1.

1 ABSTRACT
Social Islami Bank Limited (SIBL) is a banking company registered under the companies Act 1994
with its head office 15 Dilkusha C/A, Dhaka-1000. The bank operates as a scheduled bank under a
banking license issued by the Bangladesh Bank. The Bank started its operation from 22, November
1995. SIBL is a capitalized new generating Bank with an authorized capital of Taka 4000 Million in
2008 and paid up capital of Taka 585 million in 2008 and also 585 million respectively as of
December 2007. In the formal corporate sector, this Bank would, among others, offer the most up-to
date banking services through opening of various types of deposit and investment accounts, financing
trade, providing letters of guarantee, opening letters of credit, collection of bills effecting domestic
and international transfer, leasing of equipment and consumer durables, hire purchase and
installment sale for capital goods, investment in low-cost housing and management of real estates,
participatory investment in various industrial, agricultural , transport, educational and health
projects and so on. In the Non-formal non-corporate sector, it would, among others, involve in cash
Waqf Certificate and development and management of WAQF and MOSQUE properties, and Trust
funds. For coordinating my internship I have been placed in Social Islami Bank Limited, IDB Bhaban
Branch, and Dhaka. There are 03 sections in IDB Bhaban Branch. They are: 1) General Banking .2)
Investment Department 3) Foreign Exchange Department. Accordingly I shall work all of the
sections. I shall devote my utmost effort and attention to learn banker’s functions. After completion of
the internship, I will render my all knowledge to present the report on Overall banking System of
Social Islami Bank Limited- A Special Focus on Fund Management.The report is divided into Seven
Chapters. 1) Introduction 2) Organization 3) Branch operation 4) Online banking 5) Performance,
Ratio and SWOT Analysis 6) Project Analysis Fund Management 7) Concluding Remarks. In the
organizational part will briefly describe overview of the organizations historical background,
functions, business philosophy, ownership pattern, foreign correspondents and overseas operations
and benefits provided to customers by the organization. Branch operation part will describe the
product and service provided to the customers by a branch.

1.2 ORIGIN OF THE REPORT

The BBA program conducted by Pataskala Science and Technology University has
been introduced to provide a number of fresh graduates in business sector; this program
has been designed to facilitate the students and the executive to provide basic theoretical
knowledge and practical in the job activities in the context of Bangladesh.

1.3 SCOPE OF THE STUDY

I have been assigned in the IDB Bhaban Branch of Social Islami Bank Ltd., and thus
covered me the way to get myself familiarized with the banking environment for the first
time. Indeed, I have had an opportunity to gather experience by working in the different
departments of the branch. The area of concentration of this report is confined to
investigating different aspects of the banking transaction as well as problems and
prospects and by this way an endeavor is made to give recommendations for removing the
problems.

1
1.4 OBJECTIVE OF THE STUDY
This reposting study is aimed at focusing on Islamic Banking operational system in
Bangladesh. In addition to this a comparative observations would be made with other
commercial banking operation. The objectives are:
 To be acquainted with how bank perform its operation.
 To know about the modes of investment of Islamic Banks.
 To focus on products, services and financial condition of SIBL.
 To expose strengths and weakness of SIBL in comparison with competitors.

1.5 METHODOLOGY OF THE STUDY

In order to make the Report more meaningful and presentable, two sources of data and
information have been used widely.

1.5.1 Sources of Data /Information

Primary sources
 Face-to-face conversation with the respective officers and staffs of the Branch.
 Informal conversation with the clients.
 Observing banking activities for three month.
Secondary sources
 Annual Report of SIBL.
 Periodicals published by Bangladesh Bank.
 Various book, articles, compilations etc.
 Prior research reports.
 Website Information.

1.5.2 Analysis of data /Information

Two approaches have been mainly used in this report.
 Conceptual Approach.
 Empirical Approach.

1.6 AREA OF STUDY

This project is limited in overall banking system of the bank. All three functional areas
of the bank are taken to the scope of study.
 General Banking.
 Foreign Exchange Area.
 Investment Area.

2
1.7 LIMITATIONS OF THE STUDY
It is obvious that every study has some limitations. The study I have made is of great
importance and required me huge work. Those limiting factors that hampered my smooth
workings in bank and finally in preparing this report are as follows:

 The organization maintains strict confidentiality about their financial and other
information. They are afraid of any type of information leakage to their
competitors. So there was always difficulty to have appropriate information
from them.
 Duration of this study was too short to have a sound understanding of the overall
banking.
 Scope of my study is so wide that analytical and comprehensive study is not
possible.
 Lack of sufficient books, papers and journals etc.
 Web site of the Organization isn’t up to date to gather valuable information.

1.8 REPORT PREVIEW

This project is short one providing only the facts and figures of current situation of
operational activities and performance of the bank.

3
2.1 INTRODUCTION
Since the establishment of Social Islami Bank Limited has come forward as a private
commercial bank and very encourage has come forward as the stimulator of economic
activities in the country. The bank has been entrusted with the responsibility of
undertaking various steps related to the development of the country’s commercial,
industrial and agricultural sectors. The banking sector of a country is called the economic
barometer of the country. As a pioneer commercial bank in the private sector in
Bangladesh, Social Islami Bank provides considerable financial helps to the business
sector that imports industrial goods and/or exports excess production outside the country
for profit. Thus for imports the Social Islami Bank provides LIM (Loan against Import
Merchandise) and LTR (Loan against Trust Receipt) facility and for exports provides
both pre shipment and post shipment finances. Thus with these bank helps the prospects
in the business sector has increased more than ever before.

2.2 HISTORICAL BACKGROUND OF SIBL

Social Islami Bank Limited (SIBL) is a banking company registered under the companies
Act 1994 with its head office in 15 Dilkusha C/A, Dhaka-1000. The bank operates as a
scheduled bank under a banking license issued by the Bangladesh Bank, Central Bank of
the country. The Bank started its operation from 22, November 1995. SIBL is a
capitalized new generating Bank with an authorized capital and paid up capital of Taka
585 million in 2007 and also. 585 million respectively as of December 2006.Currently the
bank has 24 branches of which 12 in Dhaka, 4 in Chittagong, 1 in Sylhet, 2 in
Narayanganj, 1 in Bogra, 1 in Khulna, 1 in Rajsahi, 1 in Sirajgonj. The bank undertakes
all types of banking transaction to support the development of trade and commerce in the
country. SIBL services are also available for the entrepreneurs to set up new venture and
BMRE of industrial units. To provide clientele services in respect of international trade it
has established wide corresponded banking relationship with local and foreign banks
trade and financial interest home and abroad.Since the very inception, Social Islami Bank
Ltd. is working with the philosophy of serving the nationals as an ideal and unique
financial house. Every organization has some objectives of its own. The prime objective
of Social Islami Bank Ltd. is to earn profit throw undertaking the responsibility of
providing financial help for the development of the country’s commercial and industrial
sector.
2.3 FORMATION OF SOCIAL ISLAMI BANK
2.3.1 Formation
The Bank was incorporated in Bangladesh in the year 1995 as a banking company under
the companies Act, 1994, all types of commercial banking services as provided by the
Bank from time to time besides as a matter of policy the Bank conducts its Business on
the principles of Mushataka, Murabaha, Bai-Muazzal and Hire Purchase transaction
approved by Bangladesh Bank.

4
2.3.2 Branches Information
At present, 24 (twenty four) branches are in operation all over the country. A list of
branches is appended below:

SL. No. Name of the Branch Address Telephone No.

1 Principal Branch 15, Dilkusha C/A, Dhaka. 01713-018779

2 Agrabad Branch 103, Agrabad C/A, Chittagong. 031-714041
3 Khulna Branch 2 Sir Iqbal Road, Khulna. 041-722133
4 Sylhet Branch Central Plaza, Amberkhana, Sylhet 01711-946325
5 Rajshahi Branch 219 Shahe Bazar Main Road, Rajhahi. 0721-812317
6 Gulshan Branch 125, Gulshan Avenue, Dhaka. 01819-215161
7 Babu Bazar Branch Sultan super Market 18/4, Armanin Street, 7395118-9
8 Moulvi Bazar Branch 77/7 Wahid Center, Moulvi Bazar, 01911-350966
9 Bogra Branch Tin Potty, Borogola, Bogra. 051-65833
10 Sirajgonj Branch Zaman Complex, S.S. Road 0751-63203
11 IDB Bhaban Branch Sher-E-Bangla Nagar, Dhaka. 8115789
12 Khatunganj Branch 96, Khatungonj, Chittagong. 01819-315328
13 Panthapath Branch Bashundhara City Shopping Mall, 01913-088821
14 Chandaikona Branch Pabna Bazar, Royganj Sirajgonj 01715-805435
15 Sonargaon Branch Mograpara, Sonargaon, Narayangonj. 01819-251709
16 Foreign Exchange Branch BIWTA Bhaban, 141-143, Motijheel C/A, 01817-530004
17 Halishahar Branch VIP Plaza, Plot # 15/A, Road # 2, Block-G 01819-345299
18 Hasnabad Branch Hasnabad Super Market,Keranigonj. 01711-565893
19 Dhanmondi Branch House # 84, Dhanmondi R/A, Dhaka. 01819-274072
20 Nawabpur Road Branch 82 Nawabpur Road. 7174994-5
21 Jubilee Road Branch 610/11, jubilee Road, Chittagong. 01819-326288
22 Uttara Branch Plot # 27, Road # 7, Sector # 3, Uttara 8961124
23 Fatullah Branch Fatullah Bazar, Narayanganj 01911-358157
24 Mirpur Branch Block – Kha, Sec – 6, Main Road – 1 01819-403982

2.3.3 Capital Structure

Capital structure of Social Islami Bank Ltd. is as under:
1. Authorized capital : (4000.00 million, ordinary shares of Tk 1000 each)
2. Paid up capital : (585.00 million, ordinary shares of Tk 1000 each)
The directors may revise the capital structure from time to time according to the need.

5
2.4 OBJECTIVES and GOALS OF SIBL
Sectoral objectives
The key sectoral objectives are:

a. To humanize corporate finance in the formal sector through participatory

market mechanism with collateral.
b. To socialize non-corporate finance in the non-formal sector through non-
market and participatory custom-tailored micro-level credit package without
collateral.
c. To monetize voluntary sector through participatory financing mainly on joint
ownership basis.
d. To integrate these three sectors operational activities of the Bank to various
will-conceived and well-planned “Social Assignment and Investment
Schemes” or “Social Fund” for making them economically and ethically
“transparent” and “revealed”
Overall Operational goals
The key thrusts of the operational goals are as follows:
a. Empowering the family of the poor by creating income opportunities as well as
strengthening the family of the rich for a better future generation.
b. Achieving sustainable participatory economy, Social Security, and peace for a
society.
2.5 MISSION OF SIBL
 High quality financial services with the latest technology.
 Fast, accurate and satisfactory customer service.
 Balanced & sustainable growth strategy.
 Optimum return on shareholder’s equity.
 Introducing innovative Islamic banking products.
 Attract and retain high quality human resource.
 Empowering real poor families and create local income opportunities.
 Providing support for social benefit organizations- by way of mobilizing
funds and social services.

2.6 VISSION OF SIBL

Social Islami Bank Ltd started its journey with the concept of 21 st Century Islamic
participatory three sector banking model: i) Formal Sector- Commercial Banking with
latest technology; ii) Non-Formal Sector - Family Empowerment Micro-Credit & Micro-
enterprise program and iii) Voluntary Sector - Social Capital mobilization through CASH
WAQF and others. Finally, "Reduction of Poverty Level" is our Vision, which is a prime
object as stated in Memorandum of Association of the Bank with the commitment
"Working Together for a Caring Society".

6
2.7 FUCNTIONS OF SIBL

 Mobilization of idle resources of the country by accepting Deposits from the

general public.
 Granting Loans and Advances to the individual firms and companies for activating
and developing trade, commerce and industries and other productive activities in
the country.
 To give facilities to the client and shareholders in a systematic way.
 Give encouragement to the people for savings.
 To increase investment.
 To make easy transfer of foreign currency.
 To identify consumer’s demand and fulfill their demand by supplying money.
 To improve economy by borrowing financial facility.
 To assist capital market.

2.7.1 Management Hierarchy

CHAIRMAN

MANAGING DIRECTOR

DEPUTY MANAGING DIRECTOR

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

OFFICER

JUNIOR OFFICER

ASSISTANT OFFICER
7
8
2.7.2 The Ownership Pattern
This is a private sector commercial Bank providing comprehensive range of banking
services. The bank is owned as follows:
Promoters 50%
Government 5%
Public 45%
At present the Bank has an amount of Tk.4000.00 million of Authorized Capital and Tk.
585.00 million of Paid-up Capital.

2.7.3 Human Resource

There is no alternative to skilled and trained manpower in service Industry. Bearing this
in mind the well educated, promising and honest workers are being appointed and trained.
Bank has given top priority to develop skilled manpower and introduce them with modern
technologies with the purpose of developing quality customer services. The Bank has
undertaken program to train up its employees of all strata at its own Training Institute. A
highly experienced person was appointed as Director (Training) of the Institute in the
year 2001 with the task of formulating various training modules. Steps are being taken to
shift the Institute to separate premises for facilitating training activities. Side by side, both
inland and foreign training also imparted during the year as usual. A highly experienced,
well educated and motivated workforce is playing vital role towards the growth of the
Bank deserve appreciation. The number of Executives and Officers as on 31st December
2008 was 512 as against 455 as on 31st December 2007.

2.7.4 Training Institute

Well educated peoples are needed to achieve the objectives of a firm. With a view to
build enthusiastic and skilled work force, Social Islami Bank Training Institute was
established in 24th October, 1996 at Shyamoli, Dhaka. Every year the Institute trains
sufficient number of employees. By the side of the new employee/officer, it is possible to
trained SIBL’s existing employee/officer. There is a library in SIBL. There is about 2
thousand books remain in this library. Accounting, Management, Marketing, and
Computer related books are in this library. In 2007, 1383 officer and no-officer was
trained.

2.7.5 Foreign Correspondents of SIBL

In order to gain maximum advantage from Foreign Exchange related business, the Bank
has entered into correspondent relationship with almost all major 122 Banks of 109
countries of the world like Standard Chartered Bank, American Express Bank Limited,
HSBC, HBZ Finance, Mashreq Bank PSC, Dresdner Bank AG and with local banks in
Pakistan, India, Nepal and Bhutan etc with whom we have advising, reimbursing and
confirming arrangement.

9
2.7.6 Overseas Operations of SIBL
Social Islami Bank has set up joint venture Exchange Company named Gulf Overseas
Exchange Co. Ltd, in Oman contributing 25% of its paid up capital. The present paid up
capital of the company is Riyal Omani 1, 82,000.00. The Chairman of the company is the
ex-minister of the government of Oman. The exchange company, established in 1985,
now has three branches in Oman and is being managed fully by officials of SIBL. The
company is running in profit. SIBL is also exploring possibilities of opening branches in
the Middle East, Switzerland and USA. SIBL has entered into the Management contract
with a Kuwati Exchange company to provide management and technical services. SIBL
has acquired equity and management of Nepal Arab Bank Ltd. which is the largest and
highly profitable Private Commercial Bank in Nepal.

2.7.7 Products & Services

 Mudaraba Term Deposit.
 Mudaraba Savings Deposit.
 Al-Wadia Current Account.
 Mudaraba Notice Deposit.
 Mudaraba Scheme Deposit.
 Cash Waqf.
 Mudaraba Hajj Savings Deposit.
 Mudaraba Monthly Savings Scheme.
 Mudaraba Special Deposit Pension Scheme (5 Years).
 Mudaraba Monthly Profit Deposit Scheme.
 Mudaraba Education Deposit Scheme.
 Mudaraba Home Saving Scheme.
 Mudaraba Millinery Deposit Scheme.
 ATM Service.
 Locker Service.
 One Line Banking

2.8.8 Non-Formal and Voluntary Sector Banking Programs

Since the opening of the Bank on 22nd November 1995, Non-Formal sector has started
implementing its programs in various areas. Those are as follows:

A. Environment-friendly program: Tokai Project:

The project has a special strategic value. Till December 1995 only one group consisting
of six members was formed at Hossain Marker, Utter Badda, Gulshan Thana. Group
savings from the members is under process. Formation of more groups of ‘Tokai Pannaya
Bavshee’ (Tokai goods Traders) is under process at different areas including Hossain
Market.

10
B. Real Life Non-formal School of Management:
As a part of environmentally friendly program, the bank is committed to educate the
Tokai and this has a worldwide strategic value. Till December 1995 one Tokai Non-
formal School has been started at Hossain Market, Uttar Badda, Gulshan, and Dhaka with
30 students with a view to giving them real-life education with Islamic orientation. In the
process of learning, the Tokai developed propensity for savings. As a result they are
regularly depositing a small portion of their income as savings.

C. Mosque Property Development Program:

Construction of Mini Market at Kazi Bari Mosque, Uttar Khan, Uttara, Dhaka, consisting
of 4 shops has been completed where Bank has invested Tk.1.28 laces. Recovery rate in
this sector is 100 percent.

D. Capital Market Instruments-Securitization of voluntary sector:

In the voluntary sector, the bank is in the process of organizing Voluntary Capital Market
Operation for mobilization of necessary fund and in the process of developing the
following financial instruments with different sets of rules in con formality with Shariah:
 Waqf Properties Development Bond (specific and general).

 Cash Waqf Deposit Certificate (specific and general).

 Family Waqf Certificate.

 Mosque Properties Development Bond (specific and general).

 Mosque Community Share.

 Quarn-e-Hasana Certificate (specific and general).

 Zakat/Ushar payment Certificate.

 Non-Muslim Trust Properties Development.

 Municipal Properties Development Bond (specific and general).

The value of all the bonds and Qurd-e-Hasana Certificate are guaranteed by the Bank
against surrender of the instruments on maturity.
2.7.9 Rural Credit Program
Agriculture is the main driving force of economy in Bangladesh. And the whole
economic growth of the country depends on the development, modernization and
investment of money in this connection. As a non-Government financial institution SIBL
has been actively participation in rural credit program in the economic activities for large
population of the country since 1992. SIBL has been working intensively in collaboration
with Barindra Multipurpose Development Authority by conducting the Rural Credit
program particularly in Rajshahi, Naoga, Chapainowabgong, and the northern part of the
country in general. In the last 10 years bank has distributed the credit for Tk.69.85
million. The recovery of loan in this project is 94%. In 2001 bank has distributed the loan
for Tk.7.00million. This is the first program for any private bank. Moreover, SIBL has
been participating in Agro Based Industries and Technology Development project Loan
financed by USAID since 1996.

11
2.8 OPERATING PERFORMANCE
Total Operating Income of the Bank as on 31st December 2008 stood at Tk.
1,291,706,859 million against Tk. 902,503,334 million of the preceding year. The Bank
made an operating profit of Tk. 787,364,550 million in 2008 against Tk.480, 782,904
million of 2007.
A summary of operating result of the Bank as on 31 st December 2008 vis-à-vis the
position as on 31.12.2007 is shown below:

Operating result of the Bank as on 31st December 2008

(Taka in millions)
Particulars 31.12.2008 31.12.2007 Growth Rate %

Income from Investment 2,732,256,352 2,092,951,320 30.54562

Profit paid on Depositors 2,071,378,746 1,705,054,119 21.48463

Net Investment Income 660,877,606 387,897,201 70.37442

Commission, Exchange & Other Income 450,879,515 350,231,722 28.73749

Total Operating Income 1,291,706,859 902,503,334 43.12489

Total Operating Expenses 504,342,309 421,720,430 19.59162

Profit Before Provision 787,364,550 480,782,904 63.76717

Total Provision 432,551,257 212,920,488 103.1515

Profit Before Tax 354,813,294 267,862,416 32.46102

Profit After Tax 202,068,294 150, 037,061 34.67892

12
3.1 GENERAL BANKING AREA
Financial institution intermediary that mediates or stands between ultimate borrowers and
ultimate lenders is knows as financial institution. Banks perform this function in two
ways- taking deposits from various areas in different forms and lending that accumulated
amount of money to the potential investors in other different forms. General banking
department aids in taking deposits and simultaneously provides some ancillaries services.
General banking is the front-side banking service department. It provides those customers
who come frequently and those customers who come one time in banking for enjoying
ancillary services. In some general banking activities, there is no relation between banker
and customers who will take only one service form bank. On the other hand, there are
some customers with who banks are doing its business frequently. SIBL General banking
is divided into six sections.
1. Account opening section.
2. Bills and clearing section.
3. Remittance section.
4. Cash section.
5. Locker Service.
6. Closing of an account.

3.1.1 Account Opening Section

Under this section, SIBL officer opens different types of accounts on the request of
clients. The procedure of opening account is given below.

Procedure for Opening of Accounts

Before opening of a current or savings account, the following formalities must be
completed by the customer:
1. Application for the prescribed form
2. Furnishing photographs
3. Introduction by an account holder
4. Putting specimen signatures in the specimen card
5. Mandate if necessary
After fulfilling the above formalities, SIBL provides the customer a pay-in- slip book and
a checkbook.

13
Application Form for Current/ Savings Account
Followings are the contents of the application form for opening Savings or Current
account in SIBL,-
1) Type of the Account: Individual/ Joint/ Proprietorship/ Partnership/ Limited
Company/ Club/ Society/ Co-operatives
2) Name of the Applicant(s)
3) Father’s/ husband’s Name
4) Present Address
5) Permanent Address
6) Number, Date of issue, Date of Expiry & Place of Issue of Passport (if any)
7) Date of Birth
8) Nationality
9) Occupation
10) Nominee (s)
11) Special Instruction of Operation of the Account (if any)
12) Initial Deposit
13) Specimen Signature (s) of the Applicant (s)
14) Introducer’s Information (Name, Account Number, Specimen Signature)
In case of Join Account
a) Operation instruction of the account
b) Signature (s)
In case of Partnership Account
a) Partner’s Signature
b) Partner’s Name -------
The following formality along with the documents is to be completed before opening an
account:
a) Two copies of photograph of the Account Holder (s) duly attested by the
Introducer.
b) Account to be introduced properly.
c) Introducer’s signature on Account Opening Form to be verified by an officer
under full signature.
d) Letter of thanks to Account Holder(s) and Introducer to be sent under
registered post.
e) In case of joint account, operational instructions are to be signed by the Join
Account Holders.
In case of Club/ Society,-
a) Up to date list of office bearers.
b) Certified copy of Resolution for opening and operation of account.
c) Certified copy of Bye-laws & Regulations/ Constitution.
d) Copy of Government approval (if registered.)

14
In case of Co-operative Society/ societies Limited,-
a) Copy of Bye-law duly certified by the Co-operative officer.
b) Up to date list of office bearers.
c) Resolution of the Executive Committee as regards of the account.
d) Certified copy of Certificate of Registration issued by Registrar, Co-operative
Societies.

In case of Non- Government College/School/ Madrasha/ Muktab,-

a) Up to date list of the Governing Body/ Managing committee.
b) Copy of resolution of the Governing Body/ Managing Committee.

In case of Trustee Board,-

a) Prior approval of Head Office of the Bank.
b) Certified copy of Deed of Trust, up to date list of members of the Trustee Board
and Certified copy of the Resolution of Trustee Board to open & operate the
account.

In case of Minor’s Account,-

a) Putting the word “MINOR” after the title of the account.
b) Recording special instruction of operation of the account.
c) The account opening form is to be filled in and signed by either of the parents or the
legal guardian appointed by the Court of Law & not by the Minor.

In case of Limited Company,-

a) Certified true copy of the Memorandum & Articles of Association of the
company.
b) Certificate of Incorporation of the company for inspection and return with a duly
certified photocopy for bank’s records.
c) Certificate from the Registrar of the Joint Stock Companies that the company is
entitled to commence business (in case of Public limited Co. for inspection and
return) along with a duly certified photocopy for Bank’s records.
d) Latest copy of Balance Sheet.
e) Extract of Resolution of the Board. General Meeting of the company for opening
the account and authorization for its operation duly certified by the Chairman/
Managing Director of the company.
a) List of Directors with address (a latest photocopy of the form-xii).
b) Authorized signature.
c) Name.

15
General conditions of governing Current / Savings Account,-
(a) Minimum Balance to be maintained in current account Tk. 10,000 /- and in Savings
account Tk. 5.000/- .
(b) A suitable instruction by an introducer acceptable to the Bank is required prior to
opening an account.
(c) Recent photographs of the Account openers duly attested by the Introducer must be
produced.
(d) When cheques deposited are payable by other banks or outstation they are available
after clearing or collection only, Service charge will be charged @ Tk, 100 /- in
Current account and Tk 50 /- in Savings account yearly or as charged by the Bank
from time to time as and when required.
Provisional profit rate for Savings Account (SB) @ 6.85% (Half years compounding).

Deposits Accepted by SIBL

Mudaraba saving Deposit (MSD)
These are profit bearing deposit accounts. The drawings are restricted in respect of both
the amount of withdrawal and the frequency thereof so that the payment of interest does
not become any compensating for the banker. Some time the restrictions are ignored
against the depositor’s written confirmation to forgo his claim for interest on the total
balance for the whole month of withdrawal.
Special Saving Scheme
Mudaraba Hajj Saving Scheme
Hajj is one of the basic pillars of Islam- the complete code of life. SIBL has introduced a
scheme in the name & style “Mudaraba Hajj Saving Scheme” to facilitate the intending
Muslims to perform Hajj properly at appropriate age. This is purely a saving scheme for
Hajj. Any Muslim intending in perform Hajj by building –up deposit required for meeting
Hajj expenses will select one of the 20 alternative choices based on duration of period
from 1 year to 20 years for building- up savings by monthly installments under this
scheme.

Mudaraba Education Scheme

SIBL being encouraged by the success of the Mudaraba deposit accounts, has introduced
another savings scheme namely “Mudaraba Education Scheme”

Initial Deposit Maturity Period Total Payment Monthly Education Allowance

25,000 7 Years 55,000 1,000
25,000 10 Years 77,000 1,500
25,000 15 Years 136,000 2,500
25,000 20Years 240,000 4,500

16
Mudaraba Millionaire Scheme
People of Bangladesh are the followers of Islam. They are mostly interested to make
interest free deposits. Taking these facts into consideration SIBL a joint venture Islamic
bank introduced a monthly installment based "Mudaraba Millionaire Scheme"

Rules and regulations of this scheme:

Tk. 550/-, Tk. 1050/- or Tk. 2050/- is taken as monthly installment under Mudaraba
principles of Islamic Shariah.

Duration of this scheme will be 15, 20 and 25 yrs. After maturity an estimated amount
will become as follows:
Duration Monthly Installment Estimated amount after maturity
15 2,050/- Tk. 10 lac
20 1,050/- Tk. 10 lac
25 550/- Tk. 10 lac

The amount in the above is an estimated amount and may vary at maturity.
After starting of operation of this scheme size of installment cannot be changed

Mudaraba Special Savings (Pension) Scheme

Any Bangladeshi person aged above 18 yrs and having sound mental condition can may
open this scheme. To open this account there must be a signature of a valued introducer.
Parents or legal guardians can open this scheme in the name of their underage children.

After maturity estimated profit will be applied as follows:

Monthly Installment Estimated amount after maturity
5 years 10 years
100 8,000 22,500
200 16,000 45,000
300 24,000 67,000
400 32,000 90,000
500 40,000 1,12,500
1000 80,000 1,25,000

Mudaraba Monthly Profit Deposit Scheme

The features of this scheme are as follows:
1. Tk. 1, 00,000/-, 1, 10,000/-, 1, 20,000/- or 1, 25,000/- or any amount multiple can
be deposited under this scheme.
2. The duration of the amount should be for Five years.

17
 3. Profits shall be distributed under this scheme as follows:
a. 1,00,000/- Tk. 900 (net)
b. 1,10,000/- Tk. 1000 (net)
a. 1,20,000/- Tk. 1,100 (net)
b. 1,25,000/- Tk. 1150 (net)
4. The payable profit will become due after 1 month of deposit. But the amount will
be deposited to account in the last week of the month.
5. Generally, a depositor cannot withdraw the amount before 5 years. But, in
unavoidable circumstances the depositor can withdraw the amount and in that case
the depositor will have to submit the duly filled application form of the scheme.

Mudaraba Term Deposit

Mudaraba Term Deposit is one, which is repayable after the expiry of a predetermined
period fixed by him. The period varies from 1 month to 1 year or above. These deposits
are not repayable on demand but they are withdrawing able subject to a period of notice.
Hence, it is popularly known as ‘Mudaraba Time Deposit’ or ‘Time Liabilities”.
Normally the money on a fixed deposit is not repayable before the expiry of a fixed
period. In case of MTDR Account the Bank needs to maintain a cash reserve. So SIBL
offers a high interest rate in MTDR accounts. The Interest rates followed by SIBL

For 1 month @10.50

For 3 months @11.75
For 6 months @12.00
For 1 year or above @12.25

18
Al Wadiah Current Deposit

1. ALWADIAH Current Deposit A/c’s are opened proper introduction with

minimum initial deposit fixed by the Bank.
2. ALWADIAH Deposit is accepted on ALWADIAH principles which mean al
Amanah with permission to use. According to this principle Bank can use the fund
of the account along with other funds as per Shariah at bank's own risk. Account
holder(s) will not share any profit/loss.
3. The Law and regulation of Bangladesh, usual customs and procedures common to
banks in Bangladesh including Islamic Banking Principles shall apply to and
govern the conduct of account opened with the Bank.

3.1.2 Bills and Clearing Section

SIBL Local Office branch performs the bill clearing function through Local office. SIBL
Local office acts as the agent of all SIBL branches for the clearing house of the
Bangladesh Bank. There are two types of cheque which are-
1. Inward clearing cheque
2. Outward clearing cheque.

Inward Cheques:
Inward cheques are those ones drawn the respective branch which have been presented on
other banks and will be cleared / honored through the clearing house of Bangladesh Bank.
For example the cheque drawn on SIBL Local Office Br, then the cheque is called inward
cheque of SIBL Local Office Br,
Accounting treatment:
Customer’s A/C Debit.
SIBL General A/c Credit

Outward Cheques:
Outward cheques are those ones drawn on other bank branches which are presented on
the concerned branch for collection through clearing house of Bangladesh Bank. These
cheques are called outward cheques.
For example, the cheque drawn on Mercantile Bank LTD, Kawran Bazar Br has been
presented on SIBL Local Office Br. This cheque is called the outward cheque of SIBL
Local Office. Hence it is said that the cheque which is the inward cheque of one bank is
the outward cheque of another bank.

19
Outward Bills for Collection (OBC)
By OBC, we mean that those cheques drawn on other banks which are not within the
same clearing house. Officer gives OBC seal on this type of cheques and later sends a
letter to the manager of the branch of the some bank located in the branch on which
cheque has been drawn. After collection of that bill branch advises the concerned branch
in which cheques has been presented to credit the customer account through Inter Branch
Credit Advice (IBCA).
In absence of the branch of the same bank, officer sends letter to manager of the bank on
which the cheques is drawn. That bank will send pay order in the name of the branch.
This is the procedure of OBC mechanism.

Clearing
The scheduled banks clear the cheques drawn upon one another through the
clearinghouse. SIBL is a scheduled Bank. According to the Article 37 (2) of Bangladesh
Bank Order, 1972, the banks which are the member of the clearinghouse are called as
Scheduled Banks. This is an arrangement by the central bank where every day the
representative of the member banks gathers to clear the cheques. The place where the
banks meet and settle their dues is called the clearinghouse. The clearinghouse sits for
two times a working day.
The SIBL Local Office Br sends the instruments through Inter Branch Debit Advice
(I.B.D.A). SIBL Local Office acts as an agent in this case. For this, Local Office branch
gives the following entries,

SIBL General A/C (Local Office Br) ---------------Dr.

Customer’s A/C---------------------------------Cr.

If the instrument is dishonored, the instrument is returned to the Local Office branch
through I.B.D.A. along with the following entries,
Customer’s A/C---------------Dr.
SIBL General A/C------------------Cr.

20
Receiving Cheques for Collection
In SIBL, cheques of its customers are received for collection from other banks. In case of
receiving cheques, following points should be checked very carefully-
The cheques should not carry a date older than the receiving date for more than 6 months.
In that case it will be a ‘stale cheque’ and it will not be allowed for collection. Again the
date of the cheque should not be more than 1 day’s forward than the receiving date.

a. The amount in figures and words in both sides of the pay-in-slip should be same and it
should also be same with the amount mentioned in figures and words in the cheque.
b. The name mentioned in the cheque should be some in both sides of the pay-in-slip and
it should be the same with the name mentioned in the cheque.
c. The cheque must be crossed.

Cheque and Crossing

A “Cheque” is a bill of exchange drawn on a specified banker and not expressed to be
payable otherwise than on demand. [According to section-6, Negotiable Instrument Act,
1881]. A cheque may be classified into:
a) An open cheque which can be presented for payment by the holder at the
counter of the drawer’s bank.
b) A crossed cheque which can be paid only through a collecting banker.
Crossing cheque: A cheque is said to be crossed when two transverse parallel lines with
or without any words are drawn across the face. Crossing may be general, special or
restrictive.

Issuing Cheque Book

Following procedures are maintained by SIBL, Local Office for issuing checkbook.
(a) Firstly the customer will fill up the check requisition form.
(b) The leaves of the checkbook under issue are counted to ensure that all the leaves and
the blank requisition slip are intact.
(c) The officer writes A/C number and branch name on all the leaves of the checkbook.
(d) The name and the A/C number of the customer are than entered in the checkbook
register against the particular checkbook series.
(e) Then the officer sightseer, checkbook, and requisition slip
(f) Lastly the checkbook is handed over to the customer after taking acknowledgement
on requisition slip.

A cover file containing the requisition slip is effectively preserved as vouchers. If any
defect is noticed by the ledger keeper, he makes a remark to that effect on the requisition
slip and forward it to the cancellation officer to decide whether a new checkbook to be
issued to the customer or not.

21
3.1.3 Remittance of Funds:
Remittance of funds is ancillary services of SIBL. It aids to remit fund from one place to
another place on behalf of its customers as well as non- customers of bank. SIBL has its
branches in the major cities of the country and therefore, it serves as one of the best
mediums for remittance of funds from one place to another. The main instruments used
by SIBL, Local Office Br for remittance of funds.
-Pay Order/ Banker’s check.
-Demand Draft.
-Telegraphic Transfer.
Bank’s cheque/ Pay order
The pay order is an instrument issued by bank, instructing itself a certain amount of
money mentioned in the instrument taking amount of money and commission when it is
presented in bank. Only the branch of the bank that has issued it will make the payment of
pay order. The banker’s cheque must become the branch for payment wherever it is
presented.
Issuing of Pay Order
The procedures for issuing a Pay Order are as follows:
1. Deposit money by the customer along with application form.
2. Give necessary entry in the bills payable (Pay Order) register where payee’s name,
date, PO no, etc is mentioned.
3. Prepared the instrument.
4. After scrutinizing and approval of the instrument by the authority, it is delivered to
customer. Signature of customer is taken on the counterpart.
Cancellation of a Pay Order
If a buyer wants to cancel it, he should submit a letter of instrument in this regard and
also return the instrument.

Bank Draft
The person intending to remit the money through a pay order has to deposit the money to
be remitted with the commission which the banker charges for its services. The amount of
commission depends on the amount to be remitted. On issue of the pay order, the remitter
does not remain a party to the instrument i) Drawer branch ii) Drawee branch iii) Payee.
This is treated as the current liability of the bank as the banker on the presentation of the
instrument should pay the money. The banker event on receiving instructions from the
remitter cannot stop the payment of the instrument. Stop payment can be done in the
following cases:
i) Loss of draft before endorsement: in this case, “Draft reported to be lost,
payee’s endorsement requires verification” is marked.
ii) Loss of draft after endorsement: In this case, the branch first satisfies itself
about the claimant and the endorsement in his favor.

22
Charges
A commission of 0.15% is taken on the draft value & Tk.50/= is taken as postal charge.

Mail or Telex Transfer (TT)

Telex transfer is another widely used mode for remittances of funds. In case of telex
transfer the message for transfer of funds is communicated through tested telex. SIBL
generally recovers from the telex charges in addition to the usual service charges.
Issuing of TT
SIBL follows the following procedures:
i) The customer deposits money with SIBL to be sent.
ii) The customer obtains a cash memo containing TT serial
number.
iii) TT serial number, notifying part name is mentioned in the
telex message.
iv) The Telex Department confirms transmission of the telex.

Accounting entries for TT

Cash A/C, Client’s A/C -----------------------Dr.
SIBL General A/C (Local Office branch) ---------------Cr.

Procedures for the incoming TT

After receiving the telex, it is authenticated by test. TT Serial number is verified by the
“TT in-Concern branch” register. The following entries are given in the vouchers,-
SIBL General A/C (Local Office branch) -----------------------Dr.
Client’s A/C------------------------------------------Cr.
Tk. 50/= is taken as postal charge. The minimum commission is Tk. 50/= or o.15% of the
amount whichever is higher.

3.1.4 Cash Section

The cash section of any branch plays very significant role in general banking department.
Because, it deals with most liquid assets The SIBL Local Office Br has an equipped cash
section. This section receives cash from depositors and pay cash against cheque, draft,
PO, and pay in slip over the counter.

Receiving Cash
Any people who want to deposit money will fill up the deposit slip and give the form
along with the money to the cash officer over the counter. The cash officer counts the
cash and compares with the figure written in the deposit slip. Then he put his signature on
the slip along with the ‘cash received’ seal and records in the cash receive register book
against A/C number.
At the end of the procedure, the cash officer passes the deposit slip to the counter section
for posting purpose and delivers the duplicate slip to the clients.

23
Account treatment
Particulars Dr./Cr.
Cash A/C Dr.
Customer’s A/C Cr.

Disbursing Cash
The drawn who wants to receive money against cheque comes to the payment counter and
presents his cheque to the officer. He verifies the following information-
a) Date of the cheque
b) Signature of the A/C hold
c) Material alteration
d) Whether the cheque is crossed or not
e) Whether the cheque is endorsed or not
f) Whether the amount in figure and in word correspondent or not
Then he checks the cheque from computer for further verification. Here the following
information is checked:
1) Whether there is sufficient balance or not
2) Whether there is stop payment instruction or not
3) Whether there is any legal obstruction (Garnishee Order) or not
After checking everything, if all are in order the cash officer gives amount to the hold and
records in the paid register.
Account treatment:
Particulars Dr./Cr.
Customer’s A/C Dr.
Cash A/C Cr.

The cash section of SIBL deals with all types of negotiable instruments, cash and other
instruments and treated as a sensitive section of the bank. It includes the vault which is
used as the store of cash instruments. The vault is insured up to Tk. 60 laces. If the cash
stock goes beyond this limit, the excess cash is then transferred to Head Office. When the
excess cash is transferred to SIBL Head Office. The cash officer issues IBDA.
Account treatment:
SIBL General A/C Dr.
Cash A/C Cr.
When cash is brought from SIBL Head Office then,

Account treatment:
Cash A/C Dr.
SIBL General A/C Cr.

24
3.1.5 Locker Service
SIBL Local Office Br is providing facility of locker service for the purpose of
safeguarding the valuable property of customers. The person or the organization that has
any account in bank branch can enjoy this service. They can keep their valuable assets in
banker’s custody. Customers have right to look after with a key of their individual locker
provided by bank. SIBL maintains the following types of lockers:
------ Large locker.
------ Medium locker.
------ Small locker.
For enjoying this service, clients have to give charge yearly Tk. 1500, Tk. 1250 and Tk.
700 for large, medium and small locker respectively.

3.1.6 Closing of an Account

For two reasons, one can be closed. One is by banker and other is by the customer.
By banker: If any customer doesn’t maintain any transaction within six years and the
A/C balance becomes lower than the minimum balance, banker has the right to close an
A/C.
By customer: If the customer wants to close his A/C, he writes an application to the
manager urging him to close his A/C.
Different procedures are followed in cash of different types of A/C to close. Fixed deposit
A/C is closed after the termination of the period. Closing process for current & savings
A/C:
i. After receiving customer’s application the officer verifies the balance of the A/C.
ii. He then calculates interest and other charges accumulated on the A/C.
iii. If it bears a credit balance, the officer writes advice voucher. He gives necessary
accounting entries post to accounts section.
iv. The balance is returned to the customer. And lastly the A/C is closed.

But in practice, normally the customers don’t close A/C willingly. At times, customers
don’t maintain any transaction for long time. Is this situation at first, the A/C becomes
dormant and ultimately it is closed by the bank

25
3.2 FOREIGN EXCHANGE BANKING AREA
3.2.1 Foreign Exchange
Foreign trade
Foreign trade constitutes a sizable portion of international transactions of a country.
Payment received for exports and made for imports form a substantial part of its
remittances from and to other countries. In our country a major share of the current
balance of payments is made up of exports and imports of merchandise on private and
government account. Thus, trade is the most important factor giving rise to payments
between countries. Foreign trade is a type of specialization, which like other forms of
specialization increases productive efficiency and standard of living of the people of the
country concerned.

Need for foreign trade

Foreign trade enables a country to have a much larger flow and much more diversified
form of wealth than what is possible without it. The residents of a country are able to
enjoy the use of commodities which otherwise may not be available to them at all. There
is a wide difference in respect of the material and human resources, stage of technical and
scientific progress, and possession of capital equipment in different countries. No country
is in a position to produce everything in quantities large enough to provide its people a
reasonably high standard of living. A country, therefore, enters into trade relations with
other countries on account of certain basic differences due to topographical reasons in its
economy from theirs.
Commodities are imported because either they cannot be produced in the country at all or
can be produced at a very high cost. Import of such commodities is a convenient and
cheaper way of getting them. In exchange for imports, a country has to export certain
articles because normally imports can be paid for only by exports. A country’s exports
usually comprise commodities the cost of production of which is less than the cost of
importing them. Thus the need of the people of a country for its scarce resources and in
exchange the surplus of some of their resources constitute the import and export stimulate
the foreign trade which is intern mobilized by foreign exchange proceedings.

Types of Foreign trades Dealt in Banks

Foreign trades are mainly of two types. These two are: Import Trade & Export Trade. The
import and export trade of Bangladeshis is controlled under the Import and Export
Control Act, 1950. In normal sense the imports involve outward remittances and the
export involves inward remittances. The terms and conditions of contracts between the
importers and the exporters and the eventual remittances in foreign countries are subject
to such restrictions and formalities as are laid down from time to time by the Import and
Export Control and Exchange control in their respective jurisdiction which the importers
and exporters must comply with.

26
Import Trade
When a particular country wishes and does bring in some goods and services from
another country, trade occurring between these two countries is called import trade.
Import trade means procurement and purchase of goods and services from another
country or countries. Therefore, purchasing function of international trade is called import
trade.
Export Trade
Selling of goods and services or other sales related function for the transfer of surplus
goods or services for a value or just to merchandise them abroad trade occur between
countries. Thus export or sale of additional goods and services or surplus goods and
services is called export trade. There is another peculiar type of export trade named Re-
Export Trade.

Import
The bank defines import as to bring in, from abroad, something in kind of goods or
services (to behave lawfully). It includes the following services:
1. Letter of Credit (L/C) opening.
2. Presentation/Retirement of import documents.
The import mechanism first involves the issuing of a L/C as an instrument by a bank on
behalf of one of its customers, authorizing an individual or a firm to draw draft on the
bank or on one of its correspondents for its account under certain conditions stipulated in
the credit. Secondly the bank import mechanism involves the retirement of import
mechanism on receiving the payment or under certain conditions against the security of
payments made by the importer in documents stipulating an advance payment date.

Import Operation
Actually the import procedure is a result of a two-party negotiation or contract. Once the
importer has accepted the supplier’s offer, he agrees to open a Letter of Credit in favor of
the latter. Thus the import procedure of the bank starts with the opening of the credit. The
entire import mechanism of this branch is enumerated below.
Terms of Credit
First of all the concerned banker asks the importer to present and show the terms of the
credit that the importer wishes to issue. The terms of the letter of credit are based on the
contract between the importer and the exporter and the import license or the authorization
permits for import under free list as the case may be, issued in the name of the concerned
importer. The terms of the credit specify importantly, amount of the credit, name and
address of the beneficiary and the opener, particulars of the goods, their make, quantity
and price basis, tenor of bill of exchange, period and mode of shipment, whether part
shipment allowed, port of shipment and of destination, nature of credit, expiry date,
names and number of sets of shipping and other documents.

27
Letter of Credit Application
For the purpose of the opening the credit the importer is required to fill up and sign a
stamped Letter of Credit application, which, in addition to recording the full details of the
credit including instruction for booking exchange, serves as an agreement between the
banker and the opener.

Presentation of the application for Opening of the Letter of Credit

When the importer requests the bank for the opening of a L/C, by agreeing to the request,
the bank makes a promise of payment to the supplier by issuing it. But the importer must
make out an application for this purpose. The application must be written in a plain paper
or Letter Head pad and it should be submitted being attached with the following
certificates and papers:
If the importer is an individual
1. Current Deposit A/C No.,
2. Partnership Deed and Solvency Certificate (If partnership firm),
3. Article of Association (If Private Limited Company ),
4. Memorandum of Association (If Private Limited Company),
5. Certificate of Commencement of Business (If Public Limited Company),
6. Photocopy of Trade License (valid),
7. Photocopy of VAT Registration Number,
8. Photocopy of Tax Identification Number (TIN certificate),
9. Import Registration Certificate from CCI&E, (Renewed and valid).
10. Required amount of Registration Fee.

IRC (Import Registration Certificate) issue fee

IRC Issuing Fee Import Limit

Tk. 500 Highest annual imports limit 5 Lac.
Tk. 1500 Highest annual imports limit 15
Lac.
Tk. 3000 Highest annual imports limit 50
Lac.
Tk. 5000 Unlimited annual import capacity.

Bank Scrutiny of the Documents before Opening of the Credit

On receipt of the application form with other required documents submitted by the opener
they are thoroughly scrutinized. The points, which are carefully scrutinized, are
followings:

28
 1. Indenting the registration number.
2. That the IRC is updated or renewed and valid.
3. That the goods are marketable and legally importable and that it is not difficult for
the beneficiary to comply with all terms and conditions to be incorporated in the
L/C.
4. That the L/C is not going to be opened in favor of the importer.
5. That the importer signs it, agreeing terms and conditions.
6. That the Insurance Cover Note specifies the date of shipment.
7. That it encloses Radioactivity Report in case of food item.
8. That the Import Permission (IMP) forms is dully filled in and signed.
9. That the liability, as being applied, is under appropriate limit.
10. That the amount does not exceed the L/C value and is identical with invoice
amount and that the amount in figure and in word is same.
11. That it encloses credit report of the beneficiary in cases when the L/C value is
more than US $ 20,000.

Export
Exports, for obvious reasons, are listed in the priority sector in all developing economies.
There is no doubt in this fact that export trade constitutes the most substantial base for
sustaining the long term development and prospect of a country’s economy. Bangladesh
is also now a developing country. So this fact is equally relevant to the concerned
economic soundness of Bangladesh. We all know about the ‘Balance of Payment’. If a
countries total import outweighs its total export, the country is called to be facing drastic
negative (unfavorable) balance of payment. A continuous negative balance of payment of
country makes it totally dependent on others. And thus the economic standing and
structure of that country gradually collapse. On the other hand a positive (favorable)
balance of payment shows the greater amount of export by a country against its total
import and shows a sound economic motion. Thus export is a most import mechanism
that helps a country to be dependent and to produce goods or merchandise either through
its internal resource or through procuring resource from external sources. Whatever the
source is the export helps a country to build its capital reserve more promisingly.
Bangladesh is also now very much keen to boost up its export. But the most stumbles’
blocking the process is the non-availability of required finance. There is neither adequate
capital in the hands of the exporter to meet up their foreign trade requirements nor their
exists an organized capital market to extend fair hand as help for the finance. In view of
this, commercial banks of this country are the only real friendly base, which recently have
started playing a challenging and pivot role in the business sector through extending both
pre and post trade finance to the exporters and importers.

29
Export Policy 1997-2008
Target
1. To attain highest national growth by increasing export to regional and
international markets;
2. To reduce gradually the gap between export and import expenditure;
3. To produce export commodity at a competitive price aimed at market retention
and promotion;
4. To avail the opportunity to enter in liberalized and globalize ‘Post-Uruguay Round
International Market’;
5. To make goods exportable and more suitable for foreign markets by
diversification and quality improvement;
6. To establish backward linkage industry and services and identify higher value
added goods;
7. To develop infrastructure for exports;
8. To create skilled manpower in export sector;
9. To upgrade the quality and grading of commodity to an internationally recognized
level.
The normal export mechanism is much like the procedure maintained in a typical import
mechanism. Whereas in case of import the party is the importer and the bank acts as the
opener of his credit, in case of export the party is the exporter and the bank acts as the
negotiator of his documents. In our country the most promising exporters are the
garments industries. About 76% of the total exports of our country are made by the
garments sector. The underlying reason of success of this sector in exports is the
availability of the huge amount of cheap labor. But because of inadequate supply of
locally produced quality fabrics and accessories, we have to import about 60% of the
fabrics and accessories from abroad for use in the garments industry. This is actually a
time consuming and costly process for the garments sector. So considering the significant
contribution of the garments sector in the export trade the private commercial banks have
undertaken an especial arrangement to provide them with export finance, which is called
the foreign Back to Back Letter of credit (BTB).

BANK MECHANISM IN EXPORT

As stated earlier, the foreign trade plays a vital role in the economic advancement process
of nation. So the trend or parameters of foreign trade i.e., import and export is of great
concern to the government of a country. By the term ‘Export’ we mean carrying of
anything from the country of origin to another country in return for a value. The bankers
define ‘Export’ as the sending of visible things outside the country for sale. The export is
important because with the export earnings we met our import bills. Normally a bank
provides the following services as with the party in case of export needs.

30
Obtaining of Export Registration Certificate (ERC)
When the party or the exporter receives any export order after negotiation with the
importer, he comes to the bank and asks negotiate his transaction with the importer’s
correspondent. In such a case the bank first advises him to obtain Export Registration
Certificate from CCI&E (Chief Controller of Import and Export).

Procedure for obtaining ERC

For obtaining Export Registration Certificate (ERC), intending Bangladeshi Exporters are
required to apply to the Controllers/Joint Controller/Deputy Controller/assistant
Controller of Imports and exports in the prescribed form along with the following
documents:
 Nationality and Assets Certificate of the Proprietor/Partners/Directors;
 Registered Partnership Deed in case of Partnership Concerns;
 Memorandum and Article of Association and Incorporation Certificate in case of
Limited Company;
 Bank Certificate; and Income Tax Certificate;
 Copy of valid Trade License and
 Copy of Rent Receipt or the Business Premises.
On receipt of necessary advise from the Offices of the concerned Controller of Imports
and Exports, applicants of Export Registration Certificate are required to deposit
Registration Fee of Tk. 1000 (subject to change) in to the Government head of account
“24- Trade and Commerce-Fees Realized under Import and Export Control Act, 1950”
through Bangladesh Bank or Government Treasury Sonali Bank. Copies of Treasury
Challans showing payment of fees should be sent to the concerned offices of the CCI&E
for enabling them to issue Export registration Certificate. Once it has been registered, the
exporters are to make annual payments of Tk. 1000 (subject to change) only for having
the ERC renewed.

31
Receiving Advising of Letter of Credit
Normally the exporter receives Letter of credit in two forms
1. Cable
2. Original
The imported terms and conditions of the L/C are communicated by the L/C opening
bank to the exporter’s bank through cable, which is followed by the original L/C. The L/C
received through cable generally covers the following points:
1. The name of the importer;
2. The name of the exporter;
3. Description of goods (in short detail);
4. Expiry date of the Letter of Credit;
5. Shipment date, etc.

Issuing of EXP (Export) Form

After the receipt of the advising bank’s letter, the exporter is required to issue an Export
Form by the Authorized Dealers. The ‘EXP’ Forms are numbered serially and issued in
quadruplicate. Before the export forms are lodged by the exporters with the
Customs/Postal Authorities, they should get all the copies endorsed by the Authorized
dealers. For delay in repatriation of export proceeds or non-realization of export proceeds,
the exporters render themselves for action under Foreign Exchange Regulation Act, 1947.
Authorized Dealers and their officials who certify the export forms also render
themselves on such action by the Bangladesh Bank.

Examination of the Documents

After the issuing of the ‘EXP’ form the exporter proceeds for the shipment of the goods to
the buyer’s destiny. As soon as the shipment of goods is made, the exporter prepares the
bill of exchange and submits it with other export documents to Authorized Dealer for
negotiation of the same. As the banker deals only with documents not with the
commodity, they should be very much careful about the genuineness and correctness of
the documents evidencing shipment of the respective commodities. The banker is to
ascertain that the documents are strictly as per the terms of L/C. before negotiation of the
export bill, the banker is to scrutinize and examine each and every document with great
care. Negligence in the part of the banker may put the importer abroad into unnecessary
troubles.

32
DOCUMENTS USED IN FOREIGN TRADE RELATING TO BILLS
Every import and export involves documentary transaction of goods and services between
or among the parties involved (or between or among their supporting banks). Most of the
foreign trade and their exchanges are now held in the form of documentary Letter of
Credit (LC). Documentary letters of credit issued to finance the shipment of goods
involve the drawing of bills of exchange, which have to be accompanied by what is
known as “full set of shipping and non-shipping documents”. The attachment of these
documents to the bill is an essential obligation of the seller and the buyer so as to serve
the purpose. These typical documents can be divided into two main parts. These
documents are Shipping documents and Non-shipping documents. These documents are
the followings:

Shipping Documents
Shipping documents are those documents, which are mainly given by the exporter to the
importer after the shipment of the goods or services as been negotiated. It is impossible to
release the goods or commodity from ship/port without these documents. These
documents are described below:
Bills of lading
The bill of lading is one of the most important shipping documents, which accompany
bills of exchange drawn under letters of credit. It is an evidence of the fact that the
exporter has dispatched the goods and gives the exporter title to the goods and enables him
to collect them on arrival at the destination.

The bill of lading is more like a transferable debenture. It is a document signed and issued
by the shipping company or its agent acknowledging the receipt of specified goods for
carriage and embodying an undertaking that the goods will be delivered to a consignee
named in the bill, or to his order or assigns, or merely to order. The document specifies
the port of shipment, the destination, and the conditions under which the goods are
received for carriage.

“Clean” and “Claused” Bill of Lading

A bill of lading that indicates that the goods are in apparent good condition without any
without any qualification is known as a “clean” bill of lading. If, on the other hand, it
bears some remark relating to a defect in packing, such as ‘three bags torn’, ‘some cases
broken’, ‘received in dampened condition’, ‘goods not sufficiently packed’, etc., it is
known as a “foul” or “dirty” bill of lading. It is also known as a “claused” bill of lading.
A “claused” bill of lading is not an acceptable document, unless specifically provided for
in the sale and purchase contract. Such remarks protect the carrier against any claim for
losses attributable to bad packing. They also protect everyone else who comes in
possession of the bill of lading for value.

33
“On Board” and “Received for Shipment” Bill of Lading
When shipping space is ample and sailings are regular this type of certificate is easy to
get. An “on board” bill of lading is satisfactory from the viewpoint of the all the parties
concerned. The consignor is assured that the goods have been loaded and will reach the
destination. The consignee has equal assurance when he receives the documents that the
goods will arrive in time and will be available to him on surrender of the documents.
“Received for shipments” bills of lading have, therefore, vital lacunae and are not
acceptable to buyers and bankers. The buyer receives the documents but may not be sure
that he will get the goods in time. The merchandise may consist of perishable goods,
which, if delayed in transit, may not remain saleable. Buyers and banks, therefore, ask for
“on board” bills of lading.

“Through” Bills of Lading

Sometimes, when goods are carried overland and overseas, or during the sea voyage have
to be transshipped at an intermediate port, the carrier that takes the goods first issued a
“through” bill of lading. A railway company may issue a “through” bill of lading that
serves both as a railway receipt and some kind of bill of lading for the sea voyage. Such a
document, however, lacks authority to bind the ship owner who undertakes the sea
portion of the carriage. This kind of the bill does not provide any assurance that actual
shipment on the named vessel took place. The banker has a right to reject such a bill in
connection with a credit, which calls for delivery of a bill of lading, unless there is a
specific authorization for its acceptance.

“Straight” and “Order” Bill of Lading

A “straight” bill of lading is one, which is made out in the name of a consignee. At the
port of destination it is not necessary to present a straight bill of lading to take the
delivery of goods, except where it is necessary for the purpose of identification. An
“order” bill of lading is one, which is made out to the order of the consignor or supplier. It
can be transferred by endorsement to other parties. Such a bill of lading usually contains a
condition directing the shipping company to notify the consignee when the goods arrive.

Charter Party Bills of Lading

This is a contract for the hire of whole ship or part of a ship setting forth in detail the
rights and obligations of the owners and liners or chatterers. Charters are usually arranged
by “ship brokers”. They are for their services charging a small commission on the total
amount agreed upon for hire.
Charters are divided into “time” charters and “voyage” charters. The former is for
specified period of time, while the latter is for particular voyage. A charter party
specifies, among other details, the particular ports to which the ship is to go, the cargo to
be carried, and the freight to be paid for the hire of the ship.

34
Stale Bill of Lading
A bill of lading is said to be “stale” if it bears a date subsequent to the expiry date of the
credit under which the goods are shipped. It shows that the goods were put on board the
vessel on a date later than that authorized under the credit. A bill of lading may also be
considered stale if it is presented so long after the sailing of the carrying vessel that the
goods will be reaching the port of destination long before the buyer will get possession of
the goods when they arrive at destination.

Insurance Policy
There are many risks involved in the import and export business as the goods are shipped
and travel thousands of miles and often more than that to the buyer’s destiny. There are
obvious risks of damage, loss, or destruction of goods during transit by sea, air or by road.
For this reason, the buyer asks insurance of goods to be shipped to him from the exporter
or seller of them. Insurance policy is a kind of agreement between exporter and Insurance
Company to reduce the risk. Exporter sends this document with shipments to the
importer.

Marine Insurance Policy

A marine insurance policy is a contract between the insurer and the insured whereby the
former, in consideration of the payment of a premium by the latter, agrees to indemnify
the latter against loss incurred by him in respect of goods exposed to “perils of the sea” or
to the particular perils insured against. The marine insurance is the responsibility of the
buyers (consignee) under F.A.S., F.O.B. and C&F contracts and of the seller (consignor)
under C.I.F. contract. The sum insured should be the C.I.F. value of the goods. Where the
C.I.F. value cannot be ascertained the amount should not be less than the amount of the
drawing under the credit or invoice value of the goods. Like a bill of lading it must be
negotiated and endorsed where it is payable to order.

Bill of exchange
The Payment for the goods exported under a letter of credit is received by the seller or
exporter through the medium of a bill of exchange (commonly called bill or draft) drawn
on the buyer for the amount depending on the credit. It is known as a documentary bill
when it is drawn under a documentary credit and hence is accompanied by other shipping
documents. Through this bill of exchange the exporter orders the importer to pay the
value of the goods shipped through this document. Importer or the respective bank acting
on behalf of the importer must sign on this document. The bill is usually drawn in
duplicate of sets of two with the original copy being known as the First of Exchange and
the duplicate the Second of Exchange.

35
Invoice
The invoice is the important document of the letter of credit. It is the seller’s bill for the
merchandise. In other words, the invoice is a document containing the description of the
goods shipped, their marks, make, quantity, and prices, charges for packing, freight,
insurance etc. as are applicable as per terms of the contract as well as the name of the
carrying vessel and the date of sailing. There are different types of invoices in use. Such
as:
The Commercial Invoice
The commercial invoice is a statement of accounts drawn by the seller address to the
buyer giving the details of the amount stated therein which is based on the terms of the
contract entered into between the buyer and the seller. The exporter must dully sign a
commercial invoice.

Details found in a typical commercial invoice are name and address of the buyer and the
seller, the vessel of shipment, port of discharge etc. Also the shipment import and export
permit numbers, the number of contract and invoice and other essential details of the
transaction are recorded on the invoice. The financial terms of the sale, such as whether
under letter of credit, sight drafts etc., are given. The number of packages and the
identifying mark and numbers of them are clearly indicated. The goods contained in the
packages are detailed and prices are given item by item. The commercial invoice is
neither a document of title, nor it is negotiable. Its main utility is that it acts as a book-
device for both seller and buyer.

The Consular Invoice

Another special type of invoice named consular invoices are required depending upon the
trade regulations in importing country. It is made out in a prescribed format, certified and
signed by an individual of the importer’s country national working as a consulate in the
exporter country. In some cases it is also seen that exporter’s own invoice is authenticated
by the embassy or consulate instead of issuing consular invoice. This type of invoice is
called legalized invoice.

The Certified Invoice

Certified invoice is an invoice, which bears a signed statement, by someone in the
importer’s country who have inspected the goods and found them in accordance with
those specified in the contract.

36
The Certificate of Origin
The regulations in force in some countries require a certificate of origin of imported
goods to be produced before clearance of by customs and assessment of duty. The
certificate is usually required where goods from certain countries receive preferential
treatment, or the import of goods from some countries is partially or wholly prohibited.
This is generally issued by the Chambers of Commerce of the exporting country and is
arranged by the exporter. Sometimes, the certificate of origin is endorsed on the back of
the relative invoice, in which case the whole document is known as a “certified invoice”.
The Packing List
A packing list serves to indicate the exact nature, quantity, and quality of the contents of
each package in a shipment. The list helps the importer to identify the goods and check
them against his order. Banks may require such a list when they have financial interest in
the merchandise. Clearance of goods through customs is also facilitated by packing list.

The Other Certificates

Some other certificates are also required with of particular commodities. A “weight
certificate”, signed by a public agency, is often necessary with goods sold in bulk, such
grains, oils and similar products. The importing country may insist on a “food inspection
certificate” from an official inspecting service of the exporting country when certain
foodstuffs of perishable nature such as meat, edible fats etc., are imported. A “non-
dumping certificate” showing the comparative difference in the domestic and export
selling prices, is sometimes required with imports in some countries to ensure that goods
are not being sold at very much lower prices in the importing countries than the domestic
markets of the exporting country.

Inspection Certificate
This is normally issued by an independent inspection company located in the exporting
country certifying or describing the quality, specification or other aspects of the goods, as
called for in the contract and/or the L/C.
Quality Control Certificate
Sometimes the sale contract may demand a certificate issued by a standards institute or
quality control agency in the exporting country indicating the quality of the merchandise
shipped. This is known as a quality control certificate.
GSP Certificate
When tariff concession is sought from those developing countries providing preferential
treatment to exporters of the developing countries, a GSP certificate should be obtained
from the Export Promotion Bureau (EPB). Besides the usual shipping documents required
under the Letter of Credit or a contract entered into, the shipping documents in our
country are incomplete without being supported by Exchange Control Forms.

37
Non-shipping Documents
There are a number of other documents, which have importance in dispatch of goods in
foreign trade. A brief discussion on these documents is given below:

The Documentary Letter of Credit

A Letter of Credit is issued by a bank (Issuing Bank) at the request of an importer
(applicant) in favor of an exporter (beneficiary) from whom the importer has contracted
to purchase some commodity or commodities. The importer, the exporter, and the issuing
bank are, thus, obviously parties to a Letter of Credit. There is, however, one or more
than one bank that is involved in various capacities and at various stages to play an
important role in the total operation of the credit.

The Ships Reports

In the ship’s report the following information is found:
(a) The name of the ship.
(b) The name of the registered port and the registration number.
(c) Nationality of the ship owner or the name of the state belonging to the ship.
(d) The name of the loading port.
(e) The name of the captain of the ship or the principal of the ship.
(f) Number of the employees and the officers of the ships.
(g) Reports of things used by the employees, captain and officers of the ship.
(h) Detail reports of the transported merchandise.
(i) The name and address of the exporter.

FINANCIAL ASSISTANCE PROVIDED BY THE BANKS

In international trade the most two important terms are the export and the import. As the
mostly dependable financial institution banks are in a position to provide sufficient
financial assistance to the importer and more commonly the exporter so as to conform
smooth flow of a large bulk of foreign trade.
Now a day, both the importers and the exporters of our country receive and/or enjoy a
considerable amount of financial assistance from commercial banks and other financial
institutions.
Pre-Shipment Finance
Pre-shipment finance in taka, more popularly known as ‘Packing Credit Advance’, is
short-term working capital finance specially provided to an exporter against the
documentary evidence of having entered into export commitments. The packing credit is
granted at a pre-shipment stage, i.e., at the stage prior to the goods being shipped and the
credit is given for procuring raw material, for paying manufacturing and packing charges
and payment of insurance premium and freight. As and when the goods are shipped and
shipping documents are obtained, the pre-shipment finance is to be liquidated against the
proceeds of export documents tendered.

38
Post-Shipment Finance
The post-shipment finance is the financial facility extended by the banks after the goods
have been shipped and against the submission of export documents evidencing the
dispatch of goods. Post-shipment finance portfolio is in existence since the day
international trade has been known, but more precisely after the First World War. After
that the international trade is ever increasing, and the shipping documents against which
the exporters are getting financial facilities are well accepted.

3.2.2 FOREIGN REMITTANCE

According to Foreign Exchange Regulation Act 1947, the commercial banks or the
authorized dealer who has the Bangladesh Bank authorization can do Foreign Exchange.
According to this Act, TC (Traveler Cheque), Drafts are included in Foreign Exchange.
SIBL, Foreign Exchange Branch provides its customer with the foreign remittance
facilities by issuing Foreign Demand Drafts, Traveler Cheque, Endorsing passport for
cash etc.

Traveler’s Cheque
It is the safest way to carry money from one country to another. It can be change in any
country of the world. Even if the Traveler Cheque (TC) is lost then the holder of the T.C
can inform it to the bank and the bank will inform it to the agencies so that no one can en-
cash the T.C while issuing a Traveler Cheque (T.C) a signature is needed, so that no one
can en-cash it except the holder and also another signature is needed in encashment in
front of the banker. So Traveler Cheque (T.C) is the safest way to carry outside the home
country. A customer is permitted to endorse maximum US$ 3000 per year for travel in
countries other than SAARC countries and US$ 1000 for travel in SAARC countries. If
SAARC countries are to be visited by road then maximum US$ 500 can be endorsed per
passport per year. At a time cash cannot be endorsed over US$ 500.

Issue of Travelers Cheque

There are some requirements, which are to be fulfilled by the TC publisher:
1. Passport holder himself to be present to issue TC purchasing.
2. The passport has to be a valid one.
3. Air ticket has to be confirmed.
4. Steps involved in issue of TC:
5. After verifying all these documents, the customer as asked to fill up prescribed
application form.
6. In the application the customer states the amount he is willing to endorse and it is
to be verified that his required amount is within the stipulated amount.
7. Then the customer pays cash or by debiting hid account the Travelers Cheque is
issued.

39
 8. Endorsement is given on the passport and on the ticket. Customer fills up the
Travel and miscellaneous form.
9. Purchase application form is prepared and handed over to the purchaser along with
the Traveler Cheque.
10. Entry is given in three registers: Foreign Currency Issue Register, Travelers
Cheque “On Hand” Register and Foreign Currency “In Hand” Register.

Payment of Travelers Cheque

When a customer wants to encase his TC, he has to show his passport and it is to be
verified from the passport that he has traveled outside the country. Then -
1. The TC will have to be scrutinized very strictly;
2. If everything in the TC is in order then the customer will be asked to give
signature on the place of “Counter Signature”;
3. If the signature agrees with the one in place of “the signature of the holder” then
the payment will be made through giving cash to the customer or crediting his A/c;
4. Travelers Cheque will be crossed and endorsement given on the back of the
received TC.

Endorsement of Cash
Cash Foreign Currency can also be remitted through endorsement in the passport. In case
of endorsing cash on passport, the requirements are same as in case of traveler’s cheque.
But the only exception is that the passport holder is not required to be present by himself.

Foreign Currency Account

The accounts maintained in foreign currencies are known as foreign currency account.
The Authorized Dealers may open foreign currency accounts in the names of followings
without prior approval from Bangladesh Bank.
a) Bangladesh nationals residing abroad.
b) Foreign nationals residing in Bangladesh and also the foreign firms registered
abroad and operating in Bangladesh or abroad.
c) Foreign Missions and their expatriate employees.
Branches are mainly deals with two types of foreign currency accounts, namely:
a) Non-Resident Foreign Currency Deposit Account (NFCD).
b) Resident Foreign Currency Deposit Account (RFCD).

Non-Resident Foreign Currency Deposit Account (NFCD)

All nonresident Bangladesh nationals and persons of Bangladesh origin including those
having dual nationality and ordinarily residing abroad, may maintain interest bearing time
deposit accounts named “Not-Resident Foreign Currency deposit (NFCD)”Accounts with
the Ads.

40
Eligible persons
a. Bangladesh nationals working and earning abroad.
b. Bangladesh nationals serving with Embassies /High Commission of Bangladesh in
foreign countries including officers /Staff of Govt. / Semi Govt.
Autonomous/nationalized sector posted/ deputed abroad.
c. Shore staff posted abroad (Crew of BSC not entitled).
d. Foreign nationals and companies registered and /or incorporated abroad, institutional
investors and 100% (Hundred Percent) Foreign owned industrial unit of EPZ
(Minimum Amount USD 25000/- or equivalent).

Resident Foreign Currency Deposit (RFCD)

Ordinary resident of Bangladesh may open and maintain Resident Foreign Currency
Deposit (RFCD) accounts with foreign exchange brought-in at the time of their return
from travel abroad. Any amount brought in with declaration to Custom Authorities in
form FMJ and up to US$ 5000/- brought in without any declaration can be credited to
such accounts.

Deposit
The depositors must submit a declaration mentioning the date of return from abroad and
the amount of Foreign exchange brought in at the time of crediting to RFCD account to
the effect that Foreign exchange (i) is not a receipt against export of goods or services
from Bangladesh (ii) is not a commission due from abroad arising from business in
Bangladesh.

41
3.3. CREDIT BANKING AREA
One of the core functions of commercial banks is to create the claim against individual
borrower or real the purpose of sanctioning credit. Bank grants loan in the form of
different securities. By the primary security, we mean the financial claim of holder
against the real sector of economy. In banking the sector, the financial claim of bank
against issuer, (called investors, borrowers and deficit units). This core function of a bank
is performed by the credit department of the bank. In this case, the relationship of bank
and customer is that of the creditor and debtor.

3.3.1. Types of loans and Advances offered by SIBL

Types of Code Interest rate Features
advances
Secured 14 11.25%-16% Continuous advance facility given for one year but
Overdraft can be renewed after the expiry of the time. Given
(SOD) against I.C.B. unit, FDB, Sanchaypatras and Work
Orders.
Loan (General) 13 12%-16% Given against Personal guarantee, Hypothecation of
goods and land and building.
House 12 7% Given against Personal guarantee, land and building.
Building
Loan (staff)
House 24 12.75%-16% Given against Personal guarantee, land and building.
Building
Loan (General)
Transport 32 7% Given against Personal guarantee and Hypothecation
Loan (Staff) of vehicles.
Transport 17 15% Given against Personal guarantee and Hypothecation
Loan (General) of vehicles.
Demand 16 7%-14.5% Given against Personal guarantee, and cash collateral
Loan securities.
Industrial 22 12.5%-16% Given against land and building along with
Credit machinery, Personal guarantee of Directors and
Hypothecation of raw materials.
Cash Credit 18 11%-16% A short term arrangement by which a customer is
(Hypothecation) allowed to borrow money up to a certain limit is
sanctioned by the bank for a certain time. Given
against Registered mortgage of land and building,
hypothecation of goods and personal guarantee of
Directors.
Past Due 31 15% Given against Bills Receivables.
Bills
Loan against 15 11%-15% Advance allowed for retirement of shipping
Trust documents and release of goods imported through
Receipt L/C. The goods are handed over to the importer
(LTR) under trust with the arrangement that sale proceeds
should be deposited to liquidate the advances within
a given period. Given against Bills Receivables,
hypothecation of imported goods, Trust receipt,
personal guarantee, and registered mortgage of land
and building.

42
3.3.2. Procedure for Giving Advance
1) The potential borrower will submit application to SIBL for loan by filling up of a
specific Application form.
The Application form (request for Credit Limit) contains following particulars:
a) Name of the Borrower-----
b) A/C No.-------------
c) Bunnies address (with telephone no.) [Residential address and Permanent
address]--------
d) Introducer’s name, A/C no. & address-----
e) Date of establishment/ incorporation------
f) Trade license number, date and expiry date (Photocopy of trade license
enclosed)--------
g) GIR/TR no. & amount of income tax paid last year------
h) Constitution/ Status (Mention whether sole proprietorship/ partnership/ Public
Ltd. company/ Private Ltd. company)--------
i) Particulars of individual/ Proprietor/ Partners/ Directors (Name &
Designation, father’s/ Husband’s name, present & permanent address with
Telephone no., % of shares held)-------
j) Experience and background of Individual/Proprietors/ Partners/ Directors------
k) Full particulars of assets in the personal name of Individual/ Proprietor/
Partners/ Directors with valuation-----------
l) Names of Subsidiaries/ Affiliates, percentage of share holding and nature of
business---------
m) Nature and details of business/ products (for which credit facility is applied
for), Markets (Present market price per unite, Factory price), Estimated sales
for next one year............
n) Credit facilities required (type, amount, period, purpose, and mode of
adjustment)..........
o) Details of securities offered with estimated value (Primary security, Collateral
security, market value of the security)..........
p) Details of liabilities in the name of the client or in the name of any other
partners/Directors or Subsidiaries/Affiliates Nature of advance, amount,
security and validity of limit).....
q) Balance Sheet/ Income Statement of Statement of Accounts of the following
years attached (Preferably last 3 years)........
r) Other relevant information.........
s) Proposed debt/equity ratio.........
t) Signature of the Applicant..............

43
2) After receiving the loan application form, SIBL sends a letter to Bangladesh Bank for
obtaining a report from there. This report is called CIB (Credit information Bureau)
report. This report is usually collects this report if the loan amount exceeds Tk. 50
Lac. But SIBL usually collects this report if the loan amount exceeds Tk.10 Lac. The
purpose of this report is to being informed that whether the borrower has taken loan
from any other bank; if ‘yes’ then whether these loans are classified or not.

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.

4) Then comes processing stage. In this stage, the Bank will prepare a Proposal contains
following information
a) Name of the Borrower
b) Nature of Limit
c) Purpose of Limit
d) Extent of Limit
e) Security
f) Margin
g) Rate of Interest
h) Repayment

Branch incumbent (Local Office Br.) has the discretionary power to sanction loan (SOD)
up to Tk. 25 Lac against financial obligations by informing Head Office. But in that case,
the Branch Manager has to give attention to the following matters:
- The interest rate of the loan must not be less than 4.5% and
- The borrower must maintain 10% margin.

Except this case, the branch has to send the proposal to the Head Office. Head Office will
prepare a minute and submit it before the Executive Committee (EC). The minute has to
be passed by EC. After passing the minute, it will be sent to Bangladesh Bank for
approval in case of following:
If the proposed limit exceeds 15% of Bank’s equity;
If the proposed limit against cash collateral securities
exceeds 25% of Bank’s equity.
5) After the sanction advice, Bank will collect necessary documents (charge
documents). These documents are--------
a) Joint Promissory Note
b) Single Promissory Note
c) Letter of Undertaking
d) Loan Disbursement Letter

44
3.3.3. Feasibility Report
This report is from borrower’s point of view. He prepares this report and submitted to the
bank.
3.3.4 Credit Line Proposal
In this step of the term loan the branch sends a credit line proposal to the head office for
approval of the term loan. The credit line proposal contains the following particulars:
 Fresh/Renewal/Revision of the term loan
 Borrower name
 Types of business
 Capital structure
 Particulars of previous transaction
 Movement of the accounts
 Liabilities of sister concerns

3.3.5. Project Appraisal

It is the reinvestment analysis done by the banker before a project he approved. Project
appraisal in the banking sector needed for the following reasons:

 To justify the soundness of an investment

 To ensure repayment of bank finance
 To achieve organizational goals
 To recommend if the project is not designed properly

3.3.6. Techniques of Project Appraisal

An appraisal is a systematic exercise to establish that the proposed project is a viable
preposition. The appraising officer checks the various details submitted by the promoter
in first information sheet, credit application form, feasibility report. SIBL considers the
following aspects in apprising:
1. Entrepreneur
2. Viability of the project
A. Technical viability (location and site of the project).
B. Commercial viability (This study indicates evaluation of a project’s
feasibility in terms of market).
C. Financial viability.
D. Economic Viability.
E. Management and organization viability

45
3.3.7 Lending Risk Analysis (LRA)
Lending Risk Analysis (LRA) is a technique by which the risk of the loan is calculated.
Banker must analyze LRA when loan application is above 1 core. This analysis is done by
experienced people of Credit department in SIBL. It is a ranking whose total score is 140.
Among this score, 120 is for Total Business Risk and 20 for Total Security Risk.
In case of business risk, if the score falls---------
Between 13-19, then------- Poor risk
Between 20-26, then --------Acceptable risk
Between 27-34, then-----Marginal risk
Over 34, then ------ Good risk.

In case of security risk, if the score fall

Between – 20 to – 15 then
Between – 14 to 0, then ------------ Acceptable risk
Between 0 to 10, then -------------Marginal risk
Over 10, then -----------------Good risk.
In LRA, following aspects are analyzed
Supplies risk
1) Sales risk
2) Performance risk
3) Resilience risk
4) Management ability.
5) Level of Managerial teamwork
6) Management competent risk
7) Management integrity risk
8) Security control risk
10) Security risk cover.

3.3.8. Securities
SIBL charges the following two types of security,
1. Primary security
2. Collateral security.

3.3.9. Document and Documentation

A document is a written statement of facts of proof or evidence arising out of particular
transaction which placement may bind the parties there to answerable and liable to the
court of law for satisfaction of the change in question. The execution of documents in
proper form and according to the law is known as documentation.

46
Steps in documentation
 Obtaining the documents.
 Stamping (Stamp Act-1899)
 Witnessing.
 Execution of Documents.
 Registration of Documents (assignment on the body of an insurance Policy,
Mortgage deed, Advance to a limited company etc.)

Common Compulsory Documents

 Letter of Acceptance about the terms and conditions laid down in Sanction
Advice.
 D.P. Note (Depending on the types of borrowers)
 Letter of Arrangement.
Besides, there are other documents that are to be obtained depending on the types of
Advance. Such as-
In case of loan
1. Letter of Disbursement.
2. Letter of Authority (if required)
3. Letter of Hypothecation (when goods are hypothecated as security)
4. Insurance Policy (if required).
5. Any other document as stated in Sanction Advice.
In case of overdraft
1. Letter of Continuity.
2. Letter of Authority (if required)
3. Letter of Hypothecation (when goods are hypothecated as security)
4. Insurance Policy (if required)
5. Any other document as stated in Sanction Advice.

In case of cash credit

1. Letter of Continuity.
2. Letter of Authority (if required)
3. Letter of Pledge/Hypothecation.
4. Insurance Policy under Bank’s Mortgage clause.
5. Letter of disbursement incase of renewed go down.
6. Any other document as stated in Sanction Advice.

Transport Loan
1. Letter of hypothecation of vehicles (in separate form)
2. Photocopy of blue book
3. Photocopy of rote permit
4. Insurance policy under Bank’s mortgage clause

47
Legal Mortgage
1. Mortgage deed (certified copy)
2. Registration receipt in
3. Chain of documents for title (original if available)
4. C.S,S.A and R.S parcha
5. Up to date Rent Receipt
6. Non-encumbrance certificate
7. Power of Attorney (if asked for)
8. Legal opinion
9. Valuation Certificate
10. Location plan etc./Site plan etc
Equitable mortgage
1. Chain of documents for title
2. original title deed
3. C.S, S.A A and R.S parcha
4. Up to date Rent Receipt
5. Memorandum of deposit of title deed
6. Registered power of Attorney
7. Legal opinion
8. Valuation Certificate
9. Location plan etc
10. Non-encumbrance Certificate

3.3.10 Credit Monitoring, Follow-up and Supervision

SIBL Officer checks on the following points:
1. The borrower’s behavior of turnover
2. The information regarding the profitability, liquidity, cash flow situation
and trend in sales in maintaining various ratios.
3.3.11. Loan Classification
Like other banks, all types of loans of SIBL fall into following four scales:
1. Unclassified: Repayment is regular.
2. Substandard: Repayment is stopped or irregular but has reasonable prospect
of improvement.
3. Doubtful debt: Unlikely to be repaid but special collection efforts may result
in partial recovery.
4. Bad/Loss: very little chance of recovery.
3.3.12. Provision
Type of classification Rate of provision Type of classification Rate of provision
Unclassified 1% Doubtful 50%
Substandard 20% Bad debt 100%

48
3.3.13 Statements Prepared by the Credit Department
Monthly Statements prepared by Credit Department for Bangladesh Bank.
Quarterly Statements prepared by Credit Department for Bangladesh Bank.
Monthly Statements prepared by Credit Department for Head Office.

3.3.14 Deviations between Theories and Practices

Following dissimilarities have been observed in the credit department:

1. In case of method of granting security against loan, hypothecation is much risky as

compared with other charging security. But it is being used massively in SIBL Local
Office Br. It is risky because neither the ownership nor possession is passed on it, only
a right or interest in the goods is created in favor of the bank. Theoretically, bank
provides two types of credit facilities--- direct facilities (funded) and indirect facilities
(non-funded). But bank is being covered indirect facilities fully but not direct facilities.
For example, Demand Loan is not available in bank practically.

2. In case of mortgage, only equitable and legal mortgage are commonly used as the
charging security in immovable property but theoretically there are another types of
mortgage like mortgage by the condition of sales, English mortgage, fractural and
anomalous mortgage are not applied in practice.

49
ONLINE BANKING
Information technology (I.T.) is a well known word, The developed countries of the
world reached to the peak of information technology. SIBL have no alternative to expand
of information technology. Tight now, SIBL are facing uneven competition with many
foreign banks in the country. For this, SIBL will have to take necessary preparation form
this moment.
Information Technology and Flow of Information is become very important in the present
world. Social Islami Bank needs to develop all their banking transaction with the help of
this technology and need to introduce online banking.

4.1 What is Online Banking?

Most people heard a lot about online banking but probably haven't tried it themselves.
People still pay their bills and deposit checks at bank’s branch, much the way their
parents did. They might shop online for a loan, life insurance or a home mortgage, but
when it comes time to commit, people can feel more comfortable working with his banker
or an agent they know and trust.
Online banking isn't out to change one’s money habits. Instead, it uses today's computer
technology to give people the option of bypassing the time-consuming, paper-based
aspects of traditional banking in order to manage finances more quickly and efficiently.

4.2 Origin of Online Banking

The advent of the Internet and the popularity of personal computers presented both an
opportunity and a challenge for the banking industry.
For years, financial institutions have used powerful computer networks to automate
millions of daily transactions; today, often the only paper record is the customer's receipt
at the point of sale. Now that its customers are connected to the Internet via personal
computers, banks envision similar economic advantages by adapting those same internal
electronic processes to home use.

4.3 Brick-to-Click Banks

Today, most large national banks, many regional banks and even smaller banks and credit
unions offer some form of online banking, variously known as PC banking, home
banking, electronic banking or Internet banking. Those that do are sometimes referred to
as "brick-to-click" banks, both to distinguish them from brick-and-mortar banks that have
yet to offer online banking, as well as from online or "virtual" banks that have no physical
branches or tellers whatsoever.
The challenge for the banking industry has been to design this new service channel in
such a way that its customers will readily learn to use and trust it. After all, banks have
spent generations earning our trust; they aren't about to risk that on a Web site that is
frustrating, confusing or less than secure.

50
Most of the large banks now offer fully secure, fully functional online banking for free or
for a small fee. Some smaller banks offer limited access or functionality; for instance, you
may be able to view your account balance and history but not initiate transactions online.
As more banks succeed online and more customers use their sites, fully functional online
banking likely will become as commonplace as automated teller machines.

4.4 Virtual Banks

If anybody don't mind foregoing the teller window, lobby cookie and kindly bank
president, a "virtual" or e-bank may save very real money. Virtual banks are banks
without bricks; from the customer's perspective, they exist entirely on the Internet, where
they offer pretty much the same range of services and adhere to the same federal
regulations as corner bank.
Virtual banks pass the money they save on overhead like buildings and tellers along to
you in the form of higher yields, lower fees and more generous account thresholds.

4.5 SIBL will get Advantage from Online Banking

 Convenience: Unlike a corner bank, online banking sites never close; they're
available 24 hours a day, seven days a week and they're only a mouse click away.
 Ubiquity: If anybody out of state or even out of the country when a money
problem arises, he can log on instantly to his online bank and take care of
business, 24/7.
 Transaction speed: Online bank sites generally execute and confirm transactions at
or quicker than ATM processing speeds.
 Efficiency: One can access and manage all of his bank accounts, including IRAs,
CDs, even securities, from one secure site.
 Effectiveness: Many online banking sites now offer sophisticated tools, including
account aggregation, stock quotes, rate alerts and portfolio managing programs
helps to manage all of the assets more effectively. Most are also compatible with
money managing programs such as Quicken.

4.6 Feature that can be gives in SIBL Online Banking

 Making payments
 Tracking payments
 Stop payments by block cheque
 Review personal account details, including balances and transactions
 Pay bills online with the optional Online Bill Payment service
 View images (front and back) of cleared checks and deposit slips
 Receive e-mail notifications to alert to selected account activity
 Schedule single one-time transfers or multiple transfers

51
 Set up email notifications to be sent for balance amounts, specific checks
cleared or maturity dates
 Transfer money
 Open Accounts
 Apply for loans
 Make loan payments

52
PERFORMANCE ANALYSIS
5.1 Performance of the Bank (SIBL): A brief review of the activities
I take this opportunity to place before you the present overall operational activities of the
Bank as follows:

a) Alhamdulillah during 2008 Bank has made a net profit after tax of Tk.
202,068,294 after providing provision as per requirements of Bangladesh Bank.
Business performance of 2009 shall be much better, inshallah.
b) The growth rate in formal sector-Deposit in 2008 was significant, based on actual
expected growth rate of deposit in 2008would be much better.
c) Banking with the poor (that is mainly with street children and poor family) under
micro credit and micro enterprise under family empowerment credit program
activities is increase very rapidly

Deposit
Deposit of the Bank was increased to Tk.19, 753,940,163 million during 2008 against
total deposit of Tk. 16,170,514,627 million in 2007, compared to growth rate of 22.16 %
in the Banking Sector of the country. In view of the fact that the main target group of
SIBL is lower and middle class people, this model of Banking is capable of absorbing
abnormal fluctuation of stock market due to this target group of depositors.

Investment
Bangladesh experienced worst flood in the century and volatile economic situation during
the year under report, investment activities stood Tk16,440,259,305 million in various
sector as at the end of 31st December, 2008.as against Tk.15,312901,478 million in 2007
Alhamdulillah, there was no as such overdue or classified investment as at 31 st December,
2008.

Liquidity
Liquidity maintained in the form of cash in hand and balance with Bangladesh Bank
including foreign currency notes stood at Tk.1, 702,267,359 million as at 31st December,
2008 against Tk. 1,384,245,001 million last year. Total liquidity increased was
Tk.318022358 million. Balance held with other banks stood at Tk.4, 602,084,949 million
as on 31 st December, 2008 as against Tk 1, 572,218,612 million last year.

53
Foreign Exchange Business
Foreign Exchange Business stood at Tk.23903.80million in 2008 as against Tk.23280.00
million in 200. The breaks up of foreign exchange business are as follows:
Taka in million
Growth
Particulars 2003 2004 2005 2006 2007 2008
Rate
Import 11124.85 14908.90 13363.07 11576.71 11791.00 13482.30 14.34 %
Export 2287.64 4035.90 4500.23 5528.40 10714.00 9961.60 -0.0702 %
Remittance 107.57 120.30 224.82 332.96 775.00 459.90 -40.65 %
Total 13520.07 19065.10 18088.12 17438.07 23280.00 23903.80 2.67 %
Source: Annul report of SIBL (2003, 2004, 2005, 2006, 2007 & 2008)

54
5.1.1. DEPOSIT
The deposit of Social Islami Bank Limitedhas rapidly increased from 2007 to 2008. The
deposit of SIBL in 2007 was Tk. 16,170,514,627 million where it was Tk19,
753,940,163. Million in 2008.
Table-1
Year Deposit in million taka
2003 15141.332
2004 19709.31
2005 19704.16
2006 16,862.57
2007 16,170.51

2008 19,753.94
Source: Annul report of SIBL (2003, 2004, 2005, 2006, 2006, & 2008)

55
5.1.2 INVESTMENT
Investment of SIBL is increasing rapidly. In the year 2008 the amount of investment was
Tk. 16440.25 million which was Tk. 15312.90 million in 2007.
Table-2
Year Advance in million taka
2004 10059.11
2005 12887.27
2006 15096.83
2007 15312.90
2008 16440.25
Source: Annul report of SIBL (2004, 2005, 2006, 2007, &2008)

5.1.3 COMPARATIVE GROWTH IN DEPOSITS AND INVESTMENT

The growth rate of deposit in 2008 was 22.16 % where the growth rate in investment was
7.36 % in 2008. The growth rate in Deposit was higher than the growth rate deposits in
2007.

56
5.1.4 IMPORT BUSINESS
The import business of SIBL Tk. 13482.30 million in the year 2008 that was Tk. 11791
million in the year 2007. The growth rate of import business in 2007 was 14.34 %.
Table-3
Year Amount in million Taka
2003 11124.85
2004 14908.90
2005 13363.07
2006 11576.71
2007 11791.00
2008 13482.30
Source: Annul report of SIBL (2003, 2004, 2005, 2006, 2007 &2008)

5.1.5 EXPORT BUSINESS

The export business of SIBL is decreasing trend. The growth rate of export business in
the year 2007 was -7.02 %
Table-4
Year Amount in million taka
2003 2287.64
2004 4035.90
2005 4500.23
2006 5528.40
2007 10714.00

2008 9961.60
Source: Annul report of SIBL (2003, 2004, 2005, 2006, 2007& 2008)

57
5.1.6 GROWTH IN NET PROFIT
Earning net profit is increasingly of SIBL. In the year 2008, the net profit after tax of the
Bank was Tk. 150037061 million and the growth rate of net profit was 160.34 % in 2008.
Table-5
Year Amount in taka
2004 83,857,707
2005 13,936,185
2006 57,631505
2007 150,037,061
2008 202.068,294
Source: Annul report of SIBL (2004, 2005, 2006, 2007 & 2008)

58
 5.1.7 COMMENTS
Though Social Islami Bank Limitedis a new bank, which started its operation in the last
half of the year 1995; it has now become a reputed bank. Its deposits and investment are
increasing rapidly. Its number of branches has increased up to 24. Its foreign exchange
business is also very credible. In a few days, it is well known in the banking sector that
SIBL gives a higher standard of banking services. During my precaution orientation
program in Local Office branch, I went through many experiences that made me think
SIBL-a bank of a very high standard.
5.2 RATIO ANALYSIS
Formula Major Ratios 2008 2007 2006 2005
Profitability Ratios
Income to Total
Net Profit ÷ Total Assets. 0.0589 0.00292 0.00068 0.00389
Assets
Net Profit Before Tax ÷Total Assets. Return on Assets 1.09% 0.61% 0.27% .074%
Net Income Before Tax ÷Shareholders
Return on Investment 18.02% 4.90% 0.48% 14.00%
Equity.
Profit Before Interest and Tax ÷ Return on Working
0.171931 0.8029 0.000296 0.126
Working Capital Capital
Profit Before Interest and Tax ÷ Fixed Return on Fixed
2.0288 0.8744 0.3534 1.0984
Assets Assets
Net Income to
Net Income ÷ Total Equity 0.7991 0.6372 0.2451 1.559
Equity
Net Profit after Tax ÷ Number of
Earnings Per Share 17.60 9.85 24 143
ordinary share Outstanding
Market Share Price ÷ Earning Per Price Earnings
28.79 18.27 76 26
Share. Ratio-Times
Leverage Ratios
Debt to total Assets
Total Debts ÷ Total Assets 0.932 0.950 0.954 0.957
Ratio
Total Liabilities ÷ Stockholders Equity Debt to Equity Ratio 13.740 19.079 21.055 22.700
Liquidity Ratio
Current Assets ÷Current Liabilities Current Ratio 0.288 0.164 0.2215 0.0388
Working Capital ÷ Current Assets Current Test Ratio -0.247 0.392 -0.0351 1.57

5.2.1 Interpretation of Ratio Analysis

Liquidity Ratio
Liquidity Ratio covers the four most important ratios. Current ratio express that almost in
the five years SIBL has sufficient current asset respect with the current liabilities. Quick
ratio is also fine but not so much enough in respect with the current liabilities. Cash ratio
are also fine from my point of view because cash has opportunity cost also. So huge
amount of idle cash is not so good for any company. Operating Cash Flow ratio is also
fine. They are generating approximately 8% cash from their operation.

59
Profitability Ratios
Profitability Ratio mainly covers how much profit the organization conducts or achieved
by its operation. And we know that Islami Bank’s main concentration is not for profit. So
for the particular Islami Bank profitability ratio is not so much important. But its
profitability ratios are good from the year of 2004 to 2008.

Leverage Ratios
Leverage Ratio covers the area in which we are discussing that how much borrowed
capital the bank gathered in respect to their own equity of shareholder’s equity. In this
particular bank the leverage ratio, we can see that their almost dependent on external
liabilities rather than internal liabilities or shareholder’s equity.

5.3 SWOT ANALYSIS

SWOT analysis is the detailed study of an organization’s exposure and potential in
perspective of its strength, weakness, opportunity and threat. This facilitates the
organization to make their existing line of performance and also foresee the future to
improve their performance in comparison to their competitors. As though this tool, an
organization can also study its current position, it can also be considered as an important
tool for making changes in the strategic management of the organization.

S- STRENGTHS
W-WEAKNESS
O-OPPORTUNITIES
T-THREATS

Here is the SWOT analysis of SIBL:

Strength
 Social Islami Bank is a new commercial bank in banking sector but it has built
strong reputation in short time. It provides extra ordinary services to its
customers.
 The financial condition of Social Islami Bank is very strong, its loan and deposit
quality is better than any other commercial banks of Bangladesh.
 It has a strong network throughout the country and it provides services of good
quality to every level of customers.
 Their corresponding relationships with more than 200 international and local
banks of different countries have created global accessibility and relationship with
people.
 Installation and use of highly sophisticated, automated system that enables the
bank to have on time communication with all branches reduces excessive paper
work and time for valued customer transaction.

60
  Social Islami Bank is a new commercial bank in banking sector but it has built
strong reputation in short time. It provides extra ordinary services to its
customers.
 The financial condition of Social Islami Bank is very strong, its loan and deposit
quality is better than any other commercial banks of Bangladesh.
 It has a strong network throughout the country and it provides services of good
quality to every level of customers.

Weakness

 One of the greatest weaknesses for Social Islami Bank is shortage of manpower in
every division. During the working hour of banks the employees cannot provide
proper attention to the customers that enhances customer dissatisfaction.
 Higher service charge in some areas of its banking operation discourages
customers from opening or maintaining accounts with this bank.
 Social Islami Bank is facing some problems from their competitors because
competitors are giving a higher interest rate in deposits without any reason which
will deteriorate its position than it was before. Because of this a lot of depositors
are leaving Social Islami Bank.
 There is a very little practice for increasing motivation in the workers by the
management.
 The SIBL was listed as a problem bank in 2005 by the central bank mainly due to
shortfall of capital, liquidity crisis and classified loans. The bank has now a
surplus capital of TK. 31 core
 In 2005, the bank’s classified loan was over 11 percent of total outstanding loans
whereas its current classified loan is below 4 percent of the total loans.

Opportunity

 There is a great opportunity to take new dimension of banking such as Islamic

banking, specialized banking. Otherwise, there are many sectors where this can
give special privileges.
 The credit facility offered by Social Islami Bank has attracted security and status
conscious businessmen as well as service holders with higher income group.

61
Threats

 The emergence of several private and foreign banks within the past few years
offering similar services with less or free charge for the facilities can be a major
threat for the bank.
 Social Islami Bank. Sometimes the restrictions impose barrier in the normal
operations and policies of the bank.
 Rival banks easily copy the product offering of SIBL. Therefore, this bank is in
continuous progress of product innovation to gain temporary advantages over its
competitors.
 Sometime political loans are the threat for this banking service.

62
6.1 SOURCE OF FUND
Capital
The authorized capital of Bank is 4000 million. The paid-up capital and equity of the
Bank stood at Taka 585.00 million and taka 980.70 million respectively as at 31st
December 2007.
(Taka in Millions)
01 Paid up capital 585.00
02 Statutory Reserve 290.98
03 Retained Earnings 90.44
04 1% provision on unclassified investment 147.33
05 Investment loss off setting Reserve 8.15
06 Exchange Equalization 6.12

CLASSIFICATION OF SHAREHOLDER BY HOLDING

Year 2007 shareholding range Folio Share Percentage
1-10 675 4493 0.77%
11-50 462 11073 1.89%
51-100 82 6533 1.12%
101-500 104 25708 1.39%
501-1000 30 23505 4.02%
1001-5000 50 119707 20.46%
5001-10000 13 94610 16.17%
10001-20000 12 154780 26.46%
20001-50000 3 94146 16.09%
50001-99999 1 50445 8.62%
Total 1,432 58,5000 100.00%

6.1.2 Deposit
Since deposit is the life blood of the Bank, we drew-up service of action plan, both short
term and long term to raise the deposit base of the Bank in line with the directives of the
Bangladesh Bank. The short-term action plan included launching of special drive like
service months, deposit mobilization months; customers get together etc. during April-
June and September-December 2007. in the service months new deposit of Tk.382.84
crore was mobilized. Alongside the treasury operation of SIBL was made prudently.
Resultantly, there was an increase in client deposit by Tk. 170.47 crore and avoid
dependency on Bank deposits as compared to 2005. Besides, borrowings of Tk.177 crore
from Bangladesh Government Mudaraba Islamic bond found has added qualitative value
in liquidity management of SIBL. Therefore, we could efficiently save the Bank from
manage the found and liquidity mishap despite liquidity crisis in 2007 in the market. As a
result of continuous evaluation and monitoring we could significant improve the deposit
mix in 2007.

63
The deposit of Social Islami Bank Limitedhas rapidly increased from 2007 to 2008. The
deposit of SIBL in 2007 was Tk. 16,170,514,627 million where it was Tk19,
753,940,163. Million in 2008.
Table 6.1: Year wise fund distribution in...
Year Deposit in million taka
2003 15141.332
2004 19709.31
2005 19704.16
2006 16,862.57
2007 16,170.51
2008 19,753.94
Source: Annul report of SIBL (2002, 2003, 2004, 2005, 2007&2008)

6.1.3 Borrowed Fund

Banks collect funds from both short-term and long-term borrowings. Banks collect long-
term funds from long-term borrowings by following contemporary rules and regulations.
Loan-term funds thus act as capital. The instruments through which bank collects short-
term funds are selling of securities with a repurchase agreement, borrowing from central
bank and borrowings from sister banks. This type of loan facility may have maturity of
one or two days. Interest payable on these borrowings depends on the demand for and
supply of such funds.

6.2 FUND IMPLEMENTATION

6.2.1 Investment
The investment portfolio of the bank was propelled efficiently in 2007 as per directives of
Bangladesh Bank. The total investments of the Bank at Tk. 15312.90 million in various
sectors as at 31st December, 2007 against Tk.15096.83 million of 2005 registering a
growth by 1.43% that signifies the confidence of the clients on the Bank. The increases in
investment by Tk. 216.07 million as compared to 2005 were due to expansion of
business. We are now concentrating our efforts to increase Free-based and Exchange-
based investments to expedite the earnings of the Bank side by side to facilitate the
investment earnings. It is mentionable here that the asset quality of some of our Branches
have deteriorated since 2004 resulting in the increase of classification but we have
successfully made up the provision shortfall to Nil as on 31.12.2007 against classified
investment as depicted in the Audit Report.

64
To overcome the situation, we launched special drives to recover the sticky and classified
investments. The following graphs show the year wise position of investment:
Investment of SIBL is increasing rapidly. In the year 2008 the amount of investment was
Tk. 16440.25 million which was Tk. 15312.90 million in 2007.
Table 6.2: Year wise fund distribution
Year Advance in million taka
2004 10059.11
2005 12887.27
2006 15096.83
2007 15312.90
2008 16440.25
Source: Annul report of SIBL (2003, 2004, 2005, 2007, &2008)

Liquidity
Liquidity in the form of Balance with Bangladesh Bank, Sonali Bank (as the agent of
Bangladesh Bank) and cash in hand including foreign currency stood at Tk. 1384.25
million as at 31st December 2007 as against Tk. 1079.25 million in last to your maintain
cash & statutory liquidity. The Bank is committed to maintain the cash and statutory
liquidity requirement to effectively manage the asset & liability portfolios of the Bank in
order to maximize the profit. As per guideline of the Bangladesh Bank ALCO(assets
liquidity committee) was formed in 2005 under” Assets Liability management” project,
which is highly concerned with proper liquidity management under the close supervision
of senior management. The Bank has a policy guideline on liquidity management as
approved by its Board of Director.

6.3 INVESTMENT RETURN AND DISTRIBUTION TO CONCERNED PARTIES

Particulars 31.12.2008
Profit paid on Depositors 1,705,054,119
Total Operating Expenses 421,720,430
Total Provision 212,920,488
Taxes Paid to Government 267,862,416

Earnings per share (EPS)

Net profit after tax 57,631,505
Number of ordinary shares outstanding 585,000
Earnings per share (EPS) 99

65
6.4 INFLOWS / OUTFLOWS OF FUNDS

Inflow of Funds Amount (BDT) Outflow of Amount

B
Deposit 6,170,514,627 Funds (BDT)
A 15,312,901,478
Investments
Borrowing from other ,770,000,000 (Loans & Advance)
N
Bank, Financial Investments 501,061,600
Institutions K (Shares & Securities)

Capital / Shareholders 980,699,959 Cash in Hand 1,384,245,001

Equity Other Assets 783,620,421
F
Source: Annul report of SIBL 2007

6.5 CAMEL RATING

Supervisors gather private information, such as details on problem loans, with which to
evaluate a bank's financial condition and to monitor its compliance with laws and
regulatory policies. A key product of such an exam is a supervisory rating of the bank's
overall condition, commonly referred to as a CAMELS rating.
The acronym "CAMEL" refers to the five components of a bank's condition that are
assessed: Capital adequacy, Asset quality, Management, Earnings, and Liquidity.

CAMEL FORMULA 2007 2005

C Capital Adequacy Equity Capital+ Loan Loss 5.73 % 5.23 %
Reserve ÷Total Assets ×100
A Asset Quality Commercial &Industrial Loans ÷ 77.76 % 74.15 %
Total Assets ×100
M Management Changing loans during the past 5 10.81 %
Quality year (increase)
E Earnings Income before securities gains and 1.48 % 1.02 %
loans ÷Avg. total Assets ×100
L Liquidity Total Assets – Total Loans ÷Total 22.24 % 25.85 %
Assets ×100

66
FINDINGS
Bank is a financial institution. The service of a bank is considered as its product. Bank is
financial intermediary dealing in accepting surplus savings as deposits and extending
funds to those who can approach the bank with bankable projects. Amount of funds can
be increased or decreased depending on the professional skill of the bank executives.
Efficiency of customer service is related with progression of operation. Social Islami
Bank Ltd operations are increasing gradually. Each year deposits and investment growth
indicates SIBL better movement in the banking field, which is satisfying clients. As a
result, clients are increasing and ultimately equity is increasing. Gradually bank’s
operation is increasing. Investment is rising rapidly and a good response is getting from
the clients is different investment scheme. SIBL rising movement is generating increasing
profit. Client’s satisfaction depends on the efficacy of customer service. All operational
improvement with profit leads us to say that value of customer service of SIBL is in the
positive situation.

 General Banking Department

 In general banking department they follow the computerized banking system.

 They are using Data Base Networking in Information Technology (IT)
Department. So they can transfer data from branch to branch and branch to head
office by using one line.

 Loans and Advance Departments

 Political influence is one of the major problems in Bangladesh. Due to political

involvement the bank becomes bound to provide loans in some of the cases, which
are rarely recovered. Bank has to face this in convenience situation almost every
year and the percentage of such loans is about 20%
 The loans and advance department takes a short time to process a loan because the
process of sanctioning loan is done by computerized system. If is in average 10
working days.
 CIB report is not readily available from Bangladesh Bank.

 Foreign Exchange Department

 In foreign exchange department, it is required to communicate with foreign banks
frequently and quickly. To make the process easily, Telecommunication Network is
established in all branches.
 A scheme is operating in the name of Instant Cash Scheme. Through this scheme,
Non Residence Bangladeshi can send money from any parts of the world.

67
 Financial Performance and Fund Management

 The financial performance of the bank is satisfactory. According CAMEL rating

the bank position is C Grade in 2008.
 In 2008 SIBL total assets was BDT 24546.55 million and in 2007 it was BDT
19691.53 million. So the growth rate increase in total asset is 24.67%.
 In 2008 SIBL Income for Investment was BDT2, 092,951,320 million and in 2007
it was BDT 1,898,663,277 million. So the growth rate increase in Income for
Investment is 10.23%.
 In 2008 SIBL Profit paid on Depositors was BDT1, 705,054,119 million and in
2007 it was BDT 1,596,612,146 million. So the growth rate increase in total asset
is 6.79%.
 In 2008 SIBL total Investment was BDT 164440.26 million and in 2007 it was
BDT 15312.90 million. So the growth rate increase in total investment is 7.36%.
 In 2008 SIBL total Deposit was BDT 19753.94 million and in 2007 it was BDT
16170.51 million. So the growth rate increase in total deposit is 22.15%
 Bank has a good amount of no cost fund in its deposits breakdown.
 Return on assets and return on equity is in lowering trend, but above the
acceptable rate.
 Return on investment is inconsistent throughout the year (2004-2008).
 Foreign exchange contribution is appreciable to total income.

68
RECOMMENDATIONS
The banks are actually service organizations. The main objectives of the world famous
and successful banking organizations are to make profit through addressing the clients
time to time with new pieces of service instruments. However my little experience earned
through this internship program took me to customers’ varying demands. I had several
frank discussions with the clients and officials, which have helped me to know about the
aforesaid findings and draw the following recommendation:

 As one of leading Banks in Bangladesh, SIBL Bank should provide equal

emphasis in each department of banking service.
 SIBL may also indulge in Tele Marketing. This will smooth the progress of them
to expand their sales.
 SIBL should pursue an aggressive marketing to come up into limelight. Campaign
in order to build up a strong image reputation among the potential customers.
Campaign such as ad in the newspaper & magazine, billboard, neon signs,
publicity message. SIBL can pursue promotion campaign with its customers
particularly the corporate clients to build up a strong report. TV ad is also a major
method for attracting the potential customers. As it is an old bank, a strategy of
exposing the bank to the public must be taken so that general people will aware
about the emergence and growth of the bank. Sponsor in organization’s picnic and
arrange or sponsor in cricket match can be method of advertise.
 For monitoring and inspection of the current status of all the division for omitting
there lacking.
 SIBL should appoint customer service officers in all branches. They solve
customers’ problem, answer inquiry of customers etc.
 SIBL should differentiate its services adopting the modern facilities and diversify
products.
 To achieve the goal, a bank must establish and adhere to adequate policies,
practices and procedures for evaluating the quality of asset and the adequacy of
loan provision and reserve.

69
CONCLUSION
Now a day banking organizations are one of most vital parts of an economy. Now banks
provide various services for individual, different firms, companies even for cultivation.
Banks offer a great accumulation of loans for personal and industrial purposes. SIBL is
running successfully and for its good deposit performance the bank occupies 2nd position
in the Islamic Banking Sector. Taken all in all, it can be safely said that SIBL action
program is directed towards development of an authentic participatory Economy beyond
Market Economy. The family empowerment credit program of Social Islami Bank is
gaining ground at the grass root field level in Bangladesh. Family Empowerment micro
credit and micro enterprises program must be designed in a manner so as to make a)
finance, b) production, c) marketing, d) trading, e) local specific survey and research as
well as moral integrity in one package. In SIBL approach, credit conveys the totality in
life and clearly linked to social context and cultural setting in conformity with Shariah.
There is a better chance in provision for social subsidy. De-secularizing credit may lead
to re-writing new economics. It is thus felt that the linking credit to social goals and
assignments will have far-reaching theoretical implications for development of an
alternative concept of new theories of income, output and employment.

This bank expresses its sincere thanks to the government of the People’s Republic of
Bangladesh and Bangladesh Bank for their co-operation and valuable guidance to the
bank. SIBL also takes this opportunity to their valued clients, patrons, well wishers,
correspondents and the shareholders for their support and patronization extended during
the year under review. SIBL also records its appreciation for the services rendered by the
executives and the members of the staff for the stability and growth of the bank. SIBL
needs further active support and continued cooperation of Bangladesh Bank, ministry of
finance and other government agencies, executives and employees of the bank, valued
partners, clients and the community at large in accomplishing difficult tasks ahead of it.

BIBLIOGRAPHY
1. Social Islami Bank Annual Report.
2. Operational manual
3. Lecture sheet serve from SIBL training institute
4. www.siblbd.com
5. www.bangladeshinfo.com
6. www.google.com
7. www.valki.com

70