Articles of Association of the Bank stipulate that 50 percent of loanable funds shall be invested in small and cottage industries sector.

Capital Position

Authorized capital Tk. 2000 million

Paid up capital Tk. 1455.30 million

Total Reserve and Surplus up to 31.12.2009

Tk. 2468.61 million

The Bank is required to transfer 20 percent of its net profit before Tax to Capital Fund as per the Banking Companies Act 1991.

Functions

The Bank Offers:

a. Term loans to industries especially to small-scale enterprises.

b. Full-fledged commercial banking service including collection of deposit, short term trade finance, working capital finance in processing and manufacturing units and financing and facilitating international trade.

c. Technical support to Small Scale Industries (SSls) in order to enable them to run their enterprises successfully.

d. Micro credit to the urban poor through linkage with Non- Government Organizations (NGOs) with a view to facilitating their access to the formal financial market for the mobilization of resources.

In order to perform the above tasks, BASIC Bank works closely with its clients, the regulatory authorities, the shareholders (GOB), banks and other financial institutions.

CORPORATE STRATEGY

Financing establishment of small units of industries and business and facilitate their growthSmall Balance Sheet size composed of quality assets.

Steady and sustainable growth.

Investment in a cautious way.

Adoption of new banking technology.

To employ funds for profitable purposes in various fields with special emphasis on small scale industries.

To undertake project promotion on identify profitable areas of investment.

To search for newer avenues for investment and develop new products to suit such needs.

To establish linkage with other institutions which are engaged in financing micro enterprises.

To cooperate and collaborate with institutions entrusted with the responsibility of promoting and aiding SSI sector.

Organizational Structure

To achieve its organizational goals, the Bank conducts its operations in accordance with the major policy guidelines laid down by the Board of Directors, the highest policy making body. The day to day operation of the Bank is looked after by the management.

A. BOARD OF DIRECTORSAs stated earlier the Government holds 100 percent ownership of the Bank. All the Directors of the Board are appointed by the Government of Bangladesh. The secretary of the Ministry of Industries is the Chairman of the Bank. Other Directors of the Bank are senior Government and central Bank executives.The Managing Director is an ex-officio member of the Board of Directors. There are at present 7 Directors including the Managing Director.

B. MANAGEMENTThe management is headed by the Managing Director. He is assisted by the General Managers

and Departmental Heads in the Head Office. BASIC Bank is different in respect of hierarchical structure from other banks in that it is much more vertically integrated as far as reporting to the Chief Executive is concerned.The Branch Managers of the Bank report direct to the Managing Director and, for functional purposes, to the Heads of Departments. Consequently, quick decision making in disposal of cases is ensured.

Progress at a Glance (2005-2009)

YEAR 2009 2008 2007 2006 2005

From the Balance Sheet (Million Taka)

Authorized Capital 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00

Paid-up Capital 1455.30 1309.77 1247.40 945.00 810.00

Reserve and Surplus 2468.65 1681.39 1349.17 1294.00 916.14

Shareholders' Equity 3923.95 2,982.60 2,596.58 2,239.00 1,726.14

Fixed Assets 232.65 228.36 196.11 154.52 135.78

Total Assets 45699.5646,651.5338,773.9129,417.0927,136.37

Deposits 34501.6938,368.2331,947.9824,084.6522,325.58

Long- term Debt 2875.16 1708.4 1385.81 830.06 937.51

Loans and Advances 29261.5327,269.1322,263.35 19,000.0015,339.35

Placement & Investment 12244.91 15,653.213,560.92 8,212.2310,236.82

From the Income Statement (Million Taka)

Gross Income 5162.30 5,060.29 3,549.51 2870.32 2,228.21

Gross Expenditure 3593.96 3,526.18 2,741.37 1,858.69 1,599.77

Profit before Tax 1568.34 1534.11 808.14 1,011.62 628.44

Profit after Tax 648.85 549.95 282.96 554.14 285.49

Tax Paid (Cumulative) 4225.37 3,538.09 2,790.98 2,245.16 1,777.70

Others (Million Taka)

Import Business 33976.627,359.7721,266.5717,804.2714,094.96

Export Business 19887.722,270.8716,794.9615,463.7411,097.23

Financial Ratios (Percentage)

Capital Adequacy Ratio 13.48 12.02 12.91 11.98 11.66

Capital Fund to Deposit Liabilities 11.37 7.81 9.23 10.34 10.36

Liquid Assets to Deposit Liabilities 24.67 47.70 49.10 40.42 58.01

Loan to Deposit Liabilities 84.81 71.07 69.69 78.89 69.74

Earning Assets to Deposit Liabilities 116.44 114.69 109.70 112.99 114.56

After Tax Return on Average Assets 1.41 1.30 .83 1.94 1.23

Net Profit to Gross Income 12.57 10.87 7.97 19.31 12.81

Interest Magin Cover 135.79 137.08 176.80 211.72 214.56

After Tax Return on Equity 18.79 19.68 11.70 27.82 17.75SMI/SSI Loan and Micro Credit to Total Loan

56.93 59.32 56.73 53.43 67.00

Number of Branches 32 31 30 28 27

Number of Employees 776 735 721 651 601

Balance Sheet

(Million Taka)

2003 2004 2005 2006 2007 2008 2009

Property and Assets

Cash 741.36 1035.30 1134.50 1522.87 2125.01 2641.00 2424.89

Balance with other banks and financial Institutions

2378.50 3765.55 4126.27 4191.36 6937.53 8485.18 5906.17

Money at call and short notice

100.00 80.00 1570.00 750.00 1320.00 1480.00 108.0

Investment

Government 1831.31 2198.95 4486.54 3241.86 5271.30 5598.82 6239.23

Others 52.10 54.00 54.00 29.00 32.00 89.00 99.49

1883.41 2252.96 4540.55 3270.86 5303.30 5687.82 6338.72

Loans and advances

Loans ,cash credit, overdrafts etc.

8633.7111293.2

513759.0

517075.5

920047.9

224344.7

327226.4

8

Bills discounted and Purchased

648.48 706.88 1580.29 1924.40 2215.42 2924.39 2035.05

9282.1912000.1

415339.3

518999.9

922263.3

427269.1

229261.5

3

Fixed Assets 73.48 101.40 135.78 154.52 196.10 228.36 232.65

Other Assets 307.33 201.18 289.91 498.74 579.14 859.83 964.32

Grand Total14766.3

219436.5

627136.3

729388.3

438724.5

146651.5

345308.3

1

Capital and Liabilities

Liabilities

Borrowings from other banking companies, agents etc.

690.95 839.61 937.51 830.06 1385.81 1708.40 2875.15

Bills Payable 92.94 148.89 179.75 239.25 290.75 328.49 341.50

Deposit and other Accounts

Current Accounts and contingency accounts etc.

1398.11 1651.35 1890.61 2370.44 2867.19 2544.51 2504.61

Saving Bank deposits 581.69 724.80 793.43 1007.79 886.30 955.50 1165.84

Fixed deposits 9193.8012984.1

119461.7

820467.1

627903.7

234539.7

230489.7

3

11173.6 15509.1 22325.5 23845.3 31657.2 38039.7 34160.1

0 7 8 9 1 3 8

Other Liabilities 1609.05 1596.50 2147.13 2263.37 2843.53 3592.29 4007.50

Total Liabilities13566.5

417945.2

925410.2

327178.0

736177.3

043668.9

341384.3

6

Capital/ Shareholders' equity

Paid up Capital 450.00 675.00 810.00 945.00 1247.40 1309.77 1455.30

Statutory Reserve 450.00 555.44 681.13 883.45 1045.08 1295.26 1559.65

Other Reserves 40.00 40.00 40.00 40.00 40.00 40.00 365.55

Surplus in Profit and Loss Account

319.28 220.82 195.00 129.47 370.54 304.51 543.44

Total Shareholders' equity

1249.28 1491.26 1726.13 1052.92 2596.58 2982.59 3923.95

Total capital and liabilities

14766.32

19436.56

27136.37

28230.99

38773.90

46651.53

45308.31

Comparative Balance Sheet(In percent)

03/02 04/03 05/04 06/0507/0

608/07 09/08

Property and Assets

Cash(10.81

)39.65 9.58 34.23 39.53 24.28 (8.18)


1.55 58.32 9.58 1.57 65.51 22.30(30.39

)

Money at call and short notice Investment

25.00 (20.00)1860.5

0(52.22

)76.00 12.12

(92.70)

Government 19.34 20.08 104.03 27.74 62.60 6.21 11.43

Others 62.30 3.65 0.00(46.29

)10.34 178.12 11.78

20.22 19.62 101.54

(27.96)

62.14 7.25 11.44

Loans and advances

Loans ,cash credit, overdrafts etc. 28.40 18.50 30.80 21.83 24.10 21.43 11.83

Bills discounted and Purchased 14.44 (3.41) 9.01 123.56 21.77 32.00(30.41

)

27.09 16.65 29.28 27.83 23.86 22.48 7.30

Fixed Assets 16.65 (4.17) 38.00 33.91 13.80 16.45 1.87

Other Assets 43.48 85.46 (34.54) 44.10 72.03 31.96 12.15

Total Assets 33.91 13.42 31.63 39.62 8.29 20.47 (2.87)


Liabilities


16.07 2.13 21.52 11.66 11.46 23.27 68.29

Bills Payable 52.26 (26.11) 60.20 20.73 33.10 12.98 3.96



11.30 (12.14) 18.11 14.49 25.37(11.25

)(1.56)


Fixed deposits 40.42 17.96 41.23 49.89 5.16 23.78 11.72

33.181029.1

638.80 43.95 6.80 20.16

(10.19)

Other Liabilities 51.28 22.94 (0.78) 34.49 5.41 26.33 11.55

Total Liabilities 34.00 13.00 32.28 41.60 6.95 20.70 (5.23)


Paid up Capital - 50.00 50.00 20.00 16.66 5.00 11.11


Other Reserves 8.52 (77.15) - 0.00 0 0 813.87

Total Shareholders' equity 33.03 18.45 19.37(11.69

)(39) 14.86 31.56

Total capital and liabilities 33.91 13.42 31.63 15.75 4.03 20.31 (2.87)

Common size Balance Sheet

(In percent)

2003 2004 2005 2006 2007 2008 2009

Property and Assets

Cash 5.02 5.33 4.18 5.33 5.48 5.66 502


16.10 19.37 15.21 19.37 17.89 18.18 1611

Money at call and short notice Investment

0.68 0.41 5.79 0.41 3.40 3.17 0.68

Government 12.40 11.31 16.53 11.31 13.59 11.99 12.40

Others 0.35 0.28 0.20 0.28 0.08 0.19 0.35

12.75 11.59 16.73 11.59 13.67 12.18 12.75

Loans and advances

Loans ,cash credit, overdrafts etc. 55.96 58.47 58.10 50.70 51.70 52.18 58.47

Bills discounted and Purchased 5.16 4.39 3.64 5.82 5.71 6.26 4.39

61.11 62.86 61.74 56.51 57.41 58.44 62.86

Fixed Assets 0.58 0.50 0.52 0.50 1.50 0.48 0.50

Other Assets 1.27 2.08 1.04 1.07 1.49 1.64 2.08

Total Assets100.0

0100.0

0100.0

0100.0

0100.0

0100.0

0100.0

0


Liabilities


5.19 4.68 4.32 3.45 3.82 3.91 4.68

Bills Payable 0.96 0.63 0.77 0.66 0.80 0.75 0.63



12.22 9.74 8.50 6.97 7.92 5.82 9.47


Fixed deposits 59.86 62.26 66.80 71.72 77.12 79.09 62.26

76.00 75.67 79.03 82.72 87.48 87.09 75.67

Other Liabilities 10.05 10.90 8.21 7.91 7.85 8.22 10.90

Total Liabilities 92.22 91.87 92.33 93.64 93.30 93.60 91.87


Paid up Capital 2.30 3.04 3.47 2.98 3.21 2.80 3.05


Other Reserves 1.34 0.027 0.21 0.15 0.10 0.08 0.27

Surplus in Profit and Loss Account 1.14 0.72 0.33 0.65 2.16

Total Shareholders' equity 7.77 8.12 7.67 6.36 6.69 6.39 8.46

Total capital and liabilities100.0

0100.0

0100.0

0100.0

0100.0

0100.0

0100.0

0

Achievements

The performance of BASIC Bank Limited has been satisfactory since its inception in respect of all the measurement parameters.

The total assets of the Bank increased to Taka 45,308.31 million at the end 2009 from Taka 46,651.53 million in the previous year registering a decrease by 2.87 percent. Total deposit of the Bank at the end of 2009 stood at Taka 34,501.70 million (75.50% of Total liabilities) compared to Taka 38,368.23 million (82.24% of Total liabilities) in 2008. Total amount of deposit declined by 10.07%. Loans and advances stood at Taka 27,269.13 million as on December 31, 2008 against Taka 22,263.35 million at the end of 2007, recording a growth rate of 22.48 percent compared to 23.86 percent in the previous year. All out efforts were made to improve the recovery rate and control non-performing loans and advances. Although the recovery rate of project loans remained stable in the neighborhood of 96 percent the proportion of non-performing loans to total loans increased to 3.25 percent in 2008 from 3.70 percent in 2007. Emphasis on the maintenance of quality of assets remained the centerpiece of the

Bank's business strategy.

Year 2008 was a period of high growth in loans and advances with 22.48 percent increase compared to 23.86 percent increase in 2007. Growth of industrial finance was moderate and loans to small and medium industries was 23.91 percent of total loans and advances. The industrial loan of Tk. 17226.40 million was distributed among 13 sectors. Textile sector registered the highest concentration being 36.24 percent of industrial loans and 23.59 percent of total loans. Textile sector is followed by: food & allied industries - 13.73 percent of industrial loans and 8.94 percent of total loans, chemical & allied industries - 12.97 percent of industrial loans and 8.44 percent of total loans and engineering - 11.44 percent of industrial loans and 7.45 percent of total loans.

Activities

a. Industrial Credit BASIC Bank's services are directed towards the entrepreneurs in the small industries sector. A small industry, as per Industrial policy 1999 approved by the Cabinet, has been defined as an industrial undertaking whose total fixed investment is less than Tk.100 million.

The industrial loan reflected a significant growth of 23.91 percent over the previous year. Total outstanding industrial loans including term and working capital stood at Taka 17,226.40 million at the end of 2008 compared to Taka 13,901.40 million of 2007. Total outstanding term loan stood at Taka 6,206.75 million as on December 31, 2008 compared to Taka 5,055.58 million in 2007 reflecting a growth of 22.77 percent. The outstanding working capital finance extended to industrial units stood at Taka 11,784.08 million at the end of the reporting period compared to Taka 9,525.98 million in 2007. Growth rate here was 23.70 percent. BASIC Bank's services are specially directed towards promotion and development of small industries. Its exposure to small and medium industries sector accounted for 56.52 percent of the total loans and advances. During the year total of 87 projects were sanctioned term loan. Out of which 26 were new and the rest were under BMRE of the existing projects. As on 31 December 2008, 801 projects were in the portfolio of the bank. The textile sector including garments being one of the major contributors to national economy dominated the loan portfolio of the Bank. Other sectors financed include engineering; food and allied industries; chemicals, pharmaceuticals and allied industries; paper, board, printing and packaging; glass; ceramic; and other non-metallic goods and jute products. Recovery rate of project loan was 90.81 percent.

Year Million Taka

2000 2735.50

2001 3769.00

2002 2735.50

2003 6252.00

2004 7691.20

2005 9987.50

2006 12243.56

2007 13901.40

2008 17226.40

2009 17816.54

Outstanding at year end

b. Commercial Credit

The Bank also supports development of trade, business and other commercial activities in the country. It covers the full range of services to the exporters and importers extending various facilities such as cash credit, export cash credit, packing credit, short term loans, local and foreign bills purchase facilities. As on December 31, 2009 total outstanding commercial loans stood at Taka 10,877.17 million compared to Taka 9,278.26 million in 2008.

c. Micro Credit

Year Million Taka

2000 120.40

2001 183.50

2002 104.00

2003 186.20

2004 284.10

2005 338.30

2006 359.24

2007 680.13

2008 764.46

2009 1072.05


BASIC Bank launched a Micro Credit Scheme in 1994. Micro Credit Scheme provides for the poor for generation of employment and income on a sustainable basis particularly in urban and suburban areas. The Bank follows three systems of credit delivery.These are:1. Lending to the NGOs who on-lend to their members. At present there are 15 such NGOs.2.Lending direct to the targets groups or ultimate borrowers under the Bank’s own management.3. Lending direct to the member-borrowers and NGOs providing nonfinancial services like group formation and monitoring and supervision on exchange for a supervision fee.

At the end of 2009, total amount of Taka 1072.05 million remained outstanding as against Taka 680.13 million in 2007. Recovery rate during this period remained at a satisfactory level of 98.00 percent.

d. Foreign Trade

Million Taka

YearImport

FinanceExport

Finance

2000 7948.40 5557.00

2001 7542.80 5957.90

2002 8645.00 5557.60

2003 8930.50 6523.00

2004 12508.00 7908.00

2005 11097.23 4094.96

2006 17804.27 15463.74

2007 21266.57 16794.96

2008 27359.77 22270.87

2009 33976.60 19887.70


The bank achieved substantial growth in export in 2009 and the performance of the bank in import business was also satisfactory. The Bank handled total export business of Taka 19887.70 million and import business of Taka 33976.60 million in 2009. The export and import business decreased by (10.70) percent and grew by 24.18 percent respectively. Major items of exports were garments, jute products, textile, leather etc. Items of import included mainly industrial raw materials, garments accessories, capital machinery, food items and other essential commodities.

The Bank became a proud member of SWIFT (Society for Worldwide Interbank Financial Telecommunication) that would pave the way to achieving uninterrupted communication related to banking for international trade. business and fund transfer.

e. Other Activities

The Bank provides services for remittance, underwriting, guarantee, public offering of shares etc. The bank also provides funds to investment and leasing companies. The Bank has recently created a venture capital fund for equity support to innovative but risky projects.

Lending Criteria

1. Entrepreneur Entrepreneur / promoter has to be creditworthy and competent enough to run the proposed

industry.2. Viability of the projectThe project should be viable from organizational, technical, commercial, financial and economic points of view.

Technical Viability

The project should be technically sound and environment-friendly.

Technology transfer in case of borrowed know-how ought to be ensured.

Building should be well planned and well constructed.

Commercial Viability

Market prospect and potential for the product has to be fully assured at competitive prices.

Marketing channel for the product should be accessible to the entrepreneur.

Financial Viability

There should be reasonable debt equity ratio as determined by the Bank on individual case basis.

Debt service coverage ratio should be at least 2.5 times at the optimum level of production.

IRR should preferably be not less than 20 percent.

Economic Viability

The project should ensure benefit to the national economy and create sufficient employment opportunity and be environment friendly.

Performance Indicators

2005 2006 2007 2008 2009

At Year End (Million Taka)

Total Loans and Advances 15339.35 19000.00 22263.35 27269.13 29262.00

Total Investment 4540.55 8212.23 13560.92 15659.03 12244.91

Total Assets 27136.37 29417.09 38773.91 46651.53 45308.00

Total Deposits 22325.58 24084.65 31947.98 38368.23 34700.00

Long-term Debt 937.51 830.06 1385.81 1708.4 2875.16

Total Shareholder's Equity 1726.14 2239.00 2596.58 2982.60 3923.95

Financial Ratios (Percentage)

Capital Adequacy Ratio * 11.66 11.98 12.91 12.02 13.48

Capital fund to deposit Liabilities 10.47 10.34 9.23 7.81 11.37

Liquid Assets to Total Deposit 50.56 40.42 49.10 47.70 24.67

Loan to total Deposit 69.74 78.89 69.69 71.07 84.81

Earning Assets to Total Deposit 114.56 112.99 109.70 114.69 116.44

After tax return on Average Assets 1.23 1.94 .83 1.30 1.41

Net Profit to Gross Income 12.81 19.31 7.97 10.87 12.57

Interest Margin Cover 214.56 211.72 176.80 137.08 135.79

Return on Equity (after tax) 17.75 27.82 11.70 19.68 18.79

Industrial Loans including MicroEnterprises to Total Loans

67.00 53.43 56.73 59.32 56.93

Non performing Loans to Total Loans 4.55 3.70 3.25 4.59 4.83

Per Employee (Million Taka)

Deposit 37.15 37.00 44.31 52.20 44.46

Advance 25.52 29.18 30.87 37.10 37.70

Profit 1.45 1.55 1.51 2.08 2.02

Earnings Analysis (Million Taka)

Total Income 2228.21 2870.32 3549.51 5060.29 5162.30

Total Operating Expense 1599.77 1858.69 2458.41 3526.35 3593.96

Profit before Tax 628.44 1011.62 1091.10 1533.94 1568.34

Income Tax 342.94 457.48 808.14 984.08 919.49

Net Profit after Tax 285.49 554.14 282.96 549.86 648.85*Based on risk-weighted assets. The Bank has been calculating the ratio since 1996.Credit Rating

BASIC Bank Limited

Credit Rating Report (Entity Rating)

Year Long Term Short Term

2009 AA ST-1

2008 AA-1 ST-1

Credit Rating Information and Services Limited (CRISL) has upgraded its rating and assigned AA (double A) for long term and ST-1 for short term for the year 2009.

Banks rated AA in the long term are adjudged to be of high quality, offer higher safety and have high credit quality. This level of rating indicates a corporate entity with a sound credit profile and without significant problems. Risks are modest and may vary slightly from time to time because of economic conditions.

Banks rated ST-1 in the short term are considered as the highest certainty of timely payment. Short-term liquidity including internal fund generation is very strong and access to alternative sources of funds is outstanding. Safety is almost like risk free Government short-term obligations.

BANGLADESH KRISHI BANK

Bangladesh Krishi Bank (BKB) is a 100% government owned specialized Bank in Bangladesh. KRISHI means Agriculture. Since its inception, BKB is financing in agricultural sector remarkably. BKB also performs commercial banking. People working abroad can easily send money home through our Taka Drawing Arrangement.Bangladesh Krishi Bank (BKB) has been established under the Bangladesh Krishi Bank order 1973 (President's Order No 27 of 1973). BKB is a Banking Company under the Banking Company Act-1991. Its Head Office is located at Krishi Bank Bhaban,83-85 Motijheel Commercial Area, Dhaka-1000, Bangladesh.The major occupation of the people of Bangladesh is "Krishi". Krishi is a Bengali word which means "Agriculture". About 85% of the population depends directly or indirectly on agriculture which contributes a significant portion to GDP. The primary objective of BKB is to provide credit facilities to the farmers for the development of agriculture and entrepreneurs engaged in development of agro-based and cottage industries. The Bank is guided in accordance with the policies and principles of the Government of the Peoples Republic of Bangladesh. BKB has an authorized capital of Tk. 15,000 Million (Taka Fifteen thousand Million) only and paid up capital of Tk. 9000 Million (Taka Nine thousand Million) only which is fully paid by the government. The Bank started commercial functioning since 1977 to generate more loanable fund from the idle rural and urban savings and invest them for the betterment of our economy.

Operating BranchThe Bank operates its function through its 952 branches (except Rajshahi Division) of which 822 are rural and 130 are urban. It has 15 foreign exchange (Authorized dealer) branches. In the field level the Bank has 8 Divisional,21 Chief Regional and 30 Regional offices for close supervision of the branch activities. For smooth operation, s a part of internal control and compliance system, the bank has also 56 field level audit offices of which 5 at Divisional and 51 at Regional levels. In the Head Office the Bank has 4 Divisions headed by General Managers and 28 Departments including Local Principal Office and Training Institute headed by Deputy General Managers. The existing strength of Bank's manpower is 10275 against the approved strength of 13680 as on 31 March,2009.The Bank has a Board of Directors comprising of 8 members. The Board is headed by a Chairman. The Directors represent both public and private sectors and are appointed by the government. The Board Chairman is generally an experienced professional/ex-professional who has wide acceptability and rapport.The Managing Director is the Chief Executive of the Bank. He is appointed by the government. The Bank has two posts of Deputy Managing Directors and are appointed by the Government.The Bank has 14 posts of General Manager. They are also appointed by the Government.In the Head Office there are 4 Divisions each headed by a General Manager.

Corporate FinancingThe Bank has started financing to renowned corporate bodies of the country for the last 2/3 years. This has opened a new arena of utilizing agri-product marketing channel of the companies in easy terms and at a lower interest rate. Such companies are :

PRAN GROUP (Agriculture Markting Company Ltd.) SQUARE GROUP (Square Consumer Products Ltd.)

PARTEX GROUP (Partex Furniture Ltd.) SUPREME SEEDS PADMA GROUP P.H.P GROUP T.K. GROUP ISPAHANI GROUP SA GROUP K.D.S GROUP CITY GROUP S. ALAM GROUP MEGHNA GROUP M. M. AGA LTD NAVANA GROUP (NAVANA FURNITURE)

Credit ProgramsBKB finances the following 7(seven) priority sectors, namely:

Crop Fisheries Live Stock Farm and Irrigation Equipment Agro based Industrial Project S M E Continuous Loan (Working Capital and Cash Credit) Micro Credit (Small Loan)

International BankingBangladesh Krishi Bank (BKB) has been engaged in Foreign Exchange Business since 1980. It deals in all kinds of export, import, remittance and other sorts of foreign exchange business. BKB has got 200 major correspondent banks globally and maintain sufficient number of Nostro accounts in various foreign currencies with different leading banks in important business centers of the world. BKB has taken a massive foreign exchange programmes to increase business. Import of capital machinery and raw materials for agro-processing industries and export of agricultural products, foreign remittance & all sorts of foreign exchange transactions and services are being provided by BKB.

Products and Services: Letter of Credit (LC) Bill purchase/Discount Export Credit (Pre Shipment & Post Shipment) Remittance (Inward, Outward) Collection, Purchase and Sale of Foreign Currency and Travelers Cheques. Maintenance of Student education file Guarantees in Foreign Currency. Foreign Currency accounts. NFCD (Non-Resident Foreign Currency Deposit) A/C. RFCD (Resident Foreign Currency Deposit) A/C. Forward Contracts. Correspondent Banking Relations. Taka Drawing Arrangement. Dealing Room. S.W.I.F.T. (Society for Worldwide Interbank Financial Telecommunication).

POVERTY ALLEVIATION AND MICRO-CREDIT PROGRAMS/PROJECTS

Bangladesh Krishi Bank was established under BKB Order`1973 with the objective of strengthening rural economy by extending credit support to agricultural and agro-based sectors. In consideration of the importance of Micro-Credit and with the objective of generating employment as well as encouraging social development BKB has undertaken several Micro-Credit programs of its own and also in collaboration with local and foreign agencies. The programs have been designed to cover all segments of poor population whether skilled or unskilled such as small and marginal farmers, landless labourers, destitute women, disabled, unemployed youth and rural artisans etc. About 1417047 beneficiaries have been provided with Tk. 14469.90 million since its inception (upto 30 September,2008).

Considering the needs of the target groups since late seventy`s BKB has been implementing a series of Micro-Credit programs out of which 10 programs have recently been completed and 31 programs are in operation at present. These diversified micro-credit programs are being implemented by BKB to achieve the following objectives:

To create employment opportunities through income generating activities. To empower the rural women to establish their own rights.

To improve the living standard of the rural people.

To alleviate poverty of the poor people.

To make easy access to institutional credit facilities and resources.

To mobilize rural savings.

To make optimum utilization of rural resources.

To engage inactive human resources of the rural areas in productive/economic activities.

To engage rural people in development process of the country.

To eliminate exploitation done by the money lenders.

A Salient feature of BKB`s on going Micro-Credit Programs under poverty alleviation is given below:

Credit program for the landless and Marginal Farmers:

This program has been launched with BKB`s own fund in 1992-93 financial year through its all branches. Landless and marginal farmers get short term credit under this program. Persons/ Peasants having not more than 1.50 acres of cultivable land and annual income of highest Tk 25000/- are eligible for getting credit under this program. After formation of groups and obtaining training the group members get credit without any collateral security. But they have to hypothecate the goods and assets created by the loan. In lieu of collateral they have to take responsibility as guarantor for the recovery of loan within the group. The present Interest rate is 10%. 52 equal weekly installments are fixed and the recovery will be taken place accordingly. About 474181beneficiaries have been provided with Tk. 4698.40 million since its inception (upto 30 September,2008).

Beef fattening Joint Program:

This is a bank`s own financed program. Bank launched this program in 1994. The main objective of this program is to fill up the deficiency of animal protein in the country as well as creation of selfemployment for poor and unemployed people living in the villages. Under this program a person can get a loan amounting upto Tk.25000/- for 5 calves against guarantee of a bank official / local elite. The rate of interest is 10%. The loan is to be repaid with interest in one installment within one year. About 89025 beneficiaries have been provided with Tk.1481.30 million since its inception (upto 30 September,2008).

Swanirvar Credit Program:

Bank has been implementing swanirvar credit program without collateral security since 1979. Employment creation for the landless and marginal farmers, increasing their standard of living, creation of social and ethical values, eradication of illiteracy, providing creation of health and family planning services etc are the objectives of this program .The beneficiaries under the program are landless, rural poor & destitute having maximum 0.40 acres of cultivable land and maximum annual income is Tk.20,000/-. 212 branches of 31 districts (regions) are involved in this program. The beneficiaries have to form groups (each Consisting 5 members) and a center (consisting 5 groups). BKB & Swanirvar Bangladesh is operating this program jointly. The credit is collateral free but Group guarantee for each other is needed. Maximum loan amount is TK.15,000/- per beneficiary. It is Short term credit(to be recovered in 52 equal weekly installments within one year). Disbursement of loans to the beneficiaries is made duly recommended by Swanirvar staffs. Swanirvar Bangladesh is responsible for group formation ,giving training to the beneficiaries and recovery of loan. Rate of Interest is 16%. (6% Service charge for Swarnivar, 10% Interest for BKB). About 274115 beneficiaries have been provided with Tk.1577.80 million since its inception (upto 30 September,2008).

Small Farmers & landless Labourers Development Project (SFDP):

This project is being implemented jointly by BARD & BKB from 1995 through 21 branches under 6 Regions (districts) of Bangladesh Krishi Bank. The objectives of the project are to increase production, employment creation and increase income of the small landless farmers & labourers through formation of small groups, generation of own capital and provision for capital support for undertaking various income generating activities. Under this project Tk. 19.80 million has been disbursed to 2710 beneficiaries on average per year and recovered Tk. 15.80 million per year. Cumulative recovery rate is 97%. The beneficiaries under this program are small farmers having maximum 0.50 acres of cultivable land & landless labourers having 0.51-1.50 acres of cultivable land. Selection of target family, group formation, supervision of group activities, supervision of loan utilization and all kinds of field works are done by BARD. Opening of group account, sanctioning and disbursement of loan & maintaining savings account etc. are done by BKB. Bank provides credit from its own source after formation 5-10 members group. The loan is collateral free, but assets and goods derived from credit are hypothecated. Lien of group savings & group pressure replace the collateral. Loan is disbursed for any recognized items which is accepted by bank & identified by members of group. Interest rate is 15% of which 10% for BKB, 5% for BARD. Chairman or secretary of the group recovers the loan. Loan is recovered in weekly/fortnightly/monthly installments within maximum 18 months. About 28266 beneficiaries have been provided with Tk.215.20 million since its inception (upto 30 September,2008). This program terminated on 30 th June,2006.

South Asia Poverty Alleviation Program:

This program was launched on the basis of Dhaka conference of SAARC countries in 1993. This is a joint venture program with UNDP. But it is banks own financed program. UNDP organizes the beneficiaries, trains them and recommends the loan. The responsibility of credit realization lies with the managers of village organizations. This is an area based credit program. Only Kishorganj ( a district) sadar upazilla is the command area of this program. The maximum credit limit is Tk. 25000/- per beneficiary. 25 beneficiaries form a group. Rate of interest is 15% (BKB 10% and the manager of village organization 5%).The loan is collateral free and is recovered in weekly installments within one year. About 53723 beneficiaries have been provided with Tk.445.70 million since its inception (upto 30 September, 2008).

United Nations Capital Development Fund(UNCDF):

This program started in 1983 with the objective of financing rural & cottage industries. Now it is running on revolving fund. This is a joint venture program with BKB, BSCIC & UNCDF. UNCDF provides one third of fund while BKB provides two thirds. BSCIC selects borrower and provides extension services. The program covers 29 districts. BKB provides credit from joint fund and maintains account. Rate of interest is 10% - 14%. This is a collateral free credit. Raw materials, finished goods and capital asset created out of credit are kept as hypothecation against credit provided to the beneficiaries. About 24837 beneficiaries have been provided with Tk.136.70 million since its inception (upto 30 September,2008).

Rural Women Employment Creation Project ADB Loan No 1067 BAN(SF):

This is a joint project started in 1993 for experimenting with the idea of co-participation of government Organizations (GOs) and Non-Government Organizations (NGOs) aiming at employment creation for poor women in the rural areas. Department of women Affairs (DWA), 19 NGO`s in 12 thanas (upa-zilla) and BKB jointly implementing the project. NGOs organizes individuals into groups, train them under the supervision of DWA and recommends for credit funded by ADB. This is also a collateral free credit. Interest rate is 12%. About 67402 beneficiaries have been provided with Tk.154.70 million since its inception (upto 30 September 2008). This program terminated on 30 th June,2007.

BKB-NGO Micro Credit Program:

This program is a replication of Rural Women Employment Creation Project (RWECP).NGOs organizes individuals into groups, provides them training and recommends for credit . BKB provides credit from its own fund. This is also a collateral free credit. Interest rate is 12.5% . About 16636 beneficiaries have been provided with Tk. 136.00 million since its inception (upto 30 September 2008).

Credit Under National Poverty Alleviation Program through Goat Rearing:

This program have been introduced in 2002 aiming to eradicate poverty through goat rearing. Directorate of livestock provides with extension service while BKB provides credit from its own fund for a period of 4 years term. This is a collateral free credit provided from all branches of BKB. Interest rate is 10% . About 24354 beneficiaries have been provided with Tk. 236.50 million since its inception (upto 30 September 2008).

Milching Cow Credit Program for the Women:

The program launched in the year 1997. The main objectives of the program were proper utilization of the unemployed women increasing milk production and helping the up-lift of the condition of the women folk. Under this program one village of a branch area is selected. One women from each family of the selected village is eligible to get this credit facility. An applicant gets maximum Tk. 10,000/- to purchase a calf. Interest rate is 8%. The loan is realized within one year in weekly installments. This is a collateral free supervised credit. An officer or field worker of the branch is engaged in supervising the credit under the direct control of the branch manager. Livestock officers help the beneficiaries in treatment and rearing the cow. About 612 beneficiaries have been provided with Tk. 8.20 million since its inception (upto 30 September 2008).

Special Micro Credit Program for the Disabled:

This program have been introduced in 2002 aiming to income generation & development of socio-economic condition through employment creation for the disabled persons. Department of Social Welfare and Disabled Foundation provides extension services. This is a collateral free credit provided from all branches of the bank. Interest rate is 10%. About 530 beneficiaries have been provided with Tk. 5.60 million since its inception (upto 30 September 2008).

Monipuri Small Traders Credit Program:

This program have been introduced in 2003 aiming to provide working capital to handloom industry operated by the Monipuri women living in the greater Sylhet areas. Bank officials organizes the Monipuri women having handloom and training/education/experience of operation. Eligible women are organized into 5 member groups. This is also a collateral free credit provided from the bank`s own fund. Interest rate is 10% . About 684 beneficiaries have been provided with Tk.21.50 million since its inception (upto 30 September 2008).

Special Credit Program for the Rakhains under the district of Cox`s Bazar:

This program has been launched in 2003 aiming to provide working capital credit for producing handloom and cottage Industrial products and marketing. The loan is disbursed to the Rakhain community living in the district of Cox`s Bazar. Bank officials organizes Rakhains into 5 member groups. This is a collateral free credit programme from banks own fund. Interest rate is 10% . About 469 beneficiaries have been provided with Tk. 15.10 million since its inception (upto 30 September 2008).

Tree Plantation Programs: In 2002 and 2003 BKB has launched 8 Tree Plantation Programs-viz:

All types of tree nursery including herbal Horticulture Development

Fruit and forest tree plantation

Bamboo production

Herbal gardening

Coconut gardening

Patipata (a plant used in making mat) production

Cane production

These programs have been introduced in all branches of the bank to grow more and more trees aiming to eradication of poverty, proper use of fallen land, increase of tree production facilitating herbal treatment and development of environment. Credit under these programs is collateral free upto Tk. 25,000/-. Interest rate is 8%. About 20043 beneficiaries have been provided with Tk 203.50 million since its inception (upto 30 September 2008).

Establishment of Breeding Farm of Black Bengal Goat Program:

This program has been taken to ensure supply of kids of Black Bengal Goats in order to support the national program of poverty alleviation through goat rearing. Under this program a farm comprising 50 she goats is considered as a small farm and a farm comprising 51-200 she goats is considered as a big farm. The loan is medium term. Credit limit is Tk. 30,000/- for a small farm consisting of 10 she goats ( with a he- goat). This credit limit is calculated for making up goat-shed, purchasing of she-goats & he-goat and initial feed cost. This limit is proportionated for a small farm having upto 50 number of she-goats. For a medium farm credit limit is to be calculated deducting the cost of goat shed. This cost is borne by the entrepreneur. About 304 beneficiaries have been provided with Tk 14.60 million since its inception (upto 30 September 2008).

Community Based Resource Management Project:

This project started in 2003-04 fiscal year. It is a joint venture project of BKB, IFAD and Dept. of LGED of GOB. The project is to be implemented in all of the 10 upa-zillas of Sunamgonj (a district) at 3 phases within 11 years. The project has five components such as: (1) Infra -structure Development, (ii) Development of Fisheries, (iii) Crop and livestock Development, (iv) Grass Roots Institutional Development and (v) Small Credit Bangladesh Krishi Bank deals with ``small credit`` component of the project. LGED organizes the target people into 30 member groups. Bank Provides short and medium term loan. Maximum loan limit is Tk. 14,000/- to each member as short term and Tk. 27,000/- to each member as Medium term. The loan under this project is collateral free. Rate of interest is 15%. 1508 credit organization (each credit organization consists of maximum 30 beneficiaries) have been provided with Tk 190.35 million since its inception (upto 30 September 2008).

Poverty Alleviation through Production and Improvement of Sheep:

This is a government directed program which has been launched in the last part of the fiscal year 2004-05. Primarily this is to be implemented throughout the selected 22 upazillas under selected 11 districts of BKB`s jurisdiction. Directorate of livestock provides with extensive services while BKB provides credit from its own fund. Under this program credit amount upto taka 50,000/- is collateral free. Interest rate is 8%. This loan is to be repaid within four years in 6 equal installments including one year grace period. About 360 beneficiaries have been provided with Tk 3.80 million since its inception (upto 30 September 2008).

International Banking

Bangladesh Krishi Bank (BKB) has been engaged in Foreign Exchange Business since 1980. It deals in all kinds of export, import, remittance and other sorts of foreign exchange business. BKB has got 200 major correspondent banks globally and maintain sufficient number of Nostro accounts in various foreign currencies with different leading banks in important business centers

of the world. BKB has taken a massive foreign exchange programmes to increase business. Import of capital machinery and raw materials for agro-processing industries and export of agricultural products, foreign remittance & all sorts of foreign exchange transactions and services are being provided by BKB.

Products and Services:

Letter of Credit (LC) Bill purchase/Discount

Export Credit (Pre Shipment & Post Shipment)

Remittance (Inward, Outward)

Collection, Purchase and Sale of Foreign Currency and Travelers Cheques.

Maintenance of Student education file

Guarantees in Foreign Currency.

Foreign Currency accounts.

NFCD (Non-Resident Foreign Currency Deposit) A/C.

RFCD (Resident Foreign Currency Deposit) A/C.

Forward Contracts.

Correspondent Banking Relations.

Taka Drawing Arrangement.

Dealing Room.

S.W.I.F.T. (Society for Worldwide Interbank Financial Telecommunication).

RAJSHAHI KRISHI UNNAYAN BANK

Rajshahi Krishi Unnayan Bank is a state-owned bank in Bangladesh with regional approach. The bank emerged as the government's plan of intensive care to agriculture of Rajshahi division (Rajshahi and Rangpur Division at present) providing livelihood to 35 million people of the area. The region is less developed compared to other parts, yet full of potentials in agriculture. Rajshahi Division (Rajshahi and Rangpur Division) characterized by its surplus food grain production is popularly called the "granary of the country". Besides catering to agricultural credit, RAKUB, as it is acronymed, renders deposit banking services through all the 365 branches. The headquarters of the bank is stationed at Rajshahi city, some 270 kilometer to the north of Dhaka. Rajshahi Krishi Unnayan Bank (RAKUB) was established by the President's Ordinance No. 58 of 1986 with the aim of providing institutional agricultural credit for optimum utilization of agricultural potentials of Rajshahi Division. Taking over the branches and offices along with assets and liabilities of the Bangladesh Krishi Bank within Rajshahi division, the bank started functioning on 15 March 1987.

CapitalAuthorized capital of the bank amounts to Tk 1800 million. At present Paid-up capital amounts to Tk 1800 million and reserve Tk 208.50 million.

ManagementThe Board is vested with the responsibility of formulation of policy in line with attainment of growth in agriculture and economic development of the region through agricultural credit support. The Board of Directors is constituted by seven members, all appointed by the government. Besides, for emergency decisions there is an executive committee constituted of the Chairman of the Board and two other members: the Managing Director and one of the Directors elected by the Board. The Managing Director is the chief executive of the bank.

Organizational StructureThe head office is stationed at divisional headquarters city of Rajshahi . The branches network of the bank comprises 357 branches including one in Dhaka. Eighteen zonal offices stationed in district headquarters control branches under them. The General Manager's office at Rangpur oversees activities of 12 zones of greater Rangpur, Dinajpur and Bogra districts. There are 18 independent regional audit offices for conducting regular audit in branches and zonal offices. The only training institute of the bank is situated at Rajshahi. There are 3,464 employees of the bank of which 1,525 are officers and 1,939 other

RAKUB ActivitiesFunctions: As the largest development partner in the northwest region RAKUB aims at overall development of farmers and all the sectors and sub-sectors of agriculture in this region. The bank also performs functions like financing agri-business and agro-based industries and poverty alleviation programs.

Capital: Authorized capital of the bank amounts to Tk 7500 million. Paid-up capital amounts to Tk 5700 million and reserve Tk 208.50 million as on 25 April 2010.We extend credit facilities for

http://www.rakub.org.bd/creditprograms.htm

Crop production, Livestock & Poultry, Farm machinery, Fishery, Agro-industries and agri-business, Continuous credit, Poverty Alleviation and more.

Functions As the largest development partner in the northwest region Rajshahi Krishi Unnayan Bank aims at overall development of farmers and all the sectors and sub-sectors of agriculture in this region. Besides, catering to agricultural credit the bank performs ancillary functions as financing agri-business and agro-based industries and poverty alleviation programs.

RAKUB: Progress in Brief(Amount in Million Taka)

Operational Indicators

1989-1990 1994-1995

1999-2000

2000-2001

2001-2002 2002-2003

2003-2004 2004-2005 2005-2006

Authorized Capital

1500.00 1500.00 1500.00 1500.00 1500.00 1500.00 1500.00 1500.00 1800.00

Paid up Capital

160.00 980.00 980.00 1080.00 1080.00 1080.00 1500.00 1500.00 1800.00

Reserve 154.60 208.40 208.40 208.40 208.40 208.40 208.40 208.50 208.50Deposit Balance

994.50 2889.25 5051.94 6702.88 9052.10 10658.21 10820.34 11566.03 12883.00

Demand Deposit

185.35 946.97 2506.91 3098.40 3581.97 4230.81 4253.31 5364.34 5764.36

Term Deposit 809.15 1942.28 2545.03 3604.48 5470.13 6427.40 6567.03 6201.69 7118.64

Advances 9114.23 9505.07 12574.77 13460.18 14705.91 16424.63 18326.6521427.83.00 24712.90

Loan Disbursement

480.88 1924.58 3661.32 4075.20 4790.70 5744.34 6767.30 8697.00 8879.00

Target

1120.00 2100.00 3500.00 4200.00 4700.00 5250.00 7000.00 8500.00 8000.00

Loan Recovery

653.10 1788.26 3881.39 4238.21 4736.70 5429.80 6260.20 6829.30 7470.00

Target

3250.00 5350.00 3500.00 4200.00 4700.00 5000.00 6000.00 7000.00 7500.00

Total Asset 9756.10 17496.00 19868.85 21186.80 24014.28 26680.64 27989.12 30385.05 33915.45

Total Income 926.00 564.60 851.20 527.05 714.24 688.12 782.16 592.42 1736.00

Total Expenditure

690.80 2004.80 1177.70 503.13 560.89 573.38 733.90 958.80 2157.00

Profit-(Loss) 193.00 (1480.97) 21.40 23.92 153.35 114.74 48.26 (366.38) (421.00)Manpower 3638 3750 3737 3716 3686 3650 3577 3524 3446Officer 1165 1525 1675 1674 1653 1649 1607 1570 1514Other Staff 2473 2225 2062 2042 2033 2001 1970 1954 1932Branches 280 298 301 331 349 349 349 352 357

Background

POOR MANAGEMENT OF LOAN PORTFOLIO :

One special feature of the agricultural finance banks is that they have been given authority to recovery its dues as arrears of land revenue by certificate I accordance with the provisions of the public Debt Recovery Act, 1913. Nevertheless, they are perpetually suffering from its inability to collect loan One reason is, as with all Government owned financial institutions (possible exception is Bank on Small Industries & Commerce Bank Ltd.), inefficiency & corruption. It is widely alleged that at field level credit is liven in exchange of what is known in the parlance as "arrangement cost'

It goes without saying that when one has to pay money for a loan he begins with the expectation ill he will not have to repay the money.

Government interference in regard to disbursement and frequent loan forgiveness have also seriously undermined the credit cultural in the agricultural sector. As a result of poor credit management both the banks have to depend monthly on refinance from Bangladesh Bank- and, to a lesser extent through recycling of fund collected from file borrowers.

Liquidity constraints of BKB & RAKUB enacted from poor recovery and high overdue requiring frequent rescheduling of outstanding dues.

BKB & RAKUB have not always succeeded in adhering to the refinance repayment schedule with the Bangladesh Bank.

Bangladesh Bank has recently streamlined the refinance processes to introduce some element of discipline with regard to refinance & repayment.

Name : Bangladesh Development Bank, a state-owned commercial Bank (formed through merger of Bangladesh Shilpa Bank & Bangladesh Shilpa Rin Sangstha)

Legal Status : Public Limited Company Date of incorporation : November 16, 2009 Banking Licence obtained : November 19, 2009 issued by Bangladesh Bank Vendors’ Agreement Signed : December 31, 2009 between the Government and Board of

Directors of BDBL nominated by the Government. Formal Inauguration : January 03, 2010 Registered Office : BDBL Bhaban, 8, Rajuk Avenue, Dhaka-1000 Authorized Capital : Tk.10000 million Paid Up Capital : Tk. 4000 million Reserve (As on 01.01.2010) : Tk. 2270 million Total Assets (As on 01.01.2010): Tk. 16747 million Total Human Resource : 781 Number of Zonal Office : 3 Number of Branch Office : 17 Membership : Dhaka Stock Exchange & Chittagong Stock Exchange Ltd. Web Site : www.bdbl.com.bd

VISION, MISSION, VALUES and STRATEGIC PRIORITIES of the Bank :

VISION

To emerge as the country’s prime Financial Institution for supporting private sector industrial and other projects of great significance to the country’s economic development. Also be active participant in commercial banking by introducing new lines of product and providing excellent services to the customers.

http://www.bdbl.com.bd/

MISSION

To be competitive with other Banks and Financial Institutions in rendering services ; To contribute to the country’s socio-economic development by identifying new and

profitable areas for investment ; To mobilise deposit for productive investment ; To expand branch network in commercially and geographically important places ; To employ quality human resources and enhance their capability through motivation and

right –type of training at home and abroad. To delegate maximum authority ensuring proper accountability ; To maintain continuous improvement and up-gradation in business policies and

procedures ; To adopt and adapt to new technology ; To maximize profit by strong, efficient and prudent financial performance ; and To introduce new product lines according to market needs.

VALUES

Customer focus Provide smart, efficient, transparent and courteous services.

Social Responsibility

Practise corporate social responsibility.

STRATEGIC PRIORITIES

o Invest in Eco – friendly industries that help mitigate environmental degradation by

lending more for renewable energy, and effluent treatment plants and other projects that

employ energy efficient low-emission technologies including agro-based industries,

small power projects, ICT, transport and infrastructure projects.

o Select and invest industrial projects where locational advantages like local availability of

raw materials, good infrastructural facilities (road communication, transport facilities,

etc.) and utilities (power, gas, water, etc.) shall be available.

o Limit project loan to Tk. 15 crore maximum and Tk.2 crore minimum (for large

projects). Arrange and participate in syndicated loan for projects above Tk. 15 crore.

o Identify prospective and potential entrepreneurs and investors/ clients and motivate,

guide and help them select profitable industrial venture for investment.

o Regularly publish financial disclosures.

Undertake from time to time SWOT (Strength, Weakness, Opportunity and Threats) analysis for reviewing bank’s market position.

DOCUMENTATION POLICIES AND PROCEDURES.

Introduction:

Documentation Department has to perform a wide range of activities related to documentation of long term loans sanctioned by the bank. In addition to completion of documentation formalities of all long term loans sanctioned at Head Office level, arranges audit clearance for loan sanctioned at the branch level also. However, completion of documentation formalities of long term loans is the main function of this department. Documentation procedures followed by the bank for its Head Office & Branches as well are as follows :

i. Papers to be Submitted by the Sponsors/Company after sanction of loan :

(a) Acceptance Letter with Companies Board resolution;(b) Documentation fee : One fourth of one percent on the amount of loan

sanctioned or the actual expenses. Whichever is more, subject to a minimum Tk 5000 and maximum Tk 30,000 with VAT.

(c) Other Charges : (i) Charge filling fee.(ii) Deed Collection fee.(ii) Stamps (As per Banks requirement).

(d) Copy of Memorandum and Article of Association with certificate of incorporation.

(e) Attested passport size photographs of all Directors (2 copies for each).(f) Documents/title deeds of project land and co-lateral security (if any);(g) Non-encumbrance certificate from district registrar office;(h) Mutation with DCR;(i) C.S. S.A. R.S. Khatian;(j) Mouza Map;(k) Up to date rent receipt;(l) Chain of previous documents such as bia-deed. Bia Khatian etc.;(m)Registered Mortgage and registered Irrevocable power of Attorney;(n) Necessary papers/Documents as per Sanction letter;(o) 100% Share Certificate;(p) NOC from RAJUK/CDA/KDA/Municipal Authorities/Local authority for setting

up the project on the land within this area;(q) NOC from BSCIC authority for project to be set up at BSCIC Industrial Estate;(r) NOC from BPDB/DESA/BPS/TGT & DC; (s) NOC from Department of Environment Pollution Control where applicable; and(t) NOC from Director, Drug Administration (for pharmaceutical projects).

Particulars of documents required on the basis of type of loans and/or location of project land :-

ii New/Original Loan :

(a) Original registered title deed of project land and collateral land (if any);(b) Bia-Deed;(c) C.S, S.A & R.S Khatian with ROR;(d) DCR and Mutation Khation;(e) Rent Receipt;(f) Non-encumbrance Certificate from District Registrar; &(g) Mouza Map.

iii In case of Project Land acquired by the Govt. acquired project land :

(a) Copy of the relevant Requisition Order;(b) Copy of the Acquisition;(c) Allotment letter in favour of the company;(d) Possession Delivery Certificate;(e) Original registered deed of transfer;(f) NOC from Govt. for mortgage the land in favour of BDBL;(g) Evidence of payment of the purchase price; &(h) Site plan.

iv. In case of Project Land located at BSCIC area/Industrial Estate &/or Govt. allotted plot :

(a) Original allotment letter;(b) Possession delivery certificate;(c) NOC to create mortgage in fovour of BDBL;(d) Original registered lease deed;(e) Evidence of payment of purchase price; &(f) Site plan;

v. In case of rented premises:

(a) Lease Agreement by the borrower with land-lord;(b) Tax payment receipt in the name of land-lord; &(c) Approved Building plan by the appropriate authority.

vi. Required Documents depending on type of ownership/company :A. For Limited Liability Companies

(1) DP note (double) accompanied by DP note Revival letters (Form I & II) and delivery letter;

(2) Credit Agreement;(3) Agreement of hypothecation;(4) Memorandum of Deposit of Title deeds;(5) Resolution/Authority to execute documents;(6) Specimen signatures of executants of documents on the Banks standard cards;(7) Letter of Guarantee;(8) Affidavit/Undertaking as per sanction letter;(9) Personal Guarantee of all directors;(10) Share transfer form (Blank)-117 duly signed by the directors/Share holders; (11) 100% Share Certificate;(12) Auditors Certificate in favour of paid-up capital & Necessary papers as per

sanction letters.

B. For Proprietorship :

(1) Single D.P Note;(2) D.P Note Delivery Letter;(3) Revival Letter Form-III;(4) Specimen Signature Card;(5) Personal Guarantee;(6) Acceptance letter;

(7) Registered Mortgage & registered Irrevocable Power of Attorney along with all necessary documents/papers i.e. Bia Deed, Bia-Khatian, CS, SA, RS parcha, Mutation, DCR, up to date Rent receipt, Non-Encumbrance certificate from District Registrar;

(8) Affidavit for Declaration furnished by the borrowers/Land owners that the Mortgage Properties are free from encumbrance-from first class Magistrate;

(9) TIN Certificate & Trade License;(10) Photograph of sponsors;(11) Undertaking as per Sanction letter;(12) Agreement of hypothecation; &(13) Documentation fee, necessary stamps as per Bank’s rules.

C. For Partnership Firm :

(1) Single D.P Note;(2) D.P Note Delivery Letter;(3) Revival Letter Form-III;(4) Specimen Signature Card;(5) Personal Guarantee;(6) Acceptance letter;(7) Registered Mortgage & registered Irrevocable Power of Attorney along with all

necessary documents/papers i.e. Bia Deed, Bia-Khatian, CS, SA, RS parcha, Mutation, DCR, up to date Rent receipt, Non-Encumbrance certificate from District Registrar;

(8) Affidavit for Declaration furnished by the borrowers/Land owners that the Mortgage Properties are free from encumbrance-from first class Magistrate;

(9) TIN Certificate & Trade License;(10) Photograph of sponsors;(11) Undertaking as per Sanction letter;(12) Agreement of hypothecation; &(13) Documentation fee, necessary stamps as per Bank’s rules.(14) Credit Agreement;(15) Partnership Agreement;(16) Memorandum of Association & Articles of Association;(17) Resolution; &(18) Agreement of Hypothecation along with list of machinery.

vii. For Additional Loan & BMR& E Loan

(a) Letter of acceptance;(b) Board resolution of the company for documentation;(c) Memorandum of Association & Article of Association;(d) Auditors Certificate in respect of paid up Capital;(e) 100% Share Certificate;(f) Memorandum of deposit of title deeds/Agreement of Hypothecation with Charge

filling form- form-17;(g) Deed of continuation and Acknowledgement;(h) Photographs of each director (two copy);(i) Particulars of Directors (from RJSC);(j) Return of allotment of Shares (from RJSC);(k) DP Note;(l) DP. Note delivery letter;(m) Revival letter form I & II;

(n) Credit Agreement;(o) Specimen signature of executants of document on the Banks standard Cards;(p) Personal Guarantee of all directors;(q) Share transfer form of Directors/Share-holders form-117 (Blank); &(r) Affidavit/undertaking as per Sanction letter.

viii .In Case of Management Change :

(a) Letter of acceptance;(b) Board resolution of the company for documentation;(c) Memorandum of Association & Article of Association;(d) Auditors Certificate in respect of paid up Capital;(e) 100% Share Certificate;(f) Share transfer form - form-17 (Blank);(g) Deed of continuation and Acknowledgement;(h) Photographs of each director (two copy);(i) Particulars of Directors (from Registrar of Joint Stock Companies,

RJSC);(j) Return of allotment of Shares (from RJSC);(k) DP Note;(l) DP. Note delivery letter;(m)Revival letter form I & II;(n) Credit Agreement;(o) Specimen signature of executants of document on the Banks standard Cards;(p) Personal Guarantee of all directors;(q) Share transfer form of Directors/Share-holders form-117 (Blank); (r) Affidavit/undertaking as per Sanction letter;(s) Summery of share capital;(t) Certified copy of share transfer of new inducted director with share transfer form-

form-117 (duly stamped);(u) Affidavit/undertaking as per sanction letter; &(v) Company resolution for outgoing director and appointment of new director.

viii. in case of change in Board of Directors of the Company/Ownership:

(a) Letter of acceptance;(b) Board resolution of the company for documentation;(c) Memorandum of Association & Article of Association;(d) Auditors Certificate in respect of paid up Capital;(e) Share Certificate;(f) Deed of continuation and Acknowledgement;(g) Photographs of each director (two copy);(h) Particulars of Directors (from RJSC);(i) Return of allotment of Shares (from RJSC);(j) DP Note;(k) DP Note delivery letter;(l) Revival letter form I & II;(m)Credit Agreement;(n) Specimen Signature of executants of document on the Banks standard

cards;(o) Personal Guarantee of all directors;(p) Share transfer form of Directors/Share-holders form-117 (Blank); (q) Affidavit/undertaking as per Sanction letter;(r) Certified copy of Summery of share capital from RJSC;

(s) Certified copy of share transfer of newly inducted director with share transfer form- form-117 (duly stamped);

(t) Affidavit/undertaking as per sanction letter; &(u) Company’s resolution for out going director and appointment of new director.

ix. In case of change of Project Land :

(a) Acceptance letter of sanction letter with Company’s Board resolution;(b) Undertaking as per sanction letter;(c) Charge filling fee- form-18; &(d) All papers/deeds as per para 1(h-m).

x. In case of Rephasement/Rescheduling of Loan Account :

(1) Acceptance letter of the company/partnership/proprietor with Board Resolution; &

(2) Documentation fee TK. 5000/= with VAT.

2. Besides papers and documents to be submitted are subject to verification, examination & vetting by the bank’s lawer so as to ascertain whether they are in order to protect bank’s interest.

N.B. The above formalities are subject to amendment, modification and/or change at the discretion of the Bank Management. Further the documents/papers required for documentation purpose as delineated above may vary to some extent depending on the merit of the cases.

Provisional30-06-2010

Notes (Taka)

PROPERTY AND ASSETSCash in hand 01 16,134,354.22

Cash with Bangladesh Bank & Sonali Bank(Including foreign currencies) 02 156,896,174.83

Balance with other Banks & Financial Institution 03 3,218,967,831.45

Money at call & Short notice 04 70,238.47

Investments 05 1,429,182,121.52

Loans & Advances 06 10,193,619,638.86

Premises and Fixed Assets 07 347,691,717.56

Other Assets 08 1,515,823,501.56

Total Property & Assets 16,878,385,578.47

LIABILITIES AND CAPITALLiabilitesBorrowings from other Banks & Agents 09 2,841,728,710.02

Deposit & other Accounts 10 1,482,036,348.46Current Deposit 140,085,859.98

Bills Payable 11 11,522,724.64

Savings Bank Deposit 372,758,470.40

Fixed Deposits 714,707,328.01

Other Deposits 242,961,965.43

Deposit at Call -Other Liabilites 12 5,998,921,984.42

Total Liabilites 10,322,687,042.90

Capital/Shareholders'equityPaid-up Capital 13 4,000,000,000.00

Quasi equity 14 134,744,560.47

Statutory Reserve 15 921,909,335.71

Reserve Fund & Other Reserves 16 1,465,689,305.41

Profit & Loss Account 33,355,333.98

Total Shareholders'equity 6,555,698,535.57

Total Liabilites & Shareholders'equity 16,878,385,578.470.00

Off Balance Sheet Item 31 723,603,581.00

SENIOR OFFICER PRINCIPAL OFFICER SENIOR PRINCIPAL OFFICER

ASSISTANT GENERAL MANAGER DEPUTY GENERAL MANAGER

Particulars

BANGLADESH DEVELOPMENT BANK LTD.BALANCE SHEET AS ON JUNE 30, 2010

Provisional30 June, 2010 % of Income/Expenditure

Notes (Taka) (Taka)

Interest Income 17 378,895,663.37 61.95

Interest Paid on Deposits, Borrowings etc 21 (51,931,813.89) (12.71)

Net Interest Income 326,963,849.48 53.46Income From Investments 18 109,988,898.75 17.98

Commission, Exchange & Brokerage 19 12,990,347.37 2.12

Other operating income 20 47,872,505.02 7.83

Total Other Income 170,851,751.14 27.93

Total Operating Income 497,815,600.62 81.39

Salaries and Allowances 22 206,194,018.08 50.46

Rent, Taxes, Insurance, Lighting etc. 23 8,172,577.98 2.00

Legal Expense/Law Charges 24 613,335.50 0.15

Postage,Telegram , Telephone & Stamps 25 861,424.38 0.21Auditors' Fees 26 11,000.00 0.00Stationery,Printing & Advertisement etc. 27 2,388,362.00 0.58Director's Fees 28 1,052,320.00 0.26Depreciation & Repairs to Fixed Assets 29 20,491,826.87 5.01

Other Expenditure 30 36,939,058.79 9.04

Total Operating Expenditure 276,723,923.60 67.72

Profit/(Loss) Before Provision 221,091,677.02 36.15

Provision for Loans & Advances 80,000,000.00 0.00Other Provison 0.00 0.00Total Provision 80,000,000.00 0.00Total Profit/(Loss) after Provision 141,091,677.02 36.15Prior years' adjustments 61,913,892.49 10.12Total Net Profit/(Loss) 203,005,569.51 33.19

Net Profit/(Loss) after adjustments butbefore provision for taxation 203,005,569.51 33.19Provision for Income Tax 86,000,000.00 0.00Appropriations: 0.00Statiutory Reserve 40,600,000.00 0.00Dividend to Government 0.00 0.00Retained Earnings transfered to BS 0.00 0.00Gerenal Reserve 76,405,569.51 0.00Profit/(Loss) Transfer to Balance Sheet 0.00 33.19

PROFIT AND LOSS ACCOUNT FOR THE HALF YEARBANGLADESH DEVELOPMENT BANK LTD.

Ended on June 30, 2010

SENIOR OFFICER PRINCIPAL OFFICER SENIOR PRINCIPAL OFFICER

Particulars

ASSISTANT GENERAL MANAGER DEPUTY GENERAL MANAGER

EVALUATION OF PERFORMANCE OF SPECIALIZED BANKS IN BANGLADESH

With the possible exception of the BASIC Bank, performances of the specialized banks have

been highly unsatisfactory. All are suffer from sluggish loan disbursements, Lack of supervision

over financed projects, poor rate of recovery of loans, inefficiency, poor governance, lack of

proper accountability and corruptions. These are reflected by high proportion of non-performing

loans, accumulation of losses and capital inadequacy. Frequent infusion of funds form the

donors, Bangladesh Bank & Government of Bangladesh have failed to improve their

performance. The avoid created on account of the failure of the specialized banks to support the

industry, agriculture, industries and housing. has to a certain extent been filled by the

commercial banks. BRDB, private sector finance, leasing company and the NGOs.

Therefore, poor performance of the specialized banks is required frequent infusion of funds by

the Government, Bangladesh Bad, donors and other sources. However, these had very little in

parts on the health of there organizations.

Conclusion

Except one specialized banks, all are commonly used to utilize their loanable fund into trading

business and consequently they have been suffering the pressure of huge non-performing loan.

But the picture of BASIC Bank is completely different from all other banks. BASIC Bank Ltd.

has commenced its functioning with a view to invest at least 50% of its loanable fund in small

scale industries. Although it failed to achieve this target initially, but the recent years show that

it has acheived the target gradually. The specialized banks in Bangladesh are suffering from

sluggish disbursement of loans, lack Of supervision over financing projects, poor rate of

recovery of loans, inefficiency, Poor governance, lack of proper accountability & corruptions.

The banks, therefore should remove the problems and banks are required frequent infusion of

funds by the government, Bangladesh Bank, Donor & other Sources.

Bibliography

1. www.krishibank.org.bd

2. www. basicbanklimited .com

3. www.bdbl.com.bd

4. www.rakub.org.bd

5. www.google.com

36

http://www.rakub.org.bd/

http://www.bdbl.com.bd/

http://www.basicbanklimited.com/

http://www.krishibank.org.bd/

Assignment Banking

Documents

Transcript of Assignment Banking