Download - AB Bank Report(2)

CHAPTER

1Introductory Part

Content

1.1 Background of the Study

1.2 Rationale of the Study1.3 Objectives of the report1.4 Scope of the report1.5 Limitations of the study1.6 Methodology

1.1 Background of the Study 1

FOREIGN EXCHANGE ACTIVITIES OF ABBL

This report is originated as the academic requirement of the BBA program under the Business

Administration Department of Stamford University Bangladesh. Under this program student

have to participate in internship program of three month duration toward the fulfillment of the

Degree. As practical orientation is an integral part of the BBA degree requirement, I was sent

by the department to AB Bank Limited to take real life exposure of the activities of financial

institutions. The Human Resource Division of ABBL arranges my internship program to

Islampur Branch from February 18, 2009 to May 18, 2009.

At the end of the internship period the student have to prepare a report on the organization and

this report titled “Foreign Exchange Activities of AB Bank Limited” is the outcome of my

three months practical knowledge at AB Bank Limited.

1.2 Rationale of the Study

Theoretical knowledge is not enough for a student. There is a gap between theoretical

knowledge and practical field. So, these two should be synchronized. Our internship program

is launched mainly for this purpose. The practical orientation program in banks enable a

student to take a closer look at “WHAT” a bank does and “HOW”. Another purpose that may

be is to know about the rules, regulation, and organization environment before getting a job.

1.3 Objectives of The Report

The initial objective of this report is to obey with the topic that I have selected. But the

objective is not limited; behind this study is something broader. However, Objectives of the

study are briefly summarized in the following manner:

a) To apply the theoretical knowledge in die practical field.

b) To make a bridge between the theories & practical procedures of banking.

c) To observe the working environment in the private bank.

d) To Study the existing banker-customer relationship.

e) To know the overall functioning of AB Bank Ltd.

1.4 Scope of the Report2


The study was limited to the Islampur Branch of AB Bank Limited. I have tried my best to

learn most of the functions that a banker perform and prepare this report based on the

knowledge acquired through the internship program. The report covers the functions

performed by the Islampur Branch of AB Bank Limited rules and regulations related to

foreign exchange Procedure of opening L/C, Sanctioning Credit, Monitoring, Various

analyses related to this particular arena etc.

1.5 Limitations of the study

AB Bank Ltd is a large financial institution, therefore it is not possible to fund out the true

picture within a short period. To prepare the report I have to face some problems &

limitations. Those limitations are unavoidable for me. That may causes reduction the quality

of my report. Those are:

Difficulty in accessing data of its internal operations.

Non-Availability of some preceding and latest data.

Some information was withheld to retain the confidentiality of the bank.

I was placed to this department for only 12 weeks of time & working like a regular

employee hindered the opportunity to put the effort for the study.

Employees are so much busy with their regular activities and can not provide enough

time for us.

There was fear of disclosure in bank personnel about their some confidential activities,

which is a constraint in the way to make a good report.

Bank has no formal guidelines for internship.

Bank does not have sufficient collection of banking related books, journals, manual

etc.

1.6 Methodology

3FOREIGN EXCHANGE ACTIVITIES OF ABBL

Analysis has been made on the basis of the objectives mentioned before in the context of

Foreign Exchange Activities of AB Bank Limited. Mainly time series analysis and trend

analysis (2004-2008) has used to compare the foreign exchange performance of ABBL.

Besides this SWOT analysis has also used in the study.

Sources of Information

In order to prepare the report more comprehensive, meaningful & presentable, I have been

used widely two sources of data & information. The sources are:

1. Primary Sources.

2. Secondary Sources.

How I used those sources for collecting information are briefly discussed bellows:

The primary sources are as follows:

Face-to-face Conversation with the respective officers, executives & also with the

staff of the Branch.

Informal conversion with the clients.

Practical work exposures form the different desks of the departments of the Branch

covered.

Relevant file study as provided by the officers concerned at each desk of the

departments I have worked.

The “Secondary Sources” of the data & information are follows:

Annual Report of the “AB Bank Ltd”

The Published materials as such; various books, articles regarding “General Banking

Functions, “Foreign Exchange Operations, & also “Credit Policies”.

Different “Procedure Manual” Published by ABBL.

Different Circular Sent by the Head office of ABBL & Bangladesh Bank.

In order to Collect the data I usually used informal questionnaires which was the combination

of both open ended &’ Close ended. Group discussion & ‘Personal interview also used as a

means to collect the data. From their website I also collected their updated financial position.

CHAPTER4


2Background of ABBL

2.1 An overview of AB Bank

Limited


Content

2.1 An overview of ABBL2.2 Mission, vision, strategy statement2.3 Ownership structure2.4 Composition of the Board of Directors2.5 Capital and reserves2.6 Milestones in the development of ABBL2.7 Management structure2.8 Risk management2.9 Division-wise Branch distribution2.10 Balance sheet2.11 Profit and loss account (Income

Statement)2.12 Cash flow statement

AB Bank Limited, the first private sector bank under Joint Venture with Dubai Bank Limited,

UAE incorporated in Bangladesh on 31st December 1981 and started its operation with effect

from April 12, 1982.

Dubai Bank Limited (name subsequently changed to Union Bank of the Middleast Limited)

decided to off-load their investment in AB Bank Limited with a view to concentrate their

activities in the UAE in early part of 1987 and in terms of Articles 23A and 23B of the

Articles of Association of the Company and with the necessary approval of the relevant

authorities, the shares held by them in the Bank were sold and transferred to Group "A"

Shareholders, i.e. Bangladeshi Sponsor Shareholders.

As of December 31, 2007; the Authorized Capital and the Equity (Paid up Capital and

Reserve) of the Bank are BDT 2000 million and BDT 4511.59 million respectively.

Authorized Capital of the Bank has been increased to BDT 3000 million in the Extra Ordinary

General Meeting held on July 16, 2008. As of December 31, 2008 the equity (Paid up Capital

and Reserve) of the bank is BDT 6722.51 million.

Since beginning, the bank acquired confidence and trust of the public and business houses by

rendering high quality services in different areas of banking operations, professional

competence and employment of the state of art technology. During the last 27 years, AB Bank

Limited has opened 74 Branches in different Business Centers of the country, one foreign

Branch in Mumbai, India and also established a wholly owned Subsidiary Finance Company

in Hong Kong in the name of AB International Finance Limited. To facilitate cross border

trade and payment related services, the Bank has correspondent relationship with over 220

international banks of repute across 58 countries of the World.

AB Bank Limited, the premier sector bank of the country is making headway with a mark of

sustainable growth. The overall performance indicates mark of improvement with Deposit

reaching BDT 53375.35 million, which is precisely 26.85% higher than the preceding year.

On the Advance side, the Bank has been able to achieve 30.76% increase, thereby raising a

total portfolio to BDT 40915.35 million, which places the Bank in the top tier of private

sector commercial banks of the country.

2.2 Vision & Mission


Vision Statement

"To be the trendsetter for innovative banking with excellence & perfection"

Mission Statement

"To be the best performing bank in the country"

Goal of the Bank

To exceed customer expectations through innovative financial products & services and

establish a strong presence to recognize shareholders expectations and optimize there rewards

through dedicated workforce.

Long term Goal: Keeping ahead of other competitors in productivity and profitability.

Short Term Goal: To attain budgetary targets fixed in each areas of business.

2.3 Ownership structure

As per 2008 the authorized capital of ABBL was BDT 6000 million. The total paid up capital

was BDT 2,229.79 million.

1,500,000 ordinary shares of Taka 100 each issued for cash 150,000,000

20,797,854 ordinary shares of Taka 100 each issued as bonus shares 2,079,785,400 2,229,785,400So the total number of share of ABBL is 22,297,854

Percentage of Shareholding

The shareholder of ABBL divided into two units. One is Sponsors and public another one is government. The status of share holding of these units is shown below-

Particulars No. of shares %

Sponsors and public 22,169,889 99.43

Government 127,965 0.57

Total 22,297,854 100

2.4 Composition of the Board of Directors7


Board of directors consists of Chairman, Vice Chairman, Directors and President & Managing

Director and Company Secretary.

Chairman M. Wahidul Haque

Vice- Chairman Salim Ahmed

Director Feroz Ahmed

Director M. A. Awal

Director Shishir Ranjan Bose FCA

Director Faheemul Huq

Director Syed Afzal Hasan Uddin

Director Mishaal Kabir

Director Md Salah Uddin

Director Md Mesbahul Hoque

Director Md. Anwar Jamil Siddiqui

Director Dr. M. Imtiaz Hossain

Director Runa Zakia Shahrood Khan

President & Managing Director Kaiser A. Chowdhury

(Source: www.abbank.com)

2.5 Capital and Reserves

Capital

As of December 31, 2007; the Authorized Capital and the Equity (Paid up Capital and

Reserve) of the Bank are BDT 3000 million and BDT 4511.59 million respectively.

Authorized Capital of the Bank has been increased to BDT 3000 million in the Extra Ordinary

General Meeting held on July 16, 2008. In December 31, 2008; the paid up capital is BDT

2229.79 million.

Reserves


Cash reserve ratio and statutory liquidity ratio have been calculated and maintained in

accordance with section 33 of the Banking Companies Act 1991 and Bangladesh Bank

BRPD's subsequent circular nos. 11 and 12 dated 25 August 2005.

The statutory cash reserve ratio required on the Bank's time and demand liabilities at the rate

of 5% has been calculated and maintained with Bangladesh Bank in current account and 18%

statutory liquidity ratio, including cash reserve ratio, on the same liabilities is also maintained

in the form of treasury bills, bonds and debentures including foreign currency balance with

Bangladesh Bank. Both the reserves are maintained by the Bank in excess of the statutory

requirements, as shown below:

(a) Cash Reserve Ratio (CRR)

31.12.2008

Taka

31.12.2007

Taka

Required reserve 2,974,341,820 2,431,895,350

Actual reserve maintained 2,980,529,000 2,320,867,000

Surplus 6,187,180 (111,028,350)

(b) Statutory Liquidity Reserve (SLR)

31.12.2008

Taka

31.12.2007

Taka

Required reserve 7,733,288,732 6,322,927,910

Actual reserve maintained 8,163,405,862 6,800,195,935

Surplus 430,117,130 477,268,025

Total required reserve 10,707,630,552 8,754,823,260

Total actual reserve held with Bangladesh Bank 11,143,934,862 9,121,062,935

Total surplus 436,304,310 366,239,675

As per BRPD Circular # 12 dated 25 August 2005 all scheduled Banks have to maintain CRR

and SLR (including CRR) @ 5.00 % and 18.00% daily of their total time and demand

liabilities on bi-weekly average basis respectively, where the Bank maintained at the year

ended 5.01% and 18.73% respectively.


2.6 Milestones in the Development of the Organization

AB Bank reached 27 years of its journey, which started with a single Branch operation at

Karwan Bazar, Dhaka way back in 1982. AB Bank being the pioneer in private sector banking

in Bangladesh will be the first to achieve this milestone. Over the years, AB Bank has

contributed in many ways towards development of the private sector banking in the country.

AB thrived on customer service and relationship banking, which brought new dimensions to

this particular service sector and many more new entrants to banking sector, followed AB.

Table 2.1: Corporate event of A B Bank Ltd.

Commencement of Business: February27 1982

First meeting of the Board of Directors: February 5, 1982

Opening of the first Branch (Karwan Bazar Branch): April 12, 1982

Listing with Dhaka stock Exchange (DSE): December 28,1983

Publication of prospectus for IPO: May 5.1984

Opening of principal Branch January 16,1986

Opening of ABIFL-Subsidiary of Hong Kong November 1995

Listing with the Chittagong Stock Exchange January, 1996

First Foreign Branch at Mumbai, India April 1996

Launching of ATM April 12,2002

Operating of Merchant Banking Wing (MBW) November 2 2002

Incorporate of AB Bank Foundation November 3 2003

Launching of VISA Card December 23,2004

Operating of Islamic Banking Branch December 23,2004

Online Share Transaction in CDS May 7 ,2006

Obtained permission as a Security Custodian from Securities

and Exchange Commission

January 22 ,2007

Arab Bangladesh Bank Ltd. Changed its name to AB Bank

Limited (ABBL)

November 14, 2007

Raise the Authorized Capital Tk.600, 00, 00,000/- divided into

6, 00, 00,000 ordinary shares of Tk.100/- each

January 29, 2009

(Source: www.abbank.com)10


2.7 Management Structure

Management structure of AB Bank Limited is consisting of three organizational domains.

Firstly the President & Managing Director and Deputy Managing Director. Major

responsibilities of this are to take central decision and transmit it to the second step. Secondly,

Executive Level Management, which contains Senior Executive Vice President, Executive

Vice President, Vice President and Assistant Vice President. Major responsibilities of this part

are to supervise and control division/department. Thirdly, branch operation management,

which contains branch management and other/lower level management. Major responsibilities

of this part of the 73 branches of this bank are to report to the head Office from time to time.

Table 2.2: ABBL Management Structure

President & Managing Director (MD)

Deputy Managing

Director (DMD),

Corporate

Deputy Managing

Director(DMD)

Credit

Deputy Managing

Director(DMD),

Operations

Deputy Managing

Director (DMD).

Senior Executive

Vice

President(SEVP),

Chief Finance

Officer

Executive Vice

President(EVP),

Head of Financial

Institution and

Treasury

Executive Vice

President(EVP),

Head of Risk Asset

Management

Executive Vice

President(EVP),

Head of Regional

Relationship

Management

Senior Vice President(SVP),

Head of Information Technology

Senior Vice President(SVP),

Head of Internal Control & Compliance

Vice President(VP) Senior Assistant Vice

president(SAVP)

Assistant Vice president(AVP)

Branch Operation Manager



2.8 Risk Management

The risk of AB Bank Limited is defined as the possibility of losses, financial or otherwise.

The risk management of the Bank covers core risk areas of banking viz, credit risk, liquidity

Risk, market risk that includes foreign exchange risk, interest rate risk, equity risk,

Operational risk and reputation risk arising from money laundering incidences. The bank

Objective of the risk management is that the bank evaluates and takes well calculative

Business risks and thereby safeguarding the bank’s capital, its financial resources and

Profitability from various business risks through its own measures and through Implementing

Bangladesh Bank's guidelines and following some of the best practices as Under:

A) Credit risk

It arises mainly from lending, trade finance and treasury businesses. This can be described as

potential loss arising from the failure of a counter party to perform as per contractual

Agreement with the Bank. The failure may result from unwillingness of the counter party or

Decline in his / her financial condition. Therefore, the Bank’s credit risk management

Activities has been designed to address all these issues.

The Bank has segregated duties of the officers / executives involved in credit related

Activities. A separate Corporate Division has been formed at Head Office, which is entrusted

with the duties of maintaining effective relationship with the customers, marketing of credit

Products, exploring new business opportunities, etc. Moreover, credit approval;

Administration; monitoring and recovery functions have been segregated. For this purpose,

three separate units have been formed within the credit division. These are (a) Credit Risk

Management Unit (b) Credit Administration Unit and (c) Credit Monitoring and Recovery

Unit. Credit Risk Management Unit is entrusted with the duties of maintaining asset quality,

Assessing risk in lending to a particular customer, sanctioning credit, formulating policy /

Strategy for lending operation, etc. Adequate provision has been made on classified loans /

Investments.

A thorough assessment is done before sanction of any credit facility at Credit Risk

Management Unit. The risk assessment includes borrower risk analysis, financial analysis,

Industry analysis, historical performance of the customer, security of the proposed credit


Facility, etc. The assessment process starts at Corporate Division by the Relationship

Manager / Officer and ends at Credit Risk Management Unit when it is approved / declined

by the competent authority. Credit approval authority has been delegated to the individual

Executives.

In determining Single borrower / large loan limit, the instructions of Bangladesh Bank are

strictly followed. Internal audit is conducted at periodical intervals to ensure compliance of

Bank’s and Regulatory polices. Loans are classified as per Bangladesh Bank’s guidelines.

B) Operating risk

Operational risk address the risk associated with fraud, forgery, unauthorized activities, Error,

omission, system failure and external events among others. AB IS managing these Risks

through written procedures, regular training and awareness programs. Departmental Control

Function Checklist (DCFCL), Quarterly Operations Report, loan Documentation Checklist

etc. Are in place covering all probable risks associated with banks business and Operations.

Surprise Inspections are also made on a regular basis to make sure that all Control tools are

functioning properly.

C) Market risk

The exposure of market risk of the bank is restricted to foreign exchange risk, interest rate

Risk and equity risk.

ci) Foreign exchange risk

Foreign exchange risk is defined as the potential change in earnings due to change in Market

prices. The foreign exchange risk of the bank is minimal as all the transactions are carried out

on behalf of the customers against underlying L/C commitments and other Remittance

requirements.

Treasury department independently conducted the FX transactions and the mid office and the

back office of treasury is responsible for verification of the deals and passing of their Entries

in the books of account. All foreign exchange transactions are revalued at Mark to Market rate

as determined by Bangladesh Bank at the month - end. All Nostro accounts are Reconciled on

a monthly basis and outstanding entry beyond 30 days is reviewed by the Management for its


settlement. The position maintained by the bank at the end of day was within the stipulated

limit prescribed by the Bangladesh Bank.

cii) Interest rate risk

Interest rate risk may arise from trading portfolio and non- trading portfolio. The trading

Portfolio of the bank consists of government treasury bills of 28 days maturity. The short

Term movement in interest rate is negligible or nil. Interest rate risk of non trading Business

arises from mist aches between the future yield of an asset and its funding cost. Asset

Liability Committee (ALCO) monitors the interest rate movement on a regular basis.

ciii) Equity risk

Equity risk arises from movement in market value of equities held. The Investment Banking

Division under a well-designated policy framework monitors the risks. The market Value of

equities held was however higher than the cost price at the balance sheet date.

D) Liquidity risk

The object of liquidity risk management is to ensure that all foreseeable funding

Commitments and deposit withdrawals can be met when due. To this end, the Bank is

maintaining a diversified and stable funding base comprising of core retail and corporate

Deposits and institutional balance (note - 12). Management of liquidity and funding is carried

out by Treasury Department under approved policy guidelines. Treasury front office is

supported by a very structured mid office and Back office. Asset Liability Committee

(ALCO) monitors the Liquidity management on a regular basis. A written contingency Plan is

in place to manage extreme situation.

E) Risk arising from money laundering

AB considers prevention of money laundering risk not only as a compliance requirement

imposed by the law of the country but also as one of its core business values. The board of

Directors and senior management are firmly committed to combat money laundering. Every

Year, a message from the president and managing directors office goes to all employees of the

bank reiterating the importance of the issue. There is a high profile Central Compliance Unit

(CCU) in place to oversee the any money laundering activities. The president and managing

director himself supervise the function of CCU's. Operation has separate and dedicated


headcount for surveillance of the any money laundering functions across the Bank. Training

and awareness programs are regularly held to make all employees aware of the issue. Bank

has also undertaken campaign against money laundering in electronic Media.

2.9 Division-Wise Branch & ATM Distribution

Table 2.3:District-Wise Branch & ATM Distribution

Division No. of branch No. of ATMDhaka Division 29 5Chittagong Division 23 3Khulna Division 6 3Rajshahi Division 7 1Sylhet Division 8 -Barisal Division 1 -

Total 74 12Overseas Branch 1 (Mumbai)



http://www.abbank.com/

2.10 Balance Sheet

AB Bank LimitedBalance Sheet

As at 31 December 200831.12.2008

Taka31.12.2007

TakaPROPERTY AND ASSETSCash 4,096,044,155 4,299,269,940In hand (including foreign currencies) 679,556,149 671,113,391Balance with Bangladesh Bank and its agent bank(s)(including foreign currencies)

3,416,488,006 3,628,156,549

Balance with other banks and financial institutions

2,300,013,425 1,860,735,223

In Bangladesh 993,239,274 718,485,962Outside Bangladesh 1,306,774,151 1,142,249,261Money at call and on short notice 1,190,678,360 574,080,317Investments 11,408,536,062 8,884,601,130Government 7,159,183,261 5,855,269,461Others 4,249,352,801 3,029,331,670Loans and advances 56,708,771,906 40,915,352,218Loans, cash credits, overdrafts, etc 54,412,358,249 39,303,901,301Bills purchased and discounted 2,296,413,657 1,611,450,918Fixed assets including premises, furniture and fixtures

2,444,650,234 2,381,004,409

Other assets 5,904,918,443 4,634,821,166Non-banking assets - -Total Assets 84,053,612,585 63,549,864,403LIABILITIES AND CAPITALLiabilitiesBorrowings from other banks, financial institutions and agents

3,193,343,038 1,872,010,028

Deposits and other accounts 68,560,474,323 53,375,348,391Current deposits 5,063,421,076 4,371,717,515Demand deposits 2,523,379,991 2,666,304,319Bills payable 1,176,651,056 1,105,058,168Savings bank deposits 9,726,178,008 8,493,116,434Short-term deposits 5,089,676,621 3,396,098,545Fixed deposits 40,732,652,292 31,131,930,491


Bearer certificates of deposit 130,325,000 130,325,000Other deposits 4,118,190,280 2,080,797,920Other liabilities 5,577,289,877 3,790,916,719Total Liabilities 77,331,107,238 59,038,275,138Capital/Shareholders' EquityTotal Shareholders' Equity 6,722,505,347 4,511,589,265Paid-up capital 2,229,785,400 743,261,800Statutory reserve 2,066,121,258 1,356,905,450Other reserve 636,829,248 715,626,287Retained earnings 1,789,769,440 1,695,795,728Total Liabilities and Shareholders' Equity 84,053,612,585 63,549,864,403

(Source: ABBL Annual report 2008)

31.12.2008

Taka

31.12.2007

Taka

Off-Balance Sheet Items

Contingent liabilities 26,074,330,983 18,590,460,199

Acceptances and endorsements 6,718,613,229 3,304,001,966

Letters of guarantee 4,783,891,967 3,812,034,559

Irrevocable letters of credit 10,107,113,846 8,754,662,567

Bills for collection 4,464,711,941 2,719,761,107

Other contingent liabilities - -

Other commitments - -

Documentary credits and short term trade-related

transactions

- -

Forward assets purchased and forward deposits

placed

- -

Undrawn note issuance and revolving underwriting

facilities

- -

U d f l t db f iliti dit li d th it t Undrawn formal

standby facilities, credit lines and other commitments

- -

Total 26,074,330,983 18,590,460,199

Other memorandum items 11,990,064,507 8,697,189,377

Customers' stocks of securities-Merchant Banking

Wing

10,419,698,313 7,204,085,208

Value of traveller's cheques 11,075,194 14,688,16917


Value of savings certificates (Sanchaya Patra) 1,559,291,000 1,478,416,000


2.11 Profit And Loss Account (Income Statement)

AB Bank LimitedProfit and Loss Account

For the year ended 31 December 20082008Taka

2007Taka

OPERATING INCOMEInterest income 7,366,847,213 5,269,904,660Interest paid on deposits and borrowings, etc. (5,336,153,274) (3,830,623,489)Net interest income 2,030,693,938 1,439,281,171Investment income 2,152,888,463 1,734,306,446Commission, exchange and brokerage 1,759,019,171 1,305,338,922Other operating income 206,424,306 177,654,705

4,118,331,939 3,217,300,074Total operating income (a) 6,149,025,878 4,656,581,245OPERATING EXPENSESSalary and allowances 1,008,675,512 696,776,012Rent, taxes, insurance, electricity, etc. 173,906,367 144,255,680Leg l e pen e Legal expenses 4,409,340 1,912,103Postage, stamps, telecommunication, etc. 57,105,073 57,413,151Stationery, printing, advertisement, etc. 64,989,223 44,720,259Chief executive's salary and fees 7,341,452 5,599,996Directors' fees 2,378,949 1,588,592Auditors' fees 1,562,100 2,116,415Charges on loan losses - -Depreciation and repairs of Bank's assets 154,558,663 117,971,014Other expenses 375,711,044 258,934,177Total operating expenses (b) 1,850,637,722 1,331,287,400


Profit before provision (c = a-b) 4,298,388,155 3,325,293,845Provision against loans and advances 281,266,515 366,000,000Provision for diminution in value of investments 117,153,000 9,400,000Other provisions 299,347,000 131,900,000Total provision (d) 697,766,515 507,300,000Profit before taxation (c-d) 3,600,621,640 2,817,993,845Provision for taxation 1,300,000,000 914,500,000Current tax 1,381,655,684 831,228,293Deferred tax (81,655,684) 83,271,707Net profit after taxation 2,300,621,640 1,903,493,845AppropriationsStatutory reserve 720,124,328 563,598,769General reserve - -Dividends, etc - -

720,124,328 563,598,769Retained surplus 1,580,497,312 1,339,895,076Earnings Per Share (EPS) 103.18 85.37


2.12 Cash Flow StatementThe cash flow statement shows the structure of and changes in cash and cash equivalents

during the financial year.

AB Bank LimitedCash Flow Statement

For the year ended 31 December 20082008Taka

2007Taka

Cash Flows from Operating ActivitiesInterest receipts 6,909,298,630 5,269,904,660Interest payments (5,336,153,274) (3,830,623,489)Dividend receipts 140,634,071 41,387,078Fee and commission receipts 1,386,225,802 955,024,746Recoveries on loans previously written off 63,229,802 11,483,420Payments to employees (1,022,140,030) (702,376,008)Payments to suppliers (256,798,574) (56,160,072)Income taxes paid (896,758,330) (125,277,075)Receipts from other operating activities 2,501,253,614 2,209,404,829Payments for other operating activities (637,826,252) (488,313,256)Operating profit before changes in operating assets & liabilities

2,850,965,459 3,284,454,834

Increase/decrease in operating assets and liabilitiesLoans and advances to customers (15,525,503,906) (9,626,101,001)Other assets (483,967,119) (438,528,076)Deposits from other banks 3,119,680,194 (751,923,159)Deposits from customers 12,065,445,738 12,050,276,133Trading liabilities (short-term borrowings) 1,129,372,603 398,339,434Other liabilities 20,621,206 515,416,056

325,648,717 2,147,479,387


Net cash flow from operating activities (a) 3176614175 5,431,934,221Cash Flows from Investing ActivitiesPurchase/sale of government securities (1,114,457,700) (1,039,234,154)Purchase/sale of trading securities, shares, bonds, etc. (1,220,021,131) (1,565,116,654)Purchase/sale of property, plant and equipment (181,621,991) (1,308,483,141)Net cash used in investing activities (b) (2,516,100,822) (3,912,833,948)Cash Flows from Financing ActivitiesI /(d )fl t b i Increase/(decrease) of long-term borrowings 191 960 407 176 292 365Dividend paid - -Net cash flow from financing activities (c) 191,960,407 176,292,365Net increase/(decrease) in cash (a+b+c) 852,473,760 1,695,392,638Effects of exchange rate changes on cash and cash equivalents - -Cash and cash equivalents at beginning of the year 6,738,242,780 5,042,850,141Cash and cash equivalents at end of the year (*) 7,590,716,540 6,738,242,780(*) Cash and cash equivalents:Cash 679 556 149 671,113,391Prize bonds 3,980,600 4,157,300Money at call and on short notice 1,190,678,360 574,080,317Balance with Bangladesh Bank and its agent bank(s) 3,416,488,006 3,628,156,549Balance with other banks and financial institutions 2,300,013,425 1,860,735,223

7,590,716,540 6,738,242,780(Source: ABBL Annual report 2008)

CHAPTER

3General activities of ABBL


Content

3.1 General banking3.2 Remittance in Bangladesh3.3 Local Remittance3.4 Clearing section

3.5 Cash section

3.6 Dishonor of cheques

3.7 Deposit section

3.8 Accounts section

3.9 Credit and Risk Management (CRM)

3.10 Foreign exchange

3.1 General Banking

The General Banking Department does the most important and basic work of the banks. All

other developments are linked with this department. It also plays a vital role in deposit

mobilization of the branch. AB Bank provides different types of accounts, locker facilities and

special types of saving schemes under General Banking. For proper functioning and excellent

customer service this department is divided in to various sections named as follows:

3.1.1 Account opening section


Accounts Opening

Cash Bill & Clearing

Remittance Accounts FDR

General Banking

Account opening is a very important task to established banking relationships with a

customer. If the banker can ensure opening of an account properly in compliance with all

rules and regulation of Bangladesh Bank as well head office he can protect himself from the

lapses, inadequacies, errors fraud line activities. This section deals with opening of different

types of accounts, it deals with issuing of cheque books and different deposit books to the

different accounts openers. A customer can open different types of accounts from this

department. The accounts that are currently provided by the AB Bank are list out bellow:

Current & Short term deposit Account (CD)

Saving Account (SB)

Fixed Deposit Account (FDR)

Monthly Saving Deposit (MSDS)

Double Deposit (DDS)

Special Term Deposit (STD)

3.1.2 Documents for opening some special account

Account Opening Document Check-List

3.1.2.1 Individual and Joint Account

Bank’s prescribed Account opening application form (to be signed by the applicant in

front of BM/RM/CSM)

Two Passport Size Photograph of the Account holder(s) attested by the introducer.

Specimen Signature Card (To be signed by the applicant in front of BM/RM/CSM)

Estimated Transaction Profile and

Any of the following Identification Documents

Name of Identification Document Issuing Authority

Current valid passport Passport Office

Valid driving license Bangladesh Road Transport Authority

Voter ID Card Election Commissioner

Armed Forces ID card Employer or their delegate

A Bangladeshi employer ID card bearing

the photograph and signature of the

Employer or their delegate


applicant

A certificate from any local government

organs such as Union Council chairman,

ward commissioner etc. (In this case the

certifier should attest applicant’s

photograph along with signature

UP Chairman / Ward Commissioner

Trade license with photograph can be

accepted for individual's identification

Local Govt Authority / UP Chairman

Pourashava Chairman / Ward

Commissioner

The idea is any document showing photograph, signature and address of the customer issued

from a dependable authority (Managers and Supervisors have to apply judgment) are

acceptable.

All photocopies should be verified with the original and attested by an authorized officer of

the Bank. DSEs or other contractual staffs are not allowed to verify photocopies.

Particular care should be taken in accepting documents, which are easily forged, or which can

be easily obtained using false identities.

3.1.2.2 Sole Proprietorship Account

Bank’s prescribed Account Opening application form. (to be signed by the applicant in

front of BM/RM/CSM)

Two Passport Size Photograph of the Proprietor attested by the introducer

Specimen Signature Card (To be signed by the applicant in front of BM/RM/CSM)

Copy of valid Trade License issued by Local Government authority (City Corporation,

Pourashava, Union Parishad etc.)

Permission from Bangladesh Bank (For Buying House, Indenting or other specific

businesses)

TIN issued by Income Tax Authority

The personal identity of the proprietor of the Firm has to be established by any of the

documents as mentioned in Individual or Joint Customer category. If the Trade

License carries the photo and signature of the Proprietor this is not required.


3.1.2.3 Limited Company Account

Bank’s prescribed Account Opening application form

Certified copy of the Memorandum & Articles of Association of the Company

Certificate of incorporation

Certificate of commencement of Business (For Public Limited Companies only)

Extract of the Board resolution sanctioning the account opening and signing authority

List of the Director with address in form - XII.

Photograph of the signatories

Copy of valid Trade License

Introducer’s signature in the A/C opening form and at the back of the photograph(s) of

Account holder(s).

List of names with Appointment letter and Specimen Signature of the Persons

authorized to operate the Account.

The personal identity of all the directors or beneficial owner(s) proprietor of the Firm

has to be established by any of the documents as mentioned in Individual or Joint

Customer category.

3.1.2.4 Partnership Account

Bank’s prescribed Account Opening application form signed by the partners in front

of BM/RM/CSM

Certified copy of Partnership Deed/ Agreement

List of the Partners with Address

Extract of resolution of the partners Meeting

Copy of valid Trade License

Photograph of the signatories/ Partners

Specimen signature card (To be signed by the signatories in front of BM/RM/CSM

Introducer’s signature in the A/C opening form and at the back of the photograph(s) of

Account holder(s).

Identity of all Partners/ Directors must be verified in line with the requirements for

personal customers. Where a formal partnership agreement exists, a mandate from the


partnership authorizing the opening of an account and conferring authority on those

who will operate it should be obtained.

Evidence of the trading address of the business or partnership should be obtained and

a copy of the latest report and accounts (audited where applicable).

An explanation of the nature of the business or partnership should be ascertained (but

not necessarily verified from a partnership deed) to ensure that it has a legitimate

purpose.

3.1.3 Other Products and Services

Corporate Banking

AB Bank provides complete range of solutions to meet Corporate Customers' requirement.

AB banks Corporate Banking solutions include a broad spectrum of products and services

backed by proven, modern technologies.

Corporate Lending

AB Banks specialist teams offer a comprehensive service providing finance to large and

medium-sized businesses based in Bangladesh.

Structured Finance

AB Bank has a specialist Structured Finance Team who arrange and underwrite finance

solutions including Debt and Equity Syndication for financial sponsors, management teams

and corporate. ABBL also provide corporate advisory services.

ABBL’s aim to provide tailored financing solutions with a dedicated team who can rapidly

respond to client needs.

Following are some of the products and financial tools of Corporate Banking:

Project Finance

Working Capital Finance

Trade Finance

Cash Management

Syndicated Finance, both onshore & off-shore


Equity Finance, both onshore & off-shore

Corporate Advisory Services

Retail Banking

Unsecured Loans

Product

Name

Personal Loan

Target

Customer

Employees of reputed Local Corporate, MNCs, NGOs, Airlines, Private

Universities, Schools and Colleges, International Aid Agencies and UN

bodies, Government Employees, Self-employed Professionals (Doctors,

Engineers, Chartered Accountants, Architects, Consultants), Businessmen.

Purpose Marriages in the family, Purchase of office equipment / accessories,

Purchase of miscellaneous household appliances, Purchase of Personal

Computers, Purchase of audio-video equipment, Purchase of furniture.

Loan Amount Minimum Tk. 25,000.00

Maximum Tk. 5,00,000.00

Charges Application fee: Tk. 500.00

Processing fee: 1% on the approved loan amount or Tk. 2000.00

whichever is higher

Tenor Min 12 months

Max 36 months

Rate of

Interest

14.50% p.a. - 17.50% p.a.

Security Hypothecation of the product to be purchased. Two personal guarantees

(as per list of eligible guarantors)

Product

Name

Auto Loan

Target

Customer

Employees of reputed Local Corporate, MNCs, NGOs, Airlines, Private

Universities, Schools and Colleges, International Aid Agencies and UN

bodies, Government Employees, Self-employed Professionals (Doctors,


Engineers, Chartered Accountants, Architects, Consultants), Businessmen

Purpose To purchase Brand new vehicle, non-registered reconditioned vehicle

Loan Amount 70% for the brand new car

60% for the reconditioned car but must not exceed BDT 10,00,000.00



whichever is higher

Tenor For Reconditioned Car: Max 36 months

For Brand new Car: Max 60 months

Rate of

Interest

14.50% p.a. - 17.50% p.a.

Security Hypothecation of the vehicle to be purchased. Two personal guarantees

(as per list of eligible guarantors)

Product Name Easy Loan (For Executives)

Target

Customer

The loan is specially designed for salaried people who are employed in

different reputed companies



Computers, Purchase of audio-video equipment, Purchase of furniture,

Advance rental payment, Trips abroad, Admission/Education fee of

Children etc.


Maximum Tk. 3,00,000.00



whichever is higher

Tenor Min 12 months

Max 36 months

Rate of

Interest

16.00% p.a.


Security Letter of confirmation from the employer. One personal guarantee (as per

list of eligible guarantors)

Product Name Gold Grace - Jewellery Loan

Target

Customer

Both female & male employees may apply viz. employees of reputed

Banks & Leasing companies, reputed Local Corporate, MNCs, NGOs,

Airlines, Private Universities, Schools and Colleges, International Aid

Agencies and UN bodies. Government Employees. Self-employed

Professionals (Doctors, Engineers, Chartered Accountants, Architects,

Consultants). Businessmen with a reliable regular source of income.

Purpose To purchase ornaments/Jewellery for personal use


Maximum Tk. 3,00,000.00



whichever is higher

Tenor Min 12 months

Max 36 months

Rate of

Interest

16.00% p.a.

Security Letter of confirmation from the employer. Personal guarantee from the

parents and spouse (if married)

Product Name House/Office Furnishing/Renovation Loan

Target

Customer

Expatriate Bangladeshi nationals who are in business or service holders.

Employees of reputed Banks & Leasing companies, reputed Local

Corporate, MNCs, NGOs, Airlines, Private Universities, Schools and

Colleges, International Aid Agencies and UN bodies. Government

Employees. Self-employed Professionals (Doctors, Engineers, Chartered

Accountants, Architects, Consultants). Reputed and highly respectable

Businessmen with a reliable source of income


Purpose House/Office Furnishing/ Renovation, For interior decoration / Titles

Stones, Electrical fittings, wooden cabinets / Overall furnishing and all

types of House/Office Renovation, purchase/furnishing of apartments etc.

Loan Amount Minimum Tk. 1,00,000.00

Maximum Tk. 10,00,000.00



whichever is higher

Tenor Min 12 months

Max 48 months

Rate of

Interest

16.50% p.a.

Security Title deed of the House/Office to be furnished/renovated along with

memorandum of deposit of title deed duly supported by a notarized power

of attorney to be kept by the bank as a matter of comfort. Two personal

guarantees (as per list of eligible guarantors). Registered mortgaged of the

property if the loan amount is more than Tk. 5.00 lac

Product Name Staff Loan

Target

Customer

All permanent employees of ABBL



Computers, Purchase of audio-video equipment, Purchase of furniture

Loan Amount According to the debt burden ration and other criteria

Charges Processing fee: 1% on the approved loan amount

Tenor Min 12 months

Max 36 months

Rate of

Interest

15.50% p.a.

Security Hypothecation of the product to be purchased


Product Name Education Loan

Target

Customer

Students Criteria:

• Students of reputed Educational Institutes, such as Public & Private

Universities, Medical Colleges & Engineering Institute.

• Undergraduate & Post graduate Level

• Professionals degrees (Chartered Accountants (CA), Cost &

management Accountants (CMA), Marine, MBM, MBA)

• Doctorate degree (PhD), FCPS etc.

• Occupation: Student

• Minimum Age: 17 years

• Maximum Age: 40 years

• Educational Qualification: Minimum HSC/A-Level Pass.

Parents Criteria:

Service Holder:

• Individuals with ranks equivalent to Senior Assistant Secretary or

higher would qualify guarantor

• Bank officials (Equivalent to Senior Principal Officer of NCBs,

AVP / Branch Manager of Local and Foreign banks) and Department

Head of Multinational Company or established Local Corporate.

Guarantors must be accepted by the Branch Manager / Head Office.

Businessman:

• Well reputed and widely respected Self-employed professionals

Purpose To Financially Assist The Parents: Admission/Education Fees, Semester

Fees, Study abroad


Maximum Tk. 3,00,000.00



whichever is higher

Tenor Min 12 months


Max 36 months

Rate of

Interest

14.50% p.a. - 16.00% p.a.

Security One personal guarantees (as per list of eligible guarantors)

Secured Loans

Product Name Personal Loan

Target

Customer

All Clients of ABBL

Purpose To meet personal requirement of fund

Loan Amount Maximum 95% of the present value of the security

Charges Processing fee: Tk. 1000.00

Tenor Min 12 months

Max 36 months

Rate of

Interest

13.50% p.a. - 16.50% p.a. (subject to type of the security). 2% spread

must be maintained in case of own bank FDR

Security Lien over FDR, BSP, ICB Unit Certificate, RFCD, NFCD, and CD

account(s) etc. One personal guarantee in case of third party cash

collateral (as per list of eligible guarantors)

Product Name Personal Overdraft

Target

Customer

All Clients of ABBL

Purpose To meet personal requirement of fund

Loan Amount Maximum 95% of the present value of the security

Charges Processing fee: Tk. 1000.00

Tenor Revolving with annual review

Rate of

Interest

13.50% p.a. - 16.50% p.a. (subject to type of the security). 2% spread

must be maintained in case of own bank FDR

Security Lien over FDR, BSP, ICB Unit Certificate, RFCD, NFCD, and CD

account(s) etc. One personal guarantee in case of third party cash


collateral (as per list of eligible guarantors)

Merchant Banking Wing (MBW)

AB Bank Limited is the first Private Sector Joint Venture Bank in Bangladesh, which is now

fully owned by the Bangladeshis. Since AB banks inception in 1982, it is participating in

different industrial and national development activities in addition to normal Trade Finance

and SME development. In addition to the 74 Branches within the country ABBL has a branch

in Mumbai, India. Beside that ABBL has a wholly owned Finance Company in Hong Kong in

the name and style of “AB International Finance Limited” and representative offices at

London and Yangoon.

To expand its horizon, ABBL launched its Merchant Banking operations in the year 2003. As

a full fledged merchant banker, ABBL provides the following services:

1. Portfolio Management

2. Issue Management

3. Underwriting

4. Corporate Advisory

5. Bankers to the Issue

6. Private Placement

The Merchant Banking Wing (MBW) of ABBL has made notable progress and is presently

equipped to serve customers’ needs by offering a comprehensive range of financial solutions.

ABBL has also launched Custodial Services with a view to provide one-stop Capital Market

services to ABBL valued clients.

ABBL understand an entrepreneur’s need for stability, trust, innovation and creativity

required for the consolidation and growth of investments and endeavors to prosper. The

professionals in ABBL MBW with its state of the art integrated computerized system, are

always there to provide their vision, knowledge and service for client success.

Large Loan & Project Finance


In order to cater the demand of client AB Bank has segmented its portfolio in terms of

loan size. As per this segmentation any loan over Tk. 10.00 Crore falls under the

purview of Large Loan Unit.

In AB Bank, there is also a separate Project Finance unit who evaluate the business.

The unit is entrusted to handle the portfolio in a focused manner. AB Bank is always

in fore front to support establishment of new projects of diverse nature which will

help to broaden the manufacturing arena vis-à-vis to generate to employment.

SME Banking

SME Loan

Considering the volume, role and contribution of the SMEs, in the last two decades AB Bank

has been patronizing this sector by extending credit facilities of different types and tenor. As

of now 54% of the bank’s total loan portfolio is segmented to the SMEs which deserve all out

attention in ABBL plans, projections and forecasting.

As such the bank has emphasized on the following issues:

To provide the best services to the SME sector

To increase the SME portfolio of ABBL significantly

To improve the quality of ABBL’s portfolio

SME Sectors in which AB Bank has participated so far:

Agro machinery

Poultry

Animal Feed

Dairy Product

Fruit Preservation

Hotel & Restaurants

Garments Accessories

Leather products

Plastic product

Furniture : Wooden & Metal

Ink 33


Paint

Printing & Packaging

Wire & Cable

Aluminum

Cement and Lime Plaster

Clinics and Hospitals

Engineering & Scientific Instruments

Brokerage Service

Introduction:

AB Bank Foundation (ABBF) is a subsidiary company of AB Bank Limited having holding

99.60% shares of the ABBF. The company was first established under the trust deed

constituted and registered on the 14th day of May 2002. Subsequently the trust by a resolution

of its Board of trustee in its 3rd meeting held on 29.12.2002 resolved to cancel the Trust Deed

and utilize the trust fund for the foundation of a company limited by guarantee primarily for

charitable purpose. Then the company was incorporated on 3rd day of November 2003 under

section 28 of Companies Act 1994, a company limited by guarantee. The certificate of

incorporation is C-558(10)/2003.

The ABBF and its activities:

AB Bank Foundation (ABBF) is one of the country’s leading securities broker houses of

Dhaka Stock Exchange (member # 201) and Chittagong Stock Exchange (member # 101).

ABBF has started its operation by soft launching on 28th August 2006. Initially, ABBL have

started its operation by giving service to client of AB Bank Merchant Banking wing. ABBL

have already started operation in full swing in ABBLs corporate head office and Chittagong.

In near future, ABBL will start Mohakhali and Agrabad branch operation.

Services:

1. Brokerage Services

AB Bank's subsidiary, AB Bank Foundation, which has corporate memberships on the

Dhaka and Chittagong Stock Exchanges, can act as brokers on behalf of local and

foreign individual and institutional client to trade in the local capital market. AB


Bank's Sales & Trading Department will also support brokerage service for offloading

shares through direct listing.

2. CDBL Services as full service Depository Participant (DP)

As a full service depository participant, AB Bank Foundation provides following

services,

a)BO (Beneficial Owner) accounts opening and maintenance.

b) Dematerialization & Rematerialization

c) Freeze (freeze request and release request) and suspensions

d) pledging, unpledging and confiscation

e) BO ISIN balances and master maintenance enquiry

Custodial Service

Customers:

Investors Who Are Interested to Invest In the Bangladesh Capital Market

Non Resident Bangladeshi (NRBs)

Foreign Institutional and individual clients

Local Institutions

Sponsors' group and High net worth client

Services:

Safe custody of client securities

Foreign Trade Execution and Settlement

Share transfer in the name of client

Complete the Dematerialization process as per client request

IPO, Private Placement & Right share subscription as per client instruction with

deposit


All types of corporate action that includes cash dividend, bonus share and right share

collection

Open BO account

Instant information regarding client securities position as per their request

Quarterly reporting to the client by Custodial Department

Account Opening Procedure:

A. Account Opening Procedure

1. Criteria for opening an account:

i. The non-resident investor shall open a NITA (Non-resident investors’

taka account) with any commercial bank in Bangladesh, with freely

convertible foreign currency remitted from abroad through normal

banking channel or by transfer of funds from the non-resident investor's

foreign currency account, if any, in Bangladesh;

ii. Any two Bangladeshi national and Non Resident Bangladeshi of sound

mind having a minimum age of 18 years may open two accounts on

each in their single name and the other in their joint names.

iii. Account opening absolutely depends upon the management of ABBL.

iv. Proper documents should be submitted at the time of account opening.

v. Foreign investor has to open FC account along with NRITA account at

the time of custodial account opening.

B. Account opening formalities

1. Foreign Currency Account Opening:

i. Duly signed account opening form

ii. Submit Name, signature and photograph of the Nominee

iii. Transaction profile

iv. Signature of an introducer must be incorporated

v. Supporting Documents:

vi. Copy of the passport

vii. Bank statement/ Work permit (in case of NRB) 36


2. Non-resident Taka Account (NITA) Opening:

i. Duly signed account opening form

ii. Transaction profile

3. Custodial Account Opening:

i. Duly Signed account opening form of Custodial

ii. Duly signed custodial agreement (must be signed in all pages)

iii. Duly signed Power of Attorney (POA) in non-judicial stamp of Tk.

200/-*

iv. Supporting Documents:

Copy of the passport

Bank statement/ Work permit (in case of NRB)

4. Beneficiary Owner (BO) Account Opening:

i. Duly signed BO account opening form

ii. Duly signed BO agreement (must be signed in all pages)

5. Brokerage Account Opening:

i. Duly signed account opening form with AB Bank Foundation

ii. Nomination Form duly signed

iii. Agreement with AB Bank Foundation

iv. Supporting Documents:

v. Copy of the passport

vi. Bank statement/ Work permit (in case of NRB)

Procedure of Notarization of Power of Attorney Documents

It should be notarized by the Notary Public at the place of its execution, thereafter to

authenticate by Bangladesh Embassy, therein and Ministry of Foreign affairs of Bangladesh

upon arrival in Bangladesh. Thereafter stamp duty of Tk. 200/- is to be paid in Central

Treasury of the Government of Bangladesh through Treasury Challan.

Money Transfer


Western Union a fast, reliable and convenient way to send a money transfer. Western Union

Financial Services Inc. U.S.A. is the number one and reliable money transfer company in the

world. This modern Electronic Technology based money transfer company has earned world

wide reputation in transferring money from one country to another country within the shortest

possible time.

AB Bank Limited has set up a Representation Agreement with Western Union Financial

Services Inc. U.S.A. Millions of people have confidence on Western Union for sending

money to their friends and family. Through Western Union Money Transfer Service,

Bangladeshi Wage Earners can send and receive money quickly from over 280,000 Western

Union Agent Locations in over 200 countries and territories world wide- the world’s largest

network of its kind, only by visiting any branches of AB Bank Limited in Bangladesh.

Foreign Remittance through Exchange House For Inward Remittance, AB Bank established

extensive drawing arrangement network with Banks and Exchange Companies located in the

important countries of the world.

Non-Resident Bangladeshi (NRB) Banking

Facilities offered to NRBs

Opening of Foreign Currency A/C: ABBL open Foreign Currency Account in

USD/GBP/EUR/JPY for NRBs. Foreign Currency can be remitted by the Nationals of

Bangladesh living Abroad earned by them as wage earners or from other sources. The deposit

amount can also be used for remittance to other countries as per their requirement. Nominee

of Account holder can also able to operate this Account.

NFCD: ABBL issued Foreign Currency Fixed Term Deposit in USD/GBP/EUR with

different tenure. Interest is paid in respective Foreign Currency. Rates of Interest are

published in ABBL daily Exchange Rate.

Wage Earners Development Bond: These Bonds can be issued from the balance of the FC

account with tenure for five years. Rate of interest is 12% p.a. in BDT.

USD Premium Bond: These Bonds can be issued from the balance of the FC account with

tenure for Three years. Rate of interest is 7.5% p.a. in BDT.


USD Investment Bond: These Bonds can be issued from the balance of the FC account with

tenure for Three years. Rate of interest is 6.5% p.a. in USD.

In addition to the above, ABBL also has Drawing Arrangements with 14 (Fourteen)

Exchange/Money Transfer Remittance Houses all over the globe to facilitate fast, reliable and

hassle-free inward remittance to the expatriate Bangladeshis around the world. ABBL also has

special arrangements to credit Beneficiary's account maintained with it’s on the same day

through ABBL extensive real time on-line network.

Cards

In the present context of banking business in the world, Card is the future of any bank.

Electronic payment system is now ruling the world and some days from now cash transactions

system will turn into a history found only in the text book.

AB Bank Limited is one of the leading first generation private sector commercial banks with

Branch Network all over the country. The Bank started issuing VISA Credit Cards from the

end of year 2004 as a principal member of VISA International.

Brief description of different features:

Card Conversion & Balance Transfer Plan

'Card Conversion & Balance Transfer Plan' to AB Bank VISA Credit Card will be extended

towards all local Credit Cardholders of the market, provided that their 'other banks' credit card

is in 'regular' state, not in 'overdue' state. Cardholders will repay the approved transferred

amounts to AB Bank Credit Card Account in monthly installments stated in their monthly

statements. Other bank credit cardholders having regular payment history will also be allowed

to apply for this facility along with their new AB Bank Credit Card application form. People

can convert their other bank card to AB Bank Card and get interest facility @ 19.95% on their

outstanding.

EasyBuy

'EasyBuy' Installment Plan to AB Bank VISA Credit Card will be extended towards all AB

Bank Visa Credit Cardholders. Cardholders can convert any retail purchase done using AB

Bank credit card into an installment scheme where they can pay back the amount at rate of

interest of 19.95% per annum over a tenor ranging from 6 months to 48 months.


Easy, convenient and affordable

Under the Easy buy program, cardholder can choose own installment plan, ranging from 6 to

48 months.

1. Simple procedure, no documentation, no down payment

2. Available in comfortable payment options of 6 months to 48 months

3. Process just a call away

No cash advance fee

No cash advance fee for cash withdrawal from AB Bank ATM Booths & Tk.10 only per cash

withdrawal will be charged from other Q Cash ATM booths. Market rate is Tk. 125 per cash

withdrawal.

Auto bills pay facility

Hassle free monthly payment from AB Bank Account holders.

Higher transaction limit

AB Bank VISA card gives the facility to withdraw up to Tk. 60,000 or 50% of client credit

limit (whichever is lower) of the credit limit from any ATM with Visa logo.

Lot more features are in the pipeline to add more value to satisfy AB Bank customers.

Loan Syndication

Syndication or club financing is a growing concept in Banking Arena of Bangladesh.

Syndicated finance diversifies the risk of one bank on a single borrower and increases

the quality of loan through consensus or cumulative judgment and monitoring of

different banks / financial institutions.

AB Bank, the first bank in the private sector also took initiative to adapt to this

growing concept.

In 1997, AB Bank for the first time arranged a club financing with Dhaka Bank Ltd to

raise Tk. 6700 lac - out of which ABBL financed Tk. 5700 Lac and Dhaka bank

financed Tk. 1000 Lac.


In 1999, AB Bank arranged its second syndicated credit facility with IPDC to raise Tk

3563 Lac.

Since then AB Bank did not look back.

Since 1997 to 2007 (till date), AB Bank has raised total Tk. 25989.56 Lac as Lead

Arranger. The following banks from time to time have been partners in these

syndications: Dhaka Bank, IPDC, EXIM Bank, Bank Asia, Oriental Bank, NCC

Bank, The City Bank, Trust Bank, and Bank Asia.

AB Bank has also participated in different syndications arranged by other Banks, out

of which till date 6 (six) syndication has successfully been completed. AB Bank

exposure in these completed syndications was Tk. 4700 Lac.

At the moment AB has participation in 19 (nineteen) syndicated facilities. AB Bank’s

exposure in the ongoing syndication is Tk. 51560.29 Lac which is diversified in the following

ten sectors:

Table 3.1: Sector Wise Exposure in Syndication

SL Sector ABBL Participation (Fig. in Lac Tk.)

1 Textile 9,533.57

2 Micro-finance 3,000.00

3 Cement 7,990.00

4 Energy & Power 11,997.00

5 Telephone (PSTN) 5,500.00

6 Glass 900.00

7 Sugar 900.00

8 Steel Mills 9081.72


9 Paper 1158.00

10 Chemical 1,500.00

Total 51,560.29


Islami Banking

To provide the Islamic banking services in accordance with the principles of Islamic Shariah,

AB Bank has established Islamic Banking Wing and started it’s functioning by opening full-

fledged Islamic banking branch on 23.12.2004. The branch is known as AB Bank Islami

Banking Branch, Kakrail, and is situated at 82, Kakrail, Ramna, and Dhaka. Prominent Islami

Banker Mr. M. Azizul Huq has joined the Bank as its Islamic Banking Consultant. A

dedicated team of experienced Islamic bankers is working under his active guidance both at

head office and branch level. A competent Shariah Council consisting of Islamic scholars,

Ulema, Fukaha and Islamic bankers headed by Mr. Shah Abdul Hannan, a prominent Islamic

scholar and former Secretary, Government of Bangladesh has also been formed to guide the

Islamic banking affairs. Board of directors as well as management of the bank are very much

interested to promote Islamic banking system in the bank aiming at opening more Islamic

branches in the near future. AB Bank has already obtained membership of Islamic Banks

Consultative Forum (IBCF) and Central Shariah Board for Islamic Banks of Bangladesh.

The goals and objectives of Islamic banking Wing are as under:

To facilitate the Islamic banking system in the country

To create new entrepreneurs and to arrange required finance for them

To play effective role for socio economic development of the country

To give assistance in launching welfare oriented economic system under Islamic

values

Under this wing AB Bank extends the following Islamic banking services:

Deposit services

Investment services

Under Deposit services the following services are being rendered:


Mudaraba Savings Account

Mudaraba Short Noticed Account

Mudaraba Term Deposit Account (with different terms)

Mudaraba Monthly Profit Account

Al-Wadiah Current Deposit Account

Mudaraba Deposit Pension Scheme

Besides Mudaraba Hajj Deposit Scheme and some other schemes are under process.

Investment Services

AB Bank Islmic Banking Wing provides investment facilities for project finance, working

capital finance, SME finance, consumer / retail baking finance etc. under following modes:

Hire-Purchase under Shirkatul Melk (HPSM): Under this mode the Bank and the

client procure asset such as machinery, land, car etc. on equity participation basis. The

Bank rents out its portion of assets to the client for a certain period. The client pays the

rental with a part of principal amount on monthly / quarterly basis. The client gets its

proportionate ownership with the payment of monthly / quarterly installments. On

maturity, total ownership of the assets automatically goes to the client as and when

final payment of the account is made.

Ijara or Leasing: It is more or less like the HPSM. In this case equity participation may

or may not exist. Ownership of the asset is not automatically transferred to the client

with the payments of installments. On maturity, the bank transfers the ownership to

the client on payment of certain transfer fees.

Bai-Muajjal / Bai-Murabaha: These modes are applicable for working capital finance.

Under these schemes bank purchases goods / raw materials as per requirement of the

client. In case of Bai-Muajjal bank receives the sales proceed on deferred payment

basis. On the other hand in case of Bai-Murabaha Bank receives the sale price at the

time of delivery of the goods / raw materials. Before handing over the goods / raw

materials the bank generally keeps the same in its custody under pledge.


Musharaka : Under this mode the Bank and clients jointly participate in a project, in a

scheme or project. Profit is shared between the Bank & the concerned client as per

pre-agreed ratio. On the other hand loss is shared according to capital ratio.

Mudaraba: Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner

of the capital). Profit is shared between the two sides as per pre-agreed ratio.

Sector of Investment:

Islamic Banking Wing of the bank finances in all sectors i.e., Industry, business, Agriculture,

Real Estate etc. if purpose of the investment is permissible under Islamic Shariah.

Limit of Investment:

Investment is offered to the extent of single borrower exposure limit as fixed by the

Bangladesh Bank from time to time.

Foreign Trade:

Islamic Banking Wing provides the following services at its foreign trade desks:

Opening of LCs

Post -Import Finance

Export bill purchase and negotiation

Pre-shipment financing etc.

AB Bank Islamic Banking Wing has been continuously trying to expand its service horizon

keeping the necessity of valued clients in view and upholding the principle of Islamic Shariah.

Future Products

Expansion

To extend Merchant Banking services across the country, MBW has already launched its

operation in Agrabad (Chittagong). ABBL are going to open 3 new service networks in

Mohakhali (Dhaka), Uttara (Dhaka) and Sylhet soon.

New Business

In addition, AB Bank will also expand its operations in the investment banking in the

following areas:44


Business Area Status

Islamic Capital Market Products Processing

Derivatives Products Supporting infrastructure going to be

prepared

Asset Management / Mutual Fund AB Bank is planning to launch and manage

Mutual Fund in future.

3.2 Remittance in Bangladesh

International remittances are defined as the portion of migrant workers’ earnings sent back

from the country of employment to the country of origin (ILO, 2000). Remittances can be

individual and it can also be collective. When individuals send remittance to his/her

household or kith and kin that can be termed as individual remittance. When a group of

migrants, their associations or professional bodies mobilize resource together and send for

collective or community programmers that can be termed as collective remittance. Individual

remittances are mostly geared towards the family whereas collective remittances are generally

used for community development.

Currently two types of voluntary international migration occur from Bangladesh. One takes

place mostly to the industrialized west and the other to Middle Eastern and South East Asian

countries. Voluntary migration to the industrialized west includes permanent residents, work

permit holders and professionals. They are usually perceived as long term or permanent

migrants. Migration to Middle East and South East Asia are usually for short term. The

migrants return home after finishing their contract. Although long term migration is much

older than short term yet information on their types, extent and composition is not available

with the government. Information on the short term labor migrants who officially go overseas

for employment is available with the Bureau of Manpower Employment and Training

(BMET)

Currently, Saudi Arabia, UAE, Kuwait, Qatar, Oman, Iraq, Libya, Bahrain, Iran, Malaysia,

South Korea, Singapore, Hong Kong and Brunei are some of the major countries of

destination. Saudi Arabia alone accounts for nearly one half of the total number of workers

who migrated from Bangladesh. Labor market of Bangladeshi workers is not static. During 45


the 1970s Saudi Arabia, Iraq, Iran and Libya were some of the major destination countries.

While the position of Saudi Arabia remains at the top, Malaysia and UAE became important

receivers. In mid-1990s, Malaysia became the second largest employer of Bangladeshi

workers. However, since the financial crisis of 1997, Bangladeshis migrating to Malaysia

dropped drastically Now UAE has taken over its place.

Migrants use different methods in sending remittance involving both official and unofficial

channels. Officially, transfer of remittance takes place through demand draft issued by a bank

or an exchange house; travelers’ checks; telegraphic transfer; postal order; account to account

transfer; automatic teller machine (ATM) facilities; electronic transfer and in kind. When

remittances are transferred directly from the foreign account of migrant worker to his own

account at home it is known as direct transfer. This can be through telegraphic means or

otherwise. Remittances are frequently sent through demand draft in Taka issued by a bank or

an exchange house in favor of a nominee of migrant. Usually the draft is sent by post or in

emergency by courier service. One can send remittance through the postal authorities. In such

case the remitted money is handed over to the receiver by the local post office. Travelers’

cheques are also used as a means to send remittance. However they will be treated as official

transaction when they are encashed through banks. While coming from abroad one can bring

in foreign currency. If the amount is more than US$5000 one has to declare at customs by

filling up the FMJ form. Migrants can also send remittance to their Non-resident Taka and

Non-resident foreign currency accounts.

3.3 Local Remittance

Bank has a wide network of branches all over the country and over various kinds of

remittance facilities to the public. The main instruments used by the AB Bank are

1. Payment Order (PO)

2. Demand Draft (DD)

3. Telegraphic Transfer (TT)

3.3.1 Payment Order (PO)


Payment Order (PO) is an instrument that is used to transfer funds within a local area, i.e.

within a particular clearing house. To transfer funds from one place to another place within

Dhaka, then ABBL can use PO.

In AB Bank, they charge different amount of commission to remit funds on the basis of the

principal amount. The chat of commission is as follows:

Table 3.2: Commission on PO

Principal amount of PO Commission

Up to 10,000/- Tk. 25/-

Tk. 10,001 – Tk. 1,00,000 Tk. 75/-

Tk. 1,00,001 and above Tk. 150/-

(Source: GB Department of AB Bank Ltd. Islampur Branch)

3.3.2 Demand Draft (DD)

Demand Draft is an instrument that is drawn on one bank office to another or other bank

office to transfer certain sum of amount to the named person. It is generally used to remit

funds from one corner of the country to another corner. DD is also a most popular instrument

of remit funds. A commission of 0.15% on the principal amount or minimum Tk. 30/- has

been charge for DD.

It is drawn by a Banks Branch on another branch.

It cannot be made payable to bearer.

Its payment cannot be stopped or countermanded.

It is always payable on demand.

3.3.3 Telegraphic Transfer (TT)

Telegraphic Transfer is been used on the demand of remit fund. Sometimes the remitter wants

the money to be remit to the destination immediately. That why the bankers use TT to transfer

funds from one place to another. The charge is 0.15% on principal amount for TT and

additional Tk. 50/- has been charged for using telex/telephone. In case of TT both the

applicant and beneficiary should have the account on the same bank in different branches.


3.4 Clearing Section

For safety and security in financial transaction people use financial instrument like DD, PO,

Cheque etc. commercial banks are to collect these financial instruments on behalf of its

customer. This process that the banks use is known as clearing and collection. The main

function of this section is to collect the instrument of customer or the collect the amount of

instrument through Bangladesh Bank clearing house. There have two kind of clearing Outside

Bank Clearing (OBC) and Inter Branch Clearing (IBC). The clearing section has to examine

some matter. These are:

1. Whether the paying bank is within the Dhaka city.

2. Whether the paying bank is outside the Dhaka city.

3. Whether the paying bank is their own branch.

Table 3.3: Different charges of OBC

Amount Charge Minimum Charge

Up to 25,000/- 0.20 % Tk. 25/-

25,001 – 1,00,000 0.20 % Tk. 75/-

1,00,001 – 5,00,000 0.10 % Tk. 200/-

5,00,001 and above 0.05% Tk. 600/-

Postage Charge Tk. 25/- will be applied

(Source: GB Department of AB Bank Ltd, Islampur Branch)

3.5 Cash Section

The main operation of cash department is to keep deposits of different purpose from the

customer and make payment to the client’s cheque presented at the cash counter. Cash

department of any bank plays a vital role in general banking procedure, because it deals with

the most liquid assets. There is several counters work simultaneously in the cash section of

AB Bank Limited.

3.5.1 Cash received procedure


The work of cash receive counter is examining deposit slips. Depositor used the prescribed

deposit slip supplied by the bank for deposit cash, clearing cheque, draft, pay order etc. In all

types of deposit the teller must check the following matters:

The slip has been properly filled up.

The title of the account and its number.

The amounts in figure and in words are same.

Date of instrument.

The cash amount or the document amount matches with the deposit slip that is

deposited into the bank.

After checking all these thins the teller will accept cash, cheque, draft, pay order etc. against

the deposit slip. The teller will place the cash into the cash drawer and make a seal on the

deposit slip referring “Cash Received” and place to another authorized officer for signature

then return a copy of the slip and preserve a copy as voucher for bank purpose. Other then the

cash matter all the procedures are some the change is the other document is place to the

remittance department for clearing the document.

3.5.2 Cash Payment Procedures

Precaution

In order to safe guard the position the paying banker has to observe the following precaution

before honoring a cheque:

A cheque must be looked whether it is an opened or cross cheque.

The paying officer should see whether the cheque is drawn on this/her branch if the

bank is not online.

He must see if the cheque is post dated or predated. Precaution is must not pay any

post dated cheque.

The officer must carefully see the apparent tenor of the cheque. It is mutilated or

materially altered then the officer must not be honoring it.

The officer must compare the signature of the cheque with signature preserve for the

particular account.

The officer must verify the regularity of the endorsement.49


The officer may allow overdue against a cheque if prior arrangement is done with

bank.

After verifying the above mentioned things the officer passes it to computer section for more

verification. After that it is passed to the cash counter to make payment. By butting “Pay

Cash” seal on the cheque. Then the officer makes payment to the concern person whom

places the cheque on the counter of the bank. Canceling is must to make payment for cheques.

More then one canceling is required depending on the amount of the cheque.

3.6 Dishonor of Cheque

AB bank can dishonor a cheque in the following reasons:

Insufficient fund

Payment shopped by drawer.

Alteration required drawer signature.

Affect no clear in the cheque.

Exceed arrangement in cheque.

Full cover not received.

Payee’s endorsement irregular/illegible/required.

Drawer signature different and required.

Cheque is post dated/mutilated/out of date.

Crossed cheque must be presented through a bank.

Clearing stamp required cancellation.

Cheque crossed “Account Payee Only”

Collecting bank’s discharge irregular/required.

3.7 Deposit Section

People can ensure safety of their money and easy to collect their deposited money from any

where of the country by uses on-line banking. There are many type of deposit at AB Bank

Ltd. Those are given below:

Current & Short term deposit Account (CD)


Saving Account (SB)

Fixed Deposit Account (FDR)

Monthly Saving Deposit (MSDS)

Double Deposit (DDS)

Special Term Deposit (STD)

Current & Short term deposit Account (CD):

Current Account & short team mostly prefer by businessmen for their frequently transaction

with in day. This account balance most change frequently than other types of account because

customer can withdraw and deposit as many times they wish in the daily banking hours. There

are some steps that customers follow to open a Current & Short term deposit Account (CD)

with AB Bank Ltd. that are givens bellows:

ABBL Current & Short term deposit Account (CD) meets the needs of individual and

commercial customers with their attractive benefits

Minimum balance: TK-10000/-

ABBL Current & Short term deposit Account (CD) account maintenance charge for

every six month is TK.300/-

Account closing charge is TK.300+ VAT 15%

Withdrawal of money is permitted through the leaves of the cheque book issued by the

bank in any branch.

Customer Benefits:

Cheque book facility.

Collect foreign remittance through Western Union money transfers.

Online facility to transfer of any amount of fund to any branch with some charge.

Deposit other bank cheques through clearing house.

Opportunity to apply for safe deposit locker services.

Saving Account (SB):

Retail customers always prefer saving account those who transaction amount less than current

account. In Islampur branch most businessman open saving account for their family members.

There are some rules and regulations to open a saving account are as follows:


Any person or persons of more than 18 years having sound mind can open and operate

this account singly and jointly.

Minimum initial deposit is TK.5000/-

Provide interest at the rate @7% per month.

Maintenance charge for every six month is TK.250/-

Withdrawal cannot be twice TK.20000/- in a month.

Fixed Deposit Account provide higher rate of return and that types of prefer businessman to

save money for future investment in their business. ABBL provide Loan against such types of

FDR.

Monthly Saving Deposit (MSDS):

AB Bank introduces a new Monthly Saving Deposit scheme “AMAR SHOPNO” for the

segment of the population who seek an assured monthly earning. This is help to build peoples

fortune and found their future, one step at a time. This time saving deposit scheme that

provides individuals to create a saving pool, which allows them, access to a substantial

amount at the end of tenure to materialize their dreams.

Under this plan one can maintain accounts with deposits ranging from TK.500.00 and it

multiple to a maximum of TK.5000.00 per month per account or in multiple accounts. The

tenure can be of either 5 or 10 years.

Term and condition of a MSDS Account:

Account shall come into effect from the 1st week of the month. Account may be

opened any day of the month in which case the effect will be from subsequent month.

Monthly deposit has to be within first 10 days of the month

A person can maintain multiple accounts for different amount of deposits at any

branch

Depositor can pay installments through any branch of the bank by paying a normal

service charge.

Loan may be allowed up to 75% of the deposit amount against lien/ pledge of the

same account. (Minimum loan amount shall not be less than tk.15,000/-)


Standing including can be given by the depositors to the branch concerned to pay

regular installment from his/ her CD/SB account maintained with the branch through

payment of Tk. 10.00 service charge per transaction. Clause 6 shall also apply.

A Fee of Tk.5.00 will be charged along with the installment for late deposit on every

Tk.500/-.

Double Deposit Scheme (DDS):

Double Deposit can only open in the personal name. ABBL offer only 6 (six) years duration

double deposit scheme for their customer. The limit of deposit is 100000 to above.

Special Term Deposit (STD):

This is the special term deposit for ABBL customers. These types of account require more

balance than any types of account to get interest at the rate of 5% to 7%.

3.8 Financial Control Department (FCD)/ Account Section

This is a very much crucial department for each branch of a commercial bank. Records of all

the transactions of every department are kept here as well as with other respective branches.

FCD verifies all financial amounts and contents of transaction. If any discrepancy arises

regarding any transaction this department report to the concern department.

Role of FCD

Accounts department plays a vital role of commercial banking. In private banking sector

Accounts Department / FCD of AB Bank Limited performs its task properly. The activities of

FCD are as follows:

1. Recording the transactions in the cashbook.

2. Recording the transactions in general & subsidiary ledger.

3. Preparing the daily position of the branch comprising of deposit & cash.

4. Preparing the daily statement of affairs showing assets & liabilities of the Branch as

per General Ledger & Subsidiary Leger Separately.


5. Making payment of all expenses of the branch.

6. Recording inter branch fund transfer & providing accounting treatment in this regard.

7. Preparing the monthly salary statements for the employees.

8. Preparing the weekly position of the branch which sent to the Head office to maintain

“Cash Reserve Requirement” (C.R.R).

9. Preparing the monthly position of the branch which is sent to the Head Office to

maintain “ Statutory Liquid Requirement (S.L.R)

10. Make Charges for different types of duties.

11. Preparing the budget for the branch by fixing the target regarding profit & deposit so

as to take necessary steps to generate & mobilize deposit.

12. Checking of Transaction list.

13. Recording of the Vouchers in the Voucher Register.

14. Packing the Correct voucher according to the debit voucher & credit voucher.


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