Part-04 (Main Body of the Report)

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Investment Program of EXIM Bank Limited

Part-1

Organization Overview or Profile of the Organization

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1.1 Banking Scenario of Bangladesh

Before introducing the Export Import Bank Of Bangladesh Limited. would like to focus

some light upon the growth and development of our banking system since independence.

Growth and development of our banking system may be divided into three phases. The

complete government ownership and excessive government interference, absence of

prudential regulation and inadequate legal support for debt recovery.

The first phase was from 1972 to 1982. The performance of our banking system during

1972 to 1982 was commendable in respect of expanding network and providing easy

credit to the society desirable sector but equally frustrating with regard to maintaining

viability of customer service.

The second phase from 1983 to 1989 was characterized by denationalization and

privatization of banking system without broad-basing the prudential and information

regulatory framework. However, these measures of denationalization and privatization

could not bring viability and operational efficiency of the banking system.

Under the above circumstances and using the recommendation of World Bank, a

Financial Sector Reform Project (FSRP) was undertaken in 1989 by the government that

can be identified with third phase of the development of our banking system.

FSRP includes the following measures:

Gradually allowing (financial institutions to increase financial product prices

according to market forces.

Raising the loan class action standard in phases.

Improving level of the financial institutions to international standard in phases.

Improving the capital positions of Nationalized Commercial Bank (NCB's) and

Private Commercial Bank and fixing it at international standard level.

Delegating greater autonomy to banks especially in terms of selecting their loan

portfolio.

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Strengthening the role of Bangladesh Bank in the field of supervision on

necessary action in case of any fault.

Ensuring enabling legal environment by enacting Bank Companies Act, 1991 and

Financial Loan Court Act, 1990 etc.

The government of Bangladesh has also enacted some important acts namely financial

Institutions Act, 1993, Securities and Exchange Commission Act, 1993, The Companies

Act, 1994 and recently Bankruptcy Act, 1007.

These reform measures have been aimed at imposing financial discipline on the banks in

the short run and making the banks to operate increasingly on the basis of market forces

so as to achieve operational efficiency.

The commercial banking system dominates Bangladesh's financial sector. Bangladesh

Bank is the Central Bank of Bangladesh and the chief regulatory authority in the sector.

The banking system is composed of four state-owned commercial banks, five specialized

development banks, thirty private commercial Banks and nine foreign commercial banks.

The Nobel-prize winning Grameen Bank is a specialized micro-finance institution, which

revolutionized the concept of micro-credit and contributed greatly towards poverty

reduction and the empowerment of women in Bangladesh.

1.1.1 Central Bank Central Bank of Bangladesh is named as Bangladesh Bank (BB). Pursuant to Bangladesh

Bank Order, 1972 the Government of Bangladesh reorganized the Dhaka branch of the

State Bank of Pakistan as the central bank of the country, and named it Bangladesh Bank

with retrospective effect from 16 December 1971.

1.1.2 Nationalized Commercial BanksThe banking system of Bangladesh is dominated by the 3 Nationalized Commercial

Banks , which together controlled more than 54% of deposits and operated 3388 branches

(54% of the total) as of December 31, 2004.[1] The nationalized commercial banks are:

a) Bangladesh Krishi Bank

b) Sonali Bank

c) Janata Bank

d) Rupali Bank

e) Karmosangsthan Bank

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1.1.3 Private Commercial BanksPrivate Banks are the highest growth sector due to the dismal performances of

government banks (above). They tend to offer better service and products.

Agrani Bank Limited]

BRAC Bank Limited

Eastern Bank Limited

Dutch Bangla Bank Limited

Dhaka Bank Limited

Islami Bank Bangladesh Ltd

Pubali Bank Limited

Uttara Bank Limited

IFIC Bank Limited

National Bank Limited

The City Bank Limited

United Commercial Bank Limited

NCC Bank Limited

Prime Bank Limited

SouthEast Bank Limited

Al-Arafah Islami Bank Limited

Social Islami Bank Limited

Standard Bank Limited

One Bank Limited

Exim Bank Limited

Mercantile Bank Limited

Bangladesh Commerce Bank

Limited

Mutual Trust Bank Limited

First Security Islami Bank

Limited

The Premier Bank Limited

Bank Asia Limited

Trust Bank Limited

Shahjalal Islami Bank Limited

Jamuna Bank Limited

ICB Islami Bank

AB Bank Limited

BASIC Bank Limited

1.1.4 Foreign Commercial Banks

Citibank

HSBC

Standard Chartered Bank

Commercial Bank of Ceylon

State Bank of India

Habib Bank

National Bank of Pakistan

Woori Bank

Bank Al falah

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1.1.5 Specialized Development Banks

Out of the specialized banks, two (Bangladesh Krishi Bank and Rajshahi Krishi Unnayan

Bank) were created to meet the credit needs of the agricultural sector while the other two

( Bangladesh Shilpa Bank (BSB) & Bangladesh Shilpa Rin Sangtha (BSRS) are for

extending term loans to the industrial sector. The Specialized banks are:

Grameen Bank

Bangladesh Krishi Bank

Bangladesh Development Bank

Ltd

Rajshahi Krishi Unnayan Bank

BASIC Bank Limited

Bangladesh Somobay Bank

Limited

Ansar VDP Unnyan

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1.2 Historical Background of EXIM Bank Limited

Export Import Bank of Bangladesh Limited was established in the year 1999 under the

leadership of Late Mr. Shahjahan Kabir, Founder Chairman who had a long dream of floating a

commercial bank which would contribute to the socio-economic development of our country. He

had a long experience as a good banker. A group of highly qualified and successful entrepreneurs

joined their hands with the founder chairman to materialize his dream. Indeed, all of them proved

themselves in their respective business as most successful star with their endeavor, intelligence,

hard working and talent entrepreneurship. Among them, Mr. Nazrul Islam Mazumder who is an

illuminated business tycon in the Garments business in Bangladesh became the Honorable

Chairman after the demise of the honorable founder chairman. He is also the chairman of

Bangladesh Association of Banks (BAB). Under his leadership, BAB has emerged as an

effective forum for exchanging views on problems being faced by the banking sector of

Bangladesh and for formulating common policy guidelines in addressing such problems.

This Bank starts functioning from 3rd August, 1999 with its name as Bengal Export Import Bank

Limited. On 16th November 1999, it was renamed as Export Import Bank of Bangladesh Limited

with Mr. Alamgir Kabir as the Founder Advisor and Mr. Mohammad Lakiotullah as the Founder

Managing Director respectively. Both of them have long experience in the financial sector of our

country. By their pragmatic decision and management directives in the operational activities, this

bank has earned a secured and distinctive position in the banking industry in terms of

performance, growth, and excellent management. Under the leadership of Mr. Lakiotullah, the

Bank has migrated all of its conventional banking operation into Shariah Based Islami Banking

in the year July 2004.

In the year 2006, Mr. Kazi Masihur Rahman became the Managing Director of the bank when

Mr. Lakiotullah left the bank after completion of his successful 7 years as MD. Mr. Kazi served

in the bank for next five years. Under his leadership, the bank has been placed on a state of the

art centralized IT platform with two modern data centers where world renowned core banking

software TEMENOS T24 is running along with some alternate delivery channels like ATMs and

SMS banking.

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In 25th August, 2011, Mr. Md. Fariduddin Ahmed has joined in the bank as Managing Director.

With his long experience in the Shariah Based Islami banking in Bangladesh, EXIM Bank is

going to take a new shape where IT-enable banking service will spread in the market.

1.3 Vision of EXIM Bank Limited

The gist of their vision is ‘Together Towards Tomorrow’. Export Import Bank of Bangladesh

Limited believes in togetherness with its customers, in its march on the road to growth and

progress with service. To achieve the desired goal, there will be pursuit of excellence at all stages

with climate of continuous improvement, because, in Exim Bank, They believe, that the line of

excellence is never ending. Bank’s strategic plans and networking will strengthen is competitive

edge over others in rapidly changing competitive environment. Its personalized quality services

to the customers with trend of constant improvement will be the cornerstone to achieve their

operational success.

1.4 Mission of EXIM Bank Limited

The Bank’s mission gives emphasis to:

Provide quality financial services especially in Foreign Trade

Continue a contemporary technology based professional banking environment

Maintain corporate & business ethics and transparency at all levels

Sound Capital Base

Ensure sustainable growth and establish full value to the honorable stakeholders

Fulfill its social commitments and

Above all, to add positive contribution to the national economy.

1.5 Corporate Culture of EXIM Bank Limited

During the last two decades Corporate Culture has become an important theme in business as an

intangible concept which clearly plays a meaningful role in corporations, affecting employees

and organizational operations. It is not the only determinant of business success or failure, a

positive culture can be a significant competitive advantage over organizations with which a firm

competes. EXIM Bank Limited, as an amenable bank, believe if the employees identify with the

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culture, the work environment tends to be more enjoyable, which boosts morale and leads to

increased levels of teamwork, sharing of information, and openness to new ideas.

1.6 Shahriah Council of EXIM Bank Limited

The Board of directors has formed a Shahriah Supervisory Board for the Bank. Their duty is to

monitor the entire Bank's transactional procedures, & assuring its Shahriah compliancy. This

Board consists of the following members headed by its Chairman: The tasks of the Shahriah

supervisor in summary is replying to queries of the Bank's administration, staff members,

shareholders, depositors, & customers, follow up with the Shahriah auditors and provide them

with guidance, submitting reports & remarks to the Fatwa & Shahriah Supervision Board and the

administration, participating in the Bank's training programs, participating in the supervision

over the Allqtisad AHslami magazine, & handling the duty of being the General Secretary of the

Board.

1.6.1 Shahriah Auditing:

This is the civil supervisory aspect that shapes the Bank's main feature. It's existence is part of

the Shahriah Supervision procedures. One of it's main task is to check the Shahriah compliancy

in the Bank's transactional procedures in accordance to the Fatwas issued in that regard, under

the guidance of the Shahriah Supervisor. The Shahriah auditor is assigned the task of revising the

Bank's transactional procedures throughout the year to check the extent to which the staff

members and the different departments have abided by the regulations, advices, and Fatwas

issued by the Fatwa & Shahriah Supervision Board, forums, & banking conferences. As well as,

assuring that all the contracts that states a right for the Bank or an obligation on the Bank is

certified by the Fatwa & Shahriah Supervision Board. Moreover, the Shahriah Auditing submits

periodic reports to the Shahriah Supervisor in order to be proposed to the Fatwa & Shahriah

Supervision Board to state what it finds appropriate in that regard.

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1.6.2 Banking with Shahriah principles:

Export Import Bank of Bangladesh Limited is the 1st bank in Bangladesh who has converted all

of its operations of conventional banking into Shahriah-based banking since July/2004. We offer

banking services for Muslims and non-Muslims alike allowing our customers choice and

flexibility in their savings and investments. Our products are approved by our Shahriah Board

comprising of veteran Muslim scholars of our country who are expert in all matters of Islamic

finance. The process by which Noriba's investments are designed and executed allows the Bank

to offer a combination of Shahriah compliance and capital markets expertise that is unique

throughout the world. Noriba is committed to the strict adherence to the requirements of the

Shahriah as a result of the Bank's sole focus on Shahriah-compliant investments Shahriah Board.

Noriba experts specifically design each of the Bank's investment vehicles with the approval of

the Noriba Shahriah Board. Once the given product or transaction has been arranged, the Noriba

Shahriah Board carefully screens it for compliance before giving final approval for its

implementation. This control mechanism guarantees that all aspects of Noriba's final products

and banking transactions are in adherence with the guidelines of the Shahriah.

1.7 Prime Operational Area of EXIM Bank Limited

As a full-fledged Islamic bank in Bangladesh, EXIM Bank extended all Islamic banking services

including wide range of saving and investment products, foreign exchange and ancillary services

with the support of sophisticated IT and professional management. The investment portfolio of

the bank comprises of diversified areas of business and industry sectors. The sectors include

textiles, edible oil, ready-made garments, chemicals, cement, telecom, steel, real estate and other

service industry including general trade finance. The bank has given utmost importance to

acquire quality assets and is committed to retain good customers through customer relationship

management and financial counseling. At the same time efforts have been made to

explore/induct new clients having good potentiality to diversify and create a well established

structured investment portfolio and to minimize overall portfolio risk.

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1.8 Corporate Social Responsibilities of EXIM Bank Limited

At least 2% of our annual profit of every year is put aside for the foundation to conduct

Corporate Social Responsibilities (CSR) activities. The mainstream CSR activities that are

carried out through this foundation are:

Healthcare service

Scholarship program for brilliant poor student

Education Promotion Scheme (Interest free loan)

Helping people affected by natural calamities

Helping people in slum areas

Donation to educational institutions to setup computer lab

Beautification of Dhaka City

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1.9 Organizational Structure of EXIM Bank Limited

CHAIRMAN

BOARD OF DIRECTORS

MANAGING DIRECTOR

DEPUTY MANAGING DIRECTOR

VICE PRESIDENT

SENIOR ASSISTANT VICE

ASSISTANT VICE PRESIDENT

SENIOR PRINCIPAL

PRINCIPAL

EXECUTIVE OFFICER

OFFICER

PROBITIONARY

JUNIOR OFFICER

ASSISTANT OFFICER

TRAINEE ASSISTANT

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1.10 Awards & Achievement Of EXIM Bank Limited

1.10.1 First private sector bank to open exchange house in UK

In order to ensure delivery of smooth and most reliable remittance services to NRBs living and

working in UK, Export Import Bank of Bangladesh Limited (EXIM Bank) has started operation

of its wholly owned subsidiary “EXIM Exchange Company (UK) Ltd”. On 30th June 2009 in

London, United Kingdom, one of the oldest destinations for the expatriate Bangladeshis. It is the

first exchange house owned by a Bangladeshi private bank. Bangladesh Bank Governor Dr.

Atiur Rahman inaugurated the exchange house as the Chief Guest, while H.E. Dr. M. Sayeedur

Rahman Khan, Honorable High Commissioner, Government of the People's Republic of

Bangladesh, was present in the program as special guest. Chairman of EXIM Bank and Director

of EXIM Exchange Company (UK) Ltd. Mr. Md Nazrul Islam Mazumder presided over the

program. Deputy High Commissioner Mr. Allamah Siddique, Director of EXIM Bank Mr.

Muhammed Nurul Fazal Bulbul, Mrs Nasrin Islam, Mr. Abdullah-Al-Zahir Swapan, Mr. Md.

Shahidullah, Managing Director of EXIM Bank Mr. Kazi Masihur Rahman and local elites were

also present in the opening ceremony. With the opening of EXIM Exchange the Bangladeshi

expatriates will now be able to send remittances to their family members back home within

shortest possible time through online transfer to all the branches of EXIM Bank. EXIM

Exchange Company (UK) Ltd is located at the Universal House of Wentworth Street London

which is a very convenient location for the Bangladeshi community and business houses. Unlike

any other exchange company operating in UK, as EXIM Exchange is completely owned and

supervised by EXIM Bank under the approval of Bangladesh Bank and UK regulators, it is

expected to be the most reliable and trusted Exchange House for the NRBs.

1.10.2 Implementation of the world renowned Core Banking Software (TEMENOS

T24)

In order to provide IT enabled products and services to our valued customers, bank has

implemented a world renowned shariah based centralized core banking software named

TEMENOS T24. This software is capable enough to provide all sorts of electronic banking

services to the valued customers through various electronic delivery channels.

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1.10.3 C onversion from Conventional Banking to Shariah Based Islami Banking

It is a great pleasure that by the grace of Almighty Allah, we have migrated at a time all the

branches from its conventional banking operation into Shariah based Islami banking operation

without any trouble. Lot of uncertainties and adversities were there into this migration process.

The officers and executives of our bank motivated the valued customers by counseling and

persuasion in light with the spirit of Islam especially for the non-Muslim customers. Our IT

division has done the excellent job of converting and fitting the conventional business processes

into the processes based on Shariah. It has been made possible by following a systematic

procedure of migration under the leadership of honorable Managing Director.

1.11 The Activities of EXIM Bank Foundation

Corporate Social Responsibility is becoming an increasingly important activity to business in our

country as well as other countries around the globe. Many of the corporations have progressively

recognized the benefits of providing CSR programs in their various locations. In recent years

CSR has become a fundamental business practice and has gained much attention from all the

concerned of large companies of our country. EXIM Bank believes that a strong CSR program is

an essential element in achieving good business practices and effective leadership. An

organization’s impact on the economic, social and environmental landscape directly affects their

relationships with its stakeholders, in particular investors, employees, customers, business

partners, government and communities. The country’s long-standing traditions of respect for

family and social networks and high value placed on relationships, social stability and education

are well revered by EXIM Bank.

EXIM Bank believes in togetherness with its entire stakeholder in a broader inclusive sense to

the endless pursuit of glory and success. Since inception in 1999, the term “social responsibility”

is much more emphasized than the term ‘profit maximizing ’. EXIM Bank always proceeds with

resilient support to lessen the desolation of the underprivileged and distressed sector of the

country. In this connection, EXIM Bank has established EXIM Bank Foundation in the year

2006 to carry out CSR activities in the most planned and orderly manner.

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1.11.1 Education – the inheritance of humanity:

EXIM Bank resolutely believes that education is the inheritance of humanity. None should block

its spread, as it blocks progress and prosperity particularly for the poor of the country. We would

like to say that education is the core factor that can bring about most of the positive changes at its

stratum and leave an endless effect to stimulate further changes automatically. Our nation will be

built up on the principles of equity and democracy in true sense if, adequate education can be

ensured to the underprivileged sector. Therefore, the aim of EXIM Bank to patronize education,

thus building up an embryonic and prosperous nation.

Two of our most successful endeavors are EXIM Bank Scholarship Programme, a stipend

package for poor and meritorious students that takes care of the beneficiaries throughout their

student life, and Education Promotion Scheme, a profit free investment Quard - al - hasanah

scheme for insolvent and meritorious students.

EXIM Bank Scholarship Program, launched in 2006 with 61 poor and meritorious students

selected from different reputed educational institutions of Dhaka City including Govt.

Laboratory High School, Viqarunnissa Noon School and College, Dhaka University, BUET,

Dhaka Medical College, etc. Now, stands for 1500 students from around 269 reputed educational

institutions across the country on 31st December 2010. The students, who are enrolled in the this

program , will be taken care of for their whole educational life subject fulfillment of the

eligibility criteria that include satisfactory academic results, non - involvement in student

politics, financial insolvency etc. A good deal of money has been disbursed as scholarship under

this program. Moreover, EXIM Bank Foundation is going to enroll another 500 new students

from reputed universities and university colleges around the country within May, 2011.

Under Education Promotion Scheme, Quard or interest- free loan is provided for poor and

meritorious students to help those bear monthly educational expenditure including academic

expenses, food, accommodation, etc. The Quard is disbursed to the selected students in monthly

installments till their accomplishing the master degree. Under this program the students are

required to repay the amount (only the principal amount) in long - term monthly installments

after they have joined a confirmed job accomplishing their education properly. By 31st

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December 2010, 178 poor and meritorious students from a number of reputed educational

institutions like Dhaka University, Chittagong University, Dhaka Medical College, BUET,

Bangladesh Agricultural University, Shahjalal University of Science and Technology etc. are

enrolled to be taken care of their graduate and post- graduate level of education.

A good deal of our charity is done for developing infra -structure of educational institutions,

hospitals, etc. or providing equipments for them. EXIM Bank sponsors different seminars,

conferences or convocation program s of universities as well. EXIM Bank is going to establish a

very high profile university soon for the meritorious but underprivileged students.

1.11.2 Side - by - side with the distressed

A vital area we are dealing with is helping people to survive natural calamities. Under this

welfare program, EXIM Bank provides relief in cash and kind for flood, fire or cyclone victims

and cold -stricken people. The aim of these CSR activities is to help the target group overcome

their provisional handicap and contribute to the socio- economic growth as soon as possible.

Besides natural calamities, fire breaks out sometimes in slum areas that guts the shanties and

renders the affected people totally helpless. In that situation, the Bank helps the victims fight

against the hard days until return to normal life.

1.11.3 Beautiful City - Safe City

In response to the call of the Dhaka City Corporation, EXIM Bank has been sharing a good

portion of the mammoth task of beautifying the capital since 2005. To make the capital a modern

city enriched with adequate urban amenities, EXIM Bank always joins hands with the

government.

EXIM Bank has donated to build a foot over bridge at Paribagh near Shahbagh crossing named

“Tanzila Sarah Foot- over Bridge”. It is a reflection of the Bank to make the city more safe

through building such foot over bridge which is now a big help to the passers-by while crossing

the busy road.

Besides, a good share of fund goes to the charity organizations working for the betterment of the

socio- economic condition of the people as well.

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1.11.4 EXIM Bank Hospital

By the grace of Almighty Allah, EXIM Bank Hospital has commenced its journey from 8th May,

2010. It is a reflection of the commitment of the Bank towards the nation especially providing

access to health care facilities for poor people. Since inception of the Hospital, our collective

effort is going on to bring about the best from such a new establishment considering all related

issues. We have already appointed a good number of experienced and skilled personnel headed

by a Resident Director in the hospital. As time moves on, number of patient is increasing day by

day due to endless effort, care and positive attitude of the professionals in every sector. At

present the 24 hours service units of the hospital are Pathology, Radiology & Imaging,

Pharmacy, Emergency, Medicine, Dentistry, Surgery, ENT, Child & Maternity Care, etc.

1.11.5 Other Activities

EXIM Bank is always prompt to stand beside the helpless. The Dhaka Pilkhana carnage in 2009

rendered a good number of families helpless in absence of their sole guardians. EXIM Bank

immediately took over the living cost of eight of the families and will continue to bear their

living and other expenses at a decent standard primarily for ten long years at a stretch.

EXIM Bank has profound homage to the initiatives taken by the Govt. for upholding the spirit of

our great liberation war and the fearless freedom fighters. In this respect the bank has donated to

“Muktijuddho Jadughar Nirman ”& “Jatir Janak Bangga Bandhu SMR Memorial Trust ”fund.

EXIM Bank believes concerted efforts by the corporate bodies to promote education, generate

self-employment, alleviate poverty, develop infra-structure, patronize research works etc. from

charity consideration will have a nation building effe

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1.12 Board of Directors of EXIM Bank Limited

Designation Name

Chairman Mr. Md. Nazrul Islam Mazumder

Vice Chairman Mr. Md. Abdul Mannan

Director (1) Mr. Md. Nazrul Islam Swapan

Director (2) Mr. Mohammad Abdullah

Director (3) Mr. Md. Altaf Hossain

Director (4) Mrs. Nasreen Islam

Director (5) Mr. Mohammed Shahidullah

Director (6) Mr. A.K.M. Nurul Fazal

Director (7) Al-haj Md. Nurul Amin

Director (8) Mr. Mohammad Omar Farooque Bhuiyan

Director (9) Mr. Abdullah Al-Zahir (Shapan)

Director (10) Mr. Md. Fahim Zaman Pathan

Director (11) Mrs. Nasima Akhter

Director (12) Mr. Zubayer Kabir

Director (13) Mr. Md. Habib Ullah Dawn

Director (14) Mr. Anjan Kumar Saha

Director (15) Mrs. Rizwana K. Riza

Director (16) Major Khandaker Nurul Afser (Retd.)

Director (17) Lt. Col. (Retd) Serajul Islam BP (BAR)

Director (18) Ranjan Chowdhury

Director (19) Md. Fakhrul Islam Mazumder

Director (20) Khandakar Mohammed Saiful Alam

Director (21) Mr. Muhammad Sekandar Khan

Managing Director Mr. Md. Fariduddin Ahmed

1.13 Products & Services of EXIM Bank Limited

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1.13.1 Deposit Scheme

EXIM Bank has introduced the following schemes:

Mudaraba Deposit Account.

Mudaraba Saving Scheme-Money Grower

Mudaraba Income Scheme-Steady Money

Mudaraba Super Savings-Double in 6 Years.

Mudaraba Multiple Savings-More than Triple in 10 Years.

Mudaraba Education Savings-For Higher Education

Mudaraba Hajj Prokalpa.

Mudaraba CREDIT CARDS

Foreign Currency Deposit A/C.

1.13.2 Investment scheme

Corporate Finance

Commercial finance

Industrial finance

Project finance

Lease finance

Syndicate finance

Hire purchase finance

Real Estate finance

1.14 SWOT Analysis of EXIM Bank Limited

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A SWOT analysis has been conducted for Export Import Bank of Bangladesh Ltd. This

investigation summarises the key issues from the business environment and the strategic

capability of EXIM bank Ltd, that are most likely to impact on strategy development.

STRENGTHS

Earned good reputation among customers and regulators within a very short period.

Has grown quite rapidly in all spheres of banking services.

Gives relatively higher return on deposits in saving schemes than other banks.

Lending rate is relatively competitive.

Makes it lending decision with utmost prudence and has a very low level of bad and

doubtful loans.

Service charges are comparatively reasonable.

WEAKNESSES

Limited advertising and publicity of bank's products and activities.

Does not provide proper customer care compared to competitor.

Lacks experienced competent as well as proficient manpower in some departments.

OPPORTUNITIES

Growth of global economy and Bangladesh's foreign trade in the coming years can

provide huge growth opportunities.

Small & Medium Enterprise (SME) and retail banking can provide good opportunity for

growth.

Online banking facilities can make the operation of the bank more efficient.

Expansion of banking services into other different services.

THREATS

The macroeconomic situation of the country can deteriorate.

Government has been controlling industrial credit.

The depreciation of Taka against US dollar is a great threat to foreign exchange

transaction and profitability.

Intensification of competition in the industry.

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Part-2 (Chapter#01)

Introduction To The Report/Study

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2.1.1 Rational of the Study

There are several questions which have arise to my mind when I preferred this topic to working

on to complete my internship report regarding the Investment Program of Exim Bank Limited. In

today’s modern and globalization world business sector is competitive. It is more competitive in

the financial institution like bank. Now-a-days local banks are playing a key role for economic

growth and development of the country. As it is the question of every concerned people that

what the difference between conventional banking & Islamic banking is and as the Islamic

banking are spreading day by day in Bangladesh it is rationale to conduct the study. Islamic

banks can provide efficient banking services to the nation if they are supported with appropriate

banking laws & regulations. I am proposing this study because I want to inform the peoples of

our country about the different procedures & laws about the domestic investment sector of any

private bank. As I am working in Exim Bank Limited so I’ll try my level best to give different

information about the Investment Program of this bank. I think this study is very much important

in our day to day life because many peoples of our country wants to take loan from banks &

banks also want to give loan as a part of their investment which will help us in many ways. But

many peoples of our country don’t know the procedures of taking loan from bank so I think my

study will help us to know about this systems as well as the condition & it will also help me to

know the systems deeply & getting loan for my business in future it will help me a lot. It will

also help my university especially the Faculty of Business Administration. If my university

wants to take loan from bank then it will become very easy for them to know the systems,

necessary documents as well as the benefit. As we know that the Exim Bank Limited is one of

the leading Banks in Bangladesh. The report will also covers the organizational structure,

background, functions and the performance of the bank.

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2.1.2 Statements of the Problems

There are several questions which have arise to my mind when I preferred this topic to working

on to complete my internship report regarding the Investment Program of Exim Bank Limited.

From my study we will know that what is investment, what is the present & past situation of

domestic investment in Bangladesh? We will also know the basic characteristics, policies,

procedures, and other historical scenarios regarding the Investment Program of Exim Bank

Limited and also in respect of government of Bangladesh and related Banking Authorities & also

what is actually going on at the investment department of Exim Bank Limited regarding the

Investment Program. Is the present situation of investment of Bangladesh is good or bad, if bad

than what are the reasons behind this situation. We will also know that what could be the

financial and other losses occurred by Investment in Exim Bank Limited & also some

recommendation from my point of view.

2.1.3 Scope & Delimitation of the Study

Everything has got some scope and limitation. The scope & delimitation of my study are given

below:

Scopes:

Investment Division and its Investment banking activities are the prospective topic.

Data needed for the interpretation is much easier to access on respect of other commercial

banking business related issues.

Supervisors in the workplace are very helpful in case of data collection and interpretation.

Very realistic problems and questions can be arise from the regarding topic related issues

and very helpful for the future career illumination

Limitations:

Time is the first limitation as the duration of the program.

The main limitation is to conduct interview on some top level decision makers as they are

less interested to share their strategies and also they have very busy schedules.

Unavailability of sufficient written documents of Foreign Exchange division as required

making a comprehensive study.

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Another limitation of this report is Bank's policy of not disclosing some data and

information for obvious reason, which could be very much useful.

2.1.4 Objectives of the Study

The objective of the study may be viewed as:

Broad Objective

To acquire knowledge about Investment Banking and its practical concerns in Exim Bank

Limited.

Specific Objectives

To know elaborately about the condition of Investment Program in Bangladesh.

To discuss the Investment services offered by Exim Bank Limited

To know different Governmental and Bank policies, terms and conditions regarding the

Investment Program.

To plot a SWOT Analysis of the Investment division of Exim Bank Limited on respect of

the market condition.

To know about the Documentation process of Investment Program

To analyze the overall data and information regarding performing and non-performing

Investment Program segments in Exim Bank Limited.

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Part-2 (Chapter#02)

Review of Related Literature

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2.2.1 Introduction

Investment is one of the most significant departments in the EXIM BANK LIMITED. In modern

banking system, where interest is available called Credit Department Investment department is

performing a vital role by financing the various sectors in the economy, expressing the close and

intensive supervision of the project to ensure satisfactory performance of the economy.

Investment decision is one of the most important decisions that have to make by the management

of the bank. A big portion of Commercial bank comes from investment. The Bank, there are an

investment committee. They shall perform and be responsible for the following.

To check daily deposit, investment and other advance of the bank and find out lend able

surplus fund and invest in call market or in short term hounds as decided

To check cash reserve requirement and till requirement to meet customers need.

To check statutory liquidity reserve (Secondary Reserve) position and its investment on

the basis of maturities allowable on investment policy of the bank.

To check balance needed to meet claims with foreign correspondents.

The committee shall continuously study market and examine existing portfolio of investment and

make switches for consideration of liquidity and profitability.

2.2.2 Policy for Rescheduling Of Loans

Experience shows that the existing system of loan rescheduling has created impediments in

the way of realizing defaulted loans. Specially, a tendency has been observed among the

defaulted borrowers to avail the opportunity of loan rescheduling again and again without any

definite business rationale. Some confusions have also cropped up relating to the condition of

cash deposit as down payment for loan rescheduling. After careful and overall review of the

aforesaid problems and in suppression of all previous instructions25 the following detailed

policies for rescheduling of loans are being issued for compliance by banks:

Guidelines for Consideration of Loan Rescheduling Applications:

While considering loan rescheduling application the banks shall follow the under

mentioned guidelines:

When a borrower asks for rescheduling of loans the banks shall examine the causes as to

26


Why the loan has become non-performing. If it is found from such review that the borrower has

Diverted the funds elsewhere or the borrower is a habitual loan defaulter the bank shall not

consider the application for loan rescheduling. Instead, the bank shall take/continue all legal

steps for recovery of the loans. At the time of considering loan rescheduling proposal bank must

assess the borrower's overall repayment capacity taking into account the borrower's liability

position with other banks. In order to ensure whether the borrower would be able to repay the

rescheduled installments/existing liability the bank shall review the borrower's cash flow

statement, audited balance sheet, income statement and other financial statements. Bank officers

should ensure, if required, by spot inspection of the borrower's company/business place, that the

concerned company/business enterprise will be able to generate surplus to repay the rescheduled

liability. Such inspection reports should be preserved by the banks. If a bank is satisfied after due

diligence mentioned above that the borrower will be able to repay, the loan may be rescheduled.

Otherwise, bank shall take all legal steps to realize the loan, make necessary provision and take

measures to write-off. The rescheduling shall be for a minimum reasonable period of time. At the

time of placing the rescheduling proposal before the Board of Directors the Bank shall apprise

the Board in details, what would be implications of such loan rescheduling on the income and

other areas of the bank.

Rescheduling of Term Loans:

The loans which are repayable within a specific time period under a prescribed repayment

schedule are treated as Term Loans. For rescheduling such loans following policies shall,

henceforth, be followed:

Application for first rescheduling will be considered only after cash payment of at least

15% of the overdue installments or 10% of the total outstanding amount of loan, whichever, is

less; Rescheduling application for the second time will be considered after cash payment of

minimum 30% of the overdue installments or 20% of the total outstanding amount of loan,

whichever, is less; Application for rescheduling for more than two times will be considered after

cash payment of minimum 50% of the overdue installments or 30% of the total outstanding

amount of loan, whichever is less; Explanation: If any loan is rescheduled once before issuance

of this policy the conditions set forth in this circular for second rescheduling shall be applicable

27


for rescheduling of such loans. Likewise, the terms for 3rd rescheduling as per this circular shall

be applicable for rescheduling of any loan which has already been rescheduled twice.

2.2.3 Policy for Loan Write Off

In course of conducting credit operations by banks the quality of a portion of their loan portfolio,

in many cases, deteriorates and uncertainty arises in realizing such loans and advances. These

loans are adversely classified as per existing rules and necessary provision has to be made

against such loans. Writing off bad loans having adequate provision is an internationally

accepted normal phenomenon in banking business. Owing to the reluctance of banks in

Bangladesh in resorting to this system their balance sheets are becoming unnecessarily and

artificially inflated. In order to avoid possible legal complications in retaining the claims of the

banks over the loans written off section 28 ka has been incorporated in 2001 in the Bank

Company Act, 1991. In this context the following policies for writing off loans are being issued

for compliance by banks: Banks may, at any time, write off loans classified as bad/loss. Those

loans which have been classified as bad/loss for the last five years and for which 100%

provisions have been kept should be written off without delay. After issuance of this circular the

process of writing off all other loans classified as bad/loss should be started immediately. Under

the process the oldest bad/loss classified loans should be considered first for written off. Banks

may write off loans by debit to their current year's income account where 100% provision kept is

not found adequate for writing off such loans. All out efforts should be continued for realizing

written off loans. Cases must be filed in the court of law before writing off any loan for which no

legal action has been initiated earlier. A separate "Debt Collection Unit" should be set up in the

bank for recovery of written off loans. In order to accelerate the settlement of law suits filed

against the written off loans or to realize the receivable written off loans any agency outside the

bank can be engaged. A separate ledger must be maintained for written off loans and in the

Annual Report/Balance Sheet of banks there must be a separate "notes to the accounts"

containing amount of cumulative and current year's loan written off. Inspite of writing off the

loans the concerned borrower shall be identified as defaulter as usual. Like other loans and

advances, the writing off loans and advances shall be reported to the Credit Information Bureau

(CIB) of Bangladesh Bank. Prior approval of Bangladesh Bank shall have to obtained in case of

writing off loans sanctioned to the director or ex-director of the bank or loans sanctioned during

28


the tenure of his directorship in the bank to the enterprise in which the concerned director has

interest (as per explanation contained in section 27(2) of the Bank Company Act, 1991).

2.2.4 Importance of Documentation

Completion of required documentation formalities as per approved sanction letter before

disbursement of a loan is necessary to protect the interest of the bank from any distress situation

and also necessary for acknowledgement of the debt by the borrower. Correct documentation

enables the banker to take legal recourse against the defaulting borrowers. The bankers deal with

other people’s money which are repayable on demand. Naturally, the banker’s prime

consideration is the safety and liquidity of their depositor’s money. In case of the borrower’s

inability to repay the loan the banker must have some alternative tangible assets of the borrower

to fall back upon to recover the loan. The banker, therefore, tries to create some sort of a charge

on any other assets of the borrower in his favor. Such charge makes the asset charged available

to the banker when needed in satisfaction of the advances made to him. Herein lies the role and

importance played by different types of securities in loans and advances of a Bank.

TYPES OF DOCUMENTS:

Documents related to securing loans and advances are classified into the following two

categories (a) Charge Documents, and (b) Legal Documents:

Charge documents are pre-formatted and printed forms provided by the Bank to the

client for execution to create charge on the securities against loans and advances.

Legal Documents are legal papers provided by the client certifying the legal status of the

borrower, borrowing power, title to goods and property, legal deeds and power of

attorney related to creation of charge on securities.

PARTS OF DOCUMENTATION:

Apparently there are three parts in documentation, namely:

Obtaining instruments/Documents.

Stamping.

Execution and Registration.

29


EXECUTION OF DOCUMENTS:

Documents to be executed (signed) by the parties concerned competent to do so either in official

capacity or in personal capacity as the case may be. In some cases such documents are required

to be executed in presence of witness.

The following precautions are to be taken at the time of execution of documents:

Documents to be filled in and are executed in the presence of the Manager or an

authorized officer of the Bank. He must put his initial in pencil so that in future it can be

ascertained in whose presence the documents were executed. He may have to depose in a

Court in future.

The client should sign in accordance with the specimen signature recorded with the Bank.

If documents consist of more than one page, all the pages are to be signed by the

executants at the end of the form and also at the end of the schedule of securities.

Mention of date and place of execution in a document is mandatory.

All documents must be duly filled-in before execution. Documents should not be kept

blank except one extra set of Promissory Note and Letter of Continuity.

There should not be any cutting, overwriting, insertion, cancellation, or alteration in any

document. If any such thing happens, it is to be authenticated by all the executants under

their recorded signatures.

After execution / Registration of documents, these should be entered into the Register

(Safe custody Register for Loan Documents) duly scrutinized and initialed by an

authorized officer of the Bank.

Loan Disbursement of Credit facility should not be allowed before completion of

documentation formalities.

30


Part-2 (Chapter#03)

Methodology of the study

31


2.3.1 Methodology of This Study

To carry out the study both primary and secondary data will be used. Which are given as

following;

Primary Sources

Desk job on relevant topic at Export Import Bank Of Bangladesh Limited, Narayangonj

Branch

Face to face conversation with the employees

Appointment with the top official’s members of the Bank.

Secondary Sources

Internal Sources:

Bank’s Annual Report

The investment division of Exim Bank Limited, Narayangonj Branch and employ activity

policy

Different circulars, manuals and files of the bank;

The database of the investment division of Exim Bank Limited.

External Sources:

Different books and periodicals related to the Investment banking sector.

Online journals

Different websites

32


Part-2 (Chapter#04)

Analysis & Interpretation of Data

33


Export Import Bank of Bangladesh Limited

Narayangonj Branch

2.4.1 EXIM Bank Narayangonj Branch at a Glance:

Branch Overview

34


Item 2006 2007 2008 2009 2010

Total

Deposits

169256325.27 296323216.30 322658965.69 386256971.3

2

462532369.25

Total advance 210325632.96 326992309.78 453649187.97 485632698.2

4

565142397.20

Demand

deposit

112239622.37 235867886.53 298040401.14 303652369.2

9

400958632.36

Time deposit 136698523.24 239689502.35 283261636.71 306325698.0

2

409356852.31

Profit 56369856.26 98325698 112899367.60 116236987.3

5

130397586.84

Investment 39000000 59000000 95000000 139000000 153000000

2006 2007 2008 2009 20100

100000000200000000300000000400000000500000000

169256325.27

296323216.3322658965.69386256971.32

462532369.25

Total Deposits of EXIM Bank Limited (Narayangonj Branch From Year 2006 to

2010)

Taka In Amout

From The graph it can be said that the total number of deposits is increasing every year in EXIM

Bank Limited at Narayangonj Branch.

35


2006 2007 2008 2009 2010

56369856.26

98325698

112899367.6 116236987.35

130397586.84

Total Profit of EXIM Bank Narayangonj Branch From Year 2006 to 2010

Taka In Amount

From The graph it can be said that the profit is increasing day by day in EXIM Bank Limited at

Narayangonj Branch which proves a very good situation of this branch.

2006 2007 2008 2009 20100

20000000

40000000

60000000

80000000

100000000

120000000

140000000

160000000

180000000

39000000

59000000

95000000

139000000153000000

Total Amount of Investment of EXIM Bank Limited at Narayangonj Branch

Taka In Amount

From this graph it can said that EXIM Bank Narayangonj Branch is investing a lot of money in

every sector from year to year.

36


2.4.2 Introduction

Investment is the action of deploying funds with the intention and expectation that they will earn

a positive return for the owner. Funds may be invested in either real assets or financial assets.

When resources are used for purchasing fixed and current assets in a production process or for a

trading purpose, then it can be termed as real investment. The establishment of a factory or the

purchase of raw materials and machinery for production purposes are examples in point. On the

other hand, the purchase of a legal right to receive income in the form of capital gains or

dividends would be indicative of financial investments. Specific examples of financial

investments are: deposits of money in a bank account, the purchase of Mudaraba Savings Bonds

or stock in a company. Ultimately, the savings of investors in financial assets are invested by the

respective company into real assets in the form of the expansion of plant and equipment. When

money is deposited with an Islamic Bank, the bank, in turn, makes investments in different forms

approved by the Islamic Shariah with the intent to earn a profit. Not only a bank, but also an

individual or organization can use Islamic modes of investment to earn profits for wealth

maximization.

2.4.3 What Is Investment???

In finance and business, an investment is an asset purchased for profit, whether via income, or

capital appreciation, or some combination. The entity making the investment is an investor. The

opposite of making an investment, or selling the asset, is divestment. Investment has a

connotation of a long-term holding period, in contrast to speculation, which is the purchase of

assets seeking profit from short-term price movements. In practice, no precise definition

distinguishes between investment and speculation. The expected return on investment, or

expected ROI, is a measure of the attractiveness of an investment, whether anticipated or

realized. In economics, investment represents capital expenditure by companies in an economy

or economic model. In this context, investment is distinct from consumer expenditure,

government expenditure, and net exports.

37


2.4.4 Investment Objectives of EXIM Bank

The objectives and principles of investment operations of the Banks are:

The investment fund strictly in accordance with the principles of Islamic Shariah.

To diversifies its portfolio by size of investment, by sectors (public and private), by

economic purpose, by securities and by geographical area including industrial,

commercial and agricultural.

To ensure mutual benefit both for the Bank and the investment client by professional

appraisal of investment proposals, judicious sanction of investment, close and constant

supervision and monitoring therefore.

To make investment keeping the socio-economic requirement of the country in view.

To increase the number of potential investors by making participatory and productive

investment.

To finance various developments schemes for poverty alleviation, income and

employment generation with a view to accelerating sustainable socio-economic growth

and up-liftmen of the society.

To invest in the form of goods and commodities rather than give out cash money to the

investment clients.

In EXIM BANK LIMITED they invest in two ways;

One is Head Office Investment: Head office investment consists of investment in

Bangladesh bank, security investment and some foreign investment.

Another is investment by the branches. And Branch Investment consists of investment as

loans, advances and guarantees business.

Head Office Investment

There is a resolution of Bangladesh Bank that every commercial bank has to keep a deposit in

Bangladesh Bank, which is 15% of total deposit. The EXIM bank Head office investment

consists of investment in Treasury bill, Prize bond, Shares, Debentures and some other security

investment.

38


Security Investment: EXIM BANK LIMITED purchases securities for liquidity purposes to

augment investment and to serve as collateral for deposit liabilities to Government in short them

govt. securities generally provide limited income but are highly liquid with on credit risk and

little market rate risk.

Branch Investment

Branch invest is various sectors as loans and advances. The department of Bank, which deals

with these loans and advances, is known as credit department. now I would like to describe about

investment department of EXIM BANK LIMITED.

According to the principles of Islamic Shariah, EXIM BANK LIMITED invest on the basis of

profit and loss sharing system. Earning profit is not the only motive rather than emphasis in

given attaining social good and in creating employment opportunities. Further in order to

diversity investment portfolio, the bank engaged itself in investment operation through special

scheme introducing during the year.

Year Investment (Tk. in millions)

2006 3487460000

2007 4265290000

2008 2894021207

2009 2169435240

2010 6860990747

39


2006 2007 2008 2009 20100

1000000000

2000000000

3000000000

4000000000

5000000000

6000000000

7000000000

8000000000

3487460000

4265290000

28940212072169435240

6860990747

Investment

Here it can be said that the total investment of EXIM Bank was at a good position in the year

2006 & 2007 but in 2008 & 2009 the investment went down and in 2010 the Investment was so

high it broke all the past year’s record. This shows that this year narayangonj branch has been

successfully able to invest money

2.4.5 Sector Wise Investment Growth

A) Agriculture Industry: (In crore Tk)

Sector 2006 2007 2008 2009 2010

Agriculture 1330 1351 16838 15985 14118

Growth of agriculture industry 1.58% 1146.34% -5.07% -11.68%

40


2006 2007 2008 2009 2010-202468

101214

Agriculture Industry

Here it can be said that the investment growth of agricultural industry was good in the year 2008

but after 2008 the bank didn’t invest much money in this sector.

B) Industry (Leather, Pharma, Textile, food etc.)

(In crore Tk)

Sector 2004 2005 2006 2007 2008

Industry (Leather,

Pharma, Textile,

food etc.)

26964 46183 67381 89823 130630

Growth 36.25

%

71.28% 45.90% 33.31% 45.43%

41


2006 2007 2008 2009 20100.00%

10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%

36.25%

71.28%

45.90%

33.31%

45.43%

Growth of Industry (Leather, Pharma, Textile, food etc.) of EXIM Bank Limited

From this graph it can be said that every year EXIM Bank limited investing their money in

Industrial Sector. However in 2010 there has been a slight increase.

C) Transport& Communication (In crore Tk)

Sector 2006 2007 2008 2009 2010

Transport&

Communication

4004 5467 6987 10414 13721

Growth 23.29% 36.54% 27.80% 49.05% 31.76%

42


2006 2007 2008 2009 20100.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

23.29%

36.54%

27.80%

49.05%

31.76%

Transport & Communication Sector

From this graph it can be said that EXIM Bank limited has decreased investing in this sector in

the last. From the graph it seems that every alternate year EXIM bank increases its investment in

this sector.

D) Trade

Sector 2004 2005 2006 2007 2008

Trade

(In crore Tk)

109492 136951 53350 63324 88652

Growth 18.64% 25.08% -61.04% 18.70% 40.00%

43


2006 2007 2008 2009 2010

-80.00%

-60.00%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

18.64%25.08%

-61.04%

18.70%

40.00%

Trade

From this graph we can see that other than 2008, in all the other years EXIM Bank has increased

its investment it the Trade sector. This shows that it is able to attract a considerable amount of

customers from this sector who require investment from EXIM bank.

E) Service Industries (In crore Tk)

Sector 2006 2007 2008 2009 2010

Service Industries 5269 12812 7398 8101 18221

Growth 59.29% 143.16% -42.26% 9.50% 124.92%

2006 2007 2008 2009 2010

-100.00%

-50.00%

0.00%

50.00%

100.00%

150.00%

200.00%

59.29%

143.16%

-42.26%

9.50%

124.92%

Service Industries

44


From this graph it can be said that the bank also invest their money for service industries also.

But they invest more in this sector in the year 2007. Growth of investment of EXIM Bank in

different sector is in satisfactory level. Investments growth in service sector is comparatively

more satisfactory than other sector. The Bank however should concentrate on agriculture

industry.

2.4.6 Sector Wise Investment Concentration

It is particularly important to monitor whether the increase in loans in the economy is

concentrated in sectors that are vulnerable to shifts in economic activity. Investment

concentration in a specific economic sector or activity (measured as a share of total loans) makes

banks vulnerable to adverse developments in that sector or activity. Hence, the quality of a

financial institution's investment portfolios is closely related to the financial health and

profitability of its borrowers.

Table shows that the most of the loans from 2004 to 2008 are concentrated in the industrial

investment (around 35.91%) followed by trade (16.53%). The bank allocates lowest amount of

its loans for transport sector. (2.59%).

Sector wise loans and advances:

Sector 2006 2007 2008 2009 2010

Agriculture 0.82% 3.97% 2.63% 4.23% 3.99%

Industry (Leather,

Pharma, Textile, food

etc.)

23.15% 34.1% 35.91% 40.35% 46.29%

Working Capital

Financing

12.02% - - - -

Construction 0.92% - - 0.56% 0.98%

Transport& 2.3% 2.56% 2.59% 3.29% 3.15%

45


Communication

Trade 54.17% 50.75% 48.84% 38.2% 31.42%

Housing 4.89% 4.75% 6.19% 8.39% 9.16%

Miscellaneous 1.73% 4.00% 4.94% 4.98% 5.01%

The trend analyses of sector wise loans are given below:

0.82%

23.15%

12.02%

0.92%2.30%

54.17%

Agriculture

Industry (Leather, Pharma, Textile, food etc.)

Working Capital Financing

Construction

Transport& Communication

Trade

From the graph we can see that EXIM bank is giving more emphasizes on Trade & Industrial

sector of Bangladesh. The least amount is invested in agricultural sector followed by

construction sector. From the previous graphs we found out that each year the amount invested in

these two sectors is decreasing probably because EXIM bank does not find much profitability

from these sectors. In the trade sector however the amount has increased considerably because of

the tendency of this sector contributing more to the profit. Another new addition is Working

Capital financing which contributes 12.02%. We have noticed from the previous table that this

46


type of financing was not available earlier. After analyzing all the graphs of above here we can

see that the budgeting system EXIM Bank Bangladesh Limited is very good.

2.4.7 Investment Income from Investment

Income derived from investments from the year 2006 to 2010 is given below

2006 2007 2008 2009 20100

100

200

300

400

500

600

700

800

182.03246.14

380.37

494.34

675.53

Investment Income

Year Investment

Income [In

crore Tk]

2006 182.03

2007 246.14

2008 380.37

2009 494.34

2010 675.53

47


Source: Annual report of EXIM Bank.

From this graph it can be said that EXIM bank limited is earning a lot of profit from year 2006 to

2010 which indicates a good situation of this company in this sector. So we can say that the

income from the investment Department is one of the main sources of earning profit of this bank.

As EXIM Bank increases its investments from year to year, so it is logical that its income from

sanctioning investments is more. The bank has achieved the highest profit in 2010 from any

other previous year. So performance of providing investments of the bank is not dissatisfaction.

2.4.8 SWOT Analysis of the Investment Department of EXIM Bank Limited

Strengths

Export Import Bank of Bangladesh Limited main strength is their members of the Board of

Directors, are leading business personalities and reputed industrialists of the country.

They have their own training center.

Better working environment, which promotes team spirit, creativity, & performance

capabilities of its employees.

Compared to other banks this bank is in better position in this competitive market.

The bank has a better controlling system than the other banks to recover it’s loan.

Skilled, creative & committed manpower.

Weaknesses

Export Import Bank of Bangladesh Limited has not introduced online banking system

which has an increasing public demand now days.

Lots of works are done manually which slows down the Investment process.

48


There is no separate customer care department, which can work solely with customer care

and for continuous improvement of services.

The bank couldn't use it's full of capacity to give loan.

Shortage of manpower in this division. So during the working hour the employees can't

provide proper attention to the customer that enhances customer dissatisfaction.

Opportunities

They have a big opportunity if they provide online Banking system.

It does not foresee exciting any of its business lines since it maintains balanced portfolio &

it is well-positioned to increase out-thrust into diversified interests.

The bank has many loyal customers.

Many people in Bangladesh prefer to have money invested from Shariah based banks.

Growth of global economy and Bangladesh's foreign trade in the coming years can provide

huge growth opportunities.

Investment by Islamic micro finance is a recent trend not yet opted by any commercial

banks in Bangladesh

Threats

The emergence of several private & foreign banks within the past few years offering similar

or more services with less or free charge for the facilities can be a major threat for the

bank.

The macroeconomic situation of the country can deteriorate.

Government has been controlling industrial credit.

The depreciation of Taka against US dollar is a great threat to foreign exchange

transaction and profitability.

Competition has intensified in the industry.

Overburden with regulations & frequent changes of policies create problems in adapting

clients & complying with rules, which adversely affect the business.

Internal clash and discriminations is the biggest threat for them.

The other financial instructions are giving loan to customers at a low rate than EXIM bank.

49


Part-2 (Chapter#05)

Findings of The Study

50


2.5.1 Investment of EXIM Bank

As a 3rd generation leading commercial bank operating under Islamic Shariah, EXIM bank

provides/deals in a variety of banking services including wide range of deposit and investment

products, foreign exchange, remittance and other ancillary services with the support of most

sophisticated/modern IT and professional management. The investment portfolio of the bank

comprises of diversified areas with all nationally identified thirst sectors/areas of business and

industry. The bank has given utmost importance/efforts to park and maintain quality assets and is

committed to retain good customers through congenial customer relationship management and

financial counseling considering the customers as a real business partners. At the same time

efforts have been made to induct new customers having vast potentiality, to diversify existing

portfolio and explore new potential business area adjustable with the change in business growth

of national economy and global trend as well. By adapting the aforesaid technique/process bank

has attained a great success in building a well established and structured investment port-folio

and minimizing overall portfolio risk.

The main investment businesses are focused on the following sectors/areas

Ready Made Garments

Hospitals & Clinics

51


IT Related business

Agricultural and Agricultural developments items

Fishing and fishing business promotion

Telecommunication

Transportation and communication

Forestry and furniture

Construction business and housing development

Leather and leather goods

Plastic and other synthetics

Entertainment

Photography

Ceramic

Hotel & tourism

Warehouse and container services

Printing and packaging

Gunning and Bailing

Pathological Laboratories

Cold Storages

Horticulture- Flower growing and marketing

Food and oil processing plants

Other admissible trading and intermediaries

EXIM Bahan : An Investment product for purchasing Car/vehicle

An investment Scheme facilitating to purchase a new/reconditioned car/jeep for own/business

use.

Feature of investment

To extend investment facilities to an individual for purchasing a new/reconditioned

imported car/jeep from showroom.

To ensure investment to a person who has the capacity to maintain the car/jeep but will

help to accumulate the capital at a time.

52


To provide investment facility very promptly and easiest condition to a deserving

customer/applicant.

Facility of repayment by 12 to 60 equal monthly installments to be determined on the

basis of monthly income of the customer.

Eligibility

Employees of

Government/Semi government/ Autonomous bodies

Sector Corporation

Non-Government Organizations

Multinational Companies

Banks/financial Institutions

Educational Institutions

Professionals

Doctor

Engineer

Accountant

Others

Reputed business person

Age between 21 at the time of application and 60 at the time of maturity

Minimum monthly income BDT 25,000.00

Length of service /age of business minimum 2 years

For service holder ahead minimum service up to maturity of investment

Eligible items/Article

Car

Jeep

Station wagon

Any other vehicle for own/business use

Investment Limit

53


Maximum limit Tk.20.00 lac (Investment equity ratio minimum 50:50)

Tenure of investment

Tenure is maximum 5 years.

EXIM Sahayak : An Investment product for procuring Household

Durables

Necessity and comfort are constantly changes with the change of time and life style which also

basic indicator of the quality of life. A stitch in time saves nine. Luxurious/comfortable

articles/appliances of yesterday may be treated /converted as essentials/necessities of today.

Necessity of many things does not wait for capacity.

Exim Bank provides a suitable solution of above and make breeze between necessity and

capacity to acquire the household durables.

Eligibility

Confirmed and regular Employee having two years continuous service of the following

organizations:

Govt. Organizations

Semi-Government Organizations

Autonomous Bodies


Banks

Insurance Companies


Corporate Bodies

Professionals/self employed

Doctor

Engineer

Accountant

54


Others

Businessman (at least five years of successful track record)

Investment Limit

Maximum limit Tk.3, 00,000.00

Duration of the Investment

Maximum 3 years

Purpose of Investment

To purchase/procure following eligible items

Eligible Items/Articles

Interior decoration

Personal Computer

Photocopier / Fax Machine

Small PABX System

Television

Mobile Phone Set

Refrigerator

Air cooler

Audio-Video Equipment

Other Home Electric Appliance

Generator/IPS/Solar Power/Power Tiller/Water pump/other agri-equipment

Furniture & soft furnishing

Motor-cycle/Auto-Rickshaw/Rickshaw Van/Boat/Engine Boat etc

Any Other Household Durables

EXIM Abasan : A product for Home Investment

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At EXIM Bank they offer an easy-to-avail Home Investment with convenient repayment facility

and maximum limit on investment amount. From the scheme the customer will get necessary

help to materialize long cherished dream, to enable him/them proud owner of a flat/dwelling

house in a modern developed urban area.

Purpose of Investment Product

Purchase apartment/House(not older than 8 years)

Completion of finishing/construction work of house

Renovation of existing house

Eligibility

Confirmed and regular Employee having 2 years continuous service of the following

organizations:

Govt. Organizations

Semi-Government Organizations

Autonomous Bodies


Banks

Insurance Companies


Corporate Bodies

(Monthly average income of the above applicant must be commensurate with the monthly

installment of the investment)

Professionals & self employment

Doctor

Engineer

Accountant

Business and others

Businessman (at least five years of successful track record)

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Age

Maximum 65 years (including repayment period)

Investment Limit

Maximum BDT 50.00 lac (65:35 investment equity ratios)

Duration of the Investment

Maximum 18 years including grace period (from 06 months to 18 months)

Repayment Mode

Equal monthly installment

The total amount of investment of the bank stood at tk. 53,637,68 million as on

December 31, 2008 as against tk. 40195.24 million as on December 31,2007 showing an

increase of tk. 13,442.44 million with the growth rate of 33.44%. Investments are the

core asset of the bank. The bank gives emphasis to acquire quality assets and does

appropriate investment risk analysis while approving commercial and trade investment

to clients.

2.5.2 Industry & Business Sectors Focus

The bank provides suitable investment services & products for the following sectors

Table: Sector-wise Loan Facilities

a) Steel & Engineering. j) Brick Fields.

b) Food & Allied. k) Edible Oil.

c) Agriculture l) Assembling Industry.

d) Textile & Garments. m) Collage Industry.

e) Pharmaceuticals & Chemicals. n) Electronics & Electrical Commodities.

f) Paper & Paper Products. o) Construction Company.

g) Service Industries. p) Trading (Retail/Whole sale)

h) Housing & Real Estate. q) Others.

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i) Cement.

Source: Investment Policy of EXIM Bank

2.5.3 Major Investments Categories

The Bank has primarily divided all investment facilities into two major categories. In this section

they are discussed in details.

Izara Bill Baia:

These are the investment made by the Bank with fixed repayment schedules.

The terms of investment are:

Short term : Up to 12 months

Medium term : More than 12 and up to 36 months

Long term : More than 36 months.

Investment facility available under this category is:

Izara Bill Baia (General)

Short term, Medium term & long term investment allowed to individual/firm/industries for a

specific purpose but for a definite period and generally repayable by installments fall under this

head. This type of investment is mainly allowed to accommodate financing under the categories

(i) Large & Medium Scale Industry and (ii) Small & Cottage industry. Very often term financing

for agriculture & others.

Continuing loans

These are investment having no fixed repayment schedule, but have an expiry date at which it is

renewable on satisfactory performance. Investment facilities available under this category are:

Bai-Muazzal

Continuous Investment allowed to individual/firm for trading as well as wholesale purpose or to

industries to meet up the working capital requirements against hypothecation of goods as

primary security fall under this type of lending. It is allowed under the categories (i)

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"Commercial Lending" when the customer is other than an industry and (ii) "Working Capital"

when the customer is an industry.

Murabaha

Financial accommodations to individual/firm for trading as well as for wholesale or to industries

as working capital against pledge of goods as primary security fall under this head of investment.

It is also a continuous investment and like the above allowed under the categories (i)

"Commercial Lending" and (ii) "Working Capital".

2.5.4 Other Investments Categories

Agriculture

Investment facilities to the agricultural sector fall under this category. It is subdivided into two

major heads:

a) Investment to primary producers: Financing under these categories refers to the

investment facilities allowed to production units engaged in farming, fishing, forestry or

livestock.

b) Investment to dealers/distributors: It refers to the financing allowed to input dealers

and (or) distributors in the agricultural sectors.

Izara Bill Baia for Large & Medium Scale Industry

This category of investment accommodates the medium and long term financing for capital

structure formation of new industries or for expansion of the existing units who are engaged in

manufacturing goods and services. Investment Facility available under this category is:

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Izara (Lease Finance)

It is one of the most convenient sources of acquiring capital machinery and equipment whereby a

client is given the opportunity to have an exclusive right to use an asset usually for an agreed

period of time against payment of rent. It is a term financing repayable by installment.

Izara Bill Baia to Small & Cottage Industries

These are the medium and long term investment allowed to small & cottage manufacturing

industries.

Working Capital

Investment allowed to the manufacturing units to meet their working capital requirements,

irrespective of their size-big, medium or small, fall under the category. These are usually

continuing investment and as such fall under the head "Bai-Muazzal"

Investment on Export

Investment facilities allowed to facilitate export of all items against Letter of Credit and/or

confirmed export orders fall under this category. Investment Facilities available under this

category are:

Musharaka Pre-shipment (Export Cash Credit):

Financial accommodation allowed to a customer for exports of goods fall under this head and is

categorized as "Investment on Export". The loans are liquidated out of export proceeds with 180

days.

Musharaka Pre-shipment (Packing Credit):

Investment allowed to a customer against specific L/C contract for processing/packing of goods

to be exported falls under this head and is categorized as "Mushraka Pre-shipment". The

investments are adjusted from proceeds of the relevant exports within 180 days.

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Foreign Documentary Bill Purchase (F.D.B.P):

Payment made to a customer through purchase/negotiation of a foreign documentary bills falls

under this head. This temporary investment is adjustable from the proceeds of the

shipping/export documents.

Local Documentary Bill Purchase (LDBP):

Payment made against documents representing sell of goods to Local export oriented industries

that are deemed as exports and which are denominated in Local Currency/Foreign Currency falls

under this head. This temporary liability is adjustable from proceeds of the Bill.

Foreign Bill Purchase (FBP):

Payment made to a customer through purchase of foreign currency cheques/drafts fall under this

head. This temporary loan is adjustable from the proceeds of the cheque/draft.

Commercial Lending

Short-term loans and continuing investments allowed for commercial purposes fall under this

category. It includes export-import financing, financing for internal trade, service

establishment etc. No medium and long-term investments are accommodated here. Loan

Facilities available under this category are:

Bai-Muazzal (Export):

Investments allowed for purchasing foreign currency for payment against L/Cs (Back to Back)

where the exports do not materialize before the date of import Payment fall under this head. This

is also a investment for temporary period, which is known as export finance.

Murabaha Import Bills (MIB):

Payment made by the Bank against lodgment of shipping documents of goods imported through

L/C falls under this head. It is an interim investment connected with import and is generally

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liquidated against payment usually made by the party for retirement of the documents for release

of imported goods from the customs authority.

Murabaha Post Import (MPI):

Loans allowed for retirement of shipping documents and release of goods imported through L/C

taking effective control over the goods by pledge in go down under bank's lock & key fall under

this type of investment. This is a temporary investment connected with import that is known as

post-import finance.

Trust Receipt (TR) Loan:

Allowed for retirement of shipping documents and release of goods imported through L/C falls

under this head. The goods are handed over to the importer under trust with the arrangement that

sale proceeds should be deposited to liquidate the investment within a given period. This is also a

temporary loan connected with import and known as post-import finance.

Inland Bills Purchase (IBP) Payment:

Made through purchase of inland bills/cheques to meet urgent requirement of the customer falls

under this type of loan facility. This temporary loan is adjustable from the proceeds of

bills/cheques purchased for connection.

Others

Any investment that does not fall in any of the above categories is considered under the category

"Others". It includes loans to i) Transport equipments, ii) Construction works including house

(commercial/residential), iii) work order finance, iv) personal loan etc. Investment Facilities

available under this category are:

Izara Bill Baia (House Building):

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Investment allowed to individual/enterprises for construction of building for commercial

purpose fall under this type of investment. The amount is repayable by monthly installment with

a specified period.

Izara Bill Baia (Staff House Building):

Investment allowed to Bank's employees for purchase/construction of house falls under this

Loan.

Other Loan to Staff:

Investment allowed to employees other than for House Building is grouped under head Staff

Izara Bill Baia (General).

Izara Bill Baia (Hire Purchase):

It is a type of installment-based loan under which the purchaser agrees to take the goods on hire

at a stated rental, which is inclusive of the repayment of principal as well as profit for adjustment

of the loan within a specified period.

House Hold Durable Scheme (HDS):

It is a special investment scheme of the Bank to finance purchase of consumer durable to the

fixed income group to raise their standard of living. The investments are allowed on soft terms

against personal guarantee and deposit of specified percentage of equity by the customers. The

investment is repayable by monthly installment within a fixed period.

Quard (General/Financial Obligation):

Investment allowed to individual/firms against financial obligation (i.e. lien on

MTDR/PSP/BSP/Insurance Policy/Share etc.).

Bai-Muazzal (Work Order):

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Investment allowed against assignment of work order for execution of contractual work falls

under this head. This investment is generally allowed for a definite period and specific purpose

not for continuous purpose.

Loan Facilities for single borrower/Group or syndication

The bank from time to time allows loan facilities to a single customer/Group (Funded & non

funded) up its 50% of total capital out of which funded facilities does not exceed 25% of total

capital. In case a proposal in submitted to Head Office, then the Bank considers the extent of the

Bank's global exposure (risk) to that customer group.

2.5.5 Investment Facility Parameters

Tenure

Bank does not ordinarily go for any loan facilities for long-term basis.

Short-term loan facilities are for 3 months to 12 months.

Medium term loan facilities are for 12 months to 36 months.

Long-term loan facilities are for more than 36 months.

Size

Maximum 50% (Funded & non-funded) of total capital of the Bank.

Maximum 25% (funded) facilities of total capital of the Bank.

Security

All assets (Bai-Muazzal & Murabaha) are to be covered under proper insurance risk with enlisted

Insurance Companies.

2.5.6 Lending Facilities Restrictions

The bank establishes a specific industry sector exposure cap by preparing a sector wise loan

budget in order to avoid over concentration in any one-industry sector. The

budget is approved by the Board in the month of January every year and includes the following

points;

Total Facilities:

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The aggregated of all cash facilities is kept at 80% of customer's deposits. It is also governed by

the statutory and liquidity reserve requirement of Bangladesh Bank.

Term Facilities:

Aggregated long-term facilities are restricted to 20% of the total loan portfolio and are not

allowed for a period more than 5 (five) year.

Unsecured Facilities:

Aggregate bank loans to corporate or individual customers who are not secured by collateral and

are allowed on the strength of customer's personal integrity and financial standing or the

corporate customer's balance sheet, with or without hypothecation of stock is restricted to 30% of

the total loan portfolio.

Sector-wise Allocation:

Sector-wise allocation of loan budget is made in the month of January of each year with the

approval of Executive Committee/Board of Directors. This is reviewed from time to time.

Security:

Security accepted against loan facilities is properly valued and is affected in accordance with the

laws of the country in which the security is held. An appropriate margin of security is taken to

reflect such factors as the disposal cost or potential price movement of the underlying assets.

2.5.7 Investment Facilities Not Provided For Business Types

The Bank does not provide loan facilities to the following businesses:

Military Equipment/Weapon Finance.

Highly Leveraged Transactions.

Finance of Speculative Loans.

Logging, Mineral Extraction/Mining, or other activity that is ethically of Environmental

sensitive.

Lending to companies listed on CIB black list or known defaulters.

Counter parties in countries subject to UN sanctions.

Share lending.

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Taking an equity stake in Borrowers.

Lending to Holding Companies.

Bridge Loans relying on equity/debt issuance as a source of repayment.

Tannery Finance.

Izara Bill Baia (HB-residential) who has no other business with the Bank.

2.5.8 General Lending Principles of EXIM Bank

Lending of funds to the traders, businesses and industrial enterprises constitutes the main

business of the bank. A major part of the bank's income is earned from interest and discount on

the funds so lent. The business of lending, nevertheless, is not without certain inherent risks.

Largely depending on the borrowed funds, a banker cannot afford to take

Undue risks in lending. While lending its fund, the bank, therefore, follows a very cautious

policy and conducts its business on the basis of the well-known principles of sound lending in

order to minimize the risks. The bank usually follows the following lending principles in its

credit management operations:

Safety:

As the bank lends the funds entrusted to it by the depositors, the first and foremost principle of

lending is to ensure the safety of the funds lent. By safety it is meant that the borrower is in

position to repay the loan, along with interest, according to the terms of the loan contract. The

bank takes utmost care in ensuring that the enterprise or business for which a loan is sought is a

sound one and the borrower is capable of carrying it out successfully and is a person of integrity,

good character and reputation.

Purpose:

The bank does not grant loan for each and every purpose. Bank has its own policy regarding the

purpose for which it provides loans. Loans are normally provided for productive purposes only

such as working capital, trading, agricultural, transport, export-import etc. The bank does not

grant loans for purely speculative purposes, unproductive purpose such as social functions or

holiday or for repayment of prior loans and business having negative net-worth if it is not

covered by cash/quasi cash securities with adequate margin.

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Profitability:

Since the bank is a profit-earning institution, it employs its funds profitability so as to earn

sufficient income out of which to pay interest to the depositors, salaries to staff and to meet

various other establishment expenses and distribute dividend to shareholders. The bank usually

considers high yielding, short-term, and self-liquidating with ancillary business/compensating

deposits and prefers quality advances. The bank keeps a spread of lending rate over its expenses

that include deposit interest payment and other operating and overhead expenses. The bank is

free to determine its interest rates.

Liquidity:

Bank lends funds for short periods. The loans are, therefore, largely payable on demand. The

bank ensures that the borrower is able to repay the loan on demand or within a short period. The

bank grants loans on the security of assets, which are easily marketable without much loss.

Dispersal/Diversification:

The bank keeps its investment portfolio as much broad based as possible and in conformity with

the deposit structure. The bank does not provide investments in one

Particular direction/industry/activity or one or few borrowers because any adversity faced by that

particular industry will have serious adverse affect on the bank. Again, investment s are not

concentrated in one area alone. The bank spreads its loans against different securities,

industries/activities, borrowers, areas, etc. This way the bank diversifies its risks.

National interest/social benefit:

The Bank grants loan if the purpose of the investment is for overall plans necessitating flow of

credit to priority sector in the larger national interest. National interest for financing in some

areas, especially in advances to agriculture, small industries, export oriented industries, and

assuming great importance. The bank also looks at the social and environmental implication of

the project or business that it is financing.

2.5.9 Investment Investigation

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Lending is one of the most important functions of a bank. Therefore, It is of paramount

importance that the bank chooses a reliable borrower. For this the bank places the kind of

mechanism(s) that helps it identify the borrower who can be creditworthy. This section deals

with some of the mechanisms that the bank employs for this end.

Investment Application form

A investment application form usually contains information pertaining to the name of the

concern, constitution, nature and place of business, year of establishment, borrower's experience

in the line, particulars of assets and liabilities, purpose of advance, amount required, period of

advance required for, nature of security offered, sources of repayment, names of present bankers

with detailed borrowing and other facilities. This is the first step of knowing about the borrower.

Personal Interview

The bank arranges interview with the borrower to know more about his specific requirements,

the prospects of his employing the funds prudently, his capacity to repay and the suitability of

the security offered. The main points that are covered in the interview are: his business, all legal

documents required for operation of his business (Memorandum and Article of Association,

trade and import license), his capital with reference to working capital, his experience in the

business, results of financial statements of at least three years, amount of investment and period,

purpose of advance, source of repayment, terms of payment, security documents that are offered,

types of charge available. The bank officials who conduct the interview try to analyze and judge

for themselves the correctness or otherwise of the various statements and documents of the

prospective borrower and to arrive at a balanced opinion regarding the acceptability or otherwise

of the proposal.

If, after the initial interview, the commercial credit officer decides that the loan request meets

basic bank lending criteria, the next step is to conduct a more in-depth investigation, relying

upon the documents obtained from the client and from bank's own and outside sources.

2.5.10 Investment Recovery

The bank has a Recovery Unit (RU) under CRM. It directly manages account with sustained

deterioration (a Risk Rating of Sub Standard (6) or worse).

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The RU's primary function is:

Determine Account Action Plan/Recovery Strategy.

Pursue all options to maximize recovery.

Ensure adequate and timely investment loss provisions are made based on actual and

expected losses.

Regular review of grade 6 or worse account.

2.5.11 Investment Assessment & Risk Management

Investment Assessment

A thorough loan and risk assessment is conducted prior to the granting of loans and at least

annually thereafter for all facilities. The results of this assessment are presented in a loan

proposal to Head of Loan Division for approval. The guiding principles for a bank official while

collecting and recording information are to remain uninfluenced by extraneous considerations

and secondly he maintains contact with all those who can be of assistance.

The following steps for completion of Loan Risk assessment for each facility are followed by the

bank in conjunction with the guidelines/instructions given in Head Office circulars issued from

time to time.

Risk Management

The following risk areas are addressed for risk management:

Borrower Analysis: The majority shareholders, management team and group of affiliate

companies are assessed. Any issues regarding lack of management depth, complicated

ownership structure or inter group transactions are addressed, and risk mitigated. The

bank collects credit information from CIB regarding the borrower's past credit status and

exchanges of credit information from other banks or bank opinions. CIB report

reflects/includes the name of all the lenders with facility, limit and outstanding.

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Industry Analysis: The key risk factors of the borrower's industry are assessed. Any

issues regarding the borrower's position in the industry, overall industry concerns or

competitive forces are addressed and strengths and weaknesses of the borrower relative to

its competitors are identified.

Supplier/Buyer Analysis: Any customer or supplier concentration is assessed. Any

issues regarding the borrower's position in the industry, overall industry concern or

competitive forces are addressed and the strengths and weaknesses of the borrower

relative to its competition are identified.

Historical Financial Analysis: An analysis of a minimum of 3 years historical financial

statements of the borrower are presented. Where reliance is placed on a corporate

guarantor, guarantor's financial statements are analyzed. The analysis addresses the

quality and sustainability of earnings, cash flow and the strength of the Borrower’s

balance sheet. Specifically, cash flow, leverage and profitability are analyzed.

Project Financial Performance: Where term facilities (tenor greater than 1 year) are

being proposed, a projection of the borrower's future financial performance are provided,

indicating an analysis of the sufficiency of cash flow to service debt repayments. Loans

are not granted if projected cash flow is insufficient to repay debts.

Accounts Conduct: For existing borrowers, the historic performance in meeting

repayment obligations (Trade payment, cheques, profit and principal payments, etc.) is

assessed.

Mitigating Factors: Mitigating factors for risk identified in the loan assessment are

identified. Possible risks include margin sustainability and/or volatility, high debt loan

(leverage/gearing), overstocking or debtor issues; rapid growth, acquisition or expansion;

new business line/product expansion, management changes or succession issues;

customer or supplier concentration; and lack of transparency of industry issues.

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Loan structure: The amounts and tenors of financing of loan are justified based on the

projected repayment ability and loan purpose. Excessive tenor or amount relative to

business needs increase the risk of fund diversion and any adversely impact the

borrower's repayment ability.

Security: A current valuation of collateral is obtained and the quality and priority of

security being proposed are assessed. Adequacy and the extent of the insurance coverage

are also assessed.

Name lending: Loan proposal and the granting of loans are based on sound

fundamental, supported by a thorough financial and risk analysis and not by an over

reliance on the sponsoring principal's reputation.

2.5.12 Security Valuation

Security is a cover against loans and advances. It ensures recovery of loans and advances.

Securities play an extremely important role in a loan granting decision.

Valuation of Primary Security

Primary security means the security offered by the borrower himself as cover for the loan. It

refers to the asset, which has been bought with the help of the bank. Such as when machinery or

some goods have been bought with the help of the bank the machinery and goods constitute the

primary security.

Primary Security may be either personal security or impersonal security or both. Personal

security is given by a borrower by way of duty-executed promissory note,

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acceptance/endorsement on a bill of exchange and personal covenants in mortgage deeds or loan

agreements. Impersonal security is given when a charge is created by way of

pledge/hypothecation/mortgage over the borrower's tangible assets, such as goods and

commodity, fixed assets, bills receivables, book debts.

Murabaha Post Import (MPI)

MPI facility is allowed, as post-import finance against imported goods under the Bank's L/Cs.

MPI facility does not exceed invoice value net of L/C margin unless the Bank agrees to finance

duties/VAT. However, where market price of the goods is lower than landed cost banks makes

necessary arrangement with the customer to obtain additional deposit. Head Office approves the

price at which MPI goods to be released to customer or it may be at market price or landed cost

whichever is higher.

Murabaha

Valuation of the goods to be pledged to the Bank against Murabaha limit in no case exceeds:

The landed cost or market prices whichever is lower in case of imported goods.

The ex-mill/factory price of market price whichever is lower is case of domestically

manufactured commodities as evidenced by invoice.

The wholesale price/competitive market price duly verified by the Branch and approved

by Head Office.

Valuation of Collateral Security

All other additional security other than the primary securities such as land or building etc. are

considered as collateral securities which may be offered or deposited by the borrower or, by any

other third party.

The Bank follows the following steps for valuation of collateral security:

The property is physically inspected and verified jointly by 2 (two) bank's Officers. A

valuation certificate mentioning market value and forced sale value is prepared in a designated

form supplied to the officials and is jointly signed by the inspecting officers of the Bank. The

forced sale value of the collateral security is to be 1.5 times higher than the facility/facilities

allowed.

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"A Site Plan" and "Map" along with 3R size district photographs of the mortgaged property

covering full exposure from 3 angles mentioning detailed particulars on the back of the

photographs.

The collateral security must be in the physical possession of the mortgagor and the

mortgagor/owner has valid title over it.

A letter of satisfaction from the Bank's Lawyer is obtained that the mortgage formality has

been properly created.

2.5.13 Documentation

The bank does not disburse any loan facility until the required documentation is properly

completed. After completion of credit investigation, the bank official begins to prepare loan

proposal. The loan proposal defines clearly amount and type of loans, the purpose of the facility,

summary of the results of risk assessment, the sources of repayment, tenor, covenants, the agreed

repayment schedule, interest and value of security.

The credit officer identifies any particular documents required for each facility. The officer is

responsible for the completion of the documentation. The officer enlists outside legal assistance

where necessary e.g. when drawing up special consortium / term loan agreements etc.

Where security is to be accepted as collateral for the facility all documentation relating to the

security are to be in the approved form. All approval procedures and required documentation are

completed and all securities are in place, prior to the disbursement of the facilities. There may be

requirement of specific banking or legal documents to secure a investment according to sanction

terms and conditions. All required documents are required before any loan is disbursed.

Bank has to complete the following documentation-

Municipal Trade License.

Registered Partnership Deed duly certified as true copy (in case of a Partnership firm).

Resolution of the Partners for taking financial facilities and authorizing partner’s for

execution of documents and operation of the account (in case of partnership firm).

Copy of Memorandum & Articles of Association of the company including Certificate of

Incorporation duly certified by RJSC and attested by the Managing Director accompanied

by an up-to-date list of Directors (in case of a Limited Company). In case of public

limited company certificate of commencement of business is to be obtained.

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Copy of Board resolution of the company for taking financial facilities and authorizing

Director(s) for execution of documents and operation of the account (in cases of limited

company).

An undertaking not to change the management of the company and the Memorandum and

articles of Association of the Company without prior written permission of the Bank (in

case of a Limited Company).

Copy of the audited Balance Sheet for last 3 years (in case of Limited Company).

D. P Note Single / Joint 9Stamped)

Letter of Arrangement

Letter of Disbursement

Agreement of Pledge (Stamped)

Mudaraba Agreement (Stamped)

Pledge letter showing detailed particulars of goods with value accompanied by relative cost

memo / Invoice.

Undertaking on Tk. 150 non-judicial stamp by the client (in case of exemption of

Burglary insurance policy.)

Letter of Disclaimer from the owner of the warehouse (in case of warehouse rented by

the client).

Letter of Guarantee (Stamped) of all the partners in their individual capacity (in case of

Partnership from).

Letter of Guarantee 9 stamped) of all the Directors in their individual capacity (in case of

Limited Company).

Corporate Guarantee froe legal entity on Tk. 150/- non-judicial stamp, if required in Head

Office Sanction Advice.

2.5.14 Approval Authority

After the loan proposal is completely prepared by the branch officers, it is sent to the head office

for approval to the approval authority. To ensure proper and orderly conduct of the business of

the Bank, the Board of Director empowers the Managing Director and other Executives of the

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Bank to lend up to certain amount under certain terms and conditions at their discretion. The

lending authority is broadly categorized as follows:

(1) Board/Executive Committee.

(2) Managing Directors

(3) Head of Loan Division

Authority and responsibilities of each of the above are as follows:

a) Board of Directors

Establishes overall policies and procedures for approving & reviewing loans.

Delegate’s authority to approve and review Loans.

Approves loan for which authority is not delegated.

Approves all extension of loan that is contrary to Bank's written loan policies.

b) Executive Committee of the Board

Approves loan facilities as delegated by the Board of Directors.

Supervises the implementation of the directives of the Board of Directors.

Reviews of each extension of loan approval by the Head Office Loan

Committee/Managing Director.

c) Managing Director and Head of Loan Division, Head Office

The Managing Director and Head Office Investment Committee constitute a committee and

it is responsible for:

Reviewing, analyzing and recommending for extension of investment in accordance with

authority established and delegated by the Board of Directors.

Ensuring that all elements of the investment proposal i.e. forms, analysis, statement and

other papers have been obtained and in order.

Confirming that the transaction is consistent with existing loan policy and Bangladesh

Bank guidelines.

2.5.15 Investment Monitoring

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To minimize loan losses, the bank put in place monitoring procedures and systems that provide

an early indication of the deteriorating financial health of a borrower. The bank officials monitor

the followings:

Past due principal or profit payments, past due trade bills, account excesses, and branch of

loan covenants;

Investment terms and conditions, financial statements on a regular basis, and any covenant

breaches or exceptions for timely follow up.

Timely corrective action to address findings of any internal, external or regular

inspection/audit.

Computer systems and where automated systems are not available manual processes are used to

produce accurate exception reports. Exceptions are followed up on and corrective action taken in

a timely manner before the account deteriorated further.

The main focus of this paper is on investment management of EXIM Bank. Besides this the

paper also looked at the Islamic banking in Bangladesh as the EXIM bank was converted to an

Islamic Shariah based bank in July 2004.

Islamic banking in Bangladesh has been a tremendous success over the last decade or so. The

annual growth rate of Islamic banking is 30%. Islamic banking is based on cardinal two

principles laid down in Shariah: 1) prohibition of interest 2) replacing it with profit sharing

wherever feasible and desirable.

The study found that the bank has a well-developed lending policy. The bank follows certain

general principle of lending such as safety, purpose, liquidity and diversification. All the

investment applications go through each of the steps of the investment granting process. The

bank uses its own investment risk evaluation process in addition to LRA Manual of Bangladesh

Bank and project appraisal method for evaluating investment proposals. The bank also has a

proper investment administration to ensure proper documentation, monitoring and follow up of

each investment granted by it.

A banker can not sleep well with bad debts in his portfolio. The failure of commercial banks

occurs mainly due to bad loans, which occurs due to inefficient management of the loans and

advances portfolio. Therefore any banks must be extremely cautious about its lending portfolio

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and credit policy. So far the EXIM Bank has been able to manage its credit portfolio skillfully

and kept the classified loan at a very lower rate.

The bank grants investment to a number of sectors through various loan facilities for short,

medium and long period. The bank's lending activities mainly focus on trade and industry sector

For investment sanctioning it is observable that in 2004 and 2005 bad loss of giving investment

is near about 60% which is not good for the bank. Besides their investment in 2004 is greater

than deposit amount. Overall their growth rate is good from the date of establishment. The Bank

has achieved success among its peer group within a short span of time with its professional and

dedicated team of management having long experience, commendable knowledge and expertise

in convention with modern banking.

The management of the bank is maintaining an efficient portfolio in order to have a

healthy growth and retain customer satisfaction. In order to avoid asset liability mismatch

the management of the bank is constantly monitoring the bank’s business portfolio. The

bank has a Well-diversified and balanced advance portfolio consisting of agriculture,

industrial, garments, import construction, trade & commerce, export, transport, consumer,

and other sectors. The liquidity risk is minimized to maximum extent.

EXIM Bank is engaged in modern banking. It is expected that EXIM Bank by its efficient

asset and liability management will be able to maintain its trend of growth and thus

overcome the threat.

EXIM Bank has been able to maintain a very low classified portfolio over the last six

years of operations. Its present classified portfolio stands very low of the total loan

portfolio in the year 2010. This demonstrates the Bank’s professional management

ability.

Recognizing the risks of unfair and hostile competition in the banking industry EXIM

Bank has, since its inception, focused on diversified client base with an innovative and

differentiated product base. This strategy has been rewarding for EXIM, and it plans to

remain innovative in future also by way of creating new markets for its products.

EXIM Bank having small and targeting niche markets is likely to be less affected by

restrictive monetary and/or fiscal policy.

The Management has been following a Loan and Advance Policy, which will be

continued in future. Therefore, it is expected that the loan loss provisioning in future will

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be within tolerable limit having little material impact on future profitability as well as net

worth.

As EXIM Bank is performing well in traditional general banking and there is a good

demand for Islamic Banking, the management of the Bank is also expecting good result

in Islamic banking operation.

Part-2 (Chapter#06)

Recommendations

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EXIM bank within a short period of just five years has made good progress in terms of

profitability and growth rate of deposits and loans and advances despite tremendous competition

in the industry. The bank has to keep updating its credit operation. Although for the time being

the figures are good but the trend in the figure indicate that unless the bank becomes more

prudent in its loan granting process it can become laden with heavy bad loans.

To improve its overall performance the bank can do the following:

The segregation of duties will improve the knowledge levels and expertise in each

department.

The responsibilities of the key persons of the above function must also be clearly

specified.

There should be a Recovery Unit to manage directly accounts with sustained

deterioration. To encourage Recovery Unit incentive program may also introduced

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The bank can establish a Marketing department to increase deposits

The bank should give its loan products to customers by publishing brochures and

advertising them under different 'brand' names.

Ensure proper training of its staff.

Increasing branch number to increasing wide geographical coverage throughout the

country.

ATM booth is necessary for giving prompt service to clients.

Implementing adequate IT infrastructure to provide international service standard to

customers.

Adding some promotional offers to large balance bearing clients.

Emphasis on corporate social responsibility is also necessary. Sponsorship in different

social programs can flourish bank image.

EXIM should go aggressive advertising and promotional activities to get a broad

geographic coverage.

To gain success in the programs like "Poverty Alleviation” and "Self Reliant" especially

in rural areas, this bank should provides investment facilities on the basis of individual.

Part-2 (Chapter#07)

Conclusion

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From the practical implementation of customer dealing procedure during the whole period of

practical orientation in EXIM bank limited it can be said and concrete conclusion in a very

confident way. Everyone should believe that the realization will be in harmony with most of the

banking thinkers. It is quite evident that to build up an effective and efficient banking system to

the highest desire level computerized transaction is a must.

Success in the banking business largely depends on effective lending. Less the amount of loan

losses, the more the income will be from Credit operations. The more the income from Credit

operations the more will be the profit of the EXIM Bank and here lies the success of Credit

Financing.

Actually EXIM Bank is a private sector bank having a small market share of the industry.

Although it is a third generation bank facing government deposit restrictions, it has all the

potentials to penetrate in the market. If the weakness are addressed appropriately and

opportunities are explored keeping in view the threats behind with a stable and adroit

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management having regard to appropriate corporate governance and modern automation

technology, it is expected that EXIM advance up in the ladder of success in the coming years.

Part-04 (Main Body of the Report)

Documents

Transcript of Part-04 (Main Body of the Report)