Chapter 1: IntroductionBank plays an important role in the development of any country. Bank works as a life

blood of an economy. From securing personal fund to investment and industrialization,

bank plays an important role. Bank takes deposit from the individual person, pools the

money in one place, provides loan to meet other person/business need, invests in

productive sector, helps business client in foreign transaction, and reduces the risk of

everybody. Without the banking system all sort of these activities would not be possible.

We can not even imagine the country economic system, without the bank. So, the role of

bank can not be express in a few words. Since, bank do business with others money, a

proper guidance is necessary to mitigate the risk. If the banks fall in problem, total

economy will be in the problem. So, the banking activities should be operated in a proper

ways. Government and central bank should monitor the activities of the bank regularly.

Seeing the importance of the bank in country’s economic development, Bangladesh

government has given the permission to establish new private commercial bank in the

country after the liberation war. After then, one by one private bank has established in

the country. As a BBA student, to fulfill the requirement of degree I have to an internship

in an organization to come into an exposure in real working condition. Seeing the

importance of the bank, I have chosen to do my internship in bank. As IFIC bank is one of

the pioneer and oldest private bank in our country, I have chosen this bank to do my

internship. Throughout the three month of my internship period, I have worked in

several department of IFIC bank and learnt through observing and working with the bank

officers. Throughout the whole report, I have tried to focus on the total baking operation

of IFIC bank.

1.1 Time Period of Internship:My internship period is limited to three months. Within these three months I have

worked in several department of IFIC bank. Through extensive rotation from one section

to another, I have tried to catch up all the basic operations of bank. My internship started

in 31st May and ended in 29th august.

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1.2 ObjectivesThe primary objective of the study is to the orientation of the practical working condition

which is one of the requirements of BBA degree. The main objective of the study is to be

acquainted with the practical banking knowledge and learn about banking rules and

regulations. The objectives of the study are summarized below:

To make a bridge between the theories and practical procedures of banking day

to day operations

To have some practical exposures that will be helpful in my practical life

To comply with the entire branch banking procedures

To analyze the performance of the branch as well as IFIC Bank

1.3 Importance of the Report:

This is report is important for the completion of BBA degree. Throughout the report I

would like to focus on the Banking system of Bangladesh, Banking system of IFIC bank,

problems of IFIC bank. So, it can be use as a guideline for the person who are doing

internship on bank and who are interested to do job in the bank. I will also help the IFIC

authority to find out the problems of their bank, their financial performance, their

strength, weakness, opportunities and threats.

1.4 Methodology:

This report is prepared on the basis of the practical experience that I have gathered

during the period of three month of my internship on IFIC bank, Dhanmondi branch.

Within this three month I have worked in the several department of the bank and

learned many things. To prepare this report I have use both the primary data and the

secondary data. The things that I have learned within the tenure of my internship, is the

primary data of these report. The secondary data about the banking system of

Bangladesh and IFIC bank, are collected from websites, annual reports and from past

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internship report. The summary of both primary data and the secondary data sources are

in the following:

Primary data sources:

Observation while working in different desks and department

Informal discussion with professionals

Secondary data sources:

Bangladesh Bank websites: www.bangladesh-bank.org

Annual report of IFIC bank

IFIC bank website: www.ificbank.com.bd

Wikipedia: www.wikipedia.org

Past internship report

1.5 Organization of the Report:

This report has been prepared in different parts and chapters in order to explain my

experience in the easiest way. Introduction is presented in the part A; in the part B, I

have given a general overview of IFIC bank. Again, I have divided this part into many

chapters for easy understand of everybody. Part D, is all about the banking operation of

IFIC bank. It is also divided into many chapters to give you the idea of banking operation

of IFIC bank. In part E, I have shown the financial performance of IFIC bank. And in part F

& G I have discussed my learning as a student in IFIC bank and I have made some

recommendation to develop the services of IFIC bank.

1.6 Limitations of the Study:

A bank has many activities. Three month time is not enough to learn all the activities

about the bank. But, I have tried my level best to focus on every activity that I have

observed. Please forgive me, if anybody finds any lacking in the report.

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Chapter 2: At a Glance

2.1 Incorporation History:

IFIC Bank (International Finance, Investment and Commerce Bank Limited) originally

named as International Finance and Investment Company, was formed in October 1976.

It obtained certificate of commencement on 28 February 1977 as an investment banking

company. The company was established mainly to carry out banking and other financial

business outside Bangladesh (especially in the oil-rich Middle-Eastern countries) either

singly or in collaboration with other companies, banks and financial institutions.

Bangladesh Bank allowed IFIC to transform itself into a banking company and

accordingly, it was renamed and after completion of required legal formalities, it started

full-fledged commercial banking operations on 24 June 1983.

2.2 Title, Logo and Slogan:

Title: IFIC BANK LIMITED

Logo:

Slogan: “Your Satisfaction First”

Founder: Mr. Mohammad Lutfar Rahman (Founder & Former Chairman)

Chairman: Salman F Rahman

Number of Employee: At present there are 2,315 numbers of employees working

at IFIC Bank.

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2.3 Mission statement

“Our Mission is to provide service to our clients with the help of a skilled and dedicated workforce whose creative talents, innovative actions and competitive edge make our position unique in giving quality service to all institutions and individuals that we care for.”

“We are committed to the welfare and economic prosperity of the people and the community, for we derive from them our inspiration and drive for onward progress to prosperity.”

“We want to be the leader among banks in Bangladesh and make our indelible mark as an active partner in regional banking operating beyond the national boundary.”

“In an intensely competitive and complex financial and business environment, we particularly focus on growth and profitability of all concerned.”

2.4 Customer Satisfaction:

IFIC bank give more importance to its customer. It tries to give superior facilities to its valued customer with in its capability. Employees of IFIC bank are working hard to satisfy customer. In general, banking transaction hour ended in 4:00 PM, but, IFIC bank provides services to its customer s till 5:00 PM sometimes even in 6:00 PM. This is showing their services quality.

2.5 Sponsors:

The sponsors of IFIC Bank Limited are successful leading entrepreneurs of the country having stakes in different segments of the national economy. They are eminent industrialist and businessman having wide business reputation both at home and abroad.

2.6 Ownership Structure

The ownership structure of IFIC bank is as follows:

No. Party Percentage1 Government 32.752 Sponsor/Director 8.375 Public 58.88

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2.7 Capital and Reserves:

The authorized capital of the IFIC bank was Tk. 5,350.00 million and the paid-up capital

stood at Tk. 2,179.83 million as on December 31, 2010. The reserve of the Bank stood at

Tk. 3,585.61 million in 2010 against Tk. 2,453.60 million in 2009. A break-up of the capital

& reserves inclusive of statutory reserve are furnished below:

Nature of Capital & Reserve

2006(mn)

2007(mn)

2008(mn)

2009(mn)

2010(mn)

Share Capital 406.39 670.72 1341.43 1743.86 2179.83Statutory reserve 659.06 952.04 1215.50 1545.41 2182.23Other Reserve 139.29 153.06 82.71 179.91 83.81Retained Earnings 166.02 837.96 561.09 728.28 1319.58Total Shareholder's Equity 1370.75 2613.78 3200.74 4197.46 5765.44

2.8 Five Year Financial Summary:

2006 2007 2008 2009 2010Authorized Capita 500 1,600 1,600 5,350 5350Paid –up Capital 406 671 1,341 1,744 2180Reserve Fund 1,229 1,943 1,856 2,454 3585Deposits 28,621 29,900 36,092 50,018 55918Loans & Advances 25,491 28,361 33,018 37,794 48826Investments 3,545 3,856 5,230 9,083 9635Net Profit before taxation 608 1,465 1,317 1,650 3184Import Business 3,676 4,435 5,034 4,372 6247Export Business 4,901 5,487 6,656 5,424 5598

2.9 Credit Rating:

The Credit Rating Agency of Bangladesh Limited (CRAB) rated IFIC Bank during 2009. The CRISL also rated the Bank for preceding 3 (three) years. The CRAB rated the Bank ‘A1’ in the Long Term and ST-2 in the Short Term in 2009

Status 2009 (CRAB) 2009 (CRAB)Long -term A1 AShort-term ST-2 ST-2

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2.10 Branch network:

IFIC bank is one of the leading banks in Bangladesh. It has 100 branches (including SME

and krishi branch) spreading all over the country. Without these branches in Bangladesh,

it has some foreign branches operating in abroad. The summary of it branches are as

follows:

Area No of BranchesDhaka 46Chittagong 19Sylhet 8Rajshahi 15Khulna 10Barishal 1Head Office 1Total 100

2.11 Management of this Bank:

The management committee of IFIC bank includes the following members:

1. Mr. Mohammad Abdullah, Managing Director

2. Mr. Mati-ul-Hasan, Deputy Managing Director

3. Ms. Zaitun Sayef, Deputy Managing Director

4. Mr. A.K.M. Mozharul Hoque,

Senior Executive Vice President & Company Secretary

5. Mr. Syed Zahidul Islam,

Senior Executive Vice President & Head of Human Resources Division

6. Mr. S.M. Abdul Hamid,

Senior Executive Vice President & CFO & Head of Finance and Accounts Division

7. Mr. Narayan Chandra Roy,

Senior Executive Vice President & Head of Internal Control and Compliance Division

8. Mr. Fariduddin Al Mahmud,

Senior Executive Vice President & Head of Corporate Banking & Marketing Division

9. Mr. Wakar Hasan,

Senior Executive Vice President & Head of Credit Risk Management Division

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10. Mr. Md. Abul Hossain,

Executive Vice President & Head of Corporate Communication and Support Service

11. Mr. A.K. M Shafiqul Alam,

Senior Vice President & Head of Remedial Asset Management

12. Mr. Gopal Chandra Guha Roy, Senior Vice President & Head of IT

2.12 Management Structure:

The thirteen members of the Board of Directors are responsible for the strategic planning and overall policy guidelines of the Bank. Further, there is an Executive Committee of the Board to dispose of urgent business proposals.

Besides, there is an Audit Committee in the Board to oversee compliance of major regulatory and operational issues.

The CEO and Managing Director, Deputy Managing Director and Head of Divisions are responsible for achieving business goals and overseeing the day to day operation.

The CEO and Managing Director are assisted by a Senior Management Group consisting of Deputy Managing Director and Head of Divisions who supervise operation of various Divisions centrally and co-ordinates operation of branches.

Key issues are managed by a Management Committee headed by the CEO and Managing Director. This facilitates rapid decisions.

There is an Asset Liability Committee comprising member of the Senior Executives headed by CEO and Managing Director to look into all operational functions and Risk Management of the Bank.

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Chapter 3: About Dhanmondi Branch

IFIC Bank, Dhanmondi Branch is one of the oldest branches of IFIC bank. When IFIC bank

started banking operation in Dhanmondi there was no bank in that area. IFIC authority

found that that opening a bank branch in Dhanmondi would be helpful for the business

person of Dhanmondi area as well as it can gather more customers. That is why it has got

some advantage.

Location: Royal Plaza, 2nd and 3rd floor, house 8-A, Road #4, Dhanmondi, Dhaka-1205

Department: IFIC Bank, Dhanmondi branch provides all kind of banking facilities for the clients. It has the following departments and sections:

1) General Banking Department:a. Account Openingb. Clearingc. FDRd. Pay Ordere. Remittancef. Cashg. Credit Card

2) Foreign Exchange Department: a. Importb. Exportc. Foreign Remittance

3) Credit Department

Number of Employee:

IFIC bank, Dhanmondi branch has 46 numbers of employees, who are working to serve

the customer.

Manager: Md Sharifur Rahman, Executive Vice President and Manager

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Important Customer:

The customer’s o IFIC Bank, Dhanmondi Branch includes:

Bangladesh Export Import Limited

BEXIMCO Holding Limited

Bextrade limited

BEXIMCO Securities Limited

The Independent

Independent Publishers

Lab Aid Specialized Hospital

Lab Aid Properties

City College

Popular Specialized Hospital

Anwar Khan Modern Hospital

Blessing Agrovet Industries Limited

Hakkani Publishars

Fibina properties etc.

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Chapter 4: Product and services of IFIC Bank

Products and services:

IFIC Bank provides the following banking services to its customers:

4.1 Corporate Banking:

IFIC Bank is providing a wide range of financial services, offering specialist advice and

products to corporate clients to meet diverse demands of changing market scenario.

IFIC Bank has customized products & services to meet specific requirements of

clients. Products and services for commercial and business customers include:

a. Working Capital Finance

b. Project Finance

c. Term Finance

d. Trade Finance

e. Lease Finance

f. Syndication Finance

4.2 Retail Banking:

Retail Banking is mass- banking facility for individual customers to avail banking

services directly from wide branch network all over the country. IFIC bank provide

one-stop financial services to all individual customers through its innovative products

& services to cater their need. With a view to provide faster and more convenient

centralized online banking services, most of IFIC branches have been brought under

the real time online banking system. IFIC Bank offers a wide variety of deposit

products, loan product & value added services to suit everyone’s banking

requirements. Products and services for individual customer include:

a. Consumer Financeb. Deposit Productc. Cardd. NRB Account

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e. Student Filef. SMS Banking

4.3 Treasury & Capital Market:

a. Capital Market: IFIC Bank Limited offers brokerage services for individual and

institutional investors. The Bank is responsible for origination of sales, buy and

trading of securities of Capital markets. It aims to provide relevant support to

its customer with sophisticated and innovative financial solutions and

delivering the highest quality of services. It has a seat in Dhaka Stock Exchange

Limited. Capital Market and brokerage services include:

- Brokerage Services

i. Trade Execution

ii. Dedicated and Skilled Dealer exclusively for your trade

iii. Exclusive arrangement to safe Keeping of Securities

iv. Capable to verify and register your securities

- Margin Loan Facilities

- Services as Full Services DP:

1. BO (Beneficial Owner) accounts opening

2. Dematerialization of shares

3. Re-materialization of shares

4. Transfers and multiple accounts movement

5. Pledging, Un-pledging and confiscation

6. Corporate Action Inquiry

7. Bo ISIN Balance and master maintenance inquiry

- Phone/Fax/ E-mail Services trading facilities

b. Treasury: The Treasury Division of IFIC Bank is engaged with Cash

Management, Liquidity Planning and Liquidity Protection. It is also conscious

to protect all the bank’s Assets and Profits against loss due to domestic as well

as global financial realities, particularly Interest and Exchange Rate

fluctuations. The Treasury Department is also regarded as a Profit Center,

which generates income by trading instruments in the Financial Market. The

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Treasury is constituted with well setup Front Office, Mid Office and Back

Office.

Major Functions of Treasury:

a) Fund Management

b) Management of Statutory Requirement

c) Investment

d) Trading of F Ex. & Money Market Instruments

e) Asset Liability Management

f) Risk Management

4.4 SME Banking:

The growth of Small and Medium enterprises (SMEs) in terms of size and number has

multiple effects on the national economy, specifically on employment generation,

GDP growth, and poverty alleviation in Bangladesh. At present, Small & Medium

Enterprise sector is playing a vital role in creation of new generation entrepreneurs

and 'Entrepreneurs Culture' in the country. Experience shows that borrowers of small

enterprise sector prefers collateral free loan since normally they cannot offer high

value security to cover the exposure. To facilitate SME sector of the country, IFIC

Bank provides collateral free credit facilities to the small & medium entrepreneurs

across the country whose access to traditional credit facilities are very limited. IFIC

bank is offering 15 different products for selected target groups, such as –

Easy Commercial Loan,

Retailers Loan,

Muldhan Loan,

Women Entrepreneur’s Loan (Protyasha),

Transport Loan,

Working Capital Loan,

Project Loan,

letter of Contractor's Loan,

Bidder's Loan,

Letter of Guarantee,

Letter of Credit Loan against Imported Merchandize (LIM),

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Loan against Trust Receipt etc.

4.5 Agriculture Credit:

Our country is an agricultural country. Most of the people are involved in agricultural

business. In order to achieve desired growth in agriculture sector of the country, IFIC

Bank is offering Agriculture Loan products namely:

a) Krishi Saronjam Rin - for Agriculture Equipments

b) Shech Saronjam Rin - for irrigation equipments

c) Poshupokkhi & Motsho Khamar Rin - for Live Stock & Fish Culture &

d) Phalphasali Rin - for Fruit Orchard for individuals & group at micro

level.

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Chapter 5: SWOT Analysis

What is a SWOT?

SWOT analysis is a process to identify where we are strong and where we are vulnerable,

where we should defend and where we should attack. It tells us our strengths, our

weaknesses, the opportunities which prevail in the market and the threats which we may

face from our competitors and other from other potential factors.

Strengths:

Strong Financial Position

Govt. Support and Encouragement (32.75% own by Govt.)

Huge customer base

Qualified management team

Computerized working environment

Online branch banking services

Weaknesses:

Inexperienced and unskilled workforce

Work Overload on Employees

Small number of ATM booth

High procedural and paper works that de-motivate customer

No Islamic Banking services

Opportunities:

Rapid Growing Economy

Huge Demand for Consumer Financing

Providing Islamic Banking services

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Investment in Capital market

Micro credit financing through its broad branch network

Threats:

Political instability

High competition from others private bank

Permission to incorporate new private bank

Changes in central bank’s policy regarding interest rate, operational

procedures

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Chapter 6: Deposit Product of IFIC Bank

Different Types of Deposit Product:

IFIC Bank has the following deposit products for its customers:

6.1 Current Account (CD A/C)

6.2 Saving account (SB A/C)

6.3 FDR Account

6.4 Short term Deposit Account (STD A/C)

6.5 Monthly Income Scheme (MIS)

6.6 Special Notice Deposit (SND) Account

6.7 Pension Savings Scheme (PSS)

6.8 Others:

a. Double Return Deposit Scheme (DRDS) – double in 6 years

b. Three Years Deposit Plus

c. More money

d. School Savings Plan - A Plus

6.1 Current Account:

This is a popular type of account in Bank. Generally, the number of current account in

bank is higher comparative to other types of account. Business person, organization

generally open this accounts to operate the daily transactions. The terms and condition

of this account are as follows:

i. Required minimum 2000 taka to open account

ii. Can deposit and withdraw any amount without any notice

iii. Have to maintain minimum 2000 taka to run the account, if account goes

down to less than taka 2000, an additional amount of taka 200 will be

charged

iv. To stop payment instruction, a charge of taka 100 will be deducted from

account

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v. No interest will be provided to this account holders

vi. Debit Card facility

vii. ATM facility

viii. Online Banking facility

ix. SMS Banking Facility

x. Utility payment service

xi. Transfer of fund from one branch to another

xii. Opportunity for availing locker facility

6.2 Saving account:

This is a popular type of account to the general people. People with limited income,

opens this income to save money. The terms and condition for opening this account are:

i. Initial Deposit: Tk. 500.00 at rural branches & Tk. 1000/- for urban branches

which should be considered as minimum balance.The depositors are allowed

to withdraw twice a week without any notice

ii. To withdraw more than two times, a notice is required

iii. A charge of 200 taka will be charge to this account holder in every half quarter

iv. The account holder will be given interest rate of 5% on the monthly minimum

balance

v. Debit Card facility

vi. SMS Banking Facility

vii. ATM facility

viii. Online banking facility

ix. Utility payment service

x. Transfer of fund from one branch to another

xi. Opportunity for availing locker facility

6.3FDR Account:

It is an investment for a specific time period. Within the specific period the account holder can

not withdraw the money, if do he or she will not get interest. In IFIC bank the minimum amount

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for opening a FDR account is 50000 taka and minimum period is one month. The interest rates in

this account are as follows:

Month Amount of FDR Interest rate

1 month Less than Tk. 1.00 crore 10.50%

Tk. 1.00 crore and above 12.00%

3 Months Any Amount 12.00%

6 Months Any amount 12.00%

12 Months Any amount 12.00%

6.4Short term Deposit Account (STD A/C):

STD account is a very important class of account. An initial amount of 25000 taka is

required to open this account. The account holder is to required to maintain a minimum

balance of taka 25000 to avail for interest. Interest is given on the monthly average

balance. Depositor is allowed to withdraw any amount without any notice keeping

minimum balance of 25000 taka.

6.5Monthly Income Scheme- Protimash (MIS):

A person of 18 years of age and above will be eligible to open an account in his/her own

name. The applicant will require to open/have a CD/SB Account with the branch. A

person can open more than one account in his/her/their name in the same branch or at

any branch of the Bank. A person can Deposit once and Enjoy Higher Return on Monthly basis

as below:

Deposit Term Term Gross Monthly Income

Tk. 50,000 or multiple 3 Yrs. Tk.500.00 (i.e Tk.1000.00 per lac)

There is a loan facility against this type of account as per the Bank’s prescribed rates and

rules.

6.6Special Notice Deposit (SND) Account:

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Special Notice Deposit (SND) Account is opened for any individual/ firm/ company/ Financial Institutions/ societies/ clubs/ Trust/ NGOs/ Banks/ Corporations/ Autonomous bodies/ government organizations. Initial Deposit required to open this account is 25000 taka. Also, the account holder has to maintain a minimum balance of 25000 taka. Interest rates on the account are as follows:

Amount Interest rates

Less than Tk. 1.00 crore 2.00%Tk. 1.00 crore and above but less than Tk.25.00 crore 2.50%

Tk. 25.00 crore and above but less than Tk. 50.00 crore 4.00%

Tk. 50.00 crore and above but less than Tk. 100.00 crore 2.00%

Tk. 100.00 crore and above 2.00%

6.7 Pension Savings Scheme (PSS):

IFIC Bank offers 3(three) / 5(five) Years Monthly Savings. Monthly Installment option and

Payment after maturity, now being offered under the scheme, are shown in below:

Monthly Installment 3 years Terms 5 years Terms

Amount payable After maturity

Amount payable After maturity

Tk. 500 Tk. 20,781 Tk. 38,134Tk. 1,000 Tk. 41,562 Tk. 76,268Tk. 2,000 Tk. 83,125 Tk. 1,52,536Tk. 3,000 Tk. 1,24,687 Tk. 2,28,804Tk. 5,000 Tk. 2,07,812 Tk. 3,81,340Tk.10,000 Tk. 4,15,624 Tk. 7,62,680Tk.15,000 Tk. 6,23,435 Tk. 11,44,020Tk.20,000 Tk. 8,31,247 Tk. 15,25,360Tk.25,000 Tk. 10,39,059 Tk. 19,06,699Tk.50,000 Tk. 20,78,118 Tk. 38,13,399

The Account holder can avail loan / Secured Overdraft (maximum 80% of the deposited

principal amount but not less than Tk.20,000/-) against lien of the PSS account to meet

the personal need, educational expenses of his/her children or for medical treatment.

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Chapter 7: General Banking

General Banking department performs the core functions of Bank, operates the day to

day transactions. They take the deposit from the customer and meet their demand for

cash honoring their cheques. They pass entry of every transaction within the day. They

open new accounts, remit funds, issue bank draft and pay order etc. Since Bank is

confined to provide these services everyday, general banking is knows as “Retail

Banking”. To meet the general banking needs IFIC Bank has the following section in

general banking department:

7.1 Account opening

7.2 FDR

7.3 Checks clearing

7.4 Cash

7.5 Remittance

7.1 Account opening section:

Account opening section responsible for:

1) Opening different types of bank account,

2) Inputting the account data in computer,

3) Issue check book,

4) Account Checking

5) Providing account statement to customer

6) Transfer money from one account to another: When someone deposits check of

the IFIC bank account, they transfer the money to the payees account. They

maintain salary account and transfer the salary from the company account to

employees account.

These are all the responsibilities of account opening section. The types of accounts

open in these section are already discussed in chapter 6.

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7.1.1 Account Opening Procedures:

To open account a person has to fill up an account opening form, have to provide

required document and deposit initial amount of money. The details procedures of

opening an account are as follows:

7.1.2 Requirement for Opening Account:

General requirement for all account:

1. Two passport size photographs of account holder(s)/nominee duly attested

2. Signature of account holder, introducer etc. duly admitted /verifies

3. Photocopy of voter ID Card/Passport for individual account holder

4. Personal Information forms

5. Know Your Customer (KYC) profile

6. Transaction profiles

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Step 1: Receiving account opening application from bank officer

Step 2: Fill up the form, providing the required data

Step 3: Sign on specimen signature sheet

Step 4: Provides introducer account number and signature

Step 5: Submit the form with required document

Step 6: Bank officer receipt the form and provide the account number

Step 7: Deposit the initial amount in cash

Step 8: Account is opened and a Cheque book and pay-in-slip book is given

Proprietorship concern:

- Copy of trade license

Partnership Concern:

- Copy of partnership deed

- List of partners with their addresses

- Certificate of register of firm in case of registered firms only

Limited Company:

- Memorandum and articles of association

- Certificate of incorporation

- Resolution of board of directors authorizing opening of the account with the

bank

- Certificate of commencement at business

- List of directors with their address

- Copy of trade license

Association/Club/Charitable institution/Trust/Society:

- Certified true copy of the constitution/By-laws/Trust/Dees/ Memorandum and

Articles of Association

- Certificate of registration

- List of members of the governing body/executive committee

- List of directors with address

- Certified true copy of the resolution of the governing body/executive committee

7.1.3 Closing Procedure of an account:

An account can be close by bank or by the account holder. Bank can close the account

when transaction does not occur in that account and the account balance become less

than the minimum level. A customer can close the account if he/she does not feel

23

requirement of the account or open a new account in another bank. To close the

account, account holder required to apply to the bank. Account holder need to return

back the deposit slip and the cheque book. The bank will charge a 100 taka to close the

account.

7.2 FDR (Fixed Deposit Receipt) Section:

This section only opens and maintains the FDR account. The main responsibilities of this

section are:

1. Opening FDR account

2. Inputting is to computer

3. Renew FDR account

4. Calculate the daily money requirement FDR payment

5. Maintain good relation with the customers etc.

7.2.1 Liquidation of FDR:

i.Only the account holder himself and the authorized person can liquid the FDR

after maturity.

ii. In case of joint name, authentication from both is necessary.

iii. In case of “Either of Survivorship” clause – any one can liquid.

iv. In case of Death, the survivor cannot encase the FDR even if there exist the

either or survivor clause – succession certificate from the court is needed.

v. If demanded before the maturity the last expired duration is considered to

pay interest.

FDR section provides another service on behalf of the government. These services– this

bank issues and encash the following two government securities:

i. Five Years Bangladesh Sanchay Patra

ii. Pratirakha Sanchay Patra

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This section of this branch is also fully computerized. No ledger, no other subsidiary

books are maintained separately in this section. All entry is given directly in the

computer and then necessary information is printed when required.

7.3 Checks Clearing:

This section receipts all kind of cheque for clearing in favor of the account holders. After

receiving, cheques are divided into two primary groups

1. Inward Cheques

2. Outward Bills for Collection (OBC)

7.3.1 Inward Cheque:

This cheque is also divided into three parts:

I. Transfer cheque

II. Clearing cheque

III. Bangladesh bank government cheque

I. Transfer cheque:

Cheques from other branch of IFIC Bank are called transfer cheque. It is settled

instantly. Because of the online banking facility, it is become easy to settle this

cheque. There is no need to send this cheque to clearing house. It is just a transfer

from one account to another account. Bank officer just debit the payer account and

credit the payee account.

II. Clearing cheque:

Cheques from other Bank in clearinghouse area are called clearing cheque. Cheques

which are from the following areas are called clearing cheque:

1. Dhaka

2. Chittagong

3. Shylet

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4. Rajshahi

5. Barishal

With these area, the cheque from other online bank are called clearing cheque.

These cheques are sent for clearing to the clearing house. Clearing cheque are also

divided into two parts:

a) Same Day clearing: The cheque which contain the amount 500000 taka

or more are called same day clearing cheque or high value cheque. This

cheque is settled in one day.

b) Regular value clearing: The cheques which contain less than 500000 taka

are called regular value clearing cheque. This cheque required two days

to clear and transfer to the account.

III. Bangladesh bank government cheque:

Bangladesh bank, government cheque is not presented in clearing house. Cheque

money is collected from Bangladesh bank directly. For this, IFIC bank use special

software, called “NIKASH” software, which is supplied by Bangladesh bank. Bank

clearing officer input cheque data into computer using the software and supplied the

data to Bangladesh bank in floppy with cheque leaf.

7.3.2 Outward Bills for Collection (OBC):

The cheques other than the above five area are called OBC cheque or Outward Bills for

Collection. This cheque can not be cleared from clearing house. OBC cheque money is

collected from the respective bank directly by IFIC bank local branch or to request the

respective payee bank to supply a draft against the cheque money to order it’s another

branch which is located nearest to the IFIC bank. In case of collection by IFIC bank local

branch, a request is sent to the local branch to collect cheque money from the respective

payee bank branch. Then, the local branch collects money from the payee bank branch

and deposits the money in IFIC bank Pool account. After then, the depositor branch

credit the account holder account and debit the Pool account. In the way money is

collected in faster ways, but, if there is no IFIC branch nearest to the payee bank branch,

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it require long process and also long time to collect money. In these case, IFIC bank send

a letter to the respective payee bank to issue a draft in the name of IFIC bank ordering it’s

another branch nearest to IFIC bank to payee the cheque money. After getting the draft,

IFIC bank send it to clearinghouse to collect money. After collecting the money is

deposited to the account holder account. It requires 5 days to 10 days to deposit the

money in account holder.

7.4 Cash:

Cash department is the most important department of the bank. It receives cash from

customers and then deposits it into the accounts of the customers and maintained their

balances. The officers in this department are called teller and there are five tellers at the

counter. This department involves in two activates:-

I. Deposit cash in customer’s account

II. Make payments from customer’s account

I. Deposit Cash in Customer’s Account;

When the customer want to deposit amount in his account at opening of account or after

that then he has to fill a deposit slip that shows the amount and the account in which the

cash will be deposited. Then teller will receive amount and credit the customer’s account

II. Make Payments:

When the customer draws a cheque on the bank to pay a certain amount then teller will

debit the customer’s account that shows reduction in his account balance. Cheque

encashment are made in the following steps and procedures:

- Receiving Of Cheques- Verification Of Signature

Match the signature of the cheque with the computer- Computer Terminal Process

Checking the balance Checking any instruction like stop payment Debiting the customers account

- Payment Of Cash

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7.5 Remittance and Locker maintenance:

Remittance is transfer of funds from one place to another or from one person to another.

A Remittance is an important service provided by banks to customers as well as non-

customers. In this section foreign remittance are receipt and local remittance are issued.

Another additional responsibility of the officers of this section is maintenance of locker.

7.5.1 Parties involve in remittances:

1. Remitter: One who initiates, or requests for a remittance. The remitter comes to

the issuing or originating branch, asks for a remittance to be made, and deposits

the money to be remitted. The bank charges him a commission for this service. He

may or may not be the branch’s customer.

2. Remittee: A Remittee is also called the beneficiary, or the payee. The person in

whose name the remittance is made. A remittee is also the one who receive the

payment.

3. Issuing Bank: The bank that sends or affects the remittance, through demand

drafts, telegraphic transfers, or Mail Transfers.

4. Paying Bank: Paying Bank also knows as the drawee branch. The branch on which

the instrument is drawn. It has to make the payment (usually located in a

different city country).

7.5.2 Instruments used in Local remittances:

Demand Draft (DD)

Pay Order (PO)

Pay Slip

Call Deposit Receipt (CDR)

Cancellation of PO, DD & CDR

7.5.3 Process of issuing Pay Order:

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Of the above local remittance, mostly issued instrument of local remittance is Pay Order.

Pay order is a negotiable instrument made by the bank, on account of a customer, to pay

on order the specified amount to the directed person (payee). Pay orders are used to

make payment or to transfer money, with in the same city. Pay order is always drawn on

the bank that has issued it. The main advantage of pay order is that it cannot be

dishonored by the bank. The processes of issuing pay order are as follows:

7.5.4 Charges of Issuing Pay Order:

Amount (taka) Commission (taka) Vat (taka)

1000 or less 10 2

1001 to 100000 25 4

100001 to 500000 50 8

500001 or more 100 15

7.5.5 Cancellation of DD/PO:

1. Application in written to the Manager of the account

maintaining branch

2. Verification of the specimen signature

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1. Collect form of pay order from the respective bank officer

2. Fill up the form and signed by Applicant

7. Take Signature of Applicant at the Place of received Instrument

3. Cash Deposited or gives Cheque in favor IFIC Bank

4. Pay the charges

5. Entry in Bank Account by bank officers

6. Fill up the Pay Order Slip by the bank Officer

8. Copy of Pay Order is given to Customer

3. Computer entries

4. Sending letter to the paying Bank

**Bank will charge tk 50 to cancel the pay order.

7.5.6 Remittance Agent:

IFIC bank has the affiliation with the eight agents of foreign remittance. The bank only

receipts payment from these eight agents. The agents are:

1. MoneyGram Payment System, Inc.-global company

2. Xpress Money Services Ltd., UK

3. Oman International Exchange LLC, Oman

4. Coinstar Money Transfer (CMT)-global company

5. Placid NK Corporation, USA (global company)

6. Al Fardan Exchange, UAE

7. Multinet Trust Exchange LLC, UAE

8. Asia Exchange Centre, UAE

If anyone sends money from foreign country through any of the seven agents, people can

withdraw money from IFIC bank. To withdraw money they only require money transfer

control number and the National ID card photocopy or photocopy of passport.

7.5.6 Locker:

Locker service is another important service of the bank. IFIC bank, Dhanmondi bank

offers the locker service. There are three size lockers which are rent to the customer to

keep the valuable document and ornaments on the locker. The three size locker and

their yearly fee are shown in the following:

1. Large size - Taka 3500

2. Medium size - Taka 2700

3. Small Size – Taka 2000

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Chapter 8: Foreign Exchange

Foreign Exchanged Department deals within exports and imports. IFIC Bank, Dhanmondi

branch has a separate department to deal with foreign exchange. The bank acts as

exporter as well as importer bank for different parties who are in the business of export

and import.

8.1 Import Operation

Import of merchandise essentially involves two things, bringing of goods physically into

the country and remitting foreign currency for the cost of the merchandise and services.

The first part is regulated by the ministry of commerce while Bangladesh Bank regulates

the payments for these imports.

Import section helps business and other people to import goods. In international

environment, buyers and sellers are unknown to each other. So seller always seek

guarantee for the payment for his goods exported. Here is the role of bank. Bank gives

export guarantee that it will pay for the goods on behalf of the buyer. This guarantee is

called Letter of Credit. Thus the contract between importer and exporter is given a legal

shape by the banker by its ‘Letter of Credit’. When a buyer goes to import some goods

from a foreign buyer, he request his bank makes payments to the exporter of goods. And

the bank recovers the amount from the importer.

8.1.1 Parties involved in Letter of Credit:

There are mainly four parties involved in L/C process, but, these parties can be more. The

parties involved in a letter of credit process are:

1. Applicant: Applicant is the buyer of the goods or services supplied by the

seller. Letter of credit is opened by the issuing bank as per applicant's

request.

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2. Exporter/Seller (Beneficiary): Beneficiary is the seller of the goods or the

provider of the services in a standard commercial letter of credit

transaction. Letter of credit is opened by the issuing bank in favor of the

beneficiary.

3. Issuing Bank: Issuing Bank is the bank that issues a letter of credit at the

request of an applicant or its own behalf. Issuing bank undertakes to

honor a complying presentation of the beneficiary without recourse.

4. Advising Bank: Advising bank is the bank that advises the credit at the

request of the issuing bank. An advising bank that is not a confirming bank

advises the credit and any amendment without any obligation to honor.

5. Confirming Bank: Confirming bank is the bank that adds its confirmation

to a credit upon the issuing bank's authorization or request. Confirming

bank may or may not add its confirmation to a letter of credit. This

decision is up to confirming bank only. However, once it adds its

confirmation to the credit confirming is irrevocably bound to honor or

negotiate as of the time it adds its confirmation to the credit. Even if the

issuing bank fails to honor, confirming bank must pay to the beneficiary.

6. Nominated Bank: Nominated bank is the bank with which the credit is

available or any bank in the case of a credit available with any bank.

7. Reimbursing Bank: Reimbursing Bank shall mean the bank instructed

and/or authorized to provide reimbursement pursuant to a

reimbursement authorization issued by the issuing bank.

8.1.2 Types of Letter of Credit:

There are several types of letters of credit. Those are:

1. Revocable: A revocable LC can be cancelling or modified without the consent

of all the parties. The issuing bank can inform the advising bank for any

change in the LC. The seller can face the problems of obtaining payment

directory form the buyers.

2. Irrevocable: Irrevocable credit cannot be altered or modified without the

consent of all the parties i.e. the opener, the opening bank, the confirming

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bank and the bank beneficiary. This type of LC is issued under terms and

conditions of sales contract.

3. Confirmed LC: Letter of Credit, issued by a foreign bank, with validity

confirmed by a bank of origin. A seller who requires a confirmed Letter of

Credit from the buyer is assured of payment by the origin bank even if the

foreign buyer or the foreign bank defaults.

4. Unconfirmed LC: In case of an unconfirmed LC the bank through whom the

credit is negotiated, the advising bank does not give any guarantee to the

exporter that the bill drawn will be honored by the issuing bank. The

unconfirmed LC is a commitment of the issuing bank to honor the draft.

5. Transferable Letter of Credit: Letter of Credit that allows all or a portion of

the proceeds to be transferred from the original beneficiary to one or more

additional beneficiaries.

6. Documentary LC: A documentary LC is one which provides for bills to be

accompanied by the documents of title to goods. Such as bill of lading, invoice

and the marine insurance policy of insurance etc.

7. Clean letter of credit: If there is no condition attach to the bill and the issuing

bank makes payment up to a limit of credit, the letter of credit is called clean

or open letter of credit.

8. Standby LC: A standby letter of credit is used as support where an alternative,

less secure, method of payment has been agreed. A standby letter of credit is

an assurance from a bank that a buyer is able to pay a seller. The seller

doesn't expect to have to draw on the letter of credit to get paid.

9. Revolving LC: The revolving credit is used for regular shipments of the same

commodity to the same importer. It can revolve in relation to time or value. If

the credit is time revolving once utilized it is re-instated for further regular

shipments until the credit is fully drawn. If the credit revolves in relation to

value once utilized and paid the value can be reinstated for further drawings.

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10. Back-to-Back LC (BBLC): Two letters of credit used together to help a seller

finance the purchase of equipment or services from a subcontractor. With the

original LC from the buyer's bank in place, the seller goes to his own bank and

has a second LC issued, with the subcontractor as beneficiary. The

subcontractor is thus ensured of payment upon fulfilling the terms of the

contract.

11. Red LC: Letter of Credit that allows the exporter to receive a percentage of the

face value of the Letter of Credit in advance of shipment. This enables the

exporter to purchase inventory and any other costs associated with producing

and preparing the export order.

8.1.3 Steps in the Letter of Credit Process:

1. Buyer and seller agree to terms including means of transport, period of credit

offered (if any), and latest date of shipment acceptable.

2. Buyer applies to bank for issue of letter of credit. Bank will evaluate buyer's credit

standing, and may require cash cover and/or reduction of other lending limits.

3. Issuing bank issues LC, sending it to the Advising bank by airmail or electronic

means such as telex or SWIFT.

4. Advising bank establishes authenticity of the letter of credit using signature books

or test codes, then informs seller (beneficiary).

5. Seller should now check that LC matches commercial agreement and that all its

terms and conditions can be satisfied.

6. Seller ships the goods, then assembles the documents called for in the LC (invoice,

transport document, etc.).

7. The Advising bank checks the documents against the LC. If the documents are

compliant, the bank pays the seller and forwards the documents to the Issuing

bank.

8. The Issuing bank now checks the documents itself. If they are in order, it

reimburses the seller's bank immediately.

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9. The Issuing bank debits the buyer and releases the documents (including

transport document), so the buyer can claim the goods from the carrier.

8.1.4 Settlement under a Letter of Credit:

All commercial letters of credit must clearly indicate whether they are payable by sight

payment, by deferred payment, by acceptance, or by negotiation. These are noted as formal

demands under the terms of the commercial letter of credit.

1) In a sight payment, the commercial letter of credit is payable when the

beneficiary presents the complying documents and if the presentation takes

place on or before the expiration of the commercial letter of credit.

2) In a deferred payment, the commercial letter of credit is payable on a

specified future date. The beneficiary may present the complying documents

at an earlier date, but the commercial letter of credit is payable only on the

specified future date.

3) An acceptance is a time draft drawn on, and accepted by, a banking

institution, which promises to honor the draft at a specified future date. The

act of acceptance is without recourse as it is a commitment to pay the face

amount of the accepted draft.

4) Under negotiation, the negotiating bank, a third party negotiator, expedites

payment to the beneficiary upon the beneficiary’s presentation of the

complying documents to the negotiating bank. The bank pays the beneficiary,

normally at a discount of the face amount of the value of the documents, and

then presents the complying documents, including a sight or time draft, to the

issuing bank to receive full payment at sight or at a specified future date.

8.1.7 Steps of import LC Operation in Details:

1. Contract between the exporter and importer:

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At first the, the buyer and seller come to a consensus to buy and sell specific

amount of good in a specific price. The set the require terms and condition of the

payment and transfer of the goods. In this stage they determine the terms of

credit. The terms of the credit specify the amount of credit, name and address of

the beneficiary and opener, tenor of the bill of exchange, period and mode of

shipment and of destination, nature of credit, expiry date, name and number of

sets of shipping documents etc.

2. Application by importer to the banker to open letter of credit:

When terms of credit are determined and importer and exporter make a

contract; importer applied to the bank with required document to open a Letter

of Credit in favor of exporter. The importer needs to fill up the prescribed form

which is supplied by bank.

3. Opening of LC by the bank for the opener:

i. After taking filled up application form from the importer, issuing bank match it

with the import policy of Bangladesh government.

ii. If everything is in accidence with the import policy, issuing bank, then, opens

L/C in favor of beneficiary and informed to the advising bank of beneficiary

through air mail or cable.

iii. The advising bank advises the credit to the beneficiary on his own form where

it is addressed to him or merely hands on the original credit to the beneficiary.

4. Shipment of goods and submission of documents by exporter:

The exporter, then:

i. ships the goods to the destination of the importer country

ii. Sends the documents to the LC opening bank through his advising/negotiating

bank. Generally the following documents are sent to the Opening Banker with

LC:

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Certificate of beneficiary

Certificate of origin

Commercial Invoice

Weight and measurement list

Packing list

Certificate of quality

Bill of lading/airway bill/ truck receipt etc

5. Payment against documents by the opening Bank:

After receiving the documents, the opening banker inspects the documents. If any

discrepancy found, it informs the importer. If importer accepts the fault, then

opening bankers call importer retiring the document. At this time many thing can

happen. These are indicated in the following:

- Discrepancy found but the importer accepts - no problem occurs in

payment.

- Discrepancy found and importer not agreed to accept - In this case,

importer protest and send back all the documents to the exporter and

request his to make in the specified manner. Here banker is not bound to

pay because the documents send by exporter is not in accordance with the

terms of LC.

- Documents are OK but importer is willing to retire the documents - In this

case bank is obligated to pay the price of exported goods. Since importer

did not pay for bill of exchange, this payment by bank is one kind of credit

to the importer and this credit in banking is known as FORCED PAD.

- Everything is O.K. but importer fails to clear goods from the port and

request bank to clear - In this case banks clear the goods and takes delivery

of the same by paying customs duty and sales tax etc. So, this expenditure

is debited to the importer’s account and in banking it is called LIM.

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8.1.9 Requirements of an Importer to open LC:

a. LC application

b. IRC- Import Registration Certificate

c. TIN certificate (Tax payers Identification Number)

d. VAT certificate

e. Memorandum and article of association

f. Trade license

g. National ID card

h. Harmonized System Code No (H.S code)

i. 3 (three) sets indent or Pro-forma Invoice

j. Beneficiary’s bank name, address and Telex number

k. Insurance cover note with original money receipt

l. Copy of Bangladesh bank permission for issuing indent in favor of Beneficiary

m. Undertaking to retire the document in cash

n. In case of limited company following information are required:

a. Chairman, managing director and all other directors Bio-Data

b. Permanent, business and factory address

o. If partnership company, partnership deed is required

p. Income Tax Return or evidence of payment of income tax (last year)

q. Credit repot of Beneficiary

r. Resolution for signing authority

The buyer require all the above document to open a letter of credit for the first time, but,

these requirement are less for the second time as he has already provided some

document. He/she does not require providing the document for the second time.

8.1.10 Guide Lines of opening LC:

Import policy & export policy

Foreign Exchange Regulation Act

Foreign Exchange Circular

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Public Notices

8.1.11 LC Application SET:

1. Demand promissory note-02 copies

2. LC application-01 copies

(Application & agreement for confirmed irrevocable without recourse to

drawers L/C)

3. LCA form – 6 copies make a set

(LCA application form in lieu of import license)

4. Insurance cover note with money receipt

5. Request letter for opening LC- 01 copies

6. Declaration of an importer – 01 copies

7. Authority to debit account – 01 copies

8. Request letter for amendment – 01 copies

9. Pro-forma invoice

10. IMP form (Foreign exchange regulation act 1947 – 04 copies make a set)

11. Debit voucher (corresponding credit)

12. LC copy (06 copies)

i. 02 copies to advising bank, 01 for advising bank & other for exporter

ii. 02 copies to importer, 01 copy as officer advising copy & other customs

clearance

13. LC forwarding letter 01 copies

14. Reimbursement authorization – 03 copies

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8.1.12 LC application form:

A LC application form includes the following information:

1. LC No.

2. Name & full address of openers

3. Name & full address of beneficiary

4. Amount of foreign currency

5. Nature of goods imported

6. Name of indentor

7. Document accompanied

8. Name of insurance company

9. Shipment information

10. Approval (for use of bank only)

11. Terms and conditions (overleaf)

8.1.13 Letter of Credit includes:

An issued letter of credit includes the following information:

1. ILC no (Irrecoverable documentary credits No.)

2. Name of advising bank

3. Beneficiary’s name

4. Name of Applicant

5. Amount specified

6. Shipment:

i. Shipment from ................ to ...................

ii. Partial shipment allowed/prohibited

iii. Transshipment allowed/prohibited

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7. Expiry

8. Accompanied documents:

i. Invoice

ii. Full set of (Shipped on board/ocean bill of lading/truck receipts)

iii. Insurance cover

9. Special conditions

10. Instructions for negotiating bank

11. Other terms and conditions

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8.2 Export Operation

Export is an important for any country’s’ economic development. Import decreases the

reserve of foreign currency. Export brings the foreign currency in the country. To make

balance in foreign currency reserve, export plays important role. Growth of an economy

is directly related to exports. If exports increase at a faster pace as compared to imports,

nothing can stop an economy from being a developed one. On the other hand, the

instability in exports can adversely affects the process of economic development.

Bangladesh is an export oriented country. Bangladesh exports a large quantity of goods

to foreign households. Readymade textile garments (both knitted and woven), Jute, Jute-

made products, frozen shrimps, tea are the main goods that Bangladeshi exporters

exports to foreign countries. Garments sector is the largest sector that exports the lion

share of the country’s export. Bangladesh exports most of its readymade garments

products to U.S.A and European Community (EC) countries.

For supporting exporter IFIC bank, Dhanmondi branch has separate export management

section. IFIC bank works as a advising bank and negotiating bank to help the exporter.

The role of IFIC bank as advising bank and negotiating bank are described as followed:

a. As an Advising bank: It receives documents from the foreign importer and hands it

over to the exporter.

b. As Negotiating Bank: It negotiates the bills and other shipping documents in favor

of the exporter. That is, it collects the proceeds of the export-bill from the drawee

and credits the exporter’s account for the same.

c. Opening Back to Back LC: the export department of IFIC bank open BB LC to help

the exporter procure the raw materials and accessories required to manufacture

exporting goods.

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8.2.1 Back to Back letter of Credit:

One of the main tasks of export department is to issue Back to Back Letter of Credit (BB

LC).here, one LC is open against the another LC. Sometimes, exporter produces the goods

and then makes shipment. For the production, they need raw materials and accessories.

Sometimes, these raw material and accessories are needed to import. For the import of

the raw materials and accessories exporter open a LC using the back up of the importer

LC. Here master LC uses as the back up of the new LC. That is why is called back to back

LC. Opening BB LC is the regular activities of the export department. Back to Back LC

process is as like the usual LC process. Here, some additional documents and

arrangement are required.

8.2.1 Requirements for BB LC:

Back to Back LC process is as like the usual LC process. Here, some additional documents

and arrangement are required. The requirements of BB LC are as follows:

1) Master LC: Importer LC against which new LC will be opened

2) Application: Exporter has to apply to the bank to open BBLC.

3) Collateral: In case the importer of master LC issuer fails to pay, then from where

the bank pays to BB LC beneficiary? For this reason, bank requires some

additional collateral. This collateral can be financial securities like FDR or

registered mortgage like building or property.

4) Proforma invoice

5) Trust Receipt etc.

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Chapter 9: Credit

Credit department is an important department of the bank. Generally, bank collect

money from depositor and give those money to creditor in higher rate. Interest income

is the main sources of bank income. Credit is also important for country development. It

encourages the entrepreneur and helps them to do business successfully. As like other

bank, credit department is also an important department of IFIC bank. For credit

management IFIC bank, Dhanmondi branch has 5 officers, who always deal with

customer. IFIC bank credit services and other things related to credit service are

described details in below:

9.1 Functions of the Credit Department:

Lending money is one of the main functions of a commercial bank. In addition, objectives

of the credit department are managing credit exposure of the bank, maintaining credit

risk, compliance of Central Bank, recovering or collecting dues of retail loans or advances.

At present credit division performs following activities:

Credit Approval Processing

o Corporate Credit

o Retail Credit

Collection and Monitoring Activity

o Recovery

o Risk management

Loan is an asset to any financial institution. That is why it is very much necessary to

ensure that a loan does not become bad. The first step in ensuring that is to ask for

proper documentation of the loan applicant. A default loan might be very hard to recover

due to lack of proper charge documents.

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9.2 Why the bank provides advances?

Bank provides advances, because of the following reasons:

To earn interest from the borrowers and give the depositors interest back

To accelerate economic development by providing different industrial as well as

agricultural advances

To create employment by providing industrial loans

To pay the employees as well as meeting the interest groups

9.3 Sources of fund for lending:

1. Own fund:

a) Paid up capital

b) Reserve

c) Undistributed profit/ Retained earning

2. Outside source:

a) Deposit (up to 80%)

b) Borrowings from other banks

c) Refinance

9.4 Credit product of IFIC Bank:

IFIC Bank is providing a wide range of financial services, offering specialist advice and products

to corporate clients and retail customer to meet their diverse demands. IFIC Bank provides the

following credit products for corporate and retail customer:

1. CORPORATE Finance:

a. Working Capital Finance

b. Project Finance

c. Term Finance

d. Trade Finance

e. Lease Finance

f. Syndication Finance

2. Consumer Finance

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a. IFIC Easy Loan

b. Consumer Durable Loan

c. Parua (Education Loan)

d. Thikana (Home Loan)

e. Any Purpose Loan

f. IFIC Marriage Loan

g. CNG Conversion Loan

h. IFIC Home Renovation

Loan

i. IFIC Medical Loan

j. IFIC Holiday Loan

k. IFIC Peshajeebi Loan

l. IFIC Auto Loan

3. SME Banking:

a. Easy Commercial Loan

b. Retailers Loan

c. Transport Loan

d. Commercial House

Building Loan

e. Possession Right Loan

f. Contractor's Loan

g. Bidder's Loan

h. Working Capital Loan

i. Project Loan

j. Letter of Guarantee

k. Letter of Credit

l. Loan against Imported

Merchandize (LIM)

m. Loan against Trust Receipt

n. Muldhan

o. Women Enterpreneur's

Loan (Protyasha)

4. AGRICULTURE CREDIT:

a. Krishi Saronjam Rin (for

Agriculture Equipments)

b. Shech Saronjam Rin (for

Irrigation Equipments)

c. Poshupokkhi & Motsho

Khamar Rin (for Live Stock

& Fish Culture)

d. Phalphasali Rin (for Fruit

Orchard)

e. Phasali Rin

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9.5 Lending Rate of IFIC Bank:

IFIC bank lend it customer in the following rate:

SL. Sector Interest Rate

1 Agriculture (loans to primary producers only)(Includes Farms, Fish Culture, Forestry & Livestock)

13.00% (Max)

2 Large & Medium Industry (Terms Loan)(Loans to manufacturing units* only)

13.00%(Max)

3 Working Capital Industries:(Loans to manufacturing units* only)(Large/medium and small firm)

14.50 & 15.00%

4 Exports 7.00%5 Commercial Lending 15.00%6 Housing 15.50%7 Small Scale Industry (Term Loan)

(Loans to manufacturing units* only)13.00% (max)

8 IFIC Bank & other Banks’ FDR 2.00% above FDR rate

9 Consumer Credit Scheme 15.5% -17%10 Lending to Non-Banking Financial Institutions

(NBFIs)15.50%

11. Small Enterprise Financing:

Retailers’ Loan 16%Transport Loan 16%Possession Right Loan 16%Working Capital & Contractors’ Loan 15%&16%Project Loan 13%Muldhan Loan (1.00% above without any security) 16%Protyasha 15%Krishi Saronjam Rin, Shech Saronjam Rin, Poshupokkhi Rin, Phalphasali Rin, Phashali Rin

13.00% (max)

Easy commercial loan 2.00% above underlyingsecurity

Others for Large Enterprise Financing

Purpose Interest rateTerm Loan (Industrial) 13.00% (Max)

Term Loan (Others) 15.00% (Mid-rate)House Building Loan 15.50% (Mid-rate)SOD (Agt Other Financial Obligation) 4.00%OD (Others) Working Capital 14.50% (Mid-rate)SOD (Agt FDR of IFIC Bank) 13.00%SOD (Agt FDR of Other Banks) 14.00%CC (Hypo) 14.50% (Mid-rate)CC (Pledge) 14.50% (Mid-rate)PAD (Cash) 15.00% (Mid-rate)PAD (Forced) 16.00% (Mid-rate)PAD (Others) 16.00% (Mid-rate)LTR 14.50% (Mid-rate)Lease Finance 16.00% (Mid-rate)

Other for Medium Enterprise Financing

Purpose Interest rateTerm Loan (Industrial) 13.00%Term Loan (Others) 15.00%House Building Loan 15.50%SOD (Agt Other Financial Obligation) 14.00%OD (Others) Working Capital 14.50%SOD (Agt FDR of IFIC Bank) 2.00% above the FDR rateSOD (Agt FDR of Other Banks) 2.00% above the FDR rateCC (Hypo) 14.50%CC (Pledge) 14.50%PAD (Cash) 15.00%PAD (Forced) 16.00%LIM 15.00%LTR 14.50%Lease Finance 16.00%

Consumer Financing

Purpose Interest rateConsumer Durable Loan 17.00%Parua (Education Loan) 15.50%Thikana 15.50%Peshajeebi Loan 16.00%Auto Loan 16.50%Festival Loan

17.00%Any purpose LoanHome renovation Loan

Emergency Medical LoanCNG conversion LoanMarriage LoanEasy Loan (SOD, Loan General) Agt FDR of IFIC Bank 2.00% above the FDR rateEasy Loan (SOD, Loan General) Agt FDR of Other Banks 2.00% above the FDR rate

Easy Loan (SOD, Loan General) Agt other FO 2.00% above the FDR rate

9.6 General principle of good lending:

1. Safety-“Safety is the first”2. Liquidity3. Purpose4. Profitability5. Security6. Diversity/ spread7. National interest

9.7 General criterion for selection of borrower:

1)Character:

a. Is the borrower personal character, market standing and reputation

impeccable?

b. Has he met his part commitments?

2)Capacity:

a. Capacity or the capability of the borrower to manage his business

profitably and the capacity to repay the advances and service the

facilities according to agreed terms.

b. Is the borrower in a capacity to borrow? Or is there any legal

complication?

3)Capital:

a. The capital & resources of the borrower.

b. The capital structure of the borrower and the gearing ratios.

4)Condition:

a. General business condition

b. Are the economic conditions feasible generally and for the business,

in particular?

5)Collateral:

a. The security provided against the facilities.

b. Is the security provided: Adequate, Realizable, Marketable, Valuable,

Storable, Non-perishable and Durable?

9.8 Types of Loans offered by IFIC Bank:

In general, IFIC Bank provides two types of loan. Those are:

1. Term loan

2. Continuous loan

1. Term loan: Loans to an organization, with a fixed maturity and often featuring

amortization of principal. Bank made only one time payment of the loan. The borrower

may pay the loan in a installment or pay in maturity date depending on the loan type.

2. Continuous loan: In this case, the bank provides a credit limit of the borrower to

withdraw money and within the limit the borrower can withdraw money, although he

does not have positive balance in the bank. When the limit is over, the borrower can not

withdraw money. Again, when the borrower deposits money in the bank, he will get the

credit again. The borrower has the right to withdraw and deposit any amount with in the

limit. Interest on the loan is charge on the basis of the monthly credit amount.

Continuous loan can be two types:

a) Secured Overdraft (SOD): This is a secured loan for short term. This is given

against FDR of IFIC bank or other bank. Bank grant overdraft for maximum of

one year. After one year the loan has to be renewed. Bank grant credit limit to

the borrower. Within the limit the borrower can withdraw any amount. If the

borrower needs the money, he can withdraw it from bank, if he does not

require he may not withdraw. If the borrower uses the credit, he will be

charged interest, unless he will not be charged. But, the borrower will be

charged a service fee.

b) Cash Credit (CC): Cash Credit is the working capital provided to the business.

For which the borrower have to provide mortgage. The mortgage can be FDR

or registered assets. The bank will give a limit to the borrower according to his

need. The bank asks the stock summary of the business in every month and

calculates the borrower working capital requirement using that. As like the

SOD the borrower can withdraw as his requirement. If, borrower uses the

limit he will be charge interest, unless not.

9.9 Process to grant loan:

1. Application by the borrower:

At first the potential borrower meets with the bank officer and expresses his

necessary of loan. The bank officer will ask the purpose of the borrower loan, his

sources of income and mortgage type. If everything meets the requirement of bank,

bank provides an application form to the borrower. Then, the borrower fills it up and

submits to the officer.

2. Collect the CIB report of Borrower:

When the bank got the loan application, the first things the bank do is taking the

undertaking from applicant that the applicant has no other loan in any other financial

institutions without informed loan. Then the bank sends a letter to “Credit

Information Bureau” of Bangladesh bank to get the information about the borrower.

The process takes at least three weeks.

3. Analyze the borrower financial position:

When the bank got the CIB report from Bangladesh Bank about the applicant present

borrowing and find everything is ok as informed by the applicant, it then analyze the

applicant financial position. The bank, then, asks several information and documents

from the applicant about his income like salary certificate, trade license, TIN

certificate, financial position of the applicant, background information of applicant

etc. In analyzing financial condition bank measure the borrower repayment condition.

4. Contract Point Verification by bank:

If the applicant is unknown, a bank officer visit the applicant given address to justify

that the information given by the applicant is true and correct.

5. Document Submission:

If everything’s are ok and perfect, the bank then decides to grant loan to the

applicant. Before sanctioning the loan, the bank takes some document from applicant

and takes his/her signature in some document like promissory note and form of lien,

letter of disbursement etc. Promissory note will help the bank to collect the loan

money, in case the applicant denies to pay. Form of lien is the certificate through

which the bank gets the applicant permission to hold the certificate (FDR, deed of

properties) of mortgage.

6. Grant loan:

After doing the above formalities, the bank transfers the loan money to the applicant

loan account. Then the borrower can withdraw the money from the bank.

The process is short in case of loan against FDR or other securities. But, the process also

can be brought in case of project loan. For loan against FDR, it takes 1 or 2 days to grant

loan; for consumer credit, it takes 20 to 30 days to grant loan, for project loan, it takes 2

to 4 month to grant loan.

9.10 Requirement of borrower:

General requirement:

1. Bank Account

2. Application be the borrower

3. Mortgage

4. Tax Identification number

For Consumer loan:

1. National ID Card

2. Letter of Introduction from the employer

3. Salary Certificate

4. Financial Statement of Applicant

5. Financial statement of guarantor

6. Estimated cost of borrower

7. Background information of father, mother, wife/husband

8. Personal Net worth statement

For Business:

1. Trade License2. TIN number3. Financial Statement of Business4. Credit Rating report5. Memorandum & Articles of Association/Partnership deed

Document required when granting loan:

1. Demand promising note:

a. Single: For individual

b. Joint: For company

c. Single and several: For Partnership business

2. Letter of Disbursement

3. Letter of Lien

4. Authentication to debit account for realization of cost of registration, renewal

etc. charge

5. Letter of installment

6. Signed Post dated cheque etc.

9.11 Evaluation of loan Proposal:

When IFIC bank get new loan proposal, it analyze the proposal to make decision whether

the loan should be granted or not. When it analyzes the proposal, it considers the

following things:

1) Financial Statement Analysis:

This is the main source to evaluate the business client. Annual Reports of last 2 to 3

years are obtained from enterprise, which is requesting for credit/loan. These are

examined by various techniques like; Horizontal Analysis, trend analysis, ratio analysis

are conducted to get true and fair view of the final statements of that concern. The

entity is sometimes rated using the Bangladesh Bank prescribed format.

2) Nature of Business to be Considered:

Nature of business is important. It should be considered because if businesses to

which we are giving loan related with that industry which is not growing and declining

and sanctioning loan to that concern would lead to definite bad debts. That is why,

bank examines the nature of business properly and make sure about its in growing

trend and there is no chance to turn into bad debt.

3) Plant Visit:

This is another source of evaluating client. In this technique credit department team

visit the plant of the applicant to assure that plant is actually in a position to get

market value as which mentioned in Balance Sheet. To get real picture of that

business is obtained through personal visit.

4) Credit Rating:

Sometimes entity are rated using professional rating agency. If the applicant’s

entity is rated by any agency, the bank will examines it. The bank examine whether

the entity gat the good rating or bad; Is the rating support to grant loan? If the

rating indicates well, the bank decides to grant loan to the entity.

9.12 Mortgage Requirement:

Mortgage is collateral to secure the payment of debt. It is first and foremost important

factor of bank. It plays the main role in granting a loan. Bank always requires security of

its loan. If the borrower fails to repay the loan, bank will collect its money by disposing

the mortgage. Banks will provider more loans against good mortgage. As like other

banks, mortgage is also important for IFIC bank. IFIC bank accept only two types of

mortgage as loan collateral. These are:

1. Financial Instrument: Financial instrument includes FDR of IFIC bank or FDR of

others bank and the ICB unit certificate.

2. Registered Property: Registered property includes land, building, apartment

etc registered property.

3. Others: In case of export financing advance is provided against LTR & LIM.

9.13 Important Credit Product of IFIC Bank:

9.13.1 Home Loan (Thikana):

The product is a term financing facility to individuals to aid them in their purchases of

apartment or house or construction of house. The facility will become affordable to the

clients as the repayment is done through fixed installment as commonly known as EMI (equal

monthly installment) across the facility period. Depending on the size of the loan, the

maximum period of the loan would be 180 months (15 years). Loan amount and repayment

schedule are given below:

Loan Amount

Interest

Rate

Monthly installment (Tk.)

15 years 14 years 13 years 12 years

Tk.1,00,000/- or

Multiple

@ 15.00%

p.a

1,401/- 1,429/- 1,462/- 1,503/-

11 years 10 years 09 years 08 years

1,553/- 1,615/- 1,694/- 1,796/-

07 years 06 years 05 years 04 years

1,932/- 2,117/- 2,381/- 2,785/-

03 years 02 years 01 years

3,469/- 4,851/- 9,029/-

Restrictions and client eligibility:

1. Loans are restricted to Bangladeshi nationals falling in the categories

mentioned below: The minimum age for any borrower will be 21 years with a

maximum age 50 years (at the time of application). The minimum verified

Gross Family Monthly Income of the applicant should be BDT40,000.The

family income will include only the income of the applicant and spouse.

2. The maximum permitted Equal Monthly Installment (EMI) paid by the

borrower should be no more than the 33% of the Family Monthly Disposable

Income (FMDI) of the borrower per month.

9.13.2 Auto Loan

The product is a term financing facility to individuals to aid them in their pursuit of has a car

of their dream. The facility becomes affordable to the clients as the repayment is done

through fixed installment commonly known as EMI (equal monthly installment) across the

facility period. Depending on the size and purpose of the loan, the number of installments

varies from 12 to 60 months. The bank provides maximum 50% loan of the car price. The

maximum amount of loan in taka is 20 lacs. Loan amount and repayment schedule are given

below:

Loan Amount

Interest

Rate

Monthly installment (TK.)

60

months

48

months

36

months

24

months

12

months

Tk.1,00,000/- or

Multiple 15.50% 2,407/- 2,810/- 3,493/- 4,874/- 9,051/-

Tk.20,00,000/-

maximum 15.50% 48,140/- 56,200/- 69,860/- 97,480/- 1,81,020/

Restrictions and client eligibility:

Loans are restricted to Bangladeshi nationals falling in the categories

mentioned below The minimum age for any borrower will be 25 years and the

maximum age 52 years with a minimum verified Gross Family Monthly Income

of BDT 45,000.

9.13.3 Any Purpose Loan

Any Purpose Loan is a term financing facility to individuals to meet their immediate

requirements. With minimum formalities any one can get a loan for an amount upto Tk.3.00

lac to be repayable at 12 to 36 monthly installments. Any Purpose Loan Repayment Schedule

is shown in the following table:

9.13.4 Trade Finance:

9.13.4.1 Import Financing:

1. Pre-import financing:

a. Letter of credit

2. Post import financing:

a. Loans against Imported Merchandise (LIM)

b. Loans against Trust Receipt (LTR)

Loans against Imported Merchandise (LIM):

Loan against the merchandise imported through bank maybe allowed pledge of goods

retaining margin prescribed on their landed cost. The branch shall also obtain letter of

undertaking and indemnity from the customer before getting goods cleared through

L.I.M. account. Clearing should be taken by approved clearing agent of the bank.

Merchandise should be insured with specific risk clauses.

The following matters must consider while allowing L.I.M. against secured of goods. The

landed cost of the merchandise is measured before the goods are delivered the client

against proportionate payments. The landed cost is determined by taking following

items:

Loan Amount Interest Rate

Monthly installment

36 months 24 months 12 months

Tk. 100,000/- @16.50% Tk. 3,542/- Tk. 4,922/- Tk. 9,099/-

Invoice value if the merchandise including freight

Customs duty

Sales tax

Warfare

Derange agent’s charges

Railway freight

Insurance premium

Other charges

Loans against Trust Receipt (LTR):

Advances against a Trust receipt obtained from the clients are allowed when the

documents covering an import shipment are given without prior payment. This type of

facility is given only to first class and reliable clients.

The customer holds the goods or their sale proceeds in trust for the bank till the loan

allowed against Trust Receipt is fully paid off.

9.13.4.2 Export Financing:

Export finance can be allowed in two types or stages, namely:

Pre-shipment:

o Packing credit

o Back to Back L/C

Post- shipment:

o Through negotiation of documents

PACKING CREDIT:

Packing credit is a short-term credit granted by a bank to exporter to help him to

purchase, process, pack and ship the goods. Generally, for the movement of goods

from hinterland areas to the port of shipment, the bank provided interim facilities by

way of packing credit.

BACK TO BACK Letter of CREDIT:

It is nothing but a secondary letter of credit by the advising bank in favor of a

domestic/foreign supplier on behalf of the beneficiary of original foreign L/C.

NEGOTIATION OF DOCUMENTS:

Negotiation of documents under letter of credit is the usual method of financing exports

at the port shipment stage. In this system, after the shipment of goods, the exporter

presents the relative documents to the Negotiating bank for negotiation. Normally, an

exporter is required to submit following documents drawn in terms of the credit to the

bank for negotiation of the bills:

o Bill of exchange or draft

o Bill of fading/Airway Bill

o Invoice

o Packing list

o Certificate of origin

o Insurance policy

o Inspection certificate

o Shipping advice

o Other documents as per terms of Letter of Credit.

Chapter 13: Duties Accomplishment & Learning

My internship at IFIC Bank Limited started on May 31st, 2011 and it ended on August 31st,

2011. During these 3 months I was assigned at the Dhanmondi Branch. I had a lot of fun,

but more importantly I finally understood working by actually being there. This practical

orientation is necessary for the development and preparation of a person in the job

world.

13.1 Duties accomplished:

General Banking:

I have done a variety of work at General Banking. Those are:

1) Receiving cheque books for the customers, verifying them, putting

receiving seal

2) Putting Crossing on the cheque

3) Putting Endorsement and clearing seal on the cheque

4) Sometimes inputting cheque details in computer

5) Fill up the account opening form

6) Help customer to fill up the account opening form

7) Checking the account opening form

8) Checking the document requirement

9) Preparing the Debit/Credit voucher

Credit:

1) Fill up the credit application form

2) Preparing CIB application form

3) Preparing forwarding letter for CIB

4) Photocopying the different type of document

5) Helping client to fill up the application

6) Preparing the Debit/Credit voucher

Foreign Exchange:

1) Making L/C file

2) Preparing the Debit/Credit voucher

3) Filling up the IMP form

4) Arranging L/C file

5) Filling up the CIB report to send Head Office and

6) Photocopying was a major activity in this departments

13.2 Observation and Learning:

By doing internship in IFIC bank, the things that I have learned by observing and helping the

respective officer of different department are:

General Banking:

Here I have learned-

1) How to open a bank account?

2) What are the necessary documents are needed to open a bank

account?

3) Different types of Bank account in IFIC bank

4) Cash Deposit and withdrawal procedures

5) Cheque receiving procedures

6) Cheque clearing procedures

7) Preparation of debit and credit voucher

8) Accounting treatment of different transaction

9) Pay Order issuing procedures

10) Bank officers responsibilities

Credit:

Here I have learned-

1) What are the different types of credit product of IFIC bank?

2) What are the credit approval procedures?

3) How to prepare CIB application and forwarding letter?

4) What are the necessary documents required to apply for credit?

Foreign Exchange:

Here I have learned about-

1) L/C opening procedures

2) L/C settlement procedures

Moreover, I have learned how to deal with customer and how to cope up with the

corporate life? It is a great experience for me. I believe, this experience will help me in

my future life.

Conclusion and Recommendations

Doing internship in IFIC bank was an excellent experience of me. I have learned many

things about banking activities from there. All of the employees of IFIC bank, Dhanmondi

branch have helped me much to be acquainted with the banking operation. All that I

have shown in this report is based on the banking activities of IFIC bank limited. IFIC

bank, Dhanmondi branch is doing well, as it has first mover advantage in Dhanmondi

area. It has a large customer base. Employees of this branch are working heard to serve

customers. But, this branch has some lacking that I want to include here and recommend

IFIC bank authority to correct that and make the bank more popular to the customers.

My observations about IFIC bank and recommendations are cited in below:

1) Hire more Employees: It is observed that the employees were overburdened so

they have to stay at branch till late at night. It is particularly happened for the

foreign exchange department. Because of work overload, their efficiency level

is decreasing. Hiring more employees for this branch, specially for foreign

exchange department can reduce their work load.

2) Employee Training: Another thing, I have noticed about employee of IFIC bank

while I was doing internship in Dhanmondi branch is employee inefficiency.

Almost fifty percent of the employees are not much efficient to handle their job

in efficient ways. Some of them have the lack of knowledge of banking system.

Some of them even do not know how to behave with customers? So, the IFIC

bank authority should take care of the problem. They should arrange more

training session for employees to make them efficient. Training should be based

on job specific and also for behavioral change.

3) Office Decoration: IFIC bank, Dhanmondi branch decoration is not much good

as compared to others private bank. The decoration of bank should be more

beautiful.

4) More Branches: Although IFIC bank has a good number of branches all over the

country, but, it is not sufficient to be a market leader. IFIC bank authority

should take the initiative to establish more branches.

5) More ATM Booth: One of the important banking products of IFIC bank is card

product, but, it has not the sufficient number of ATM booth to withdraw

money. For this service, it has to depend on the other bank ATM booth, which

is costly for the service receiver. So, the bank authority should take more

initiative to establish more and more ATM booth.