report on customer satisfaction-final

8/3/2019 Report on Customer Satisfaction-Final

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1. Introduction:

1.1 Origin of the report:

This report is originated as a partial fulfillment of the training on Applied

Marketing Research Methodology. The report titled Measuring Customers

Perceived Service Quality of Banking Service and Customer Satisfaction:

From the Context of Prime Bank Ltd.The report is submitted to honorable

faculty Mr. Fazlul Haque Shah, University of Dhaka on November 27, 2011.

1.2 Background of the problem:

Customer Satisfaction has become an important dimension for performance

measurement particularly for banking and finance industry. As most banks

and finance organizations offer similar products and services, improving

customer satisfaction and loyalty is the most important factor in maintaining

as well as increasing market share for these organizations. The purpose of

the paper is to identify Customer perceived service quality of Banking

Service and Customer satisfaction: From the context of Prime Bank Limited.

1.3. Objectives:

The objectives of the study are as follows:

To identify the critical factors of service quality in the banking sector

in Bangladesh To identify the critical factors of customer loyalty in the banking

To identify the interrelationships between service quality, customer

satisfaction and customer loyalty in the retail banking sector and to

identify the benefits of this relationships.


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To understand how PBL uses their policies to create customer loyalty.

To understand the different functions of banking system, various

services provided by bank, and changes in these functions and

services.

To know all the banking related information to gain knowledge about

banking jobs and also for the real life needs.

To find the services it provides to the customers.

To understand the on-line banking system and at the same time

different types of on-line posting.

To know the process that PBL uses to build long-term relationship with

its customers.

To present some recommendations, from my point of view that helps

PBL to make more competitive places in the banking industry.

1.4 Scope:

The report is concerned with the Customers Perceived Service Quality of Banking

Service and Customer Satisfaction: From the Context of Prime Bank Ltd. Prime

Bank Limited is one of the new generation banks in Bangladesh. The reportcovers the organizational structure; background, functions and the

performance of the bank; so this report covers all the activities and

performance that the bank offers to the customers to attract them.

This Report Directly Focuses On:

The banking system of Bangladesh

The history of Prime Bank Ltd.

Different Deposits and Credit schemes of PBLto attract customers

Various customer services of PBL

Current position of PBL in the Banking Industryand evaluation of performance.

1.5 Methodology:


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The method of data analysis was divided into two parts. First We gather

opinions of the customers by interviewing with a questionnaire from the

different branches of Prime Bank Ltd. Then We have presented the data of

PBL from its annual reports and analyzed it to find its performance from

year to year. So We have presented and analyzed the data in two ways:

Customer services of PBL through different branches.

Performance of PBL in various sectors.

For collaborating the data and information collected through primary and

secondary sources. We have also used quantitative & qualitative method

that gives a view about Banking System of our country especially Prime Bank

Ltd. To gather information we had to visit PBL main branch and also some

website especially PBLs website.

The sources of data or information are divided into two parts that are;

Primary Data

Secondary Data

Primary Data:

In the primary source, data are collected directly from interviewing the

customers of this Bank, asking questions to officials and staffs and other

related personnel. According to direct question, we have made a set ofquestions to find the responses of the customers by the factors that are

extremely related with Banking Performance and customer service.

The major primary sources are

Face to Face conversation with the respective customers.

Interviewing officers and staffs.

Sharing practical knowledge of officials.

Relevant file study provided by the officers concerned.

Secondary Data:

In the secondary source, different textbooks and journal, brochuresrelating to the theoretical framework of the report have been applied.Moreover, annual reports, company projects profile, related preserveddata, financial statements had been collected from the Prime Bank Ltd.


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The major secondary sources are

Annual Report of PBL

Audit Reports

Website

Relevant books, Research papers, Newspapers and Journals.

Internet and various study selected reports.

1.6. Limitations of the Study:

It is well known to all the banking sector is too much sensitive and the

banking market is comparative nowadays. So all of the banking data and

information are confidential for writing this report, data was not available.

Interviewees do not disclose the accurate figures and facts about theirbranch.

We have faced the following problems that may be terms as the limitations

or shortcoming of the study. However we have faced a lot of problem,

though I have overcome it. They are

Budgeted times for the study:

The first obstruct is time itself. Due to the time limitation, the scope and

dimension of the study has been curtailed. As the limit was assigned forsubmitting the report was very short, it was not possible to spend sufficient

time for the study.

Data insufficiency:

It was very difficult to collect data, which is very essential for interpretation,

because the PBL is one of the fast growing commercial bank and for this

reason the personnel and staffs are very busy have not enough time to

supply our topic related.

Poor library facility:


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There is no proper storage facility in the branch to store banking related

books, journals, magazines, case study etc. that might be help me.

Time Limitation

Due to time limitation many of aspects could not be discussed in the present

report.

Prime Bank at a glance:

2.1 Introduction

In the backdrop of economic liberalization and financial sector reforms, a

group of highly successful local entrepreneurs conceived an idea of floating a

commercial Bank with different outlook. For them, it was competence,

excellence and consistent delivery of reliable service with superior value

products. Accordingly, Prime Bank Limited was created and commencement

of business started on 17th April 1995. The sponsors are reputed personalities

in the field of trade and commerce and their stake ranges from shipping to

textile and finance to energy etc.

As a fully licensed commercial Bank, Prime Bank Ltd. is being managed by a

highly professional and dedicated team with long experience in Banking.

They constantly focus on understanding and anticipating customer needs. As

the Banking scenario undergoes changes so is the Bank and it repositions

itself in the changed market condition.

Prime Bank Limited has already made significant progress within a very short

period of its existence. The Bank has been graded as a top class Bank in the

country through internationally accepted CAMEL rating. The Bank has

already occupied an enviable position among its competitors after achieving

success in all areas of business operation.


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Prime Bank Ltd. offers all kinds of Commercial, Corporate and Personal

Banking services covering all segments of society within the framework of

Banking Company Act and rules and regulations laid down by Bangladesh

Bank. Diversification of products and services include Corporate Banking,

Retail Banking and Consumer Banking right from industry to agriculture, and

real state to software.

Prime Bank Ltd., since its beginning has attached more importance in

technology integration. In order to retain competitive edge, investment in

technology is always a top agenda and under constant focus. Keeping the

network within a reasonable limit, Banks strategy is to serve the customers

through capacity building across multi delivery channels. Banks past

performance gives an indication of their strength. The Bank is better placed

and poised to take their customers through fast changing times and enable

them compete more effectively in the market they operate.

2.2. Objective:

The objectives of the Prime Bank Limited are specific and targeted to its

vision and to position itself in the mindset of the people as a bank with

difference. The objectives of the Prime Bank Limited are as follows:

To mobilize the savings and channeling it out as loan or advance as the

company approve.

To establish, maintain, carry on, transact and undertake all kinds of

investment and financial business including underwriting, managing and

Distributing the issue of stocks, debentures, and other securities. To finance the international trade both in import and export.

To carry on the foreign exchange business, including buying and selling of

foreign currency, travelers cheques issuing, international credit card

issuance etc.


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To develop the standard of living of the limited income group by providing

Consumer Credit.

To finance the industry, trade and commerce in both the conventional

way and by offering customer friendly credit service.

To encourage the new entrepreneurs for investment and thus to develop

the countrys industry sector and contribute to the economic

development.

2.3 Vision:To be the best Private Commercial Bank in Bangladesh in terms of efficiency,

capital adequacy, asset quality, sound management and profitability having

strong liquidity.

2.4 Mission:

To build Prime Bank Limited into an efficient, market driven, customer

focused institution with good corporate governance structure. Continuous

improvement in our business policies and procedures, cost reductions

through integration of technology at all levels.

2.5. Slogan:

A bank with a difference.

2.6. Strategic Priorities:

To have sustained growth, broaden and improve range of products and

service with the aim to add increased value to shareholders invest and offer

highest possible benefits to our customer.

2.7. Core Values:

For our Customers:


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To become more caring bank by providing the most courteous and efficient

service in every area of our business.

For our employees:

By promoting the well-being of the members of the staff.

For our Shareholders:

By ensuring fair return on their investment through generating stable

profit.

For our Community

By assuming our role as a special responsibility corporate entity in a

tangible manner through close adherence to national policies andobjectives.

2.8. Awards & Recognition

Secured 1st position in National ICAB Award for Published Accounts &Reports for seven consecutive years.

Received SAFA Merit Award for best presented Accounts for threeconsecutive years.

2.9. Branch Network:

Prime Bank Limited is a fast growing commercial bank in our country. The

said bank has established a good operating network throughout the country.

It has 97 branches throughout the country. Prime Bank Limited is operating

branches on both conventional interest based banking and Islamic Shariahprinciple based banking. The Islamic Banking operations are completely

separated from the conventional Banking. It carries out all the banking

activities through its branches in Bangladesh out of the above four branches

of the Bank are running under Islamic Shariah, the modus operandi of which

is substantially different from other branches run on commercial basis.


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Managerial Hierarchy of PBL

Chairman

Board of Directors

Executive Committee

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

Senior Assistant Vice President

Assistant Vice President

First Assistant Vice President

Senior Executive Officer

Executive Officer

Senior Officer

Management Trainee

Officer

Junior Officer

Trainee Assistant

Top

Executive Level

Management

Mid Level

Management

Junior Level

Management


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2.10. Brief description of business activities and

PRODUCTS & Services

Prime Bank Limited launched several financial products and services since its

inception. Among them is Contributory Savings Scheme, Monthly Benefit

Deposit Scheme. All of these have received wide acceptance among the

people.

Business Activities of PBL

The Principal activities of the bank were banking and related businesses. Thebanking businesses included deposits taking, extending credit to corporate

organization, retail and small & medium enterprises, trade financing, project

financing, international credit card etc. Prime Bank Limited provides a full

range of products and services to its customers, some of which are

mentioned below with a brief overview of the major business activities.

Retail Banking:

As a part of risk diversification strategy PBL expended the lending activities

in this sector during 2010. The growth rate of PBLs consumer financing was

38% during this year. The loan schemes offered by the bank include.

Swapnaneer HomeLoan

Swapnashaj Home Loan

Swapnapuron HomeLoan Abash Home Loan

Car Loan Any Purpose Loan

CNG Conversion Loan Doctor's Loan

Marriage Loan Travel Loan
http://www.primebank.com.bd/index.php/home/SWAPNA_NEER_Home_Loanhttp://www.primebank.com.bd/index.php/home/SWAPNA_NEER_Home_Loanhttp://www.primebank.com.bd/index.php/home/SWAPNASHAJ_Home_Loanhttp://www.primebank.com.bd/index.php/home/SWAPNAPURON_Home_Loanhttp://www.primebank.com.bd/index.php/home/SWAPNAPURON_Home_Loanhttp://www.primebank.com.bd/index.php/home/ABASH_Home_Loanhttp://www.primebank.com.bd/index.php/home/Car_Loanhttp://www.primebank.com.bd/index.php/home/Any_Purpose_Loanhttp://www.primebank.com.bd/index.php/home/CNG_Conversion_Loanhttp://www.primebank.com.bd/index.php/home/Doctors_Loanhttp://www.primebank.com.bd/index.php/home/Marriage_Loanhttp://www.primebank.com.bd/index.php/home/Travel_Loanhttp://www.primebank.com.bd/index.php/home/SWAPNASHAJ_Home_Loanhttp://www.primebank.com.bd/index.php/home/SWAPNAPURON_Home_Loanhttp://www.primebank.com.bd/index.php/home/SWAPNAPURON_Home_Loanhttp://www.primebank.com.bd/index.php/home/ABASH_Home_Loanhttp://www.primebank.com.bd/index.php/home/Car_Loanhttp://www.primebank.com.bd/index.php/home/Any_Purpose_Loanhttp://www.primebank.com.bd/index.php/home/CNG_Conversion_Loanhttp://www.primebank.com.bd/index.php/home/Doctors_Loanhttp://www.primebank.com.bd/index.php/home/Marriage_Loanhttp://www.primebank.com.bd/index.php/home/Travel_Loanhttp://www.primebank.com.bd/index.php/home/SWAPNA_NEER_Home_Loanhttp://www.primebank.com.bd/index.php/home/SWAPNA_NEER_Home_Loan


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Household DurablesLoan

Hospitalization Loan

Education Loan Loan Against Salary

SME Lending:

Job creation is essential and it must come from Small and Medium Enterprise

that will ultimately dominate the private sector. During 2010 banks Strategy

was focused on customer convenience. The Bank provided working capital

loans to suppliers or dealers of large corporations or clusters of small

exporters of non-traditional items.

Corporate Credit:

PBLs strategy is to provide comprehensive service to the clients of this

segment who are large and medium size corporate customers with expertise

in trade finance and related services. Besides trade finance bank areproviding working capital finance, project finance and arranging syndication

for our Prime Bank Limited corporate clients. Syndication and structured

Finance Unit of the Bank strengthened its footstep in the consortium

financial market and arranged a number of syndication deals for its

corporate clients.

Islamic Banking:

For the development of Islamic Banking Business, 2010 was also a

commendable year. It has been observed that compliance of Shariah has

improved in 2010 as compared to the preceding years. According to their

advice Islamic Banking operation of the bank has been separated from the
http://www.primebank.com.bd/index.php/home/Household_Durables_Loanhttp://www.primebank.com.bd/index.php/home/Household_Durables_Loanhttp://www.primebank.com.bd/index.php/home/Hospitalization_Loanhttp://www.primebank.com.bd/index.php/home/Education_Loanhttp://www.primebank.com.bd/index.php/home/Salary_Loanhttp://www.primebank.com.bd/index.php/home/Household_Durables_Loanhttp://www.primebank.com.bd/index.php/home/Household_Durables_Loanhttp://www.primebank.com.bd/index.php/home/Hospitalization_Loanhttp://www.primebank.com.bd/index.php/home/Education_Loanhttp://www.primebank.com.bd/index.php/home/Salary_Loan


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operation of Conventional Banking and shown separately in the banks

financial statement.

Credit Card:

In the year of 2005, Prime Bank Ltd has launched VISA. Before that PBL started its

credit card operation in 1999 by introducing Master Card. Now PBL has become the

first local Bank of the country to achieve principal membership of both the

worldwide accepted plastic money network i.e. MasterCard Gold Credit Card, Visa

Gold Credit Card, and International Credit Card.

PBL has redesigned the credit card facility by providing the incentive of Free

Life Insurance Coverage for their valued cardholders to mitigate the

financial risk.

Custodial Service:

PBL equator fulfills its strategic commitment to provide custody and clearing

services. Equators focuses are on the following:

Commitment to quality

Dedication to customer needs

Sustained investment in people and systems

International Trade Management: This division is operational throughout the

group and PBLs core strength is trade finance and services. With an


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experience, Prime Bank has developed knowledge of trade finance, which is

world class. Principle services to importers include imports letter of credit,

import bills for collection and back to back letters of credit facilities. Services

provide to exporters include export letters of credit, direct export bills,

bonds, and guarantees.

Cash Management:

Prime Bank recognizes the importance of cash management to corporate

and financial institutional customers, and offers a comprehensive range of

services and liquidity management.

Institutional Banking:

Prime Bank Limited provides a wide range of services to institutional clients,

commercial, merchant and central banks; brokers and dealers; insurance

companies; funds and managers, and others. It provides relationship

managers who are close to their customers and speak local language. This

wide network of institutional banking facilities includes transaction,

introduction, problem solving and renders advice and guidelines on local

trading condition.

Treasury:

Treasury operations had been consideration as an important avenue forincome generation purpose within Head Office. In fact, in the past, income

from treasury operation was quite sizable and significant to the total income

generated by the bank. The treasury division publishes daily and weekly

currency newsletters, which provide analyses of currency trends and related

issues. Seminars and workshops are conducted for customers from time to


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time on foreign exchange related topics. Prime Bank is one of the first local

banks in Bangladesh to integrate treasury dealings of local money market

and foreign currency under one Treasury umbrella. The bank has handled

significant volumes of treasury over the last several years. Prime Bank's

Dealing Room is connected with automated Reuters Terminal facility thus

enabling the bank to provide forward/future facilities to its corporate clients

at a very competitive rate.

Merchant Banking:

The Banks operation in this sector was limited to Underwriting, Portfolio

Management and Banker to the Issue functions. The compulsory requirement

for opening BO account for share trading has increased the demand foropening BO account.

Online Branch Banking:

The bank has set up a Wide Area Network (WAN) across the country to

provide online branch banking facility to its valued clients. Under this

scheme, clients of any branch shall be able to do banking transaction at

other branches of the bank.

Under this system a client will be able to do following type of transactions:

Cash withdrawal from his/her account at any branch of the bank.

Cash deposit in his/her account at any branch of the bank irrespective of

the location.

Cash deposit in others account at any branch of the bank irrespective

of the location.

Transfer of money from his/her account with any branch of the bank.

At present all branches are under online. Clients can easily deposit and

withdraw money from those online branches in a moment.

SWIFT:


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Prime Bank Limited is one of the first few Bangladeshi banks, which have

become member of SWIFT (Society for Worldwide Inter bank Financial

Telecommunication) in 1999. SWIFT is a member owned co-operative, which

provides a fast and accurate communication network for financial

transactions such as Letters of Credit, Fund Transfer etc. By becoming a

member of SWIFT, the bank has opened up possibilities for uninterrupted

connectivity with over 5,700 user institutions in 150 countries around the

world.

Information Technology in Banking Operation:

Prime Bank Limited adopted automation in banking operation from the first

day of its operation. The main objective of this automation is to provide

efficient and prompt services to the bank's clients. At present, all the

branches of the bank are computerized. At branch level, the bank is using

server based multi-user software under UNIX operating system to provide

best security of automation.

Profitability and Shareholder Satisfaction:

The bank had been one of the most profitable in the banking sector. The

bank's return on assets (ROA) was 2.37% in the year 2010. Even though the

capital market of the country has been suffering over the last few years, the

good performance of Prime Bank made sure that the banks share price

remained in a respectable position.

Products and Services of PBL

Prime Bank Limited offers various kinds of deposit products and loan

schemes. The bank also has highly qualified professional staff members who

have the capability to manage and meet all the requirements of the bank.

Every account is assigned to an account manager who personally takes care


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of it and is available for discussion and inquiries, whether one writes,

telephones or calls.

Deposit Schemes

Fixed Deposit Scheme

Contributory Saving Scheme

Monthly Benefit Deposit Scheme

Special Notice Deposit

Education Savings Scheme

Prime Bank Monetary Scheme

Savings Deposit Account

Multi Currency Account

Foreign Currency Deposit Account

Non Resident Taka Account

NFCD (Non Resident Foreign Currency Deposit Account)

NITA (Non Resident Investors Taka Account .

Loan Schemes:


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General Credit Unit (GCU)

Short-Term Finance

Long-Term Finance

Real Estate Finance

Import Finance/Trade Finance

Work OrderFinancing/Construction Business

Export Finance Unit

Project Loan

Working capital

- Back-to-Back L/C

- PC/Overdraft/ECC

- L/C & LTR

- Cash Credit (Hypothecation):

- SOD (CI)

Structured Finance Unit

Project Finance

Acquisition Finance

Securitization

Advisory

Investment Procedure

Lease Finance Unit
http://www.primebank.com.bd/index.php/home/General_credit_unithttp://www.primebank.com.bd/index.php/home/General_credit_unithttp://www.primebank.com.bd/index.php/home/General_credit_unithttp://www.primebank.com.bd/index.php/home/General_credit_unithttp://www.primebank.com.bd/index.php/home/General_credit_unithttp://www.primebank.com.bd/index.php/home/General_credit_unithttp://www.primebank.com.bd/index.php/home/General_credit_unithttp://www.primebank.com.bd/index.php/home/Export_Finance_unithttp://www.primebank.com.bd/index.php/home/Export_Finance_unithttp://www.primebank.com.bd/index.php/home/Export_Finance_unithttp://www.primebank.com.bd/index.php/home/Structured_Finance_unithttp://www.primebank.com.bd/index.php/home/Structured_Finance_unithttp://www.primebank.com.bd/index.php/home/Structured_Finance_unithttp://www.primebank.com.bd/index.php/home/Structured_Finance_unithttp://www.primebank.com.bd/index.php/home/Structured_Finance_unithttp://www.primebank.com.bd/index.php/home/Structured_Finance_unithttp://www.primebank.com.bd/index.php/home/Lease_finance_unithttp://www.primebank.com.bd/index.php/home/General_credit_unithttp://www.primebank.com.bd/index.php/home/General_credit_unithttp://www.primebank.com.bd/index.php/home/General_credit_unithttp://www.primebank.com.bd/index.php/home/General_credit_unithttp://www.primebank.com.bd/index.php/home/General_credit_unithttp://www.primebank.com.bd/index.php/home/General_credit_unithttp://www.primebank.com.bd/index.php/home/General_credit_unithttp://www.primebank.com.bd/index.php/home/Export_Finance_unithttp://www.primebank.com.bd/index.php/home/Export_Finance_unithttp://www.primebank.com.bd/index.php/home/Export_Finance_unithttp://www.primebank.com.bd/index.php/home/Structured_Finance_unithttp://www.primebank.com.bd/index.php/home/Structured_Finance_unithttp://www.primebank.com.bd/index.php/home/Structured_Finance_unithttp://www.primebank.com.bd/index.php/home/Structured_Finance_unithttp://www.primebank.com.bd/index.php/home/Structured_Finance_unithttp://www.primebank.com.bd/index.php/home/Structured_Finance_unithttp://www.primebank.com.bd/index.php/home/Lease_finance_unit


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House Building Loan & Apartment Loan Scheme:

Advance against Shares

Custodial Services for investors (both individual & institutional) investing inthrough Stock exchange

One stop services for payment of utility bills.

Credit card

Other Products & Services

Online Banking Service

SWIFT Service

Letter of Credit Delivery Service

Locker Service

3.01 Functional Structure:

3.01.01. General Service Division (GSD):

The functions of GSD are classified as Establishment and General Banking

(GB).

(a) Establishment:

The main function of GSD is to procure and supply the tangible goods to

branches of PBL. Those are:

Tangible functions of opening a branch, for example, interior

decoration, making lease agreement


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Print all security papers and bank stationeries, forms, registers and

distribute them to the branches

Purchase and distribution of banks furniture and fixtures

Find out the demand of equipment from the branches and divisionsand arrange the purchase and delivery of them to the branches

concerned

Install and maintain different facilities in different branches.

(b) General Banking:

General department performs the majority functions of a bank. It is the core

department of any bank. The activities of GB of PBL are mainly divided into

the following categories:

Account opening section

Local remittance section

Online branch banking section

Deposit scheme section

Clearing section

Collection section

Cash section

Accounts section

All of the above activities of GB are discussed elaborately in the next chapter

which is the core chapter of this report.

3.02. Head Office Accounts (HOA):

It deals with the Head Office transactions with banks and its different

branches and these are recorded under the following headings:

Income and expenditure positioning: It maintains all the income and

expenditure information


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Cash section: It handles cash expenditure for office operations and

payments.

Bills section: It deals with inland bill transactions.

Salary and wages section: Salary and wages of head office executivesare given from this account.

Provident fund: Employee provident fund are maintained here.

3.03. Consolidation of Branch Accounts (CBA):

All branches of PBL have to periodically send their income and expenditure,profit and loss accounts to head office. This division consolidates all these

information and makes statements to submit to Bangladesh Bank.

Credit Division (CD)

Bank is a financial intermediary whose prime function is to move scarce

resources in the form of credit from savers to those who borrow for

consumption and investment. The word credit is derived from the Latin

word credere, which means to trust. The fundamental nature of credit is

that an element of trust exists between buyer and seller-whether of goods or

money. In a modern industrial society Banks are uniquely important because

of their ability to create money. Lending comprises a very large portion of a

Banks total assets and forms the backbone of the Bank and interest on

lending constitutes the highest proportion of income of a Bank. As such

credit quality remains the prime indicator of its commercial success.

Unsound credit reduces the ability of a Bank to provide credit towards

profitable borrowers and undermine liquidity and solvency. Therefore lending

is very important for the profitability and success of a Bank.

When a bank advances a loan, it does not pay the amount in cash. But it

opens an account in his name and allows him to withdraw the required


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amount by cheque. Banks provide credit facilities to businessmen by way of

loans and advances, overdraft and cash credit. When a loan is granted or

overdraft is sanctioned, the amount of loan or overdraft is entered in the

account of the customer and he is allowed to draw a cheques upto the

amount agreed upon. Thus the bank creates a deposit in the name of the

borrower. Basically credit is the function by which people can perform their

job by depositing and lending money from the bank with an implied interest

rate and bank performs here as a middleman. Banks create money and

credit. It happens in two ways. First, when a customer is granted loan, he has

to sign a promissory note and receive in turn, a banks demand deposit, or

cash. The promissory note does not act as money but it receives money and

can readily spend almost everywhere. Thus it creates credit. Second, the

entire systems of banks also create money as the deposits generated by

lending flow from bank to bank. By law, each bank must set aside a

fractional reserve behind each deposit it receives and the remaining excess

can be loaned out. No single bank can lend out more than its excess

reserves, the entire banking system can create a multiple volume of deposit

money through credit creation.

Types of Bank Credit

Modern banking operations touch almost every sphere of economic activity.

The extension of bank credit is necessary for expansion of business

operations. Bank credit is a catalyst for bringing about economic

development. Without adequate finance there can be no growth or

maintenance of a stable output. Bank lending is important to the economy,

for it makes possible the financing of agricultural, commercial and industrial

activities of a nation. The credit facilities are generally allowed by the bank

may be in two broad categories. They are:

(1) Funded Facilities:


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Funded facilities can also be divided into the following categories:

Loans:

i) Short term : Up to 12 months.

ii) Medium term: More than 12 and up to 36 months.

iii) Long term : More than 36 months.

Overdrafts:

# Against hypothecation of goods/stock

# Against pledge of goods/stock

# Against any other permissible securities.

Other advances:

# Against import bills.

# Against imported merchandise.

# Against Trust receipts (T/R).

# Against Export Bills Purchased/Discounted

# Against Work order

# Against other securities.

(2) Non-Funded Facilities:

Letter of credit (L/C)

Letter of Guarantee (L/G)

3.04. Types of Advances Offered by PBL:


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Secured Advances:

A. The following type of secured advances are allowed against tangible

securities subject to margin restrictions:

Loan (General)

House Building Loan

Other Loans to Staff

Cash Credit (Hypothecation)

Cash Credit (Pledge)

Hire-Purchase

Lease Financing

Consumers Credit

SOD (Export)

SOD (Others)

PAD

LIM

LTR

IBP

Packing Credit

FDBP (Foreign)

FDBP (Local)

FBP

B. These advances are allowed against the following securities:

Shares of various Companies approved by Head Office from time totime and listed in the Stock Exchange.

Term Deposit Receipts issued by any Branch of our Bank.

Lien on balance in Savings A/C, Current A/C. and other Savings

Schemes

Government Promissory Notes.


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Various Sanchaya Patras

Surrender value of Life Insurance Policies.

WEDB

Assignment of bills against work orders/supply orders and receivables

Stock of goods in trade (Permissible goods only) pledged or

hypothecated.

Hypothecation of power driven vehicles or watercrafts.

Hypothecation of capital Machineries and equipments.

Immovable Property.

Imported merchandise - pledged or hypothecated.

Trust Receipts.

Import Bills (Pads)

Bills Purchased

Scheduled Bank/Insurance Guarantees

Export Bills

Inland Bills.

Personal Guarantee

Corporate Guarantee

Unsecured Advances:

An unsecured or clean Advance is one, which is granted to a constituent

without obtaining any security subject to restrictions imposed from time to

time by Bangladesh Bank or any competent authority. In such case only

charge documents are held.

A. Unsecured Advances mean and include:

i) Clean Overdrafts, and

ii) Clean Loans.


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B.

I. A customer should not ordinarily be permitted to overdraw his account

without security. However, an unsecured facility may be allowed in

exceptional circumstances, only for a short period, with definite

repayment arrangement, subject to restrictions imposed by

Bangladesh Bank or any other competent authority, with prior approval

of Head Office, to a customer on the basis of his personal credit

worthiness, standing and reliability.

II. It shall not be granted unless the Sanctioning Authority has full

confidence in the ability and reputation of the customer to repay it, on

demand, or at its maturity if it is a loan. Definite arrangements for

repayment, whether by installments or otherwise, must, as a rule, be

made.

3.05. Procedure of Giving Advance:

1. The borrower has to apply to PBL for loan by filling up of a specificapplication form.

2. After receiving loan application form, PBL sends a letter to

Bangladesh Bank for obtaining a report. This report is called CIB (Credit

Information Bureau) report. Giving of this report is essential if the loan

amount exceeds Tk. 50 lac. The purpose of t6his report is to being informed

that whether the borrower has taken from any other bank; if yes, then

whether these loans are classified or regular.

3. After receiving CIB report, if the bank thinks that the prospective

borrower will be a good borrower, then the bank will scrutinize the

documents. In this stage, the bank will look whether the documents are

properly filled up and signed.


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4. Then comes processing stage. In this stage, the bank will prepare a

proposal. A proposal contains all relevant information (e.g. name of the

client, type of the loan, amount of the loan, period of giving loan, security,

date of application, financial data, etc.) Branch incumbent (Local Office)

has the discretionary power to sanction loan (SOD) upto Tk.25 lac against

financial obligations by informing head office. But in that case, the branch

manager has to give attention on the following matters:

a) The interest of the loan must not be less than 14.5%, and

b) The borrower must maintain 10% margin.

Except this case, the branch manager has to send a proposal to the head

office. Head office will prepare a minute and submit it before the executive

committee. The minute has to be passed in the executive committee (EC)

under certain cases.

After passing the minute, it will be sent to the Bangladesh Bank for approval

in the following cases:

a) If the proposal limit exceeds 15% of banks equity.

b) If the proposal limit against cash collateral securities

exceeds 25% of the banks equity.

After getting the proposal it will again come to the head office.

5. After the processing stage, a sanction advice will be prepared in

favor of the client.

6. After the sanction advice, bank will collect necessary documents(charge documents).

7. After receiving all the documents, the bank will disburse the loan

to the borrowers. For withdrawing the loan amount, customer creates a

current account and the loan amount is transferred to this account.


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3.06. Lending Principles:

For sound lending the following points should be kept in view:

Judicious selection of Customers

Purpose

Safety

Security

Liquidity

Adequate return (Profitability)

Supervision

National/Social interest Credit Control Policy of Bangladesh Bank

It is to be always remembered that the Bank is the custodian of public

money and as such we must be judicious, careful and selective while lending

out the depositors money to ensure timely recovery. The deciding factors for

recovery of loans are selection of right type of borrowers, end-use of credits

and effective follow-up and proper supervision.

3.07. Processing Of Credit Proposals:

1. A secured credit facility may be allowed to a customer only after getting

a limit sanctioned by the authorized officials.

2. The customer seeking a credit facility against acceptable security must

make an application in banks printed form Request for Credit Limit PF-146

enclosing necessary papers/documents to his nearest Branch of the Bank

where he maintains his operative account.

3. Make a preliminary study of the affairs of the intending borrower by

consulting the followings:

Borrowers application


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Reports in confidence collected through all feasible means

regarding the state of the business of the intending borrower.

Borrowers own mode of dealing

Statement of accounts of the borrower with own and otherBanks

Statement of assets and liabilities

Financial statements for the last 3(three) years

Income Tax statement

Trade and other reports

Arrange an interview with the intending borrower to know on the

following points : Present and future prospect of the customers business

Total investment required in the business

Borrowers stack in the business

Amount of advance required

Experience in the line

Purpose

Period for which the advance is required

Source of repayment

Customers previous Banker

Present liabilities, if any, with other Bank and conduct of

the same

Securities offered

Proposed margin

Type of charge to be created against the proposed security

Terms of repayment

Rate of interest

4. Before finally selecting the borrower, be satisfied that;

The customer possess character, capacity and capital


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The account is remunerative one

Dealing items and primary security of the customer possess the quality

of easy marketability, durability and storability

Collateral security offered possesses the quality of easy marketabilityand is not encumbered and its valuation is judiciously assessed so as

to leave sufficient margin after covering the advance and belongs

preferably to the borrower.

Repayment arrangement is satisfactory

Means, standing and respectability of the applicant and the guarantor

(if any) are satisfactory.

Credit worthiness of the applicant is reasonable

Location of the business is good.

5. If the proposed facility is beyond the delegated business power of the

Branch Manager, the proposal shall be submitted to Credit Division, Head

Office duly recommended in the specified Format.

The following Papers/documents are to be submitted by the Branch

Managers along with the proposals:

Request for Credit limit of customers.

Project Profile / Profile of Business

Copy of Trade License duly attested

Copy of TIN Certificate

Certified copy of Memorandum and Articles of Association, Certificate

of Incorporation, Certificate of commencement of business in case of Public

Ltd. Co., Resolution of Board of Director, Partnership Deed, (where

applicable) Personal Net worth Statement of the

Owner/Director/Partner/Proprietor in Banks Format.


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Valuation Certificate in Banks Format alongwith photograph of

collateral security (land & building with detail particulars on the back duly

authenticated by the Branch Manager.

In case the value of the property offered as security exceed Tk.50.00

lac, the value to be assessed by banks enlisted surveyor and report

thereof to be obtained.

3 years Balance sheet and profit and loss A/C

CIB Enquiry Form duly filled in (For proposal of Tk.10.00 lac and

above)

Lending Risk Analysis for Credit facilities of Tk.50.00 lac and above

Inspection/Visit Report of Factory/Establishment/Business premises of

the customer.

Stock Report duly verified (where applicable)

Credit Report from other Banks.

Indent/Proforma Invoice/Quotation (Where applicable)

Price verification report (where applicable)

Statement of A/C (CD/SB/CC) for the last 12 months. In case the

customer maintaining account with other Bank, Statement of Account forthe last 12 months of the concerned Bank should be furnished.

In case of renewal/enhancement of credit facility, Debit Turnover,

Credit Turnover, highest drawing, lowest drawing, Total income earned,

Detailed position of existing liabilities of the customer i.e. Date of sanction,

Date of expiry, Present outstanding, Remarks, if any.

Declaration of the customer of the name of sister/allied concerns and

liabilities with other Banks, if any, and an undertaking to the effect that

they have no liability beyond those declared.

In case of L/C proposal, detailed performance of L/C during the last

year i.e. No. and date of L/C opened, commodity, L/C value, Date of creation

of PAD, date of retirement, mode of retirement etc.


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Whether the applicant is Shareholder/Director of Prime Bank Ltd. as

per definition of Banking Companies Act.

Financial Analysis to be prepared by the Branch Manager based on

the financial performance of the company which should show trends in

sales/profitability, liquidity, leverage etc. It should also contain an

assessment of the competence and quality of the business management,

the general economic & competitive environment of the borrowers industry

and any other pertinent factors that is relevant for managements credit

decision.

Justification/consideration for the facility.

6. Approval of Limit:

The sanctioning authority on receipt of the proposal shall scrutinize the same

and ensure that:

The proposal contains all pertinent information relating to the proposed

facility and the borrower.

All necessary papers and documents have been submitted.

The proposal has been duly signed by the members of the Branch Credit

Committee including the Manager.

The proposal has been duly recommended.

The proposal does not fall within the existing credit restriction

Minimum margin requirement against the credit facility has been

proposed.

The primary security has got easy marketability, durability and storability


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The value of the property offered as collateral security is judiciously

assessed

The proposal is viable and stands all credit tests

The proposed borrower is not defaulter of any Bank/Financial Institution There is no request from other Bank/Financial institution for not

allowing/stoppage of facility to the prospective borrower

The proposal meets all the provisions/requirement of Bank Companies

Act/Rules of Bangladesh Bank/Other Laws / Rules

Where the proposed accommodation in the form of working capital may

be considered on the project financed by any other Bank including DFI.

Favorable status report and No Objection Certificate (NOC) from the

financing Institution to be obtained.

Where 2nd charge on the fixed and floating assets (in case of a limited

company) or 2nd mortgage on real estate is offered, clearance in respect

of creation of 2nd charge on the property together with confirmation that

documents will be held by them on behalf of the Bank and that they shall

not part with the same without consent of the Bank, is obtained from the

1st mortgagee.

7. Check list of action to be taken by the Branch Manager/Second

Officer/Credit Officer before disbursement of Credit facilities

Acceptance of customers relating to the terms & conditions to be

obtained on the duplicate copy of sanction advice.

They will thoroughly examine and ensure that the subject credit facility

does not contradict any law, rules and regulation of the country,

Bangladesh Bank and Banks credit policy.


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They will obtain NOC from Bank where the customer has existing

liability.

CIB Report on the borrower to be obtained through Head Office.

Lending Risk Analysis as per FSRP Formula in case of credit of Tk.50 lacand above.

No objection certificate of Bangladesh Bank in case the credit facility

exceeds 15% of Capital Funds of the Bank.

Regularization/Adjustment of classified/overdue credit of the

customer/their sister/allied concerns with our Bank/other Banks, if any.

Original Title deed, Bia deed, Khatian, Mutation parcha, uptodate rent

receipt, Municipal Tax receipt, Map, Plan approved by

RAJUK/Municipality, Power of attorney, relay certificate about the

actual physical possession of the property to be mortgaged, valuation

certificate, photograph of the property to be mortgaged with detail

particulars on the back.

Non-encumbrance certificate relating to the property to be mortgaged

from the Banks panel lawyer.

Deed of Mortgage and power of attorney to be drafted and executed

under the supervision of B.L.A.

Lawyers certificate to the effect that proper Registered/Equitable

Mortgage (as the case may be) has been created on the land and

building in favor of the Bank as per the terms & conditions of the

sanction letter.

Registered Power of attorney to be obtained from the borrower

(contractor) as per Head Offices approved specimen assigning the

work order favoring the Bank.


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The power of attorney to be filed with the work order-giving Agency. A

consent letter to be obtained from them that they will issue all cheques

in payment of bills against the work order favoring the Bank A/C the

customer as per the power of attorney.

Storage of pledge goods in Banks godown (as the case may be) under

proper security and the same duly insured.

Insurance Policies covering risks as per sanction terms & conditions.

Charge documents as per sanction letter.

Ostentation of certified copies of Blue Book/Registration Certificate,

Route Permit, Tax Token, Fitness Certificate, Insurance Policy in

respect of vehicles finance.

Procurement of post-dated cheques against installments of loans/Hire-

Purchase/Lease /CCS (as the case may be).

Satisfaction certificate of the lawyer in respect of all documentation

both banking & legal. The Branch Managers should show all the legal &

charge documents to their lawyer & obtains their certificate that

documents have been completed as per sanction terms & are in order

for extending the facility.

Entry has been made in the Safe-in and Safe-out Register and the

documents are preserved under joint custody of the 2nd man/ In-

charge of the Credit Dept./ F. Ex. Dept.

3.08. Securities:

To make the loan secured, charging sufficient security on the credit facilities

is very important. The banker cannot afford to take the risk of non-recoveryof the money lent. PBL charges the following two types of security, -

) Primary security:

These are the security taken by the ownership of the items for

which bank provides the facility.


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) Collateral security:

Collateral securities refer to the securities deposited by the third

party to secure the advance for the borrower in narrow sense. In

wider sense, it denotes any type of security on which the bank has a

personal right of action on the debtor in respect of the advance

Modes of Charging Security:

There are different modes of charging security are exercised by the bank:

11Pledge:

Pledge is the bailment of the goods as security for payment of a debt or

performance of a promise. A pledge may be in respect of goods including

stocks and share as well as documents of title to goods such as railway

receipt, bills of lading, dock warrants etc. duly endorsed in banks favor.

11Hypothecation:

In case of hypothecation, the possession and the ownership of the goods

both rest the borrower. The borrower to the banker creates an equitable

charge on the security. The borrower does this by executing a document

known as Agreement of Hypothecation in favor of the lending bank.

11Lien:

Lien is the right of the banker to retain the goods of the borrower until the

loan is repaid. The bankers lien is general lien. A banker can retain all

securities in his possession till all claims against the concern person are

satisfied.

11Mortgage:

According to section (58) of the Transfer of Property Act,1882 mortgage is

the transfer of an interest in specific immovable property for the purpose of

securing the payment of money advanced or to be advanced by way of loan,


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existing or future debt or the performance of an engagement which may give

rise to a pecuniary liability. In this case the mortgagor does not transfer the

ownership of the specific immovable property to the mortgagee, only

transfers some of his rights as an owner. The banker exercises the equitable

mortgage.

3.09. Documentation:

Documentation can be described as the process or technique of obtaining

the relevant documents. In spite of the fact that banker lends credit to a

borrower after inquiring about the character, capacity and capital of the

borrower, he must obtain proper documents executed from the borrower to

protect him against willful defaults. Moreover, when money is lent against

some security of some assets, the document must be executed in order to

give the banker a legal and binding charge against those assets. Documents

contain the precise terms of granting loans and they serve as important

evidence in the law courts if the circumstances so desire. Thats why all

approval procedure and proper documentation shall be completed prior to

the disbursement of the facilities.

Charge Documents:

Deficiency Following charge documents are necessary while giving loans.

Letter of guarantee:

This is a document given by the proprietor, directors or the third party in

favor of the principal debtor. The beneficiary of this document is the bank.

Surety is bound to pay the guaranteed amount if such situation arises.

Counter guarantee:


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The principal debtor agreeing that if the guarantor pays any amount, the

principal debtor is bound to pay this amount gives this guarantee.

Letter of authority:

BY this letter, the principal debtor gives the authority to the bank to debit the

current account or investment account of the principal debtor for the

following cases:

i. Wages of the godwon keeper and godwon guard.

ii. Rent of the godwon.

iii. Insurance premium and

iv. Any other expenses regarding these functions.

Letter of recall the loan:

This letter is given to the bank by the borrower, giving the bank the right of

recalling the loan amount at any time if the borrower fails to repay any one

of the installments. And the borrower can not protest such recalling.

Letter of continuity:

By this letter, the borrower agrees that the promissory note given by the

bank will be act as security for the repayment of the ultimate balance or sum

remaining unpaid on account of the overdraft or advance.

Letter of revival:

By this letter, the borrower agrees that he will be liable to bank for payment

of the promissory note with interest in respect of all present and future

indebtedness liabilities secured thereby which promissory note is to remain

in force with all relative securities, agreements and obligations.


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Joint promissory note:

This promissory note is given to the bank by the borrower if the borrowers

are more than one person.

Single promissory note:

The borrower to the bank gives this promissory note if the borrower is a

single person.

Letter of undertaking:

This document is given to the banker by the borrower acknowledging the

right to cancel the facility at any time with or without intimation to the

borrower.

Loan disbursement letter:By this letter, the borrower request to disburse the loan sanctioned in his

favor by the bank. All the persons, in whose names the account is opened,

should sign the letter.

Charge over bonds or certificate of shares etc.:

It is a document given by the borrower to the banker declaring that the

stocks, shares, debentures, securities and investments which are now

deposited to the bank and which may from time to time be deposited by the

borrower shall stand charged and hypothecated to bank as security for the

payment to bank on demand of the balance of the loan amount and of any

other indebtedness and liability to the bank of any kind whether mature or


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accruing and whether incurred alone or jointly with others and whether as

principal or surety including all interest document, commission, expenses,

charges and costs incurred by the bank in relation any such indebtedness or

liability.

Letter of lien against fixed deposit receipt:

By this letter, the borrower gives the right to the bank to hold the Fixed

Deposit Receipt (FDR) if the borrower fails to repay or adjust the loan on

demand or discharge the liabilities to bank. In this letter, FDR number,

issuing branch, name of the favoring person and amount are written.

Letter of authority to encash FDR:

By this letter, the borrower gives the right to bank to encash the FDR in case

of need. Here the amount and address of the bank of issue and the signature

of the holders are given.

Memorandum of deposit of title deeds:

It is a deed that is necessary in case of mortgage by deposit of title deed or

equitable mortgage. Here the mortgagor agrees that he has deposited

necessary documents of the property to the bank.

Hypothecation of goods to secured a demand cash credit or

overdraft or loan account:

Here the amount of loan, interest, and the name of the borrowers are

written. Here the bank and the borrowers agree on the following terms:

Security

Balance due to the bank


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Borrowers not to the encumber or parts of the goods

Sale

Inspection

Insurance

Margin

Interest rate

Repayment

Sale of goods

Surplus

Statement of account

Continuing security

Title

Saving

Change of borrowers and

Notices.

Guarantee by third party: Sometimes third party guarantee is needed for

allowing loan. Here third party gives the guarantee that of the principal

debtor fails to repay the loan, and then the guarantor will be bound to repay

the loan to bank.

Hypothecation of vehicle:

This document is necessary in case of transport loan. Here the borrower

hypothecat hypothecated the vehicle to the bank. In case of failure of repay

the loan, bank will sell the vehicle to collect the money.

3.10. Loan Schemes Offered By PBL:


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Consumer Credit Scheme

General Loan Scheme

Lease Finance

Small and Medium Enterprise

House Building/Apartment Loan Scheme

3.11 Emphasis on SME & Personal Loan

SME & Personal loan are the most potential sectors for expansion of loan.

There is ample scope to enhance credit in this sector. So far this sectors

were almost unattended by Banks since they generally cannot provide

collaterals for the Credit facilities. So access to Banks credit is important for

them. Bank has some advantages of extending credit facilities in this sector,

Rate of return is generally higher than Corporate/ Large loans. Their

bargaining power for pricing is low.

The loan amount is small. So the Banks worry for default is low

compared to large loans.

The portfolio is diversified.

If monitoring & supervision can be ensured, the recovery can be

maintained at satisfactory level.

Their growth rate is comparatively much higher than the corporate market.

Moreover, higher margin lower bargaining power of customer, low risk has

made this sector more advantageous over corporate lending.

International Division (ID):

This division is responsible for monitoring and supervising the foreign

exchange dealings of the bank. It performs the following functions:


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Making guidelines and frameworks for foreign dealings complying the

rules of Bangladesh Bank

Circulating instructions of Bangladesh Bank

Maintaining correspondence with foreign banks and exchange houseswith which it has exchange arrangement

Maintaining NOSTRO accounts with banks in abroad

Fixing and sending foreign exchange rates to Authorized Dealer (AD)

branches and Bangladesh Bank as follows:

3.12 Pioneer of Retail Credit

Prime Bank is the pioneer of retail credit and introduced first ever in

Bangladesh in the year 1995. It has gain popularity within every short span

of time due to its smaller amount of loan than general credit. This is why

even the limited income people have huge access in this loan. It has already

proved it self as one of the most profitable credit sector in Prime Bank and

following the step of Prime Bank others Bank are also launching Retail

product.

Definition

One of the credit, which is extended to people having fixed but regular

income for acquiring consumer durables and other purpose for satisfying

personal needs

Possibility

Retail lending is one of the core businesses for Prime Bank Limited and has

been targeted for significant further growth. This reflects potential of retail

lending to produce high levels of economic profit and perceived demographic

trends toward an expended middle class and higher income levels.


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Mission

Prime Bank is a conservative lender in retail credit as part of its corporate

philosophy. However, conservatism does not mean simply minimizing bad

debts, but incorporates the concept of lending against acceptable risk. The

Banks overriding goal is not only to increase total shareholder return but

also to contribute to the socio economy by improving the life style of the

limited income segment of the country

Vision

The goal of retail credit can be best achieved optimizing profits, rather than

just minimizing losses. Profit optimization will follow from:

o Good planning and control of approval process

o Well designed products with appropriately focused marketing

o The use of statistical techniques and decision support systems that

permit risks to be managed predictably

o Gathering high quality management information, which is then read

and used.

Factors

Asset quality is generally expected to be higher in personal lending than

corporate lending due to variety of factors including:

Diversification of risk

Security

Cultural values

The increasing need for individuals to have access to bank credit for

the conduct of normal daily activities.


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Fundamental of policies

Fundamentally, credit policies and procedures can never sufficiently capture

all the complexities of the product. Therefore, the following credit principals

are the ultimate reference points for all concerned executives & staff-

marking consumer financing decisions.

The customers character for integrity and willingness to repay are

assessed.

Only lend when the customer has capacity and ability to repay are

examined thoroughly.

Bank only extends credit if it can sufficiently understand and manage

the risk.

Should use common sense and past experience in conjunction with

thorough evaluation and credit analysis are used.

Bank never base decisions solely on customers reputation, accepted

practice, other lenders risk assessment or the recommendations of

other officers.

Being proactive in identifying, managing and communicating credit risk

is essential.

Be diligent in ensuring that credit exposures and activities comply with

the requirement set out in Product Program Guidelines.

Objective

To improve living standard of limited income segment by providing

collateral free easy credit

To take part in the Scio-economic development of the country To ensure access to credit by mass people

To diversify lone portfolio to minimize risk

To maximize bank profit as well as to minimize pressure on liquidity

through quicker recycling but higher yielding loan operation


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3.13 Target marketing of retail banking

Confirmed officers of Government. Non- Government organization /

institute, semi- Government, Autonomous bodies & Corporation.

Professional, Business Executive and self employed persons who have

regular monthly income with repayment capacity.

Any other individual where the monthly installment size shall not

exceed one third of their take home income.

3.14 Types of Product:

Eleven types of products are in Prime Bank Facilities Tower under Retail

Credit.

1. Car Loan

2. Household Durable Loans

3. Any Purpose Loan

4. Doctors Loan

5. Marriage Loan

6. Education Loan

7. Advance Against Salary

8. Travel Loan

9. Hospitalization Loan

10. CNG Conversion Loan

11. Swapna Neer

3.15 Retail banking operation

Good planning and control of approval process

Well designed products with appropriately focused marketing


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The use statistical techniques and decision support systems that

permit risk to be managed predictable

Gathering high quality management information, which is then read

and used

Risk management cycle consists of six steps:

Planning products and risk management controls

Acquiring accounts

Maintaining account and managing credit quality

Collecting delinquencies

Writing off bad debts

Evaluating performance and refining plans control

3.16 Borrower selection

Selecting borrower is a very crucial fact as there are subject of moral hazard

and adverse selection problem. Therefore banker has to be very careful

regarding lending money. In order to overcome these problems the following

points should be used as:

Assess the customers character for integrating and willingness to

repay

Only lend when customer has capacity and ability to repay

Only extend credit if bank can sufficiently understand and manage the

risk

Use common sense and past experience in conjunction with through

Do not base decision solely on customers reputation, accepted

practice, other lenders risk assessment or the recommendations of

other officers

Be proactive in identifying, managing and communicating credit risk


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Be diligent in ensuring that credit exposures and actives comply with

the requirement set out in product program guideline

3.17 Credit Assessment and approval

Regarding lending it should be gathered all necessary information of

borrowers so that loan cant be default. In order to solve this problem

following rules should be applied.

Each credit Assessment must:

Be based on the sound ethical practices, which are consistent

with all banking rules and legislation

Application:

Telephone and address contact details

Employment/ business details

Income details

Income and expenditure statement

Personal net worth statement

Residence details

Credit reference and guarantors details

Assessment Methods

Credit scoring matrix

Judgmental decision


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Credit scoring

Credit scoring is a method used for predicting creditworthiness of

applications. This scoring is based on the concept that applicants

will perform in similar way to existing customers with a similar

demographic profile.

Credit risk management

The credit risk is managed by the retail credit assessment unit which is

completely segregated from sales

Loans will be given only after verification of customers static data and

repayment capacity

Every loan will be secured by hypothecation over the asset financed

and customers authority taken for re-possession of the asset in case of

default situation.

The approval system is parameter driven which will substantially

eliminate the subjective part of the assessment procedures

The credit and collection activities will be managed centrally and loan

approval authorities will be controlled centrally where the branch

managers of sales people will have no involvement

Operational risk

Credit administration unit will manage the following aspect of the

product

a. Input, approvals, customer file maintenance

b. The operation jobs like disbursal in the system including

raising debit standing orders and the lodgment and

maintenance of securities.

Credit Committee of this Branch


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Credit Committee is consisting with six members:

1. Manager (Chairman)

2. Second man

3. Foreign exchange In charge

4. General Credit In charge

5. General Banking In charge

6. Retail Credit In charge (Member Secretary)\

Procedure

Application

Information / Verification

Assessment

Pledge in the Committee Approval

Sanction

Disbursement

Charge Documents

Charge documents is an important part regarding lending

Demand promissory note

Letter of Authority

Letter of Installment

Letter of Guarantee

Letter of Disbursement

Letter of Hypothecation

Letter of Revival

Letter of Agreement

Loan agreement under CCS

FOREIGN EXCHANGE


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3.18 Exchange rate and management system

Exchange rate management system is the principle of fixing price of a

currency in terms of another. The exchange rate can be viewed as the result

of the interaction of the forces of supply any demand for the foreign currency

in any particular period of time.

Broadly exchange rate management system can divide into three groups.

1. Fixed exchange rate system

2. Floating exchange rate system

3. Hybrid exchange rate system

Fixed exchange rate system

The term fixed exchange rate system refers to a system that permits only

very small, if any deviations from officially declared currency value. A point

made in favor of fixed exchange rate is that is that such a system provides

for the discipline needed in economic policy to prevent continuing inflation.

Floating exchange rate system

By floating exchange rates we mean rates that are completely free to vary,

that is the foreign market is cleared at all times by exchange in the

exchange rate. Under the system, exchange rate of a currency is determined

and supply factor.

Hybrid exchange rate system


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Hybrid exchange rate system refer to adjustable pegs, crawling pegs and

managed floating all of whish combine various characteristics of fixed and

floating exchange rate system.

Export Section:

Creation of wealth in any country depends on the expansion of production

and increasing participation in international trade. By increasing production

in the export sector we can improve the employment level of such a highly

populated country like Bangladesh. Bangladesh exports a large quantity of

goods and services to foreign households. Readymade textile garments

(both knitted and woven), Jute, Jute-made products, frozen shrimps, tea are

the main goods that Bangladeshi exporters export to foreign countries.Garments sector is the largest sector that exports the lion share of the

country's export. Bangladesh exports most of its readymade garments

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

exports about 40% of its readymade garments products to U.S.A. Most of

the exporters who export through PBL are readymade garments exporters.

They open export L/Cs here to export their goods, which they open against

the import L/Cs opened by their foreign importers.

Export L/C operation is just reverse of the import L/C operation. For

exporting goods by the local exporter, bank may act as advising banks and

collecting bank (negotiable bank) for the exporter.

3.19 Export Policy:

Export policies formulated by the Ministry of Commerce, GOB provide the

overall guideline and incentives for promotion of exports in Bangladesh.

Export policies also set out commodity-wise annual target. It has been

decided to formulate these policies to cover a five-year period to make them

contemporaneous with the five-year plans and to provide the policy regime.


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The export-oriented private sector, through their representative bodies and

chambers are consulted in the formulation of export policies and are also

represented in the various export promotion bodies set up by the

government.

3.19.01. Export Incentives:

. Financial Incentives:

Restructuring of Export Credit Guarantee Scheme;

Convertibility of Taka in current account;

Exporters can deposit 40% of FOB value of their export earnings

in own accounts in dollar and pound sterling;

Export Development Fund;

Expansion of export credit period from 180 days to 270 days;

50% tax rebate on export earnings;

Duty draw back;

Bonded warehouse facilities to 100% export oriented firms;

Duty free import of capital equipment for 100% export oriented

firms;

. General Incentives:

National Export Trophy to successful exporters;

Training course on external trade;

Arrangement of international trade fairs, commodity-based

exhibitions in the country and participation in foreign trade fairs;

. Other Incentives:

Assistance in improvement of quality and packaging ofexportable items;

Simplification of export procedures;

3.19.02 Export Procedures:


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The import and export trade in our country are regulated by the Import and

Export (Control) Act, 1950.Under the export policy of Bangladesh the

exporter has to get valid Export registration Certificate (ERC) from Chief

Controller of Import & Export (CCI&E). The ERC is required to renew every

year. The ERC number is to incorporate on EXP forms and other papers

connected with exports.

(a) Registration of Exporters:

For obtaining ERC, intending Bangladeshi exporters are required to apply to

the controller/ Joint Controller/ Deputy Controller/ Assistant Controller of

Imports and Exports, Dhaka/ Chittagong/ Rajshahi/ Mymensingh/ Sylhet/

Comilla/ Barishal/ Bogra/ Rangpur/ Dinajpur in the prescribed form along with

the following documents:

1 Nationality and Assets Certificate;

1 Memorandum and Article of Association and Certificate of

Incorporation in case of Limited Company;

1 Bank Certificate;

1 Income Tax Certificate;

1 Trade License etc.

(b) Securing the Order:

After getting ERC Certificate the exporter may proceed to secure the export

order. He can do this by contacting the buyers directly or through agent.

In this purpose the exporter may get help from:

1 License Officer;


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1 Buyers Local Agent;

1 Export Promoting Organization;

1 Bangladesh Mission Abroad;

1

Chamber of Commerce (local & foreign)1 Trade Fair etc.

(c) Signing the Contract:

After communicating buyer, exporter has to get contracted (writing or oral)

for exporting exportable items from Bangladesh detailing commodity,

quantity, price, shipment, insurance and marks, inspection and arbitration

etc.

(d) Receiving Letter of Credit:

After getting contract for sale, exporter should ask the buyer for Letter of

Credit (L/C) clearly stating terms and conditions of export and payment.

The following are the main points to be looked into for receiving/ collectingexport proceeds by means of Documentary Credit:

(1)The terms of the L/C are in conformity with those of the contract;

(2)The L/C is an irrevocable one, preferably confirmed by the advising

bank;

(3)The L/C allows sufficient time for shipment and negotiation.

(Here the regulatory framework is UCPDC-500, ICC publication)

Terms and conditions should be stated in the contract clearly in case of other

mode of payment:


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Cash in advance;

Open account;

Collection basis (Documentary/ Clean)

(Here the regulatory framework is URC-525, ICC publication)

(e) Procuring the materials:

After making the deal and on having the L/C opened in his favor, the next

step for the exporter is to set about the task of procuring or manufacturing

the contracted merchandise.

(f) Shipment of goods:

Then the exporter should take the preparation for export arrangement for

delivery of goods as per L/C and incoterms, prepare and submit shipping

documents for Payment/ Acceptance/ Negotiation in due time.

Documents for shipment:

1 EXP form,

1 ERC (valid),

1 L/C copy,

1 Customer Duty Certificate,

1 Shipping Instruction,

1 Transport Documents,

1 Insurance Documents,

1 Invoice,

1 Other Documents,

1 Bills of Exchange (if required)

1 Certificate of Origin,

1 Inspection Certificate,


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1 Quality Control Certificate,

1 G.S.P. Certificate,

1 Phyto-sanitary Certificate.

(g)Final Step:

Submit the documents to the Bank for negotiation.

3.20 Import procedures

1. Procurement of IRC from the concern authority

2. Signing purchase contract with the seller.

3. Requesting the concerned bank on behalf of the importer favoring theexporter

4. The issuing bank opens the LC in accordance with the instruction of the

importer and request another bank located in exporter country to

advice the L/C to the beneficiary. The issuing bank may also request

the advising bank to confirm the credit, if necessary.

5. The advising bank advises the seller that the L/C has been issued.

6. As soon the exporter receives the L/C and is satisfied that he can meet

the L/Cs terms and conditions, he is in a position to make shipment of

the goods.

7. After making shipment of goods in favor of the importer the exporter

submits the documents to the negotiating bank for negotiation.

8. The negotiating bank scrutinizes the documents and if found o.k.

negotiates the documents and sends the said documents to the L/C

issuing bank

9. After receiving the documents the L/C issuing bank also examines the

documents and if found o.k. makes payment to the negotiating bank.

10. The L/C opening bank then requests the importer to receive the

documents on payments.


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11. The importer after paying all dues receives all the documents

from the L/C issuing bank and then release the imported goods form

the port authority

3.21 Letter of credit

Letter of credit can be defined as a Credit contract whereby the buyers

bank is committed to place an agreed amount of money at the sellers

disposal under some agreed conditions.

Documentary credits may be either:

i) Revocable

ii) Irrevocable

Revocable Credit

A revocable is a credit, which can be amended or canceled by the issuing

bank at any time without prior notice to the seller.

Irrevocable Credit

An irrevocable credit constitutes a definite undertaking of the issuing bank,

provided that stipulated documents are presented and the term of the seller

satisfies conditions. An irrevocable credit can be either confirmed or

unconfirmed depending on the desire of the seller. This sort of credit is

always preferred to revocable letter of credit.

3.22 Special Documentary Credit

a) Revolving Credit

b) Transferable credit

c) Bank to bank credit

d) Anticipatory credits

e) Parties to a letter of credit


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f) Operations of documentary letter of credit

3.23 Foreign remittance

Foreign remittance means remittance of foreign currencies from one

place/person to another place/person. Generally it does not include sale and

purchase of foreign currencies on account of import and export. All foreign

remittance transactions are grouped into two broad categories:

a) Outward Remittance

b) Inward Remittance

Discussion on outward remittance

Outward remittance mainly include, sale of foreign currency by T.T., M.T.,

Drafts, and Travelers cheque. In the case of outward remittance T.M. form is

used. Outward remittance is of different types:

a) Private Remittance

b) Official & Business Travel-related Remittance

c) Commercial Remittance

Account Procedure for Outward Remittance:

a) Issuance of Travelers Cheque

b) Issuance of Drafts, T.T.

c) Issuance of F.C Note

Types of foreign currency A/C

According to guidelines for foreign exchange transactions A.Ds may follow

types of FC accounts without prior permission of Bangladesh Bank:

1) Private Foreign Currency Accounts


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2) Non-Resident Foreign Currency Deposit (NFCD) Account

3) Resident Foreign Currency Deposit (RFCD) Account

Private Foreign Currency Accounts

Private Foreign Currency Accounts may be opened in the names of:

o Bangladeshi nationals residing abroad

o Foreign nationals residing abroad or in Bangladesh

o Foreign firms registered abroad and operating in Bangladesh or abroad

Non-Resident Foreign Currency Deposit (NFCD) Account

All non-resident Bangladesh nationals and person of Bangladesh origin

including those having dual nationality and ordinarily residing abroad

may maintain interest bearing time deposits named Non-Resident

foreign Currency Deposit Account with the Ads.

Resident Foreign Currency Deposit (RFCD) Account

Resident Bangladeshi may maintain RFCD Accounts with origin

exchange brought in at the time of their return to Bangladesh from

visits abroad.

General Banking Services of Prime Bank Limited

When we decided to perform as an intern and selected by PBL, I had beenplaced in the General Banking Department for whole time of my internee.

Several activities are performed here. I have prepared this report based on

this department. So this is the core part of this report.


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3.24 Area of Operations:

General Banking department performs the majority functions of a bank. It is

the core department of PBL like other commercial banks. In fact, bank

operates with the peoples money. And this process starts with the General

Banking Department. The activities of the General Banking Department of

PBL are mainly divided into the following categories:

Account Opening Section,

Local Remittance Section,

Online Branch Banking Section,

One Stop Utility Services Section,

Deposit Schemes Section,

Clearing Section,

Collection Section,

Cash Section,

Accounts Section,

Account Opening Section:

To establish a Banker and customer relationship Account opening is the first

step. Opening of an account binds the Banker and customer into contractual

relationship. But selection of customer for opening an account is very crucial

for a Bank. Indeed, fraud and forgery of all kinds start by opening ac