Report on InternshipFund Management System & General Banking Practice In a commercial bank: The Case Study of National Bank Limited

Submitted To: Mr. Raihanul Hasan Faculty, Dept of Business Studies State University of Bangladesh

Submitted by: S.M.Aminul Islam, PG:02-12-06-005, Faculty of Business Studies State University of Bangladesh

Date of Submission: 4th September 2008 4th September 2008 Mr. Raihanul Hassan Lecturer Department of Business Studies State University of Bangladesh

Subject: Submission of internship report titled Fund Management System and General Banking Practice of National Bank Limited.

Sir, It is my great pleasure to submit you the internship report on the above-mentioned topic as directed by you. Through this report I have tried to depict a vivid picture of the Fund Management System and General Banking Practice of National Bank Limited. In the process of preparing this report enriching my knowledge in practical banking system and this report immensely benefited me attempts to describe my observation, learning during the internship program. I have made my sincere efforts to study related materials, documents and annual reports of NBL and examine relevant records for the preparation of the report. I have tried to my best to make this report as comprehensive and informative as possible within the time allowed for me and I enthusiastically look forward upon you to consider and evaluate my efforts. It is worthwhile to mention that there might be some errors and mistakes in my report due to my limited knowledge and due to various constraints for which I beg your apology. I shell be obliged to clarify any matter or to provide any further information regarding this report on your kind supervision.

Thanking you, Sincerely yours, S. M. Aminul Islam Department of Business Studies State University of Bangladesh

PrefaceThis report is the ending stone of our MBA Program and has the aim to enhance the capability to study in the field of practical organizational arena. The MBA Program under the State University of Bangladesh is the ambition of theoretical and practical knowledge. In this theory we went across the different aspects of operation of administration. There we have got the idea about business strategy, policy, risk, competency factors, management capabilities, and problems in operating administration and day-to-day business functions along with the premedical measures for some problems etc. As consequences of such gathering we are to acquire the practical knowledge ourselves in any organizational environment. Moreover the cope with the technological advances in industrial and commercial development in this current world of globalization the capability of executive must be enhance with a view to make themselves efficient and effective in the execution of his duty and responsibilities they are assigned for.

The student of MBA program is to conduct an internship program under an institution for certain period of time so that they can justify the practicality of the theoretical knowledge they have learned in their academic classes.

Since the program is providing a huge benefits for the students, this program is to be structured in a more organized way and to get the supreme benefit from such program the time dimension is to be enhanced as the organization is a new environment for every one and to be settled there it takes few days and for which the students are deprived of getting practical knowledge which they have gone for. But it is damn true that this program of course provide a great help in building career on the basis of their academic knowledge.

AcknowledgementAt the beginning I want to pay my homage to the almighty Allah who made me capable to continue my everyday tasks both inside and outside the workplace during the whole period of my internship program. After ward I want to pay my deepest gratitude to Mr. Raihanul Hassan, Lecturer of Business Department, Business Faculty of the State University of Bangladesh, the supervisor of me. If I dont mention some names of the staffs of National Bank Limited, Motijheelr branch, my acknowledgement will be uncompleted. In this part I am highly grateful to Mr. Immarat Hossin; SPO; Mrs Tasmin Afsana SO of EXIM Bank and Mr. Ziaul Haque AVP of National Bank who helped me to get this opportunity to conduct my internship in NBL. I was under the supervision of Mr. Abdur Rahim Vice President and manager, Mr Mustafizur Rahaman (Late) SPO, MrsTamanna Naznee, SO; Mrs.Shahanaz Parven JO of Motijheel branch of National Bank Limited. In account opening section, I want to give thanks Dilara Zaman and Jobaida Rahman for providing me a lot of information about the general banking system of National Bank Limited and guidelines to prepare this report. I also say thanks some clients of NBL who has provided me necessary support by expressing their opinion about NBLs services. Successful completion of any course requires support from various people. I have been fortunate to get the guidance and supervision of my teachers, friends, National Bank Officials and others.

ACRONYMSA/C AD B/L BB BOE CCI & E CFR CIB CIF DD DP Note EPB EXP FC FDD FOB HS Code IBC IBCA IBDA IMP IRC L/C LCAF OBC PO PSI SWIFT TC TIN TR TT STD Account Authorized Dealer Bill of Lading Bangladesh Bank Bill of Exchange Chief Controller of Import & Export Cost & Freight Credit Information Bureau Cost Insurance & Freight Demand Draft Demand Promissory Note Export promotion Bureau Export Form Foreign Currency Foreign Demand Draft Free On board Harmonized System of Coding Inward Bills for Collection Inter Branch Credit Advice Inter Branch Debit Advice Import Form Import Registration Certificate Letter of Credit Letter of Credit Authorization Form Outward bills for Collection Payment Order Pre Shipment Inspection Society for Worldwide Inter Bank Financial Travelers Cheque Tax Identification Number Truck Receipt Telegraphic Transfer Short Term Deposit

Table of ContentsChapter Topics Preface Acknowledgement Acronyms Table of contents List of tables and figures Executive summary INTRODUCTION AND BACKGROUND OF THE STUDY 1.1. Background of the study 1.2. Statement of problem 1.3. Rationale of the study 1.4. Objectives of the study 1.5. Scope of the study 1.6. Limitations of the study LITERATURE REVIE METHOLOGY OF THE STUDY 3.1. Introduction 3.2. Population of the study 3.3. Sampling unit 3.4.Sampling method 3.5. Sources of data 3.6. Methods of data collection 3.7. Analytical tools and software ORGANIZATIONAL PROFILE 4.1. Historical background of NBL 4.2. Nature of business 4.3. Principles and values 4.4. Vision 4.5. Mission 4.6. Objectives 4.7. Business ideology 4.8. Organizational strategy 4.9. Function of National Bank Limited 4.10. Capital structure 4.11. Foundation of National Bank Limited 4.12. Training and training instruction 4.13. Organizational structure and departments 4.14. Management structure 4.15. Products and services 4.16. Consumer service expansion program 4.17. Sports and cultural activities Page

Chapter 1

Chapter 2 Chapter 3

Chapter 4

Chapter 5

Chapter 6

Chapter 7 Chapter 8

Chapter 9

GENERAL BANKING 5.1. Dispatch section 5.2. Account opening section 5.3. Cash management section 5.4. Remittance section 5.5. Deposit section 5.6. Clearing section 5.7. Credit card section 5.8. Loan and advance section 5.9. Western Union section 5.10. Accounts section FUND MANAGEMENT SYSTEM 6.1. Fund management 6.2. Liquidity management 6.3. Deposit management 6.4. Capital management 6.5. Reserve management 6.6. Loan management RESULTS AND FINDINGS SWOT AND PEST ANALYSIS 8.1. SWOT analysis 8.2. PEST analysis RECOMMENDATIONS AND CONCLUSIONS Recommendations Conclusions References

List of ChartsNo 1 Topics Organism of NBL Procedure and journals for Pay Order Page

2 3 4 5 6 7 8 9 10 List of Tables No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Procedure and journals for Demand Draft Management chart of day to day cash in bank Planning of bank capital Factors determining working reserve Factors determining secondary reserve Loan administration Structure Steps in loan analysis View points of credit analysis

Topics Capital structure Products and services Special deposit scheme Savings insurance schema Monthly savings scheme Account opening procedure Yearly charge on credit card Sources of fund Application of fund Credit risk determining ratio Liquidity risk determining ratio Interest rate risk determining ratio Capital risk determining ratio Operating risk determining ratio Indicators of success Demand for and supply of capital adequacy List of capital instrument Capital adequacy ratio

Page

Executive SummaryThis report is a combination of three months internship program in National Bank Limited.

Bank a little word but plays a very significant role in each country for the economic development. Even it is become impossible now a day to think about a countrys economical environment excluding banking system. Whatever the countries are standpoor, less develop, developing or developed but all the countries should have the banking system. Banking system is the heart of each countrys economic body. Economic, momentary and fiscal all the policy directly or indirectly depends on banking system for its better implementation. National Bank Limited is a banking company in comported in the Peoples Republic of Bangladesh with limited liability. The task of satisfying the export-import group, deposit group and borrower group is the first priority here. It aims at maintaining the high quality of service, has already achieved at the same time being in a sound financial health. Credit risk and quality risk are well under control. The management of National Bank has been focusing on these key issues for ensuring a better base foe their bank to stand on. The internship report is divided into two parts the organizational part and the project part. The organizational part includes the company profile, company background, nature of business, vision mission, goals, objectives, capital structure, organization and management structure, products and services, human resources, market and target customers, organizational strategy. The project part consists of analysis of the fund Management System of National bank Limited. From this analysis of fund management system, I am tried to find out some recommendation issues that might be an accurate way to overcome the drawbacks of National Bank Limited. I acknowledge different banking functions and day-to-day banking operation on my way to complete this internship. In this report I have explained my best in respect of my real life experience gather from different department.

Chapter-1

Introduction & Background of the study

1.1. Background of the study:Internship program has been included to MBA curriculum for providing talent, up-to date and smart, efficient executives. Internship means gaining supervised experience. Internship program offers an opportunity to know the environment of a particular organization. By doing this program, I have developed and refined my theoretical knowledge gained in the classroom. This program provides exciting experience of planning, culture, behavior of employee and management style of that organization, which helps me to fill the gap between theoretical and real practical world. Theoretical knowledge does not make a person perfect. To implement the academic knowledge, practical knowledge related to it, is important. A perfect consideration between theory and practice is important in the context of modern business world. In order to resolve the dichotomy between theory and practice, the State University of Bangladesh arranges internship program as a partial completion of MBA program. This program is necessary for every student to complete his or her academic degree. Internship program brings students closer to the business theory and practical and thereby help them

to substantiate their knowledge so that they can prepare themselves to start a successful career. Under the internship program, every student is assigned to an organization with a view to acquire practical knowledge. After taking practical knowledge, each student is required to prepare a report on the selected organization under the guideline of his/ her assigned teacher. As a participant in this program, I was place at National Bank Limited, Motijheel branch that is well reputed for trade and commerce in Dhaka city, for a period of three months.

1.2. Statement of the Problem:I was very much interested about the fund management system of bank that is practiced in our country. In order to know the activities related with fund management system and documents required to maintain this system, I chose the topic as Fund Management System and General Banking Practice in a commercial bank of Bangladesh: A Case Study of National Bank Limited.

1.3. Rationale of the Study:The purpose of this report is to get a gist idea about the fund management system, which is practice in our country. Banking is a vast term and through this report I have tried to analyze some crucial topics regarding fund management system. Without understanding the nerve position, it is very difficult to go deeply a system. To make the banking concept easier to the people, I tried my best to present the crucial topics in a smooth way. If the liquidity position of the bank is not in a suitable position, the bank may face crisis. Although excess of the fund may create problem because it does not bring anything for the bank however it is a financial intermediary. That is why we should know the different issues regarding the fund management system to get a comprehensive idea about bank. This report basically deals with the fund management system of National Bank Limited covering the areas like General Banking, capital management, liquidity management, credit management, reserve management etc.

1.4. Objectives of the Study:The main objective of the internship program is to formalize me with the real market situation and help me learn how bookish concepts are used in the real market. Therefore, from the very beginning of the study I have tried my level best to conduct my internship with a view to achieve some specific objectives and I have gone across the various department of the bank to acquire some related information and functioning procedure regarding those department.

The objectives of the study are mentioned below: 1To acquire knowledge about the different operations of a bank. 2To learn how the fund management system of a bank operates. 3To know the issues those are required to manage to run the fund management system. 4To identify the problems those are related with the fund management system. 5To know the sources of fund and the areas in which the fund of a bank are utilized 6To analyze the reasons for which the growth rate of deposit of a bank increase or decrease day by day. 7To know the ratios that bank determines to measure its different risk to evaluate its performance. 8To know the various liquid assets of a bank and their importance. 9To know the different capital instruments of a bank. 10To know the different types of reserves and their functions in a bank. 11To know the steps those followed in providing loan. 12To know the factors that a bank considers before sanctioning loan. 13To know the documents those are maintained by a bank in providing loan. 14To find out the area in which a bank is more interested to invest. 15To know the problems those are related in loan management. 16To know the positions those exist in organizational framework of a bank. 17To know the services those a banks provides for its customers. 18To go through all the departments of a bank and observe what actually happened in these departments. 19To find out how the general banking system of a bank runs. 20To know how the foreign exchange functions of a bank are done. 21To know the ratios those a bank finds out to know its liquidity position.

1.5. Scope of the report:This report has been prepared through extensive discussion with bank employees, clients and officers and on the information gathered from the annual report and prospectus of National Bank Limited. I have got the great opportunity to have an in-depth knowledge of the fund management system of NBL. The scope of this report is not only limited to the fund management system but also the report focused on the general banking system.

1.6. Limitations of the Study:Although I have got the full co-operation from employees, clients officers of NBL and they also gave me much time to prepare this report properly in the way of my study, I have faced some difficulties, which made my conduction of the program little hazardous. Some of these are mentioned below:

1It should be certainly mentioned that the time two months is very short to get the total view of the banking functions. 2The officers were quite busy with their regular activities. For this reasons it was also a little problem to collect detail information from them. 3In some cases, they could not be able to supply me any information for the reason that they have no printed documents. 4Office secrecy was one of the most important problems. Disclosing of some information was restricted. 5In case of secondary data collection, there was very little secondary information. There were few support books, reports, journals, etc. moreover, the branch office had very little of this information. Thats why bulk of it had to be collected from the head office. 6As the officers were very busy with their day-to-day work, they could provide very little time.

Chapter-2

Literature Review

There are numerous research reports on the different activities and programs of National Bank Limited. Again, there are more studies on NBLs service expansion program. The human resource department arranges different research program to identify its problems and inefficiencies. And by this way it tries to resolve their problems to provide excellent services to its customers. Beside that every year a number of students of different universities conduct their internship program in different branches of National Bank Limited. After the completion of their internship program they submit a report on their study to the Senior Vice President of Human Resource Department, Head Office, National Bank Limited. In their reports they flash out some recent problems and draw some recommendations about what the management of NBL should do to resolve these problems. Like every year a number of students conducted their internship program in NBL in the year of 2007. Among them a student of American International University-Bangladesh, named Md. Mobarak Hossain, mentioned in his report that the absence of online banking system in NBL is the main constraint of its success. The top management should start the online banking system as soon as possible if it wants to reach at the desired position. The top management has already taken the necessary steps to start online banking system. It can be expected that the customers of NBL will get the online banking service from the next year. Another student of Dhaka University named Fahima Bushra students of MBA Program work on the Foreign Exchange Management of NBL in the last year. In her report she mentioned that the information technology of NBL is poor and the management should take necessary steps to improve its information technology. Because of this inefficiency managers required to do a lot of duplication work. Now the top managers of NBL try to ensure all types of technological support in their all branches.

Chapter-3

Mythology of the study

3.1. Introduction:The nature of this report is descriptive. So instead of doing any survey, observation method is used to complete this qualitative research. I have tried to collect all such information that will reflect the actual situation of the bank for any report. I have collected various types of primary and secondary data while I was performing my job. I have collected various data from various sources by face to face interview with the employees working in different departments of National Bank Limited, Motijheel branch, personal investigation bankers of different branches of NBL, circulars sent by Head office and maintaining daily diary which contains all the activities that has been observed in the bank.

3.2. Population:The report has prepared on general banking practice and fund management system of National Bank Limited. Therefore, for the purpose of the study, all the branches of National Bank Limited have been considered as the population of the study.

3.3. Sampling Unit:Only one branch of National Bank Limited has been taken as the sampling unit for the study, i.e. Motijheel branch.

3.4. Sampling method:Random sampling method has been used for the purpose of the study.

3.5. Sources of data:The report is based on both primary and secondary sources of information. Interviewing the managers and officers of the bank, talking to the customers, the primary data have been collect. Further more different publications of the bank annual reports and the bank websites have been used for the purpose of collecting secondary data. 3.5.1. Primary sources of data: 1.Guidelines and suggestions from fund management in charge of NBL (Motijheel Branch). 2.Opinions and suggestions of bank officials. 3.5.2. Secondary sources of data: 1.Annual report of NBL.

2.Published booklet of NBL. 3.Various published document.

3.6. Method of data collection:For the purpose of the study, two methods of data collection have based: a) Observation method. b) Interview method.

3.7. Analytical tools and software:To make the report more understandable and give a nice look, different analytical tools and software, have been used to prepare the report. A number of flowchart, graph, table and different computer software are used.

Chapter-4

Organizational Profile

4.1. Historical Background:National bank Ltd is the first and major private sector commercial bank in Bangladesh fully owned by the Bangladeshi Entrepreneurs. The Bank started its operation from 23 rd March 1983. As a result of the collective effects of the some eminent bankers, of failure in playing due to role in mobilizing small savings of the teeming millions and providing improved clients services to them in our country, the Government gave right decision to allow establishing banks in private sector. National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the private sector. From the very inception it is the firm determination of National Bank Limited to play a vital role in the national economy. It is determined to bring bank the long forgotten taste of banking services and flavors. It wants to serve each one promptly and with a sense of dedication and dignity. NBL prudently and boldly faced the challenges of various adverse situations prevailing in the post independence Bangladesh and has now established it self as one of the most successful bank of the country. People in all regions can easily avail of the services of NBL through its 98 branches spread all over the country. Besides, the bank has been smoothly conducting its overseas activities with utmost efficiency through its 358 correspondents in 67 countries of the world. NBL has drawing with 18 overseas exchange houses including the gulf overseas exchange. In order to provide modern banking services to satisfy the demand of the country and the people, all branches of the bank have been brought under computer network. It is able to reach with lighting speed the hard-earned foreign exchanges of non-resident Bangladeshis to their near and dear ones at home through the world renewed Western union. The bank maintains round the clock communication with the external world using the latest information technology services of SWIFT and REUTERS. In order to give improved and risk free banking services to the valuable clients, all arrangements for launching line banking are its final stage. Since the very beginning the bank extended much emphasis on overseas operation and handled a sizeable quantum of homebound foreign remittance. The Bank established extensive drawing arrangement network with Banks and Exchange companies, located in important countries of the world. Expatriates Bangladeshi wage earners residing in those countries can now easily remit their hard earned money to the country with confidence safety and speed. NBL has been able to create a special image at home and abroad by introducing different banking products in accordance with the expectations requirements of people of the country. NBL was the pioneer bank to allow back-to-back LC facility without any margin to the entrepreneurs of garment industry during the Eighties, thereby helping the industry thrive to its present position. This has not only contributed to enrich of the countrys foreign exchange reserves, but also opened employment opportunities for a large numbers of labor force of the country. As a pioneer in this sector, NBLs name will remain in golden letters. NBL has been the pioneer in promoting readymade garment industries and still is the

single largest financier in this sector. In the early 80s when garment industry in Bangladesh was experiencing a process of trial, the bank foresights the bright prospect of this sector and extend finance to the deserving and promising entrepreneurs. It provided them with financial support including market information and advice and today the garment sector constitutes about 66% of the total export of the country. NBL is the first bank to introduce international Master Card in Bangladesh, which has facilitated the users to get benefit to different facilities in home and abroad. NBL is the first among private sector banks, which has set an uncommon precedence of extending fully, supervised collateral agriculture credit in the brained area of Rajshahi district to help small farmers to grow. The wise directions and guidance of a prudent and versatile Board of directors and concerted efforts of a team of well-qualified and professionally heightened executives and officials have brought an extraordinary distinctiveness for the bank. Above two thousand dedicated executives, offers and staffs working day and night to serve its customers satisfactorily. Through strong commitment base, the bank has introduced new products like Credit card. E-cash. The popularity of the bank has gained momentum with quick money transfer arrangement anywhere in world in association with Western Unions U.S.A

4.2. Nature of Business:The Bank engaged in all types of commercial Banking services within the stipulations laid down by Bank Companies Act 1991 and directives as received from Bangladesh Bank from time to time. The Bank within the stipulations laid down by Bank Companies Act-1991 and directives as received from Bangladesh Bank from time to time provides all types of Commercial Banking Services. Mainly National Bank Limited collects deposit from the people at lower rate and invests the same to the people again at higher rate. And difference between lower rate of deposit and higher rate of investment is the earnings of the Bank. National Bank Limited mainly invests in industrial sector like short term, middle term as well as long term for import of capital machineries, establish new industry and working capital assistances with this Bank plays a significant role in Bangladesh economy. The function of the Bank mainly three categories: a)General Banking b)Credit and investment c)Foreign Trade (Import, Export & Remittance)

4.3. Principles and values:The National Bank Limited is committed to five core business principles: 1Outstanding customer service. 2Effective and efficient operations. 3Strong capital and liquidity. 4Prudent lending policy. 5Strict expense discipline. 6Loyal and committed employees who make lasting customer relationships and international teamwork easier to achieve support the business principles. 7National Bank Limited also operates according to certain key business values. 8The highest personal standards of integrity at all levels. 9Commitment to truth and fair dealing. 10Hands-on management at all levels. 11Commitment to quality and competence. 12 A minimum of bureaucracy. 13Fast decisions and implementation. 14Putting the teams interests ahead of the individual's. 15The appropriate delegation of authority with accountability. 16Fair and objective employer. 17A diverse team.

4.4. Vision:The main vision of the National Bank Limited is to develop the economy of Bangladesh by profitable investment of public money and build up their confidence to the private institution. To ensuring highest standard of clientele services through best operation of latest information, technology, making due contribution to the national economy and establishing ourselves firmly at home and abroad as a front ranking bank of the country is our cherished vision.

4.5. Mission:The missions of the National Bank are as follows: The aim of NBL is to become one of the leading Banks in Bangladesh by its prudence, fair and quality of operation. 1Its effort for expansion of its activities in home and abroad by adding new dimension to its banking services is contributed unabated. 2It is also putting highest priority in ensuring transparency, accountability, and improved clientele services as well as to its commitment to serve the society through which it wants to get closer and closer to the people. 3Its goal is to act as a caring companion in uplifting the national economic standard through continuous gradation and diversification of its clientele services in line with national and international requirement 4It intends to meet the needs of its clients and enhance its profitability by creating

corporate culture. 5It believes in strong capitalization. 6Its aim is to ensure its competitive advantages by upgrading banking technology and information system. 7It maintains high standard of corporate and business Seth's. It provides high quality financial services to strengthen the well being and success of individual, industries and business communities.

4.6. Objectives:The objectives of National Bank are mentioned below: 1Offering quick and improved clientele services through application of modern information technology. 2Playing an important role in the national progress by including improved bankercustomer relationship. 3Ensuring highest possible dividend to the respected shareholders by making best use of their equity. 4Pushing the policy of nurturing balanced growth of the bank in all sectors. 5Consolidating our position in the competitive market by introducing innovating banking products. 6Ensuring highest professional excellence for our workforce through enhancement of their work efficiency, discipline and technological knowledge 7Expanding the banks area of investment by taking part in syndicated large loan financing. 8Increasing finances to small and medium enterprise sector including agriculture and agro based industries, thus making due contribution to the national economy. 9Upholding the image of the bank at home and abroad by pushing dynamic and time befitting banking activities. 10Ensuring maintenance of capital adequacy and highest profit through successful implementation of the Management Core Risk Program.

4.7. Business Ideology:Alongside providing the best services to the clienteles, patronizing and taking part in social development activities as well as making due contribution to growth of the national economy.

4.8. Organizational Strategy:As the financial services industry is a very competitive industry, the main strategy of NBL is the organic growth to build branches and strengthen their distribution network. They will continue to invest and expand in Bangladesh as fast as local regulations allow.

The principle strategies are People - Attract, retain and reward top performers. Profitable Growth - Growing sales and increase the revenues. Execution - Performing with skill and speed. Credit Quality - Maintaining credit quality and understand the role in managing losses. Customer Centered - Always providing exceptional customer service. Ownership The performance and results should be owned. Efficiency - Lowering the costs and wise use of resources.

4.9. Functions of National bank Ltd:Some general function of National Bank are given below1To maintain all types of deposit Accounts. 2To make investment. 3To conduct of reign exchange business. 4To conduct other Banking services. 5To conduct social welfare activities. 6To work for continues business innovation and improvements. 7To bui1d up strong-based capita1ization of the country. 8To ensure the best uses of its creativity, well disciplined, well manages and perfect growth.

4.10. Capital Structure:Table-1: The Capital Structure of NBL Particulars Amount (in Tk) Core Capital: Paid up capital 804,741,524 Statutory reserve 806,240,084 General reserve 482,723,327 Retained earning as per profit and 409,471,121 loss account Supplementary Capital: 1% general provision 307,425,523 Exchange Equalization account 41,371,514 Other reserve 385,176,688 Total 3,237,879,790

4.11. National Bank Foundation:Keeping the view the great objective of contributing to expansion of education and welfare of the society, the National Bank Foundation was set up in 1989. With financial assistance of the Foundation, The National Bank Public School and College has been established in Moghbazar Dhaka. There are a total of 820 students studying in the school section from class 1st to 10th, while there are 120 students at the college section. In 2006, a total of 70 students appeared at the SSC Examination, of which 87% came out successful. In the college section, a total of 90 students appeared at the HSC Examination, of which 81% came out successful.

4.12. Training and Training Institute:Not number, but diversified work efficiency of human resource is the key to sustained progress of an institution. Thus, not merely recruitment of workforce but a regular program for imparting time benefiting training to them is all the more important. With this realization, The National Bank Training Institution (NBTI) was established at Shamoli on 24 October 1989, which is fully residential. Beside faculty members of the Institute, renewed professionals like banker, economists, teachers and researches are invited to deliver lectures in training programs. NBTI has a rich library for use by the trainees. NBL has a program to open a Research and Publication Division soon. During the years under review 225 employees attained in training programs arranged by the training institute of the bank. In every batch, 25 trainees can attain in training program with residential facilities.

4.13. Organizational Structure and Department:Organizational setup of the National bank Limited is consisting of three organizational domains. Firstly the central top management, which contains Board of Directors, Managing Director, Additional Managing Director and Deputy Managing director. The major responsibilities of this group are to take central decision and transmit it to the second step. Secondly the executive level management, which contains Executive Vice Presidents, Senior Vice Presidents, Vice Presidents and Assistant Vice Presidents. The major responsibilities of this part are to supervise and control division/ department. Thirdly, the branch operation management, which contains branch manager and other mid/ lower level management. The major responsibilities of this part are to the 100 branches of this bank and report to the Head Office from time to time.

Organism of the Bank

4.14. Management structure of National Bank Ltd.:In 2007 National Bank Limited made commendable progress in all business, like deposit, credit, fund management, investment, foreign remittance, credit card & foreign exchange related business. Bank has expended business activities as holding previously & parallels by diversification its investment to a new product, as a major financier remarkable portion of total exports of the country. The management processes are as follows: 4.14 1. Planning: The strategic planning approach in NBL is top-down. Top management formulates strategy at the corporate level, and then it is transmitted through the division to the individual objectives. Board of directors or Executive committee usually takes the decision. In this process lower level manager are detached in making process, even brainstorming of lower level manager is absent in decision-making and planning process. 4.14.2. Organizing: Organizing of the National Bank Limited is based on Departmentalization. The organization is divided into twelve departments headed by Executive vice President or Senior Vice President. In the National Bank Limited the whole operation is centralized and authority is delegated by written guidelines. These guidelines are: 1Operational manual approved by Head Office, where each aspect or banking operation is elaborately defined. 2Advance manual including advances limit for different management level. 3Bad and doubtful recovery manual. 4Code of conduct. 5Foreign banking guidelines. 6Central bank directives. 7Different management position holders in departments and branches practice their authorized power in different cases with administrative loophole. 4.14.3. Staffing: Entry-level recruitment process of the National Bank Limited is conducted in three ways. One way is recruitment of probationary officer. Each probationary officer has one-year probation period. After completion of probation period the officer joins as officer grade III (b). The career path of probationary officer is headed toward different management positions. Second way of recruitment is to recruit non-probationary officer who joins as a assistant officer. The career path of an assistant officer is lengthier than probationary officer. The third way of recruitment is recruitment of staff and sub-staff such as typist, Messenger, driver, guard, attendant, cleaner and other lower level positions. Promotion policy of NBL is basically based on seniority basis. Sometimes, employees are promoted

to the higher position for their outstanding perfoffi1ance. However, it is found that the average length of a position held by an employee is around five years. 4.14.4. Controlling: The bank has strict control over its all-organizational activities. The Bangladesh Bank directives indicate some control measures. Audits and inspection are conducted by different parties to check whether the bank implement these control system properly or not. The central bank conducts credit inspection by a team. The National Bank Limited has audit and inspection department to take controlling measures in internal operations. Audit and inspection team send to the branches now and then and is responsible for preparing report that will be submitted to the chief Administration to take necessary actions.

4.15. Products and services:Table-2: Products and services of NBL Consumer Credit Scheme Special Deposit Scheme Monthly Savings Scheme Credit Card NBL ATM Service Western Union Money Transfer Saving Insurance Scheme NBL Saving Scheme National Bank Deposit Scheme

4.15.1. Consumer Credit Scheme Buying home appliances? Get them through our Consumer Credit Scheme. National Bank's Consumer Credit Scheme gives you a great opportunity to buy household and office items on easy installments. This scheme gives you the advantage of part payment to cope with the high price tags of many necessary home and office appliances. Television, Refrigerator, VCR, Personal Computer, Photocopier, Washing Machine, Furniture, Microwave Oven, Car, and a number of other expensive items are now within your buying range. With this scheme NBL makes better living possible for people living on fixed income. Customers can buy those home and office equipment's without over taxing their budget.

4.15.2. Special Deposit Scheme

Add to your monthly income, add to your solvency. For most of the people on fixed income the opportunity to supplement their monthly earning is a golden one. And NBL Special Deposit Scheme gives a customer just that. Under this scheme, customers can deposit money for a term of 5 years. The deposited money is fully refundable at the expiry of the term. At the same time, during the term period they can enjoy a monthly profit corresponding to their deposited amount. As for instance, under this scheme a deposit of Tk.55,000/- gives a monthly income of Tk.500/-. Table-3: Special deposit scheme of NBL Deposited Amount Monthly Benefit Tk. 55,000/Tk. 500/Tk. 1,10,000/Tk. 1,000/Tk. 1,65,000/Tk. 1,500/Tk. 2,20,000/Tk. 2,000/4.15.3. Monthly Savings Scheme See your small savings grow with NBL. This scheme is specially designed for the benefit of the limited income group members. This helps to accrue small monthly savings into a significant sum at the end of the term. So, after the expiry of the term period the depositor will have a sizeable amount to relish on. Monthly Installment 500/1000/2000/3000/4000/5000/10000/Return after 3 years 9.00% 20,627/41,255/82,510/1,23,765/1,65,020/2,06,274/4,12,549/Return after 5 years 9.25% 37,896/75,791/1,51,583/2,27,374/3,03,166/3,78,957/7,57,914/Return after 8 years 9.50% 70,849/1,41,697/2,83,394/4,25,091/5,66,788/7,08,485/14,16,970/-

4.15.4 Credit Card Safe, Instant and Universal Money. Through its Credit Card. National Bank Limited has not only initiated a new scheme but

also brought a new life style concept in Bangladesh. Now the dangers and the worries of carrying cash money are memories of the past. Credit Card comes in both local and international forms, giving the client power to buy all over the World. Now enjoy the conveniences and advantages of Credit Card as you step into the new millennium. 4.15.5. NBL ATM Service NBL ATM card - your access to prompt cash. National Bank Limited has introduced ATM service to its Customers. The card will enable to save our valued customers from any kind of predicament in emergency situation and time consuming formalities. NBL ATM Card will give our distinguished Clients the opportunity to withdraw cash at any time, even in holidays, 24 hours a day, 7 days a week. 4.15.6. Western Union Money Transfer Money transfer from anywhere in the World to Bangladesh in minutes. Joining with the world's largest money transfer service "Western Union", NBL has introduced Bangladesh to the faster track of money remittance. Now money transfer between Bangladesh and any other part of the globe is safer and faster than ever before. This simple transfer system, being on line eliminates the complex process and makes it easy and convenient for both the sender and the receiver. Through NBL - Western Union Money Transfer Service, your money will reach its destination within a few minutes. For any Further information, please contact: National Bank Limited International Division 18, Dilkusha Commercial Area Dhaka-1000 Bangladesh Tel: 880-2-955 7045 Fax: 880-2-956 3953

4.15.7. Saving Insurance Scheme Worried about the future? NBL has just the scheme for you This is an uncertain World and the threatening silhouettes of future catastrophes are

always looming around. This NBL scheme gives your family protection against the insecurities of the world. This scheme is the first of its kind in Bangladesh. It combines the benefits of regular savings and insurance scheme, so, you get the usual rate of interest on the deposited amount while you enjoy the protection of a comprehensive insurance coverage. Under this scheme, the beneficiaries will get equal the deposit in case of natural death of the account holder whereas in the event of accidental death of the account holder the beneficiaries will receive twice the deposit. As for example, if a customer picks up Easy Class (Tk.50,000/-) he/she will get Tk.50,000/- for natural death and Tk.1,00,000/- for accidental death apart from his/her deposited amount and interest. Table-4: Saving Insurance Scheme of NBL Accidental Death Normal Death Benefit Benefit Class Deposit (Including Own (Including Own Deposit) Deposit) Easy 50,000/- 1,00,000/1,50,000/Convenient 1,00,000/- 2,00,000/3,00,000/Classic 2,00,000/- 4,00,000/6,00,000/Standard 5,00,000/- 10,00,000/15,00,000/4.15.8. NBL ATM Service National Bank Limited has introduced ATM service to its Customers. The card will enable to save our valued customers from any kind of predicament in emergency situation and time consuming formalities. NBL ATM Card will give our distinguished Clients the opportunity to withdraw cash at any time, even in holidays, 24 hours a day, and 7 days a week.

4.16. Consumer services Expansion Program of National bank Ltd:Present age is the age of competition. A good number of new private commercial banks came to banking sector in Bangladesh during the last decade. Foreign banks (Standard chartered, American Express, HSBC, Citibank N.A, etc) also conduct banking business in Bangladesh very successfully. These new generation banks introduced many attractable products for customers. National Bank Ltd. is also introduced many products to attract customers. The products introduced during the last five years are as follows: 1Monthly Savings Scheme. 2E-Cash/ATM card. 3Consumer Credit Scheme. 4SWIFT Services. 5Power Card. 4.16.1. Monthly Savings Scheme:

It is an attractable savings project for limited income group people. National Bank Ltd. has got quick response in this project. A depositor can deposit 500-10000 Taka monthly for 3-8 years. The return is as follows: Table -5: Monthly Savings Scheme of NBL Monthly Installment 500/1000/2000/3000/4000/5000/10000/Return after 5 years @ 9.00% 20,627/41,255/82,510/1,23,765/1,65,020/2,06,274/4,12,549/Return after 8 years @ 9.25% 37,896/75,791/1,51,583/2,27,374/3,03,166/3,78,957/7,57,914/Return after 10 years 9.50% 70,849/1,41,697/2,83,394/4,25,091/5,66,788/7,08,485/14,16,970/-

4.16.2. E- Cash/ ATM CARD: ATM service is the dynamic process of electronic technology in modern banking. National bank Ltd. has elevated services to the highest standard by bringing Electronic banking (E-Banking) and ATM services at the doorstep of clients. Today the entire banking system has been undergoing are evolution change in providing improved services to the clients. One of ATM has made the lifestyle of our clients much easier and comfortable. The note able characteristics of ATM are: 1Payment facility for 24 hours a day 2Arrangement for payment of bills 3Instant inquiry 4Multiple location facility Dhaka, Chittagong, and Sylhet.

4.16.3. Consumer credit Scheme: National Banks consumer credit scheme gives a great opportunity to buy house and office items on easy installments. This scheme gives an advantage of part payment to cope with high price tags of many necessary home and office appliances. A consumer is the ultimate user of a good. Thus Consumer credit is the credit, which directly comes into the use of consumer. Objectives of Consumer Credit Scheme:

The Objectives of Consumer Credit Scheme of National Bank Ltd. is as follows: a.To bring the credit facility to wide range of customers. b.To provide financial assistance to the limited income group people toward buying utility products. c.To help the professionals to raise their living standard. d.To participate in the socio-economic development of the country. Goods and services under the scheme: Under the Consumer Credit Scheme NBL grants pecuniary help for the following goods and services. a.Private car and station wagon new and reconditioned. b.Refrigerator and deep fridge. c.Air cooler, Air condition, Room-heater, Water Purifier. d.Sewing machine. e.Photocopier. f.Generator. g. Other goods that are not mentioned above but are considered essential. 4.16.4. SWIFT Services: NBL is one of the first few Bangladesh Banks to obtain membership of SWIFT. SWIFT is a members owned cooperative which a first and accurate communication network for financial transaction such as Letter of credit, Fund Transfer etc. By being a member of SWIFT, the bank has opened up possibilities for uninterrupted connectivity with over 5700 user institutions in 150 countries all over the world. 4.16.5. Power Card: In Bangladesh, NBL has first introduced the power card. The use of power card is very easy and the cost of transactions is very low. So anybody can use it like cash to do their daily transaction.

4.17. Sports and Cultural Activities:Since its inception, NBL has been playing a pioneering role in sponsoring sports and games in the country. NBL was the sponsor of Metropolis Football League and Senior Division Football League last year. Besides, NBL extended substantial patronization to Bangladesh Olympic Association and Bangladesh volleyball Federation in 2003.The Bank never hesitates to extend its helping hands to the people as in the days of crisis so also in the exuberant happy moments of cultural events.

4.18. Market and target customers:

Due to the predecessor Companys involvement financing sector of the country, the bank inherited its top corporate customers. Moreover the bank is involved in import trade financing. Bulk importers of consumer durable, food gains industrial raw materials are its customers. The bank has financed in textile and apparels sectors. The bank has a trade of choosing customer from diversified groups. The bank has first class customers in the construction sectors involved in high-rise building, heavy construction and roads and high way construction.

4.19. Sports and Cultural Activities:Since its inception, NBL has been playing a pioneering role in sponsoring sports and games in the country. NBL was the sponsor of Metropolis Football League and Senior Division Football League last year. Besides, NBL extended substantial patronization to Bangladesh Olympic Association and Bangladesh volleyball Federation in 2003.The Bank never hesitates to extend its helping hands to the people as in the days of crisis so also in the exuberant happy moments of cultural events.

Chapter-5

General Banking

General banking department is the heart of all banking activities .All other departments are linked with this department. It also plays a vital role in deposit mobilization of the

branch. National Bank Limited provides different types of accounts, locker facilities, special types of saving scheme and flexibilities of remittance under general banking. This department performs the general function of banking. In National Bank Ltd. for performing the operation of this department a good number of people are allotted. The general banking department of National Bank (Motijheel Branch) consists of the following section: 1.Dispatch section 2.Accounts opening section 3.Cash Management section 4.Remittance section 5.Deposit section 6.Clearing section 7.Credit Card section 8.Loans & Advances Section 9.Western Union Money Transfer section 10.Accounts section

5.1. DISPATCH SECTION:Dispatch division operates the function of dispatching the intimation letter to the client, IBCA, IBDA, and OBC to the other banks for internal transaction with bank. The officer engaged in the dispatch division maintains two types of register books to entries for record of these documents particulars. These two types of register books are: 1. Inward mail registers. 2. Outward mail registers.

5.2. ACCOUNTS OPENING SECTION:Account opening is the gateway for clients to enter into business with bank. It is the foundation of banker-customer relationship. This is one of the most important sections of a branch, because by opening accounts bank mobilizes funds for investment. Various rules and regulations are maintained and various documents are taken while opening an account. A customer can open different types of accounts through this department. Such as:

Table-6: Account opening procedure:

Step 1

Step 2 Step 3

Step 4 Step 5 Step 6

The account should be properly introduced by Any one of the following: An existing Current Account holder of the Bank. Officials of the Bank not below the rank of an Assistant officer. A respectable person of the locality well known to the manager/Sub-Manager of the Branch concerned. Receiving filled up application in bank's prescribed form mentioning what type of account is desired to be opened. The form is filled up by the applicant himself / herself. Two copies of passport size photographs from individual are taken, in case of firms photographs of all partners are taken. Applicants must submit required documents Application must sign specimen signature sheet and give mandate. Introducer's signature and accounts number - verified by legal officer. Authorized Officer accepts the application. Minimum balance is deposited - only cash is accepted. Account is opened and a Cheque book and pay-in-slip book is given.

Documents required for opening account: Individual /Joint Account: 1.Introduction of the account. 2.Tow photographs of the signatories duly attested by the introducer. 3.Identity (copy of passport). 4.Joint Declaration Form (For joint a/c only). 5.Employee's Certificate (in case of service holder). Partnership Account: 1.Introduction of the account. 2.Two photographs of the signatories duly attested by the introducer. 3.Valid copy of Trade License. 4.Rubber stamp. 5.TIN number certificate. 6.Identity (Copy of passport). 7.Permission letter from DC/Magistrate (in case of newspaper) Limited company: 1.Introduction of the account. 2.Two photographs of the signatories duly attested by the Introducer. 3.Valid copy of Trade License. 4.Board resolution of opening A/C duly certified by the Chairman/Managing Director. 5.Certificate of Incorporation. 6.Certificate of Commencement (In case of Public limited company). 7.Certified (joint stock) true copy of the Memorandum and Article of Association of the Company duly attested by Chairman or Managing Director. 2.List of directors along with designation & specimen signature. 3.Latest certified copy of Form - xii (to be certified by register of joint stock

companies) (In case of Directorship change). 4.Rubber Stamp (Seal with designation of each person) 5.Certificate of registration (In case of Insurance Company Obtained from department of Insurance form the Peoples Republic of BD.) Club / societies account: 1.Introduction of the account. 2.Two photographs for Opening A/C duly certified by President/Secretary. 3.Board Resolution for Opening A/C duly certified by President/Secretary. 4.List of Existing Managing Committee. 5.Registration (if any). 6.Rubber Stamp. 7.Permission letter from Bureau of N.G.O. (In case of N.G.O. A/C).

5.3. CASH MANAGEMENT SECTIOM:Cash management section of any bank plays vital role in general banking department because it deals with the most liquid assets. The proper management of this section entails overall effectiveness of any bank. NBL has a very equipped cash section. This section is responsible for the following function: 1. Receipt of deposit. 2. Making payment to the customers. 3. Management of vault of the branch. 5.3.1. Receipt of deposit This section receives deposit or funds from the customer and the collection procedure as follows: 1At first the amount is counted and if ok then verified the purity of the note paid if there is any confusion of the teller. 2If the cash notes are satisfactorily sound then the teller marked in color the amount in word over the deposit slip. 3At last the receiving officer/ teller signed the deposit slip and by the sign of the authorized officer the deposit of fund finished in favor of a customer. 4In case of received of clearing cheque, the cheque is scrutinized at first whether the cheque is authenticated as per the NI Act. If satisfied then a crossing is marked so that this cheque never been enchased over the cash counter 5Then the amount is kept apparently deposited in the customers account and the cheque proceeds to the clearinghouse accordingly. 5.3.2.Making payment to the customer

The payment is made to the customer only against a valued authentic cheque. the teller has to follow the following steps in making such payment: 1Receiving the cheque from the customer. 2Examining the cheque. In case of examining the cheque, the teller is predated then the date is to be sure about the following questions: Date of cheque todays or not; if it is predated then the date is with in 6 months from today; ii. Amount is written in word and in figure and both is valued same; iii. Signature is installed and it is as it is the signature kept in the bank; iv. There is sufficient amount in the customers accounts for making payment. 1If the teller is satisfied regarding the above questions, then he/she debits the Respective party a/c for making payment. 2If it is a bearer cheque ( a cheque where the bearers name is installed instead of Self/cash) the signature is also taken for the record. 3Finally the cash paid seal is marked over the cheque leaf for the collection of the cheque after making the payment to the customers. 5.3.3. Management of the vault The cash section also manages the vault of the branch. The manager of cash section is the in charge of the necessary liquid money in the vault for the payment of the customer. In this regard, there is specific guideline from the central bank for the limit of the amount such as: 1The bank is required to maintain at least 9% of cash balance with Bangladesh on its total paid up capital. 2Limit of cash vault up to Tk.1.5 Crore. 3Limit of a cash counter up to Tk. 1.25 Crore. 4Limit of cash in transit up to Tk. 75 lacs. So the cash department is to maintain a cash limit of Tk. 2 Crore 45 lac as whole. The excess amount of a branch limit is to be proceeded to the account maintained with Bangladesh Bank. i.

5.4. Remittance Section:

Remittance means transferring of fund through different instruments other than cheque. Remittance includes both inland and foreign remittance. In this section, only the local remittance is described. There are two types of remittance: 1. Inward remittance. 2. Outward remittance. 5.4.1. Inward remittance It consists of the following: Pay Order payable. Demand Draft payable. Telegraphic Transfer payable. 5.4.2. Outward remittance The outward remittance includes the following: Pay Order issue. Demand Draft issue. Telegraphic Transfer issue.

Procedures & Accounting treatment of outward remittance: Specific procedure and accounting journals are made for the transfer and the settlement of the outward remittance

Procedures and journals for pay order (PO): Filling of PO application form

Receive Cash/ OK transfer Chaque From the client

Preparation of PO & signed by two officers Bearing power of attorney No(PA No)

Handover The PO to the client along with the copy of application form

Procedures and journals for TT/DD: Filling of TT/DD application form

Receive Cash/ OK transfer Chaque From the client

Preparation of DD & signed by two officers Bearing power of attorney No(PA No)

Handover The DD to the client along With the copy of application form

5.5. Deposit SectionDeposit is the lifeblood of a bank. From the history and origin of the banking system, deposit collection is the main function of a bank. 5.5.1. Accepting deposits: The deposits that are accepted by NBL like other banks may be classified into two types. These are: a) Demand Deposits b) Time Deposits a) Demand deposits: These deposits are withdrawn able without notice, e.g. current deposits. National Bank

Limited accepts demand deposits through the opening of, o Current account o Savings account o Call deposits from the fellow bankers b) Time deposits: A deposit which is payable at a fixed date or after a period of notice is a time deposit. National Bank Limited accepts time deposits through Fixed Deposit Receipt (FDR), Short Term Deposit (STD) and Bewared Certificate Deposit (BCD) etc. While accepting these deposits, a contract is done between the bank and the customer. When the banker opens an account in the name of a customer, a contract arises between them. This contract will be valid one only when both the parties are competent to enter into contract. As account opening initiates the fundamental relationship & since the banker has to deal with different kinds of persons with different legal status, National Bank Limited officials remain very much careful about the competency of the customers.

5.6. Clearing Section:Cheques, Pay Order (P.O), Demand Draft (D.D.) Collection of amount of other banks on behalf of its customer are a basic function of a Clearing Department. 5.6.1. Clearing: Clearing is a system by which a bank can collect customers fund from one bank to another through clearing house. 5.6.2. Clearing House: Clearing House is a place where the representatives of different banks get together to receive and deliver cheque with another banks. 5.6.3. Member of clearing House: National Bank Ltd. is a scheduled Bank. According to the Article 37(2) of Bangladesh Bank Order, 1972, the banks, which are the member of the clearinghouse, are called as Scheduled Banks. The scheduled banks clear the cheque drawn upon one another through the clearinghouse. 5.6.4. Types of Clearing: There are two types of clearingA. Outward clearing. B. Inward clearing. (A) Outward Clearing: When the branches of a bank receive cheque form its customers drawn on the other banks within the local clearing zone for collection through Clearing House, it is Outward

Clearing. (B) Inward Clearing: When the branches of a bank receive cheque drawn on them from other banks in the Clearing House, it is Inward Clearing. 5.6.5. Types of clearing house: There are two type of clearing house. These are: A) Normal clearing house B) Same day clearing house (A) Normal clearing house: 1) 1st house: 1st house normally stands at 10 am to 11 am 2) 2nd house: 2nd house normally stands after 3 p.m. and it is known as return house. (B) Same day clearing house: 1) 1st house: 1st house normally stands at 11 a.m. to 12 p.m 2) 2nd house: 2nd house normally after 2 p.m. and it is known as return house. 5.6.6. Who will deposit cheque for Clearing? Only the regular customers i.e. who have Savings, Current, STD & Loan Account in the Bank can deposit cheque for collection of fund through clearing house. Transfer: 1.Precaution at the time of cheque receiving for Clearing, Collection of LBC, and OBC & Name of the account holder same in the cheque & deposit slip. 2.Amount in The cheque & deposit slip must be same in words & in figure 3.Date in cheque may be on or before (but not more than six months back) clearing house date. 4.Bank & Branch name of the cheque, its number & date in the Deposit slip. 5.Cheque must be signed. 6.Signature for confirmation of date, amount in words / in figure Cutting & Mutilation of cheque. 7.Cheque should be crossed (not for bearer cheque). 8.Account number in the deposit slip must be clear. 9.Depositor's signature in the deposit slip.

5.6.7. Return house Return House means 2nd house where the representatives of the Bank meet after 3 p.m. to receive and deliver dishonored cheque, which place in the 1st Clearing House. Cheque may be dishonored for any one of the following reasons: 1)Insufficient fund.

2)Amount in figure and word differs. 3)Cheque out of date/ post- dated. 4)Payment stopped by the drawer. 5)Payee's endorsement irregular/ illegible / required. 6)Drawer's signature differs / required. 7)Crossed cheque to be presented through a bank. 8)Other specific reasons not mentioned above. The dishonor cheque entry in the Return Register & the party is informed about it. Party's signature required in the return register to deliver the dishonor cheque. After duration, the return cheque is sent to the party's mailing address with Return Memo. Responsibility of the concerned officer for the Clearing Cheque: 1)Crossing of the cheque. 2)(Computer) posting of the cheque. 3)Clearing seal & proper endorsement of the cheque. 4)Separation of cheque from deposit slip. 5)Sorting of cheque 1st bank wise and then on branch wise. 6)Computer print 1st Clearing House computer validation sheet. 7)Examine computer validation sheet with the deposit slip to justify the computer posting. 8)Copy of computer posting in the floppy disk. 5.6.8. Bills Collection In modern banking the mechanism has become complex as far as smooth transaction and safety is concerned. Customer does pay and receive bill from their counterpart as a result of transaction. Commercial bank's duty is to collect bills on behalf of their customer. 5.6.9. Types of Bills for Collection a) Outward Bills for Collection (OBC) b) Inward Bills for Collection (IBC) (a) What is OBC? OBC means Outward Bills for Collection. OBC exists with different branches of different banks outside the local clearinghouse. Normally two types of OBC: 1) OBC with different branches of other banks 2) OBC with different branches of the same bank Procedure of OBC: 1) Entry in the OBC register.

2) Put OBC number in the cheque. 3) "Crossing seal" on the left corner of the cheque & "payees account will be credited on realization" seal on the back of the cheque with signature of the concerned officer. 4) Dispatch the OBC cheque with forwarding. 5) Reserve the photocopy of the cheque, carbon copy of the forwarding and deposit slip of the cheque in the OBC file. (b) Inward bills for collection (IBC) When the banks collect bills as an agent of the collecting branch, the sys tem is known as IBC. In this case the bank will work as an agent of the collection bank. The branch receives a forwarding letter and the bill. Procedure of IBC: 1.IBC against OBC: To receive the OBC cheque first we have to give entry in the IBC Register. The IBC number should put on the forwarding of the OBC with date. 2.Deposit of OBC amount: OBC cheque amount is put into the "sundry deposit sundry Creditors account", prepare debit & credit vouch of it. If the OBC cheque is honored, send credit advice (IBCA) with signature & advice number of the concern branch for the OBC amount. 3.If the OBC cheque is dishonored, the concerned branch is informed about it. 4.Again place in the clearing house or send the OBC cheque with Return Memo to the issuing branch according to their information.

5.7. Credit Card Section:Carrying of cash is not so safe in todays world. There is always a chance of losing or hijacking of cash. On the other hand, the desire to purchase any desired item of one may not be fulfilled for the want of cash at the time of that willingness. To remove these problems, credit card has been introduced which is very popular to face the mentioned problems. 5.7.1. Meaning of Credit Card It is a card (usually plastic) that assures a seller that the person using it has a satisfactory credit rating and that the issuer will see to it that the seller receives payment for the merchandise delivered. NBL is the first local bank, which introduced credit card & MasterCard in Bangladesh in both local and international market in 1997. MasterCard captured 35% of credit card through the world. However present market analysis reflects that a large number of people whose average income ranges in above Tk.l0000 are using the credit card. Credit card division is continuing their all-possible efforts for the participation in the globalize Master Card Program. The number of users of the credit cards is increasing day by day. During the year 2006 the bank has got a profit of Tk.124.25 million from credit card business. NBL also has got the licenses from international brand Visa Card and very

soon, it will be launched in the country. 5.7.2. NBL & Credit Card NBL is the first local bank, which introduced credit card & MasterCard in Bangladesh in both local and international market in 1997. MasterCard captured 35% of credit card through the world. However present market analysis reflects that a large number of people whose average income ranges in above Tk.l0000 are using the credit card. Credit card division is continuing their all-possible efforts for the participation in the globalized MasterCard program. The number of users of the credit cards is increasing day by day. During the year 2004 the bank has got a profit of Tk.104.25 million from credit card business. NBL also has got the licenses from international brand Visa Card and very soon, it will be launched in the country 5.7.3. Types of Credit Card National Bank Limited offers mainly two type of credit card according to the geographical area. These are Local credit card and International credit card. According to the level of income the local and international credit cards are divided into two categories viz. Gold card and Silver card. These types of credit cards are described below: (a) Local credit card: Local credit card is valid only in Bangladesh. Out side Bangladesh, the card is invalid. Local card are two types. They are Gold local card and Silver local card. The card limit of gold local card is Tk.50000 to Tk. 100000 and silver local card is below Tk.50000.

(b) International Credit Card: International credit card is valid mainly outside Bangladesh. But for the payment of roaming facilities for Grameen phone, cardholders can use international credit card in Bangladesh. International credit cards are of two types. These are gold international credit card and silver international credit card. The card limit of gold international credit card is $ 2000 to $4000 and silver international credit card below $2000.

5.7.4. Yearly Charges on credit card National Bank Limited receive card fee for new card and renew card from the cardholder. The rate of card fee for new card and renew card are the same. In case of new card the bank receives the card fee with the next months bill. The rate of card fee is given in below:

Table-7: Yearly charges on credit card Type of card Card fee International Gold Card Tk 4000.00 (including vat) International Silver card Tk 2000.00 (including vat) Local Gold card Tk.1725.00 (including vat) Local Silver Card Tk.1805.00 (including vat) 5.7.5 Documentation for a credit card Any person whose monthly income is over 10000 can be a credit card holder of NBL. The requirements of a card are: For Local card: 1The fulfillment of the application form. 22 copies of photographs. (If supplementary card is taken then 2 copies of photographs of the nominee). 3TIN certificate. 4A security. (MSS, SDS or FDR as lien). 5Charge documents. For International card: 6The fulfillment of the application form. 72 copies of photographs. (If supplementary card is taken then 2 copies photographs of the nominee). 8TIN certificate. 9A security. (MSS, SDS or FDR as lien). 1Charge documents. 2The photocopy of passport. 5.7.6. Billing of a credit card National Bank Limited offers the cardholder 15 to 45 days credit facilities. For the proper billing the bank divided the cardholder into three cycles. These are 0 cycle, 3 cycle and 5cycle. In 0 cycle hill are prepare and send to the cardholder 1st day or every month and last date of payment is 15th day of the month. In 3cycle bill are prepare and send to the cardholder 3rd day of every month and last date of payment is 18th day of the month. In 5cycle bill are prepare and send to the cardholder 5th day of every month and last date of payment is 20th day of the month. The cardholder can pay the bill any branch of the National Bank. If any cardholder fails to pay the bill within the last date then he/she must pay 2% monthly interest and his/her card stop automatically. But if the cardholder pay minimum bill (10% of the bill) then he/she must pay the interest on the balancing amount

and can use the card as usual. On the other hand, if the card holder withdraws any cash amount from the ATM booth (maximum limit is 20% of card limit) a monthly charge of 2.5% is to be charged from the date of withdraw. In that case the cardholder will not get the 45 days credit payment facility.

5.8. Loans & Advances Section:This is the survival unit of the bank. The reason is that until and unless the success of this section, the survival is a big question. This is the main earning unit of the bank. Banks accept deposits from the depositors in condition of providing interest to the depositors in condition of providing interest to them. Now the question is how bank provides interest to their clients. The simple answer is interest from advances. The bank provides interest to the borrowers because: 1To earn interest from borrowers and give depositors the interests get back. The rest are the profit of the bank. 2To accelerate economic development. 3To meet the interest groups. Credit is a continuous process. Recovery of one credit gives rise to another credit. In this process of revolving funds, bank earns income in the form of interest. A bank can invest its fund in many ways. Bank provides loans and advances to traders, businessmen and industrialists. Moreover, nature of credit may differ in terms of security requirement, disbursement provision, terms and conditions etc. Bank often uses loans and advances as an alternative to one another. But, academically this concept is incorrect. Academically, Advances is the combination such items where loans is a part only. For this credit section of the banks is known as advance section. 5.8.1. Types of Advances It is not possible to discuss all these types of advances in details in this report but an attempt has been made to analyze the basic difference and characteristics of these advances all in the following manner: 5.8.1. (A) Overdraft: Overdrafts are those drawings, which are allowed by the banker in excess of the balance in account up to a specified amount for definite period. It is given to the businessmen to increase their business activities. There are two forms of overdrafts: 1SOD (Secured Overdraft).

2Loan General. (LG) Any deposit in the SOD account is treated as repayment of overdraft. The features of SOD are: The interest rate is 14%. The interest starts from the date of first withdrawal. Only businessmen can open this and he has to be a current account holder of the respective branch of NBL. The security that is kept against the SOD loan are generally FDR, SDS, MSS etc. 5.8.1. (B) Cash Credit (CC): It is one type of current account. The difference between them is that current account is intended to be an account with credit balance and the CC is an account for drawing in advance. Operation of cash credit is same as that of overdraft. The purpose of cash credit is to meet working capital needs of traders and industrialists. It is given through the Cash Credit (CC) account. 5.8.1. (C): Inland Bills Purchased (IBP): Bank purchases two types of Inland Bill. Such as: Clean Bill and Documentary Bill.

\Clean Bill: Clean bill are those that requires no payment for documents cheques, Demand Draft, Telegraphic Transfer, and Mail transfer. Documentary Bills: Documentary bills are those that require related documents for payments like Bills of Exchange, Railway/ Shipment receipt and invoice etc. This bill is often created in businesses and bank purchases these before their maturity. Thus, purchases of these bills are one kind of credit to these before their maturity. As bank purchases these bills on behalf of the business so it is one kind of credit to those businesses. After maturity, bank presents it to the drawer for encashment. 5.8.1. (D) Employee Loan: For the betterment of its own employees NBL provides loans. The branch managers and executives get this facility. Repayment is adjusted from their monthly salary on an equal

monthly installment. 10% of basic salary is contributed by employee in every month. The staffs can also take loan, which is known as Staff Loan against Provident Fund (SPF). The repayment is adjusted from their monthly salary. 10% of basic is also contributed to the PF by the bank. 5.8.1. (E) Consumer Credit Scheme: National Banks Consumer Credit Scheme gives a great opportunity to buy household and office items on easy installments. This scheme gives the advantage of part payment to cope with the high price tags of many necessary home and office appliances. To lead a better life NBL provides this credit to consumers to purchase household items as Television, Refrigerator, Personal Computer, Furniture, Car etc. The people with fixed income get this credit. It is a 24 to 48 installment system of 14% interest. The amount allowed to the borrower is 10000/- to 300000/-. 5.8.2. Creation of charges for securing Loans: For the safety of the loan, bank requires security from the borrower so that it can recover the loan by selling security if borrower fails to repay. Creation of charge means making it available as a cover for an advance. The method of charging should be legal, perfect and complete. Securities are charges in order to: 1Protection of interest. 2Ensuring the recovery of the money lent. 3Provision against unexpected change. 4Commitment of the borrower. A brief description about the securities that is kept against the loans is described below: 5.8.2. (A) Primary Security Security deposited the borrower himself to the loan such as FDR, Cash, MSS.

5.8.2. (B) Collateral Security 1Narrow Sense security deposited by a third party to secure the advances for the borrower. 2Wider sense any types of security on which the creditor has a personal right of action on the debtor in respect of advance common method of charging security

and their nature of security. 5.8.2. (C) Lien It is the right of the banker to hold the debtors property until the debt is discharged generally retained by the bank in its own custody or to the hands of the third party with lien marked. The third party cannot discharge it without the permission of the bank. In case of need bank needs permission of the court to sell the property. 5.8.2 (D) Assignment Borrower transfers the right of property or debt to the bank. Life Insurance Policy, supply bills, book debt of the borrower can be assigned. 3.8.2. (E) Pledge It is one kind of lien but the bank enjoys more rights on it. In this case, physical transfer of the goods is must to the bank. Bank can sell the property without the intervention of the court in case of default on loan. 5.8.2. (F) Mortgage Mortgage is the transfer of special movable property like land, building, plant etc. Most common type of mortgage is legal mortgage in which ownership is transferred to the bank by registration of the mortgage deed. Another method called equitable mortgage is also used in bank for creation of charges. Registration is not required. In both the cases, the mortgaged property is retained in hand of the property. 5.8.3 Principles of sound lending: In order to secure a balance between liquidity Profitability, and security, NBL following principles of sound lending: 5.8.3. (A) Liquidity While lending, adequate care is taken to ensure the liquidity of the lien item. In this case, NBL choose such securities, which possess such liquidity. 5.8.3. (B) Safety National Bank exercises the lending function only it is safe and the risk factor is adequately mitigated and covered. Safety depends upon the security offered by the borrower. 5.8.3. (C) Diversity In order to minimize the risk, National Bank invests its fund in different industries of different industries situated in different regions of the country. 5.8.3. (D) Yield From the commercial point of view, National Bank considers sufficient yield of return while financing a project.

5.8.3 (E) Productive Purpose National Bank exercises its lending function only on productive purpose. 5.8.3 (F) National or Social Interest National Bank also considers national aspect of any project while financing. They take utmost care so that the project cannot be determined to the society as well as to the nation. 5.8.4. Selection of Borrower: In lending, the most important step is the selection of the borrower. Due, to the asymmetric information and moral hazard, banks have to suffer a lot due to the classified loans and advances, which weakens the financial soundness of the bank. If the selection of the borrower is correct, that is the borrower is a good character, capital and capacity or of reliability, resourceful and responsible the bank can easily get the return from them. This point of view, NBL follows the following procedures: 5.8.4. (A) Studying past track record After getting an application for a loan the past record of the applicant is carefully studied. Generally such studies includes i.Account balances and past transactions ii.Credit report from other banks iii.Information of the industry by studying market feasibility iv.Financial statements (balance sheet, cash flow statement, and income statement). If the borrower is a sole proprietor then the single entry accounting treatment is converted into double entry system. v.If the amount is more then TK. 10 lac then report from credit information bureau of Bangladesh Bank is collected. 5.8.4(B) Borrower analysis Borrower analysis is based on 5-cs (character, capital, capacity, collateral, creditworthiness) and 3-r (responsibility, reliability and resourcefulness). It follows that the bank forms a rational judgment about the integrity of the borrower which should be undoubted. 5.8.4. (C) Credit approval procedure After receiving the application from the client, National Bank Limited prepares a Credit Line Proposal (CLP) and forwards the same to the Head Office to place before Head Office Credit Committee (HOCC) for approval. It includes-

1Request for credit limit of customer. 2Project profile/ profile of business. 3Copy of trade license duty attested. 4Copy of T I N certificate. 5Certificate copy of Memorandum & Articles of Association, certificate of incorporation, certificate of commencement of business, Resolution of the Board, Partnership Deed (where applicable). 63 years balance sheet and profit & loss account. 7Personal net worth statement of the owner/ directors/partners etc 8Valuation certificate of the collateral security in banks form with photograph of the security. 9CIB enquiry form duly filled in (for proposal of above 10 lac). 10Credit report from other banks. 11Stock report duly verified. 12Indent/ Performa invoice/Quotation. 13Statement of accounts. 5.8.5. Documentation: Documentation can be described as the process of technique of obtaining the relevant documents. In spite of the fact, that banker leads credit to a borrower after inquiring the character, capital, capacity, collateral, creditworthiness of the borrower NBL obtains proper documents executed from the borrower, and he must obtain proper documents executed from the borrower to protect him against willful defaults. Documentation contains the precise terms of granting loans and thereby serve as important evidence in the law courts if the circumstances so desire. Charge documents as required by the different types of advances are mentioned below: 5.8.5(A) Loan: 1Letter of arrangement. 2Letter of disbursement. 3Letter of partnership (firm) or Board of resolution (Limited companies). 4Letter of pledge. 5Letter of hypothecation. 6Letter of lien and ownership. 7Letter of credit for packing credit. 8Letter of lien. (in case advance against FDR). 9Letter of lien and transfer authority. 10Legal documents for mortgage of property. 11Copy of sanction letter mentioning detail of terms and condition duly acknowledge by the borrower.

12Trust receipt. 13D P Note.

3.8.5 (B) OverdraftLetter of partnership. Letter of arrangement. Letter of continuity. Letter of lien. Letter of lien and ownership/share transfer form (in case of advance against share). Letter of lien and transfer authority. Legal documents for mortgage of property. D P Note. 5.8.5 (C) Cash Credit: 1 Letter of partnership (partnership firm) or Board of resolution (in case of Limited company). 2 Letter of arrangement. 3 Letter of continuity. 4 Letter of hypothecation. (In case of CC). 5 Legal documents for mortgage of property. 6 Letter of pledge or arrangement of pledge. 7 D P note. 5.8.5(D) Bills Purchased: 1 Letter of partnership (partnership firm) or Board of resolution (in case of limited company). 2 Letter of arrangement. 3Letter of acceptance, where it calls for acceptance by the drawee. 4Letter of hypothecation of bill.

5.9. Western Union Money Transfer Section:National bank Ltd. signed an agreement with the Western Union Financial services, USA in 1993. Millions of people from different parts of the world are sending money with confidence to their near and dear through the western union has the most modern technology for remitting money within quiets possible time from any part of the world through their more than 170000 representatives in 190 countries and regions has

established a unique money transfer system with western union of. Through an online computer system units can be instantly of the world. 56.17 million dollar was remitted to this bank through this organization during the year 2003.NBL brought a substantial amount of foreign exchanges in to the country through the western union in 2003, which is 44% higher than that of 2002 The western union is a globally reputed name in money transfer services and data exchange forever 150 years. Western union has continued its tradition of possessing the latest technology and handling wide scale remittances. Payment of remittance by expatriate Bangladeshis through the western union are being made at 100 branches of NBL. These branches are connected with the on-line computer system of the western union. The special feature of services is as follows: Fast : Remits money in minutes Safe : World class security system Easy : Over 2,00,000 agents locations across 200 Countries and territories worldwide Reliable : Trusted by millions for over 150 years.

5.10. Accounts section:Accounts Department is called as the nerve Center of the bank. In banking business, transactions are done every day and these transactions are to be recorded properly and systematically as the banks deal with the depositors' money. Improper recording of transactions will lead to the mismatch in the debit side and in the credit side. To avoid these mishaps, the bank provides a separate department; whose function is to check the mistakes in passing vouchers or wrong entries or fraud of forgery. This department is called as Accounts Department. If any discrepancy arises regarding any transaction this department repot to the concerned department. Besides these, the branch has to prepare some internal statements as well as some statutory statements, which are to be submitted to the Central Bank and the Head Office. This department prepares all these statements. Workings of this department: Recording the transactions in the cash book. Recording the transactions in general and subsidiary ledger. Preparing the daily position of the branch comprising of deposit and cash. Preparing the daily Statement of Affairs showing all the assets and liability of the branch as per General Ledger and Subsidiary Ledger separately. Making payment of all the expenses of the branch. Recording inters branch fund transfer and providing accounting treatment in this regard.

Preparing the monthly salary statements for the employees. Preparing the weekly position for the branch which is sent to the Head Office to maintain Cash Reserve Requirement (C.R.R) Preparing the monthly position for the branch which is sent to the Head Office to maintain Statutory Liquidity Requirement (S.L.R) Make charges for different types of duties. Preparing the budget for the branch by fixing the target regarding profit and deposit so as to take necessary steps to generate and mobilize deposit. Checking of Transaction List. Recording of the vouchers in the Voucher Register Packing of the correct vouchers according to the debit voucher and the credit voucher.

Chapter-6

Fund Management System

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Fund Management

6.1.1. Sources of funds and its utilization:The main sources of fund of National Bank are shareholders equity and savings of the public which the bank mobilizes as deposits and deploys as short and long term loans and advances as well as invest in different financial institutions including the Bangladesh Bank to earn profit. Total funds of the bank is controlled by and utilized through the Treasury Division, Loan division and merchant of the banks total demand and time liabilities are required to be maintained as:

Table-8: Sources of funds of NBL Sources of funds Paid up capital Reserve capital Borrowings Deposit of other accounts Other liabilities Total Percentage 1.72% 5.28% 1.45% 86.23% 5.32% 100.00%

CRR in current account with Bangladesh Bank (on which no interest is received) and the

rest 13% are maintained in different approved securities, treasury bills, bonds, debentures and foreign currencies. In utilizing its res