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Analysis of Banking Industry in Bangladesh: A Study on

JBL.
Bangladesh is a country which attains Independence in the very recent time. The
country is also a developing country. Like other developing country, the financial and
economical infrastructure of the country is not in sound and strong position. But in the
recent time this scene is going to past. Due to relentless struggle of Bangladesh Bank
and some other well-organized Commercial Bank the overall scenario is going to
rapid changes.

Bank is a business organization. Bank’s major objective is also to earn profit. Bank is
one of the most information intensive sectors. The need of banks is undeniable in any
economy. Banks are financial institutions which deal in money. It takes in money
from those who are not using them at the moment and lends it to those who are in a
position to use them for production purpose.

Financial institutions are very much essential for overall development of a country.
Especially banks play an important role in the field of promotion of capital,
encouragement of entrepreneurship, generation of employment opportunities etc.

In Bangladesh, the spread in the banking sector has been persistently high over the
years. The Bangladesh banking sector relative to the size of its economy is
comparatively larger than many economies of similar level of development and per
capita income. One of the most important developments in banking sector has been
the growth of the financial industry over the past two decades. The benefits of
financial industry can be seen in the form of large scale industrial development,
increased employment opportunities, higher turnover as well as revenue generation to
the government and also increase in export of goods and services.

The banking industry in Bangladesh has flourished over the years, making double-
digit profit percentages, sustaining growth and surviving cut-throat competition while
providing attractive returns to shareholders. However, the greed for more without
befitting platform and fundamentals brings its own challenges and questions in
people's minds.

The image of the banking industry has many times been tarnished by several stories
regarding the owners in recent media releases. Despite the considerable progress
made, foreign countries are still somehow treating our banking industry activities as
questionable.

Countering the image issue is not the only block in the road to developing a
respectable and successful institution, product, compliance and ethics, competition,
change management and technology among others.

Though someone may differ, competition in Bangladesh seems to be the deadliest of


all. It not only brings in positive developments but also encourages malpractice. There
is competition not only from other banks but also from non-bank financial institutions
(NBFI) and micro finance institutions (MFI).

Not only are the institutions competing, the regulators and customers are also pitting
one against the other, making the situation extremely difficult giving you the feeling
of being stuck between a rock and a hard wall. A customer will often try to make the

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Analysis of Banking Industry in Bangladesh: A Study on
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best out of the situation by not complying with the regulatory requirement, referring
to the service provided by another bank or banks.

Competition in the banking industry is also hitting from the capital market end, with
the corporate increasingly going to the equity market to rise funding. This not only
hits the banks in the belly by affecting their core business but also indirectly affects
their contribution to market cap which dropped from 59% in 2007 to less than 25% in
June 2010. More importantly it forces them to risk their position by over exposing
them to volatile capital market through proprietary trading and position taking in
order to maintain profitability.

The new offering in the market which has got all banks running are the requirements
of BASEL II & Automated Clearing House. The major challenge with change of
regulation is that often the regulators are in a hurry to implement a sudden decision,
rolling out action plans without proper research or understanding the broad
implications and capabilities of the banks to comply with it.

The outcome is delay in implementation, confusion among stakeholders and new


techniques to bypass these regulations. This in its turn creates a non-level playing
field for those who comply with the regulation versus those cleverly "managing" the
situation without having to comply. Too much noise and less action, at times, create
doubt about the sincerity of the purpose.

As a law-abiding citizen you wonder why it is so easy to "manage" non-compliance.


The final question remains -- which is losing out by this? Ultimately, every citizen of
the country, as our country suffers. The banking sector could be our pride and a major
growth engine of the economy. Regulators are taking appropriate decisions to
implement proper regulations at the right time.

An appropriate example is when several financial institutions shifted towards the


riskier capital market to counter the lower growth in their core businesses using the
depositors money, the regulators aptly stepped in to make merchant banks separate
subsidiaries. The regulations are there. The problem is enforcing them in an honest
manner.

If the regulators and the legal system were honest then all these recurring image issues
and malpractices could have been avoided. Facing the challenges head-on in a
compliant manner should be our goal towards creating a sustainable, profitable and
forward-looking banking sector. We need to do more and run faster with clear
visibility about the destination. Perhaps, it also has to do a lot with the overall
governance and accountability situation in the country.

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1.1: B ACKGROUND O F B ANKING S YSTEM I N B ANGLADESH

The banking system at independence consisted of two branch offices of the former
State Bank of Pakistan and seventeen large commercial banks, two of which were
controlled by Bangladeshi interests and three by foreigners other than West
Pakistanis. There were fourteen smaller commercial banks. Virtually all banking
services were concentrated in urban areas. The newly independent government
immediately designated the Dhaka branch of the State Bank of Pakistan as the central
bank and renamed it the Bangladesh Bank. The bank was responsible for regulating
currency, controlling credit and monetary policy, and administering exchange control
and the official foreign exchange reserves.

The Bangladesh government initially nationalized the entire domestic banking system
and proceeded to reorganize and rename the various banks. Foreign-owned banks
were permitted to continue doing business in Bangladesh. The insurance business was
also nationalized and became a source of potential investment funds. Cooperative
credit systems and postal savings offices handled service to small individual and rural
accounts. The new banking system succeeded in establishing reasonably efficient
procedures for managing credit and foreign exchange. The primary function of the
credit system throughout the 1970s was to finance trade and the public sector, which
together absorbed 75 percent of total advances. The government's encouragement
during the late 1970s and early 1980s of agricultural development and private industry
brought changes in lending strategies. Managed by the Bangladesh Krishi Bank, a
specialized agricultural banking institution, lending to farmers and fishermen
dramatically expanded. The number of rural bank branches doubled between 1977
and 1985, to more than 3,330. Denationalization and private industrial growth led the
Bangladesh Bank and the World Bank to focus their lending on the emerging private
manufacturing sector. Scheduled bank advances to private agriculture, as a percentage
of sectorial GDP, rose from 2 percent in FY 1979 to 11 percent in FY 1987, while
advances to private manufacturing rose from 13 percent to 53 percent. The
transformation of finance priorities has brought with it problems in administration. No
sound project-appraisal system was in place to identify viable borrowers and projects.
Lending institutions did not have adequate autonomy to choose borrowers and
projects and were often instructed by the political authorities.

In addition, the incentive system for the banks stressed disbursements rather than
recoveries, and the accounting and debt collection systems were inadequate to deal
with the problems of loan recovery. It became more common for borrowers to default
on loans than to repay them; the lending system was simply disbursing grant
assistance to private individuals who qualified for loans more for political than for
economic reasons. The rate of recovery on agricultural loans was only 27 percent in
FY 1986, and the rate on industrial loans was even worse. As a result of this poor
showing, major donors applied pressure to induce the government and banks to take
firmer action to strengthen internal bank management and credit discipline. As a
consequence, recovery rates began to improve in 1987. The National Commission on
Money, Credit, and Banking recommended broad structural changes in Bangladesh's
system of financial intermediation early in 1987, many of which were built into a
three-year compensatory financing facility signed by Bangladesh with the IMF in
February 1987. One major exception to the management problems of Bangladeshi

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banks was the Grameen Bank, begun as a government project in 1976 and established
in 1983 as an independent bank. In the late 1980s, the bank continued to provide
financial resources to the poor on reasonable terms and to generate productive self-
employment without external assistance. Its customers were landless persons who
took small loans for all types of economic activities, including housing. About 70
percent of the borrowers were women, who were otherwise not much represented in
institutional finance. Collective rural enterprises also could borrow from the Grameen
Bank for investments in tube wells, rice and oil mills, and power looms and for
leasing land for joint cultivation. The average loan by the Grameen Bank in the mid-
1980s was around Tk2,000 (US$65), and the maximum was just Tk18,000 (for
construction of a tin-roof house). Repayment terms were 4 percent for rural housing
and 8.5 percent for normal lending operations. The Grameen Bank extended
collateral-free loans to 200,000 landless people in its first 10 years. Most of its
customers had never dealt with formal lending institutions before. The most
remarkable accomplishment was the phenomenal recovery rate; amid the prevailing
pattern of bad debts throughout the Bangladeshi banking system, only 4 percent of
Grameen Bank loans were overdue. The bank had from the outset applied a
specialized system of intensive credit supervision that set it apart from others. Its
success, though still on a rather small scale, provided hope that it could continue to
grow and that it could be replicated or adapted to other development-related priorities.
The Grameen Bank was expanding rapidly, planning to have 500 branches throughout
the country by the late 1980s. Beginning in late 1985, the government pursued a tight
monetary policy aimed at limiting the growth of domestic private credit and
government borrowing from the banking system. The policy was largely successful in
reducing the growth of the money supply and total domestic credit. Net credit to the
government actually declined in FY 1986. The problem of credit recovery remained a
threat to monetary stability, responsible for serious resource misallocation and harsh
inequities.

Although the government had begun effective measures to improve financial


discipline, the draconian contraction of credit availability contained the risk of
inadvertently discouraging new economic activity. Foreign exchange reserves at the
end of FY 1986 were US$476 million, equivalent to slightly more than 2 months
worth of imports. This represented a 20-percent increase of reserves over the previous
year, largely the result of higher remittances by Bangladeshi workers abroad. The
country also reduced imports by about 10 percent to US$2.4 billion. Because of
Bangladesh's status as a least developed country receiving concession loans, private
creditors accounted for only about 6 percent of outstanding public debt. The external
public debt was US$6.4 billion, and annual debt service payments were US$467
million at the end of FY 1986.

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1.2: O RIGIN O F T HE S TUDY

Theoretical knowledge doesn’t highlight the reality as clearly as practical knowledge.


Theoretical knowledge is guideline, but practical knowledge is experience oriented.
Practical knowledge is must for the completeness of theoretical knowledge. So both
are necessary as a MBA student we have gathered enough theoretical knowledge and
techniques. Now it is needed to compliance with this knowledge with in practical
orientation.

After completion the Master of Business Administration (MBA) Course requires a


three months internship program with an organization followed by a report assigned
by the supervisor in the organization and endorsed by the faculty advisor. The report
entitled “Analysis of banking industry in Bangladesh: A study on JAMUNA BANK LTD
(JBL)” has been prepared as a partial fulfillment of MBA program authorized by the
coordinator of MBA program, department of Business & Economics, Daffodil
International University (Uttara Campus). My faculty supervisor also approved the
topic and authorized me to prepare this report as part of the fulfillment of internship
requirement.

1.3: R ATIONALE O F T HE S TUDY

Well- educated, dedicated, skilled and enterprising workforce is the sine-qua-non for
the progress and development of a service oriented industry like Bank. From very first
emergence and inception of modern civilization, Bank plays a pivotal role in case of
overall financial and socioeconomic development of any modern country. The
economic development of our country mainly depend upon the efficiency of the
banking results is so far as, whether the bankers have been able to read the economic
situation properly and are successful in selecting the promising industrial sectors
seeking import and export assistance to grow. With the rapid changes of time mans
are readily depend on banking services in case of handling cash, transferring cash, and
also financing in various industrial and business projects.

Last year Bangladesh Bank undertook a project to review the global best practices in
the banking sector and examines in the possibility of introducing these in the banking
industry of Bangladesh. Now in Bangladesh banking competition are increased day by
day. As a result, realizing the present condition banks especially commercial banks are
trying to promote their customer giving better service.

So as an Internee I thought of having special knowledge on this field of increased


importance.

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1.4: O BJECTIVES O F T HE S TUDY

In this report an attempt has been made to study the Bangladesh Banking System, find
out the problems and recommend some possible measures to solve them. The prime
objective of this report is to identify, evaluate and analyze the pros and cons of the
Bangladesh Banking System to convey the knowledge to the concerned people or to
the unknown fellows.

The main purpose of this study is to measure about Bangladesh banking industry is to
survey method and financial position of JBL in Bangladesh banking industry. The
main objectives of the study are as follows:

 To know about some function of Bangladesh Banking Industry.


 To recognize the Qualitative Analysis of JBL.
 To recognize the Quantitative Analysis of JBL.
 To find out and analyze the major problems by JBL in case of Overall
Banking Practices.
 To recommend some possible measures to overcome the problems.

1.5: S COPE O F T HE S TUDY

The field of my study is the entitled “Analysis of banking industry in Bangladesh: A


study on JAMUNA BANK LTD (JBL)”. For conducting this study an overall knowledge
on total banking system is necessary because the various departments of banking are
linked with each other due to some partial proceedings.

And also this report covers Bangladesh banking system, banking rules, etc.

The scope of the organizational part covers the organizational structure, background,
objective, function, and departmental and business performance of Jamuna Bank
Limited as a whole. The study covers a period of 5 (Five) financial and operational
years from 2008 to 2012 Ratio analysis and collecting 3 (Three) years 2010 to 2012
financial position of Jamuna Bank Ltd for calculating Horizontal analysis.

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1.6: M ETHODOLOGY O F T HE S TUDY

Knowledge and learning becomes perfect when it is associated with theory and
practice. Theoretical knowledge gets its perfection with practical application.
Methodology is an essential part of any research-based study because this will
highlight the preparation of the report and methods used in case making the report. It
designed in a way so that it is correspondent to achieve the objectives of the study. It
includes designing samples, sources of data used, collection procedure of data,
techniques of analysis of data etc.

This study of the “Analysis of banking industry in Bangladesh: A comparative study


focused of JAMUNA BANK LTD (JBL)” is mostly quantitative and qualitative in nature.
To fulfill the objectives of this study total work is divided into two major parts like
Secondary sources and Primary sources.

Primary Sources of Data:

When data are collected through direct searching in the field then it is called primary
source of data. Primary Sources are:

 Asking the respective officers


 Direct communication with the clients
 Exposure on different desk of the bank
 File study

Secondary Sources of Data:

The secondary data are collected from Internet, different article published in the
journals and magazines. Secondary sources are:

 Relevant books, Newspaper, Journals etc.


 Annual Reports of Jamuna Bank Ltd
 Periodicals published by the Bangladesh Bank
 Different seminar papers on Bangladesh banking practices.

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1.7: M ETHOD O F D ATA C OLLECTION

In the secondary research I am using the available literature and other relevant
publications to find out the theoretical framework and also to know what early
research mentioned regarding selected topic. For primary research, collecting data
was personal interview, observation, and survey. Based on these requirements, I have
collected information in addition. The First hands helped to get the actual information
for reliable research analysis, sound conclusion & recommendation. On the other
hand, the secondary information allows for convenient use because as the secondary
information has been already analyzed, it can be used in future for further study. The
sources are shown in the following table:

Table I: Method of data collection

Types of
Sources of Information Purpose
Research

Personal interviews
Primary To achieve the objectives of
Observation
Research the study
Personal Experience

Secondary
Internet, printed materials related
Research Processing and analyze data
to study area

1.8: O RGANIZATION O F T HE S TUDY

Since it has stated earlier that the major objectives of the present study are to know
the” Analysis of banking industry in Bangladesh: A comparative study focused of
JAMUNA BANK LTD (JBL)”. To do so, the whole study has been divided into the
following chapters:

Chapter 1 it deals with the introductory part of Bangladesh banking industry,


Background of Banking system, objectives, scope, it also deals with methodological
issues and concepts used in the study, and limitation of the study. Chapter 2 and 3 are
discusses about Jamuna Bank Ltd organization and brunch (Banani) profile. It deals
with analytical findings of the study such as account opening and schemes, cash
payments and receipts, remittances, loans and advances, clearing and foreign trade
and foreign exchange etc. Chapter 4 it focuses survey about the some literature about
banking industry, focused on history about banking in Bangladesh and also it deals
focuses analysis main part of this report that is banking industry in Bangladesh and
discuses about financial sector policy avowal on Bangladesh. Chapter 5 & 6 includes
qualitative and quantitative analysis about JBL. Qualitative analysis consists of
SWOT analysis, Risk analysis, and financial performance in JBL. Quantitative
analysis consists of comprehensive performance of JBL through past five years.
Chapter 7 & 8 is parts of focus upon on the problems faced by the bank and also

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some possible recommendation to solve the problems and finally the conclusion part
of the study.

In fine the report has been come to an end by dint of reference section that are chapter
9, 10, and 11 which includes abbreviations, bibliography, appendix etc.

1.9: L IMITATIONS O F T HE S TUDY

To prepare a report on the topic like this in short time duration is not very easy task.
In preparing this report some problems and limitations have encountered which are as
follows:

 The main constraint of the study was insufficiency of information, which was
required for the study.
 Non availability of enough fund / resources.
 The study particularly focuses on JBL.
 Completely depends on official records and annual report.

Finally, this is the researcher first experience on job, so there may arise some faults in
this report though the researcher have tried his level best to over come the problem.

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Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies
Act, 1994 with its Head Office at Chini Shilpa Bhaban, 3, Dilkusha C/A, Dhaka-1000.
The Bank started its operation from 3rd June 2001.

Jamuna Bank Limited is one of the leading private commercial banks in


Bangladesh that has achieved tremendous popularity and credibility among the
people for its products & services. It is a public limited company and its shares
are traded in Dhaka and Chittagong stock exchange. The bank undertakes all types of
banking transaction to support the development of trade and commerce in the country.
JBLs service is also available for the entrepreneurs to set up new ventures and BMM
of industrial units. To provide clientele services in respect of international trade it has
established wide, corresponded Banking relationship with local and foreign banks
covering major trade and financial interest home and abroad.

The Bank undertakes all types of banking transactions to support the development of
trade and commerce of the country. JBL's services are also available for the
entrepreneurs to set up new ventures and BMRE of industrial units. Jamuna Bank
Ltd., the only Bengali named new generation private commercial bank was
established by a group of winning local entrepreneurs conceiving an idea of creating a
model banking institution with different outlook to offer the valued customers, a
comprehensive range of financial services and innovative products for sustainable
mutual growth and prosperity. The sponsors are reputed personalities in the filed of
trade, commerce and industries.

The Bank is being managed and operated by a group of highly educated and
professional team with diversified experience in finance and banking. The
Management of the bank constantly focuses on understanding and anticipating
customers needs. The scenario of banking business is changing day by day, so the
bank's responsibility is to device strategy and new products to cope with the changing
environment. Jamuna Bank Ltd. has already achieved tremendous progress within
only eight years. The bank has already ranked as one of top quality service providers
& is known for its reputation.

At present the Bank has real-time centralized Online banking branches (Urban &
Rural) throughout the Country having smart IT-Backbone. Besides these traditional
delivery points, the bank has ATM of its own, sharing with other partner banks &
Consortium throughout the Country.

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2.1: Sponsors and Management

The sponsors of Jamuna Bank Limited are leading entrepreneurs of the country
having stakes in different segments of the national economy. The managing Director
of the Bank is a forward-looking senior banker having decades of experience and
multi-disciplinary knowledge to his credit. A team of experienced banking
professionals is efficiently managing the Bank.

2.2: V ISION

To become a leading banking institution and to play a pivotal role in the development
of the country.

2.3: M ISSION

The Bank is committed to satisfying diverse needs of its customers through an array
of products at a competitive price by using appropriate technology and providing
timely service so that a sustainable growth, reasonable return and contribution to the
development of the country can be ensured with a motivated and professional work-
force.

2.4: C ORPORATE S LOGAN

Your partner for growth

2.5: S PONSORS

The sponsors of JBL are highly successful leading entrepreneurs of the country
having stakes in different segments of the national economy. They are eminent
industrialists and businessmen having wide business reputation both at home and
abroad.

2.6: M ANAGEMENT

JBL is managed by highly professional people. The present Managing Director of the
bank is a forward looking senior banker having decades of experience and multi
discipline knowledge to his credit both at home and abroad. He is supported by an
educated and skilled professional team with diversified experience in finance and
banking. The Management of the bank constantly focuses on the understanding and
anticipating customers’ needs and offer solution thereof JBL has already achieved
tremendous progress within a short period of its operation. The bank is already ranked
as one of the quality service providers and known for its reputation.

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2.7: JBL C ORPORATE C ULTURE

Employees of JBL share certain common values, which helps to create a JBL Culture.

╬ The client comes first.


╬ Search for professional excellence.
╬ Openness to new ideas and new methods to encourage creativity.
╬ Quick decision-making.
╬ Flexibility and prompt response.
╬ A sense of professional ethics.

O BJECTIVES OF JBL:

 To earn and maintain CAMEL Rating Strong.


 To establish relationship banking and improve service quality through
development of strategies marketing plans.
 To remain one of the best banks in Bangladesh in terms of Profitability and
assets quality.
 To ensure an adequate rate of return on investment
 To maintain adequate liquidity to meet maturing obligation and commitments.
 To maintain a healthy growth of business with desired image
 To develop and retain a quality work force through an effective
Human Resources Management System
 To ensure optimum utilization of all available resources

S TRATEGIES OF JBL:

 To manage and operate the Bank in the most efficient manner to


enhance financial performance and to control cost of fund.
 To strive for customer satisfaction through quality control and delivery
of timely services.
 To identify customers credit and other banking needs and monitor
their perception towards our performance in meeting those requirement.
 To review and update policies, procedures and practices to enhance the
ability to extend better services to customers.

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 To train and develop all employees and provide adequate resources so
that customer needs car, be responsibly addressed.
 To cultivate a working environment that fosters positive motivation for
or improved performance
 To increase direct contract with customers in order to cultivate a closer
relationship between the bank and its customers.

2.8: JBL C ORPORATE G OVERNANCE

The organizational structure and corporate governance of JBL reflect the


determination to establish, sustain and increase its strength for a strong base as a
customer-oriented bank with a transparent management.

Board of Directors: The board of directors consists of 13 members elected from the
sponsors. The Board of Directors is the supreme body of the Bank.

Audit Committee: In line with the guidelines of Bangladesh bank, a three-member


Audit Committee of the Board of Directors has been formed to assists the Board in
matters related to Audit and Internal Control System of the Bank.

S ERVICES :

Jamuna Bank Limited offers different types of Corporate and Personal Banking
Services involving all segments of the society within the purview of the rules and
regulations as laid down by the Central Bank and other Regulatory Authorities.

 Deposit Products:

All types of Deposit Accounts: The client can maintain different types of
deposit accounts i.e. Current, Savings, STD, FDR and Foreign Currency
Account according to his necessity and convenience,

 Loan Products:

a. General Loan Facility: Letter of Credit, Bank Guarantee, Cash Credit, SOD,
Loan (general) Hire Purchase, Lease Finance, LIM, LTR, Work-order Finance,
Export finance, House Building Loan, LDBP and FDBP.
b. SME Credit Scheme
c. Retail Credit Products

2.9: JBL C ORPORATE B ANKING

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The motto of JBL's Corporate Banking services is to provide personalized solutions to
their customers. The Bank distinguishes and identifies corporate customers' need and
designs tailored solutions accordingly.
Jamuna Bank Ltd. offers a complete range of advisory, financing and operational
services to its corporate client groups combining trade, treasury, investment and
transactional banking activities in one package. Their corporate Banking specialists
will render high class service for speedy approvals and efficient processing to satisfy
customer needs.
Corporate Banking business envelops a broad range of businesses and industries.
Every one can leverage on our know-how in the following sectors mainly:

╬ Agro processing industry


╬ Industry (Import Substitute / Export oriented)
╬ Export Oriented Garments, Sweater.
╬ Engineering, Steel Mills
╬ Chemical and chemical products etc.
╬ Telecommunications.
╬ Information Technology
╬ Real Estate & Construction ·
╬ Transport · Hotels, Restaurants ·
╬ Lease Finance · Hire Purchase · International Banking ·
╬ Export Finance
╬ Import Finance

P ERSONAL B ANKING :
Personal Banking of Jamuna Bank offers wide-ranging products and
services matching the requirement of every customer. Transactional accounts, savings
schemes or loan facilities from Jamuna Bank Ltd. make available to all a unique
mixture of easy and consummate service quality.

O NLINE B ANKING :
Jamuna Bank Limited has introduced real-time any branch banking on April 05, 2005.
Now, customers can withdraw and deposit money from any of its 45 branches located
at Dhaka, Chittagong, Sylhet, Gazipur, Bogra, Naogaon, Narayanganj and
Munshigonj. Their valued customers can also enjoy 24 hours banking service
through ATM card from any of Q-cash ATMs located at Dhaka, Chittagong, Khulna,
Sylhet and Bogra. All the existing customers of Jamuna Bank Limited will enjoy this
service by default.

M ONTHLY S AVINGS S CHEME (MSS):

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Savings is the best friend in bad days. Small savings can build up a prosperous future.
Savings can meet up any emergencies. JBL has introduced Monthly Savings Scheme
(MSS) that allows saving on a monthly basis and getting a handsome return upon
maturity

M ONTHLY B ENEFIT S CHEME (MBS):


Jamuna Bank Limited has introduced Monthly Benefit Scheme (MBS) for the prudent
persons having ready cash and desiring to have fixed income on monthly basis out of
it without taking risk of loss and without enchasing the principal amount. This scheme
offers highest return with zero risk.

D OUBLE /T RIPLE G ROWTH D EPOSIT S CHEME :


For people who have cash flow at this moment and want to get it doubled/tripled
quickly JBL has introduced Double/Triple Growth Deposit Scheme that offers to
make double/triple money within 6(six) years and 9.5 (nine and a half) years
respectively resulting a high rate of interest.
E DUCATION S AVINGS S CHEME :
Education is a basic need of every citizen. Every parent wants to impart proper
education to their children. Education is the pre-requisite for socio-economic
development of the country. As yet, there is no arrangement of free education to the
citizens from the government level.
L AKHPATI D EPOSIT S CHEME :
To become a lakhpati is a dream to most of the people of Bangladesh especially to the
lower and lower middle class income group. Keeping the above in mind JBL has
introduced “Lakhopati Scheme” which has flexibility in report of maturity and
monthly installment as per affordable capacity.

Q-C ASH R OUND T HE C LOCK B ANKING :

Jamuna Bank Q-Cash ATM Card enables the customers to withdraw cash and do a
variety of banking transactions 24 hours a day. Q-Cash ATMs are conveniently
located covering major shopping centers, business and residential areas in Dhaka and
Chittagong. ATMs in Sylhet, Khulna and other cities will soon start be introduced.
The network will expand to cover the whole country within a short span of time.
With customers Jamuna Bank Q-Cash ATM card they can:
╠ Cash withdrawal Round The Clock from any Q-Cash logo marked ATM
booths.
╠ POS transaction (shopping malls, restaurants, jewellaries etc)
╠ Enjoy overdraft facilities on the card (if approved)
╠ Utility Bill Payment facilities
╠ Cash transaction facilities for selective branches nationwide

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╠ ATM service available in Dhaka and Chittagong Withdrawal allowed from
ATM's of Jamuna Bank Ltd., AB Bank, The City Bank, Janata Bank, IFIC
Bank, Mercantile Bank, Pubali Bank, Eastern Bank Ltd. respectively
╠ And more to come Is Q-Cash

D EPOSIT & L ENDING R ATES


Table III: Interest Rate of Deposit

Sl. Category of Deposit Interest Rate

1. 5.00% - 5.50%
STD

2.
FDR for 1 (one) month but less than 3 months 7.50% - 8.00%

3. FDR for 3 (three) months but less than 6 8.50% - 9.00%


months

4. 8.00% - 9.00%
FDR for 6 (six) months but less than 12 months

5. 8.50% - 9.00%
FDR for 1(one) year & above

I NTEREST R ATES OF L OANS & ADVANCES

Table IIII: Interest Rate of Loans & advances


Sl Type of Lending Interest Rate
1. 13.00% (Maximum)
Agriculture

2.
Term Loan to Large & Medium Scale Industry 13.00% (Maximum)

3. 13.00% (Maximum)
Working Capital to Large & Medium Scale Industry

4. 7.00% (Fixed)
Export

5. 13.00% (Maximum)
Trade/Commercial Financing *

6. 13.00% (Maximum)
Housing Loan

7.
Consumer Credit, Credit Card and Retail Portfolio 16.00% (Mid Rate)

8. 14.00% (Mid Rate)


Credit to Non-Bank Financial Institution
9.
Others Personal Loan

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a) FDR issued by JBL 2.50% above rate of FDR
b) Schemes deposit of JBL 15.50% (Mid Rate)
c) FDR/other Deposit instruments issued by other
15.50% (Mid Rate)
Banks
Others 15.50% (Mid Rate)
* 12.00% Interest rate on import financing will be applicable for some selected essential
commodities as per Bangladesh Bank guideline.

I MPORT AND E XPORT HANDLING AND FINANCING

I MPORT F INANCING :
Is the most important method of import financing .International trade take place
between sellers and buyers located in different countries. The parties to a trade
transaction are not always known to each other. Even if they are known to each other
the seller may not have full confidence in the carried worthiness of the buyer or the
buyer may not like to pay before he actually receives the goods. In letter of credit the
banker’s credit worthiness is substituted for the credit worthiness of the importer.
Under a bank cards letter of credit, the issuing bank gives a written undertaking on
behalf of the buyer that the bank will honor the obligation of payment or expectance
as the case may be on presentation of stipulated documents. As the request of the
importers bank issue the letter of credit at a merging by the govt. instruction. Bank
does not generally issue the letter of credit less then 50% margin. JBL follow the
margin prescribed by the government strictly.

E XPORT F INANCING :
The Exporter needs finances at various stages, some at pre-shipment stage and the
other at the post shipment stage.

2.10: JBL CORPORATE CULTURE

Employees of JBL share certain common values, which help create a JBL culture:

╠ The client comes first.


╠ Search for professional excellence.
╠ Openness to new ideas and new methods to encourage creativity.
╠ Quick decision making.
╠ Flexibility and prompt response.
╠ A sense of professional ethics.

(1) Business functions:

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The Bank operates through its Head Office at Dhaka and 19 branches at Dilkusha
Branch (Dhaka), Mohakhali Branch (Dhaka), Agrabad Branch (Chittagong),
Sonargoan Road Branch (Dhaka), Moulvi Bazar Branch (Dhaka), Shantinagar Branch
(Dhaka), Goala Bazar Branch (Sylhet), Sylhet Branch (Sylhet), Beani Bazar Branch
(Sylhet), Dhanmondi Branch (Dhaka), Gulshan Branch (Dhaka), Naogon branch,
Mohadevpur Branch (Naogaon), Nayabazar Branch (Malitola,Dhaka), Konabari
branch(gajipur), Bhatyari branch (Chittagong), Foreign Exchange branch (Dhaka),
Jubilee Road branch(Chittagong), Khatungonj branch (Chittagong). The Bank also
carries out international business through a Global Network of Foreign Correspondent
Banks.

(2) Business Operations:

(i) Main Products or Services Contribution to Revenues:

Revenue incomes during the past years are as follows:

(ii) Other Business Indicators:

(Tk in Million except Branch & Employees figures)

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2.11: O RGANOGRAM OF JBL


Chairman

Board of Directors Chief Advisor

Managing Director (MD)

Deputy Managing Director (DMD) Additional Managing Director (AMD)

Senior Executive Vice President (SEVP)

Executive Vice President Executive Vice President Executive Vice President


(EVP) (EVP) (EVP)

SVP (Board SVP (HRD) SVP (Credit) SVP SVP


Secretary)

Vice President (VP)

Senior Assistant Vice President (SAVP)

Assistant Vice President (AVP)

First Assistant Vice President (FAVP)

Jr. Assistant Vice President (JAVP)

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Senior Executive Officer (SEO)

Executive Officer (EO)

First Executive Officer (FEO)

Probationary Officer (PO)

Officer
A bank becomes familiar to the market by its local branch. Local branch is the feeding
office of a bank. It is like the heart of a bank. The image of a bank depends to a great
extent on the performance of the local brunch.

Banani branch the local office of JBL started its operation on March 20, 2007 as 30 th
branch. It is situated at Tower Hamlet (2nd floor), 16, Kemal Ataturk Avenue, Banani
C/A, Dhaka-1213. Now it has 18 executive and officers. And branch Manager Md.
Mahbub Alam (Vice President).

JBL Banani branch performs Retail Banking, Corporate Banking, SME Banking,
NRB Banking, Islami Banking, Investment Banking, Project Finance, Loan
Syndication, and Money Transfer.

3.1: E MPLOYEE D ESCRIPTION O F B ANANI B RANCH JBL

Banani branch is the local office of JBL. Branch has 18 executive and officers
including 2 sales executives and 1 marketing executive. Mr. Md. Faiz Ahsan (Senior
Vice President) in branch in- charge. Mrs. Shahida Khatun (First Assistant Vice
President) is sub-manager. Banani branch has four First Assistant Vice President
(FAVP), one Senior Assistant Vice President (SAVP), one Senior Executive Officer
(SEO), three executive officers (EO), four Officers and three Junior Officers (JO).

3.2: C LIENTS D ESCRIPTION O F B ANANI B RANCH JBL

Banani Branch of JBL is also a corporate banking branch. It has more then 3000
depositor and over 400 borrowers. Most of the borrowers are corporate clients and
well recognized organization of the country. Some mentionable client’s company’s
names are following:

© Pertex group
© Robsons engineering

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© Galaxy international trade ltd.
© Rezaul & Brothers
© Data Fashion
© Spectra international ltd.
© New Thai aluminum ltd.
© Arunina sports & ware
© Active composite ltd.
© Dishari international company ltd.

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3.4: P ROFIT OF B ANANI BRANCH

Since inception, the profit of JBL Banani Branch started to grow. But in the year
2012 the branch fall to a stagnate situation. It is going to a turning back and regaining
its glorious position with the hard effort of this efficient workforce under the
leadership of its young energetic head of the branch.

Profit summery of JBL Banani Branch:

Year Taka Growth


(Figure in million)
2009 37.6 --------

2010 105.8 73%

2011 82.2 - 18%

2012 128.6 56%

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3.5: I NTERNSHIP P OSITION AND D UTIES

I have completed my internship program in JBL at Banani Branch. It is one the


leading privet commercial bank in Bangladesh. My internship program duration was
three months. I have joined there at 26nd May, 2013 and worked there up to 22nd
August, 2013.

JBL Banani branch has mainly performed three departments. And I had been worked
in all departments very sincerely. Departments are GB department, Forex department,
and Credit department.

General Banking department (GB):

General banking has three sections these are accounts opening section, local
remittance section and clearing section.

A/C opening section is one of the important sections in any bank. When customer
come to the bank in any business then they are first meet these section. In remittance
section mainly work to issue PO, DD, and honor inward DD and PO. Clearing
section is also an important section for principle brunch of every bank. In this section
bank receive other banks chaque from its clients and send it to that bank by
Bangladesh Bank clearing house.

In GB department I started my internship duty first and with this section from 26 nd
May, 2013 to 25th June, 2013. My duties at GB department are:

 Verify A/C opening form fill up by the customer.


 Provide chaque book, deposit book, debit card to the customer need.
 Helping new customer with providing necessary information’s.
 Issue payment order (PO).
 Inward pay order and demand draft (DO) entry in resister book.
 Receiving outward chaque.
 Giving crossing, clearing and endorsement seal in outward chaque.

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 Entry to inward chaque to the register book.

Credit department:

Credit department has two sections these are corporate and retail banking section.

This section lends the fund what the bank mobilizes through its various deposit
accounts this is the second function of banks two generic function deposit
mobilization and credit creation. The major part of banks income is derived from
credit and since the banks credit is customer’s fund, bank takes extreme caution in
lending.

In Credit department I started my internship duty first and with this section from 25 th
June, 2013 to 24th July, 2013. My duties at Credit department are:

 Issuing bank guaranty for the customer.


 Calculation of interest rate of loan per month.
 Verify the loan application forms that fill up by the customer.

Foreign Exchange (FOREX) department:

Forex department consists of two main sections these are Import and Export
section.

Is the most important method of import -financing International trade take


place between sellers and buyers located in different countries. The main task
Import section for bank is issue Letter of Credit (L/C) on behalf of its clients. In
letter of credit the banker’s credit worthiness is substituted for the credit
worthiness of the importer. Export section mainly receives L/C on behalf of
its clients. The Exporter needs finances at various stages, some at pre-shipment stage
and the other at the post shipment stage.

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In FOREX department I started my internship duty first and with this section from
24th July, 2013 to 23rd August, 2013. My duties at FOREX department are:

 Receive application form and put the L/C number in resister book.
 Checking the information of a L/C paper received.
 Organize required paper for issuing L/C and put then into a file.
 Posting and sending L/C report to Bangladesh Bank.
 Send Payment in PO at required bank.

Day to day work at a glance:

Working
No. Department Date
days

General 26nd May, 2013 to


1. 30 days
banking dept. 25th June, 2013

25th June, 2013 to


2. Credit dept. 30 days
24th July, 2013

24th July, 2013 to


3. Forex dept. 30 days
23rd August, 2013

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4.1: B ANKING IN B ANGLADESH


The Pakistani banking system at independence (14 August 1947) consisted of two
branch offices of the former State Bank of Pakistan and seventeen large commercial
banks, two of which were controlled by Bangladeshi interests and three by foreigners
other than West Pakistanis. There were fourteen smaller commercial banks.

Virtually all banking services were concentrated in urban areas. The newly
independent government immediately designated the Dhaka branch of the State Bank
of Pakistan as the central bank and renamed it the Bangladesh Bank. The bank was
responsible for regulating currency, controlling credit and monetary policy, and
administering exchange control and the official foreign exchange reserves. The
Bangladesh government initially nationalized the entire domestic banking system and
proceeded to reorganize and rename the various banks. Foreign-owned banks were
permitted to continue doing business in Bangladesh. The insurance business was also
nationalized and became a source of potential investment funds. Cooperative credit
systems and postal savings offices handled service to small individual and rural
accounts. The new banking system succeeded in establishing reasonably efficient
procedures for managing credit and foreign exchange. The primary function of the
credit system throughout the 1970s was to finance trade and the public sector, which
together absorbed 75 percent of total advances.

The government's encouragement during the late 1970s and early 1980s of
agricultural development and private industry brought changes in lending strategies.
Managed by the Bangladesh Krishi Bank, a specialized agricultural banking
institution, lending to farmers and fishermen dramatically expanded. The number of
rural bank branches doubled between 1977 and 1985, to more than 3,330.
Denationalization and private industrial growth led the Bangladesh Bank and the
World Bank to focus their lending on the emerging private manufacturing sector.
Scheduled bank advances to private agriculture, as a percentage of sectoral GDP, rose
from 2 percent in FY 1979 to 11 percent in FY 1987, while advances to private
manufacturing rose from 13 percent to 53 percent.

The transformation of finance priorities has brought with it problems in


administration. No sound project-appraisal system was in place to identify viable
borrowers and projects. Lending institutions did not have adequate autonomy to

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choose borrowers and projects and were often instructed by the political authorities.
In addition, the incentive system for the banks stressed disbursements rather than
recoveries, and the accounting and debt collection systems were inadequate to deal
with the problems of loan recovery. It became more common for borrowers to default
on loans than to repay them; the lending system was simply disbursing grant
assistance to private individuals who qualified for loans more for political than for
economic reasons. The rate of recovery on agricultural loans was only 27 percent in
FY 1986, and the rate on industrial loans was even worse. As a result of this poor
showing, major donors applied pressure to induce the government and banks to take
firmer action to strengthen internal bank management and credit discipline. As a
consequence, recovery rates began to improve in 1987. The National Commission on
Money, Credit, and Banking recommended broad structural changes in Bangladesh's
system of financial intermediation early in 1987, many of which were built into a
three-year compensatory financing facility signed by Bangladesh with the IMF in
February 1987.

One major exception to the management problems of Bangladeshi banks was the
Grameen Bank, begun as a government project in 1976 and established in 1983 as an
independent bank. In the late 1980s, the bank continued to provide financial resources
to the poor on reasonable terms and to generate productive self-employment without
external assistance. Its customers were landless persons who took small loans for all
types of economic activities, including housing. About 70 percent of the borrowers
were women, who were otherwise not much represented in institutional finance.
Collective rural enterprises also could borrow from the Grameen Bank for
investments in tube wells, rice and oil mills, and power looms and for leasing land for
joint cultivation. The average loan by the Grameen Bank in the mid-1980s was around
Tk2,000 (US$65), and the maximum was just Tk18,000 (for construction of a tin-roof
house). Repayment terms were 4 percent for rural housing and 8.5 percent for normal
lending operations.

The Grameen Bank extended collateral-free loans to 200,000 landless people in its
first 10 years. Most of its customers had never dealt with formal lending institutions
before. The most remarkable accomplishment was the phenomenal recovery rate;
amid the prevailing pattern of bad debts throughout the Bangladeshi banking system,
only 4 percent of Grameen Bank loans were overdue. The bank had from the outset
applied a specialized system of intensive credit supervision that set it apart from
others. Its success, though still on a rather small scale, provided hope that it could
continue to grow and that it could be replicated or adapted to other development-
related priorities. The Grameen Bank was expanding rapidly, planning to have 500
branches throughout the country by the late 1980s.

Beginning in late 1985, the government pursued a tight monetary policy aimed at
limiting the growth of domestic private credit and government borrowing from the
banking system. The policy was largely successful in reducing the growth of the
money supply and total domestic credit. Net credit to the government actually
declined in FY 1986. The problem of credit recovery remained a threat to monetary
stability, responsible for serious resource misallocation and harsh inequities. Although
the government had begun effective measures to improve financial discipline, the
draconian contraction of credit availability contained the risk of inadvertently
discouraging new economic activity.

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Foreign exchange reserves at the end of FY 1986 were US$476 million, equivalent to
slightly more than two months worth of imports. This represented a 20-percent
increase of reserves over the previous year, largely the result of higher remittances by
Bangladeshi workers abroad. The country also reduced imports by about 10 percent to
US$2.4 billion. Because of Bangladesh's status as a least developed country receiving
confessional loans, private creditors accounted for only about 6 percent of outstanding
public debt. The external public debt was US$6.4 billion, and annual debt service
payments were US$467 million at the end of FY 1986.

4.2: M ARKET S TRUCTURE OF B ANGLADESH

Banking Sector:

The banking sector in Bangladesh has grown quickly since about 1995, with annual
average growth rates of between 11 and 23 percent between 1995 and 2005. The
banking sector grew faster than national GDP during this period. Despite this
impressive growth, the total number of deposits and loans grew only moderately. In
comparison, in India between 2001 and 2005, deposit accounts per 1,000 people grew
from 417 to 432, and loan accounts, from 51 to 71. Bangladesh saw a much smaller
growth rate: deposits per 1,000 people grew from 232 to 237, and loans, from 57 to
60. This data shows that both access to deposits and loans has room to grow.

Performance of the Financial Sector:

The liberalization of the financial sector in the 1990s and the implementation of
prudential banking regulation in Bangladesh have facilitated growth since 2000.
Inefficiency, however, continues to keep the cost of financial intermediation high,
reflected in high—albeit declining—interest rate spreads. Overall lending rates remain
high within the South Asian context.

The restructuring of nationalized commercial banks, long on the agenda of the central
bank, has finally begun. In fiscal year 2008 (FY08), three of these four banks (Sonali,
Janata, and Agrani) were transformed into public limited companies. Rupali Bank
may also be privatized. The newly restructured companies have begun to reorganize
and initiate efforts to improve the quality of their respective portfolios. The positive
impacts of these measures have, however, yet to flow through to improved efficiency
and performance.

Performance of the Microfinance Sector:

Performance in the microfinance sector remains relatively strong. The four “large”
MFIs (Grameen, BRAC, ASA, and Proshika) continue to dominate the market with
approximately 80 percent of total microfinance disbursements. Total disbursements
have increased steadily for all four institutions since 2005, although Proshika’s
disbursements declined in the second half of FY08. In fact, the historically strong

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portfolio quality of these four MFIs declined in FY08 due to the effects of two floods
and a cyclone. Nonperforming loans ranged between 4 and 7 percent since 2005,
reaching about 10 percent of the combined outstanding portfolios of the big four MFIs
in the second half of FY08.

Performance data for the numerous smaller MFIs in Bangladesh is scarce, although
recent results provided by the Microcredit Regulatory Authority for the whole sector
provide a mixed picture. Sectorwide, loan recovery rates are generally above 90
percent, although the effects of recent natural disasters most likely have reduced this
rate. Borrower-to-member ratios generally trend around 70 percent, although some
MFIs have performed quite poorly, with ratios hovering around 50 percent.

4.3: F INANCIAL S ECTOR O VERVIEW

The financial sector consists of the central bank, Bangladesh Bank, 4 state owned
commercial banks, 5 government-owned specialized (development) banks, 30
domestic private commercial banks, 9 foreign-owned commercial banks, and 29
NBFIs. In terms of both industry assets and deposits, private commercial banks
command the greatest market share. Additionally, 298 microcredit organizations are
licensed by the Microcredit Regulatory Authority (MRA). Insurance companies, stock
exchanges, and cooperative banks comprise a smaller part of the financial system.

In late 2006, financial sector assets totaled roughly 69 percent of GDP. The banking
sector accounted for the majority of these assets, at 58 percent, followed by the
securities market, which accounted for another 6 percent of GDP. The remainders of
financial sector assets were in non bank financial institutions (NBFI), insurance
companies, and microfinance institutions.

F IGURE I: F INANCIAL S ECTOR ASSETS , 2001–2006

Source: IMF, 2007, “Bangladesh: Selected Issues.”

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Banks:

Together with foreign-owned commercial banks, private commercial banks have


gained market share since 2001 at the expense of the less efficient state owned
commercial and specialized banks.

In 2006, the four state-owned (or nationalized) commercial banks had assets of
BDT 786.7 billion, or 33 percent of total banking sector assets. They then controlled
35 percent of deposits and operated 3,384 branches— roughly half of the total number
of bank branch outlets in Bangladesh. These banks have traditionally focused on
lending to state-owned enterprises.

The six development finance institutions, or specialized banks, as they are also
known, have total assets of BDT 187.2 billion—roughly 8 percent of banking assets.
They control just over 5 percent of total banking sector deposits and have a network
of 1,354 branches. The specialized banks, like the nationalized commercial banks,
require restructuring; operational efficiency lags and nonperforming loans are
rampant among them. The government has initiated efforts to merge two of the
specialized banks, Bangladesh Shilpa Bank and Bangladesh Shilpa Rin Sangtha, to
improve efficiency. Another two of these banks, Bangladesh Krishi Bank and
Rajshahi Krishi Unnayan Bank, were established to provide credit to the agricultural
sector, while the two being merged were mandated to provide loans to the industrial
sector.

4.4: T RENDS I N T HE B ANKING I NDUSTRY


At the beginning of the 21st century, the biggest banks in the industrial world have
become complex financial organizations that offer a wide variety of services to
international markets and control billions of dollars in cash and assets. Supported by
the latest technology, banks are working to identify new business niches, to develop
customized services, to implement innovative strategies and to capture new market
opportunities. With further globalization, consolidation, deregulation and
diversification of the financial industry, the banking sector will become even more
complex.

Although, the banking industry does not operate in the same manner all over the
world, most bankers think about corporate clients in terms of the following:

 Commercial banking - banking that covers services such as cash


management (money transfers, payroll services, bank reconcilement), credit
services (asset-based financing, lines of credits, commercial loans or
commercial real estate loans), deposit services (checking or savings account
services) and foreign exchange;
 Investment banking - banking that covers an array of services from asset
securitization, coverage of mergers, acquisitions and corporate restructuring to
securities underwriting, equity private placements and placements of debt
securities with institutional investors.

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Over the past decade there has been an increasing convergence between the activities
of investment and commercial banks, because of the deregulation of the financial
sector. Today, some investment and commercial banking institutions compete directly
in money market operations, private placements, project finance, bonds underwriting
and financial advisory work.

Furthermore, the modern banking industry has brought greater business


diversification. Some banks in the industrialized world are entering into investments,
underwriting of securities, portfolio management and the insurance businesses. Taken
together, these changes have made banks an even more important entity in the global
business community.

4.5: B ANKING I NDUSTRY A NALYSIS I N B ANGLADESH


The Bangladesh Commercial Banking Report provides industry professionals and
strategists, corporate analysts, banking associations, government departments and
regulatory bodies with independent forecasts and competitive intelligence on
Bangladesh's commercial banking industry. Since Q108, the authors have described
numerically the banking business environment for each of the countries surveyed by
BMI. They do this through our Commercial Banking Business Environment Rating
(CBBER), a measure that ensures they capture the latest quantitative information
available. It is weighted 70% to the former and 30% to the latter. Within the 70% of
the CBBER that takes into account the Limits of Potential Returns, the market
elements have a 60% weighting and the country elements have a 40% weighting. The
evaluation of the Risks to Realization of Returns also includes banking elements and
country elements (specifically, BMIs assessment of long-term country risk). However,
within the 30% of the CBBER that takes into account the risks, these elements are
weighted 40% and 60%, respectively.

Banks 'profitability depends on the results of some parameters and among them Bank
b Return on Equity, Market Size, Market Concentration Index, and Bank Risk
Measure are widely used and the same are investigated in the Bangladesh Banking
Industry in this study for a period of the last six years. The data comes from the
annual reports of individual banks listed in Dhaka Stock Exchange (DSE) and from
the Bangladesh bank published statistics book (Scheduled Banks Statistics).
Correlation matrix and stepwise regression have been used for the purpose of data
analysis. The analysis finds that market concentration and bank b risk do little to
explain bank return on equity, whereas bank market size is the only variable providing
an explanation for banks return on equity in the context of Bangladesh.

The banking industry of Bangladesh is a mixed one comprising nationalized, private


and foreign commercial banks. Many efforts have been made to explain the
performance of these banks. Banks and other financial institutions were fully owned
by the government. In the early part of 1980, Bangladesh entered into the IMF and
World Bank adjustment programs and the process of privatization and liberalization
gained momentum under the influence of the World Bank and the IMF. In line with
this, the current study makes an effort to unearth those pillars which are major
constituents of strategies and goals.

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4.6: T HE ROLE OF COMMERCIAL BANKS
Commercial banks engage in the following activities:

 processing of payments by way of telegraphic transfer, EFTPOS, internet


banking, or other means
 issuing bank drafts and bank cheques
 accepting money on term deposit
 lending money by overdraft, installment loan, or other means
 safekeeping of documents and other items in safe deposit boxes
 cash management and treasury services
 merchant banking and private equity financing

4.7: I NTEREST R ATE S PREAD IN BANKING SECTOR

The interest rate spread (IRS) is widely used as a parameter of bank profitability,
intermediation cost, and the degree of efficiency of the banking sector. The IRS shows
the additional cost of borrowing that bank takes on to perform intermediation
activities between borrowers and fund lenders. The market structure plays an
important role in determining IRS. From a bank's perspective, IRS is a premium for
the risk that the bank undertakes. Besides, it compensates for loan default, but also for
the risk related to cost of funding.

The country’s banking structure is segmented with SCBs and PCBs holding 33.1
percent and 51.4 percent of total assets respectively. Within the structure, high IRS
resulted from a number of factors including state control of lending, absence of risk
management practices, accumulation of bad loans due to political interference on
commercial lending decisions, and limited technical skills particularly in the arena of
risk management.

Figure II: Lending and Deposit Rates and IRS

Source: Statistics Department, Bangladesh Bank

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Figure II: shows the weighted average deposit (WADR) and lending (WALR) rates
and the spread (IRS) of all banks from end June 2001 to end September 2008. The
IRS, as measured by the difference between weighted average lending and deposit
rates of commercial banks, shows a generally declining trend since June 2001 except
for few deviations. The spread between lending and deposits rate declined by 1.6
percentage points while deposit rates increased by 0.1 48 percentage points and
lending rates decreased by 1.4 percentage points respectively between June 2001 to
September 2008 resulting from persistent efforts of BB to encourage the banks to
reduce IRS to reasonable level to facilitate investment and growth.

Figure III: shows the IRS of different groups of banks. Since September 2005, the
FCBs maintained the highest spread almost all the time while the spread of SCBs was
higher than PCBs until March 2008. The IRS of SBs is the lowest among the groups.

Figure III: IRS of Different Bank Groups

Source: Statistics Department, Bangladesh Bank

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4.8: B ALANCE OF P AYMENTS AND F OREIGN E XCHANGE M ARKET

Balance of Payments:

The overall balance of payments situation remained reasonably stable during July-
November FY09. During the period, export earnings (fob, including EPZ) increased
by 27.4 percent (from USD 5,103 million to USD 6,500 million), workers'
remittances by 33.6 percent (from USD 2,805 million to USD 3,747 million), and
import payments (fob, including EPZ) by 28.2 percent (from USD 7,206 million to
9,239 million) over the same period of the last fiscal year.

As a result, the current account balance (CAB) showed a deficit of USD 24 million in
July-November FY09 against a surplus of USD 39 million during the same period of
FY08. The balance in the financial account, on the other hand, was recorded at USD
148 million in July-November FY09 which was USD 289 million during the same
period of FY08.

Exports:

During July-December FY09, total exports stood at USD 7,754.7 million which was
higher by 19.4 percent over USD 6,495.9 million earned during the same period of
FY08.5 Among the export products, several items registered robust growth including
textile fabrics (144 percent), chemical fertilizer (179 percent), and melamine
tableware (210 percent) whereas woven garments, knitwear products, and home
textile grew by 21 percent, 27 percent, and 18 percent respectively. On the other hand,
exports of frozen food, jute goods, and leather declined by 4 percent, 18 percent, and
32 percent respectively during the period over the same period in the last, fiscal year.

Figure IV: Major Export Earnings

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Source: Export Promotion Bureau

Imports:

Between July and January FY09, total merchandise imports as measured by


provisional data on settlement of LCs showed 17.9 percent growth to USD 12,913.6
million from USD 10,953.3 million during the same period of FY08. The growth rate
was 22.4 percent during July- December FY09.

Figure V: Settlement of LCs of Major Import items

Source: Foreign Exchange Policy Department, Bangladesh Bank

The import of RMG related goods except machinery for garment industry witnessed a
robust growth along with import of raw cotton (27 percent) and cotton yarn (35
percent) while textile machinery import rose by 30 percent (Figure :V).

Remittances:

The inflow of workers’ remittances posted a healthy growth during July-December


FY09. During the period, total remittances increased by 30.9 percent (from USD
3,440.3 million to USD 4,504.7 million. The inflow of remittances from Saudi Arabia,
the largest host country of Bangladeshi migrants, stood at USD 1,352.4 million in
July-December FY09 from USD 953.1 million during the same period of FY08
(Figure :VI).
Figure VI: Inflow of Workers' Remittances

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Source: Foreign Exchange Policy Department, Bangladesh Bank.


Foreign Exchange Market:

Over the period between January 2008 and January 2009, the foreign exchange
market remained relatively stable except for minor uptrend in Taka/USD during some
months. The weighted average Taka/USD exchange rate increased to Tk. 68.90 at the
end of January 2009 from Tk. 68.52 in January 2008 (Figure :VII). Thus the nominal
value of Taka depreciated by 0.5 percent over the period. On the other hand, gross
foreign exchange reserves reached USD 5,787.8 million at the end of December 2008
higher than USD 5,514.6 million recorded in December 2007.

Figure VII: Daily Exchange Rate Movement (weighted average)

Source: Monetary Policy Department, Bangladesh Bank.

During January-September 2008, both nominal effective exchange rate (NEER) index
and real effective exchange rate (REER) index appreciated while the nominal
exchange rate depreciated slightly that resulted in an appreciation of 0.5 percent of the
value of Taka. As a result, Bangladesh lost some export competitiveness in the
international market. Besides, nominal exchange rate marginally appreciated between
October 2008 and January 2009 and the rate remained higher than the REER based
exchange rate. Since the nominal Taka-USD exchange rate remained higher than the
REER based exchange rate, Bangladesh enjoyed some export competitiveness in the
international market during the period.

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4.9: F INANCIAL S ECTOR IN B ANGLADESH

Background:

The financial system in Bangladesh includes Bangladesh Bank (the Central Bank),
scheduled banks, non-bank financial institutions, microfinance institutions (MFIs),
insurance companies, co-operative banks, credit rating agencies and stock exchange.
Among scheduled banks there are 4 nationalised commercial banks (NCBs), 5 state-
owned specialised banks (SBs), 30 domestic private commercial banks (PCBs), 9
foreign commercial banks (FCBs) and 29 nonbank financial institutions (NBFIs) as of
December 2006. However, Rupali Bank, an NCB is being sold to a foreign buyer, and
once this transaction is completed, the country will have only 3 NCBs. Which are
being corporatized. Over and above the institutions cited above, three development
financial institutions namely House Building Finance Corporation (HBFC), Ansar-
VDP Unnayan Bank and Karma Shangsthan Bank are operating in Bangladesh, all of
which are state owned.

Financial service:

The financial service industry remains underdeveloped in spite of a decade of major


reforms conducted under the Financial Sector Reforms Program. According to the
International Labor Organization, this sector provides employment for 213,000 people
(1996). Since independence it has been under state control, as the major commercial
banks were nationalized soon after independence. The local banks are often accused
of providing poor financial services and being beset by corruption, inefficient
management and capital inadequacies. Bangladesh lags behind in the introduction of
computerized banking payment systems, the development of electronic payment
systems, and electronic banking. The Agrani Bank, Janata Bank, Rupali Bank and
Sonali Bank are the main financial institutions still under state control. They account
for almost half of all deposits.

In 1999 the government launched a Commercial Bank Reform Project intended to


improve the functioning of the private commercial banks. One bank has provided a
success story: the Grameen Bank, which was founded by university professor
Mohammad Yunus, pioneered in providing small credits to local communities in need.
At present the IMF and the World Bank, which are often notoriously ineffective in the

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poor countries of Asia and Africa, have carefully studied the Grameen Bank's
microcredit model with a view to applying it in other developing countries.

Retail:

In Bangladesh, as in many other Asian countries, many small- and medium-sized


businesses have been built around the retail sector and are often associated with small
shops and restaurants. The retail sector provides employment for a large number of
people, but it still remains relatively underdeveloped, due to a generally low level of
income among the population. There are still a number of small family-run traditional
shops and cafes, selling mainly locally-made products.

The United States has found that the enforcement of intellectual property rights is
"weak" and that "intellectual property infringement is common." The Bangladeshi
government has begun to address this problem seriously, introducing a new Copyright
Act in 2000 in order to bring the country's copyright laws into compliance with the
WTO. This act updated the Patents and Design Act of 1911, and some other outdated
regulations.

Central Bank and its Policies:

The objectives of the Bangladesh Bank (BB) is to formulate monetary policy which
aims at supporting the highest sustainable output growth while maintaining price
stability, adjusting smoothly to the internal and external shocks faced by the economy
from time to time. Within this mandate, BB also supervises and regulates scheduled
banks and non-bank financial institutions operating in Bangladesh. It maintains the
traditional central banking roles of note issuance and the banker to the government
and banks. Its prudential regulations include, among others, ensuring minimum
capital requirements, applying limits on loan concentration and insider borrowing,
and, providing guidelines for asset classification and income recognition. The
Bangladesh Bank has the legal authority to impose penalties for non-compliance and
also to intervene in the management of a bank if serious problems arise. It has the
delegated authority of issuing policy directives regarding the foreign exchange
regime.

Scheduled Banks:

Out of 6562 scheduled bank branches operating in the country, up to end December
2006 the NCBs operate 3384 branches, of which 2146 are in rural areas and 1238 are
in urban areas; SBs have 1354 branches of which 1200 are in rural areas and 154 are
in urban areas; PCBs have 1776 branches of which 488 are in rural areas and 1288 are
in urban areas; and FCBs have 48 branches exclusively in urban areas. Out of 30
PCBs, six have been operating as Islamic banks. Besides these full-fledged Islamic
banks, 10 conventional banks in the private sector have opened selected branches and
Islamic banking counters respectively to deal with the Islamic banking business
parallel to their conventional operations. NCBs owned 65.3 percent while PCBs, SBs
and FCBs own 24.5, 6.6 and 3.6 percent respectively of total assets of the scheduled
banks. Of the total deposits, NCBs' share stood at 38.8 percent while SBs, PCBs and
FCBs shared 5.8, 48.7 and 6.8 percent respectively. Among PCBs, the Islamic Banks'
share of deposits is 12.5 percent. On the other hand, NCBs disbursed 32.3 percent of

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total advances while SBs, PCBs and FCBs disbursed 9.3, 51.5 (of which 14.8 percent
was disbursed by the Islamic Banks) and 6.9 percent respectively at the end of
September 2006.

Non-Bank Financial Institutions (NBFIs):

Non-Bank Financial Institutions are an important part of financial system in


Bangladesh. NBFIs operations are regulated under the Financial Institutions Act,
1993. The NBFIs consist of investment, finance, leasing companies etc. There were
29 financial institutions operating in Bangladesh as of 31 December 2006. Of these
one is government owned, 15 are local (private) and the other 13 are established under
joint venture with foreign participation. Bangladesh Bank has introduced a policy for
loan and lease classification and provisioning for NBFIs from December 2000 on a
half-yearly basis. Among the 29 financial institutions, 12 have been listed in the stock
exchanges up to 31 December 2006 to strengthen financial capability and the rest are
under process to be listed in due course.

Capital Market:

The capital market in Bangladesh is regulated and supervised by the Securities and
Exchange Commission (SEC) under the SEC Act, 1993. The SEC so far has issued
licenses to 27 nonbank institutions to participate in the capital market of which 19
institutions are Merchant Banker and Portfolio Manager while 7 are Issue Managers
and l(one) acts as Issue Manager and Underwriter. The Dhaka Stock Exchange (DSE),
which was established as a public limited company in April 1954, and the Chittagong
Stock Exchange (CSE), established in April 1995, dealing in the secondary capital
market. As of end December 2006 the total number of enlisted securities with DSE
stood at 310 of which 255 are listed companies, 13 mutual funds, 8 debentures and 34
treasury bonds. Recently, two power sector companies namely Dhaka Electric Supply
Company (DESCO) and Power Grid Company of Bangladesh (PGCB) have been
listed in the capital market under the newly introduced direct listing regulation. The
Investment Corporation of Bangladesh (ICB) was established in 1976 with the
objective of encouraging and broadening the base of industrial investment. ICB
underwrites issues of securities, provides substantial bridge financing programs, and
maintains investment accounts, floats and manages closed-end and open-end mutual
funds and closed-end unit funds to ensure supply of securities as well as generating
demand for securities. ICB also operates in both DSE and CSE as dealer. Some SBs,
such as Bangladesh Shilpa Bank (BSB), Bangladesh Shilpa Rin Sangstha (BSRS),
Bangladesh Small Industries and Commerce (BASIC) Bank Ltd. As well as NCBs
and some foreign banks are engaged in long-term industrial financing.

Insurance:

The insurance sector is regulated by the Insurance Act, 1938 with regulatory oversight
provided by the Controller of Insurance on authority under the Ministry of
Commerce. A separate Insurance Regulatory Authority is being established. A total of
62 insurance companies have been operating in Bangladesh, of which 18 provide life
insurance and 44 are in the general insurance field. Among the life insurance
companies, except the state-owned Jiban Bima Corporation (GBC) foreign owned
American Life Insurance Company (ALl CO), and the rest of the private. Among the

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general insurance companies, state-owned Shadharan Bima Corporation (SBC) is the
most active in the insurance sector. A total of 31 insurance companies are listed in the
capital market, of which 8 offer life insurances.

Microfinance Institutions (MFIs):

MFIs in Bangladesh were left unregulated for a long time since their inception. The
government, with the close cooperation of Bangladesh Bank, undertook efforts to
establish a regulatory framework which culminated in the enactment of the
Microcredit Regulatory Authority Act, 2006. An Executive Board consisting of eight
members is responsible for executing the general and administrative tasks of the
management. The Board consists of the Governor of Bangladesh Bank as ex-officio
chairman, six government officials nominated by the government and one executive
vice-president who serve as the member secretary of the board. The main
responsibilities of the authority include issuance and cancellation of the license for
microcredit, overseeing, supervising and facilitating the entire activities of MFls.

In recognition of the robust poverty eradication via microfinance activities, the


Grameen Bank and its founder, Dr. Muhammad Yunus have been awarded The 2006
Nobel Peace Prize. Now it has been recognized worldwide that microfinance can be
easily adapted and thus replicated in diverse cultural and geographic locations all over
the world. The member-owned Microfinance Institutions (MFIs) have an explicit
social agenda to cater to the needs of the poorer sections of population, and have a
particular focus toward rural women clients. Grameen Bank was established in 1983
under a special law with the initial support from the Bangladesh Bank. The typically
landless borrowers of Grameen Bank mostly women, are owners of the bank and it is
the pioneer organization of this type. Besides Grameen Bank, there are more than
1000 semiformal institutions operating mostly in the rural sector of the country; of
these, BRAC, ASA, and PROSHIKA are considered three largest NGO-MFIs.

Cooperative Banks:

In Bangladesh 119 cooperative banks are operating, of which 64 are central


cooperative banks, 48 are land mortgage and rest 7 are other cooperative banks. The
maximum share of total assets, 90 percent, is controlled by central cooperatives.
Similarly the maximum share deposits (85 percent) and advances (90 percent) are
likewise handled by the same central cooperatives.

4.10: T HE F INANCIAL S ECTOR P OLICY S TANCE OF B ANGLADESH

At the present stage of development of the Bangladesh economy, the financial sector
has a key role to play in facilitating smooth exchange of goods and services through
monetization of the economy and improvements in payments and settlements, and
acting as a well performing bridge between the savers and the investors and between
the present and the future. The country's financial sector policy stance is geared to
serve as a tool for poverty reduction in two major ways: first, through creating direct
impact on productive activities and hence on employment and income generation; and
second, through indirectly influencing the fiscal and monetary policy stances that are

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important determinants of employment and output growth and hence of poverty
reduction.

The prime goal of bringing better financial intermediation is to ensure the availability
of required pool of financial resources necessary to sustain smooth and adequate flow
of credit to the economy, especially to the productive sectors, to realize high
economic growth along with economic stability. In the backdrop of the above issues
which are relatively long term in nature, no major changes are stipulated in the
financial policy stance that was articulated in the previous issue of the Financial
Sector Review (FSR, 3(2), June 2008). The concerns would be to maintain both
quantity and quality of financial intermediation through ensuring efficiency,
credibility, transparency, and accountability along with creating necessary financial
safety-nets through implementing anti-money laundering safeguards.
The global financial crisis has created renewed pressures on the global credit market
and the global economic outlook is undergoing fast changes in the backdrop of
growing liquidity crunch in the global market. The financial strains remain acute,
pulling down the real economy with world growth projected to fall to 0.5 percent in
2009, its lowest rate since World War II.

Bangladesh has successfully cushioned itself from the headwinds of ongoing global
financial crisis and remained largely unaffected by the global slowdown mainly due to
its limited openness to short term capital flows and innate wariness about excessive
debt exposure to the global financial system. Like other small economies, Bangladesh
however is by no means invulnerable to fallouts from prolonged global downturns or
to negative spill over of policies of large economies, and thus has a strong stake in
global stability.

Although till now relatively protected from the direct effects of the global financial
crisis, Bangladesh's banking sector would probably face more pressure over time.
Obviously, in view of the current experience, the longer term concern for Bangladesh
would be to move toward a macro-prudential and regulatory architecture that is
effectively integrated along with needed coordination among all financial sector
institutions including commercial banks and the Bangladesh Bank.

Banking Sector Competition: Privatization and Restructuring:

Several qualitative improvements in the performance of the banking sector have been
noted in the present Review. There have been improvements in sectoral lending
activities of the SCBs which would contribute toward raising the overall banking
sector performance and competitiveness. The corporatization of three nationalized
commercial banks (Sonali Bank, Janata Bank, and Agrani Bank) has enabled them to
operate as public limited companies (known as state owned commercial banks, SCBs)
and created a larger space for improvement in their operation.

In Bangladesh, a major concern for the monetary authority is the adverse effect on
bank balance sheets arising out of high NPLs of the banks. Along with other
measures, Bangladesh needs to strengthen asset management companies to quicken
recovery and improve efficiency in the banking sector. The BB’s recent directives to
the banks are: to take precaution while extending loans to high risk sectors and

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prioritize loans to productive sectors which would help to further improve the NPL
situation in the country.

Bangladesh’s Financial Sector Risks and Stability:

The global financial crisis, unprecedented in recent times, shows that there is no
substitute of prudent government intervention and careful regulation even when
market determined incentive structures operate. A liberalized, market based, and
effectively supervised and regulated financial sector is necessary in order to promote
and sustain rapid growth in Bangladesh. The Bangladesh Bank, as the supervisor of
the country's financial sector, carefully monitors the liquidity conditions and other
financial developments and takes appropriate actions when needed.

5.1: SWOT Analysis

SOWT analysis is done for a company, to find out its overall Strengths, Weaknesses,
Threats, and Opportunities leading to gauging to competitive potential of the
company. Here, SOWT analysis of Jamuna Bank Limited is given bellow……….

1. Strengths:

 Diversified Portfolio:

The Jamuna Bank Ltd mainly focused on trade finance, garments,


housing, food, and beverage. The portfolio continues to be free undue
concentrations in terms of exposure to any specific industry.
 The Jamuna Bank Ltd has skilled workforce means that they can be
moved and trained into other areas of the business and experienced top
management.
 Overhead production employee cost is much lower in Jamuna Bank Ltd
than other banks.
 Satisfactory capital base, Low infection in loan Exposure, and
Prospective IT infrastructure.

2. Weaknesses:

 There customer care, and service is slandered, but it can more improve.
 Poor location for business needs.
 In modern world ATM card is very much essential in business, and private
life, but Jamuna Bank Ltd failed to introduce to ATM booth.
 Limited market share, Excessive dependency on term deposits, and Weak
fund management

2. Opportunities:

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 The Jamuna Bank Ltd continues to strengthen its position by expanding
its core business activities.
 The Jamuna Bank Ltd is increased spending power in the local/national
economy and gives loan to the various types of investors for changing
Bangladesh economy.
 The Jamuna Bank Ltd is moving their product in to a new market sector.
 The Jamuna Bank Ltd has regulatory environment favoring private
sector department.
 The Jamuna Bank Ltd try to increase remittance in our country by make
relation to the other country.

4. Threats:

 Large and increasing competition of many international banks.


 Increasing rules, and regulations of Bangladesh Bank are very strong than
privies any year.
 Now a day, online banking is most popular, but in Bangladesh it may be
very expensive.
 Number of bank in Bangladesh is higher than its demand for service. So,
recently want to specialize for the Banking system.
 Over all liquidity crises in money market.

5.2: Risk Analysis

Risk Management:

Risk is inherent in all aspects of a commercial operation; however for Banks and
financial institutions, credit risk is an essential factor that needs to be managed. Credit
risk is the possibility that a borrower or counter party will fail to meet its obligations
in accordance with agreed terms. Credit risk, therefore, arises from the bank’s
dealings with or lending to corporate, individuals, and other banks or financial
institutions.

JBL believes these will improve the operational and financial performance along with
meeting the regulatory requirements. The Bank is in constant efforts to establish
superior monitoring of credit risks and returns. For bringing in harmonious matching
between assets and liabilities ALCO reviews these on a regular basis for keeping risk
in this area to an acceptable level.Continuous efforts are made to maintain earning
assets at the highest possible level so as to maximize profits and minimize cost of
operation.

The risk Management of Jamuna Bank Limited evolves identification, measurement,


monitoring and controlling risks to ensure that:

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╠ The Bank’s risk exposure is within the limits established by Board of
Directors.
╠ The Bank’s risk taking decisions are in line with the business strategy and
objectives set by Board of Directors of the Bank as well as Bangladesh Bank
guidelines.
╠ The Bank’s risk taking decisions are explicit and clear.
╠ Sufficient capital as a buffer is available to take risk.

Market Risk:

Jamuna Bank Limited is exposed to market Risk in variety of ways. Market Risk
exposure is mainly explicit in portfolio of Bangladesh Government Treasury Bills and
treasury Bonds held under HFT (held for trading) conversely, Market Risk is implicit
such as interest Rate Risk due to mismatch of loans and Foreign Exchange Risk due
to maturity mismatch of foreign currency positions. The portfolios are being revalued
at an interval at current market price of marking to market basis. Besides, the
portfolios have been synchronized in line with Bangladesh Bank guidelines of risk
based Capital Adequacy (BASEL-II) for interest rat risk and foreign exchange risk.

Interest Rate Risk:

Interest Rate Risk arises when there is a mismatch between positions. The Bank’s
lending, funding and investment activities give arise to Interest Rate Risk.

Foreign Exchange Risk:

The Bank is also exposed to Interest Rate Risk, which arises from the maturity
mismatching of foreign currency position. It also includes settlement risk. The total
holding position is being revalued on marking to market on monthly basis.

Credit Risk:

A typical Credit Risk management framework in Jamuna Bank Limited is broadly


categorized into following main component:

a) Board’s and senior management oversight.


b) Organizational Structure.
c) Systems and Procedures for identification acceptance, measurement,
monitoring and control risks.

The Bank board of Directors approved Credit Risk strategy and significant policies
relating to Credit Risk.

Reputation risk arising from money laundering incidences:

Money laundering risk is defined as the loss of reputation and expenses incurred as
penalty for being negligent in prevention of money laundering. The bank has already
taken many steps required by Bangladesh Bank and some are in under process.

Operational risk:

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Internal Control and Compliance is a process to provide ‘Immunization’ and a high


level of protection from errors, improper process, frauds, surprises and inability to
comply with legal and regulatory requirements. Steps have been implemented and
some are in under process.

5.3: F INANCIAL P ERFORMANCE OF THE BANK

I. PROFIT AND OPERATING RESULTS:

The Bank earned net profit before tax of Tk. 128.26 million during the period May
2009 after all provisions including 1% General provision on unclassified Loans &
Advances. Provision for Income tax for the year is amounted to Tk. 54.15 million
resulting a net profit after tax of Tk. 74.10 million. In 2011 Jamuna Bank Limited
posted an operating profit of Tk. 1040.20 million as against Tk. 824.21 million in
2010 with a spectacular growth of 26.21 percent over the preceding year. After having
made necessary provisions for loans and advances Tk. 174.39 million in accordance
with the instructions of Bangladesh Bank Net Income before Tax (NIBT) stood at Tk.
865.82 million in the year under review against Tk. 405.04 million in the preceding
year. An amount of Tk. 382.05 million has been kept as provision for payment of Tax.
Thus Net Income after tax and provision stood at Tk. 479.44 million in 2011 which
was Tk. 89.11 million in 2010. In 2012 JBL posted an operating profit of tk. 19114.25
million as against tk. 1040.20 million in 2011 with a spectacular growth of 84.03%
over the preceding year.

II. FOREIGN EXCHANGE BUSINESS:

International Trade constitutes the main stream of business activities of Jamuna Bank.
It offers a full range of trade finance and services namely, Issue, Advise and
Confirmation of Documentary credit; arranging forward exchange coverage; Pre-
shipment and Post-shipment finance; Negotiation and Purchase of Export Bills;
Discounting bill of Exchange; collection of bills, inward and outward remittance, etc.

II.I: Import Business:

The total Import Business handled by the Bank during the period May 2009 was Tk.
5269.29 million compared to Tk. 7,923.90 million in the year 2008.

II.II: Export Business:

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The total export Business handled by the bank during the period May 2009 was Tk.
1739.97 million compared to Tk. 4,790.80 million in the previous year.

II.III: Foreign Correspondents:

Jamuna Bank Limited has established correspondent relationship with leading


International Banks in 105 countries through 316 correspondents to cover all
important financial centers of the Globe. It endeavors to increase its network of
Correspondent Relationship with more International Banks and Financial Institutions
in order to help satisfy the expanded needs of its customers globally. Efforts are being
made to establish drawing arrangements with the overseas exchange houses to bring
homebound remittances into the country through the Banking channel mainly issues
Electronic Fund Transfer (ETT) system.

III. CAPITAL AND RESERVE FUND:

The Authorized Capital of the Bank is Tk. 1,600.00 million. Total Share holders
Equity at the end of May, 2009 stood at Tk. 681.43 Million. The Paid up Capital
represents the face value of 4,290,000 ordinary shares of Tk. 100/- each fully paid by
the Sponsor Share holders. Subsequently, the Paid up Capital increased from Tk.
390.00 million to Tk. 429.00 million by the end of December 31, 2004 by issuance of
Bonus shares of 10.00%. At the close of business on May 31, 2009, the capital
adequacy ratio was 12.14% as against accepted standard ratio of 9%.

C APITAL S TRUCTURE

JBL has a conviction of maintaining a strong capital base in carrying on operation. It


started operation on June 03, 2001 with a paid-up capital of Tk. 390.00 million
divided into 3.90 million ordinary shares of Tk. 100 each. The authorized capital of
the Bank was Tk. 1600.00 million and in 2009 it increased and stood at Tk. 4000.00
million divided into 40 million ordinary shares of Tk. 100.00 each. The Bank’s paid-
up capital as at 31st December 2010 stood at Tk. 1313.27 million, Tk. 429.00 million
was raised through initial public issue of 4.29 million ordinary shares of Tk. 100.00
each with a premium of Tk. 20.00 each while Tk. 214.50 million was raised by issue
of Bonus Shares in the ratio of 1:4, i.e. one bonus share, on the holding of 8.58
million ordinary shares as on 31.12.2005, one Bonus Share for every 4 shares out of
profits up-to the year 2009 and Tk. 153.21 million was raised by issue of Bonus
Shares in the ratio of 1:7 in the year of 2010 Tk. 87.56 million was raised by issue of
Bonus Share in the ratio of 1:14. Thus, as on 31 st December 2011, the total
shareholders’ equity and reserve stood at Tk. 2160.73 million and total Bank’s capital
stood at Tk. 2444.34 million.

C APITAL ADEQUACY R ATIOS

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The Bank adopted BIS risk adjusted capital standards to measure the capital adequacy
in line with the criteria set by Bangladesh Bank. According to the instructions
contained in Bangladesh Bank’s BRPD Circular No. 05 dated May 14, 2009 relating
to Capital Adequacy every commercial bank operating in the country is required to
maintain at minimum 10 percent of its risk-weighted assets as capital. Jamuna Bank
Limited could maintain Capital Adequacy ratio of 11.91 percent as at 31.12.2010,
which was higher than the required Capital Adequacy Ratio.

D EPOSITS & D EPOSIT M IX

In commercial banks operation starts with mobilization of resources i.e. tapping of


deposits and then the said resources are deployed as loans, advances and investments
for the purpose of maximizing wealth which means deposits have dominance in
commercial bank’s operations. That is why; there is a common saying that deposit is
the lifeblood of a bank. In keeping with this axiom JBL attaches utmost importance to
the deposit mobilization campaign and to the optimal deposit mix for minimizing
COF as far as practicable. A stiff competition persisted in the market as to deposit
mobilization and there was a pressure on interest rate. Besides, instability in political
atmosphere was adversely affecting business, which stood as a hindrance to the
smooth operation of banks including deposit mobilization.

Despite all these unfavorable factors JBL was able to instill confidence in customers
as to its commitments to the depositors and borrowing customers and thereby could
mobilize a total deposit of Tk. 27307.94 million in 2010 against that of Tk. 20924.02
million in the preceding year showing an increase of Tk. 6383.92 million being 30.51
percent. Endeavor is underway for augmenting low cost deposit by accommodating
good customers at competitive price. For healthy growth of business JBL puts
emphasis on no cost and low cost deposit all the time. A number of savings schemes
are in place for mobilizing long term deposits which can be planned to be invested in
term loans in the area lease finance, project finance and SME with a view to having

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better yields. JBL’s such move will motivate the people to have good savings habit, as
well.

L OANS & ADVANCES

Though there was an unfavorable business environment due to political turmoil


throughout the year JBL was in constant efforts to explore different areas of credit
operation and could raise the credit portfolios to Tk.21036.86 million in 2011 with an
increase of Tk. 4419.41 million (26.59%) over that of the preceding year. The total
credit was on 31.12.2010 was Tk. 16617.45 million. In order to ensure compliance
with regulatory requirements for avoiding risk of exposure to single borrower,
concentration on large loans, to bring in excellence in credit operation in relation to
risk management, yield, exposure, tenure, collaterals, security valuation etc.

JBL strived for further diversification of credit portfolios. Its credit facilities were
concentrated on Trade Finance, Agriculture and related sectors, project finance,
wholesale and retail trade, transport sector, hospital and diagnostic centers and
syndicate financing for big projects, capacity additions to the manufacturing sector
and structured financing for developing infrastructure of the country. Initiatives are
taken for helping small and medium entrepreneurs in the ventures for which, in JBL,
we have developed SME credit products and separate unit has been established for
enhancing SME products to the clients. JBL has also increased lending activities to
small consumers through Consumer Credit Scheme.

I NVESTMENT

The investment portfolio of the Bank as on 31.12.2008 stood at Tk. 4238.63 million
as on 31.12.2007. The investment portfolio was blended with Government treasury
bills amounting to Tk. 1589.46 million. Treasury Bonds of Tk. 1.16 million. Its
investment was made in acquisition of Preference Shares of Tk. (50.00-25.00) 25.00
million of Aftab Automobiles Limited. Besides, Tk. 2.00 million has been invested in
acquisition of two shares of Central Depository Bangladesh Limited (CDBL). The
Bank’s major portion of investment is in Govt. Treasury Bills and Bonds for the
purpose of fulfilling Statutory Liquidity Requirement.

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H IGHLIGHTS OF JBL

HIGHLIGHTS ON 2011 TO 2012

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6.1: R ATIO ANALYSIS

Ratio analysis is a tool used by individuals to conduct a quantitative analysis of


information in a company's financial statements. Ratios are calculated from current
year numbers and are then compared to previous years, other companies, the industry,
or even the economy to judge the performance of the company. Ratio analysis is
predominately used by proponents of fundamental analysis.

Here, this report includes some ratios. Most ratios can be calculated from information
provided by the financial statements of JBL.

I. LIQUIDITY RATIO:

Liquidity ratio provides information about a firm's ability to meet its short-term
financial obligations. They are of particular interest to those extending short-term
credit to the firm.

Formul Year
Sl. a for
Ratio
No. calcula 2008 2009 2010 2011 2012
tion
1 Liquidity Current
Ratio Asset/
0.36:1 0.36:1 0.41:1 0.31:1 0.33:1
Current
Liability

CURVE OF LIQUIDITY RATIO

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There is an increase in almost all the current asset of the bank except for investment.
On the other hand, the bills payable and borrowing from the financial institutions have
decreased resulting is a strong current ratio.

As a result, I think more liquidity which means greater ability to meet the credit
demands that may be made on the bank from time to time. These charges have
decreased to a greater extent in the current year inducting the focus of management
activeness, attention and concern for improvement in the liquidity position of the
Bank.

II. DEBT / LEVERAGE RATIOS:

Financial leverage ratios provide an indication of the long-term solvency of the firm.
Unlike liquidity ratios that are concerned with short-term assets and liabilities,
financial leverage ratios measure the extent to which the firm is using long term debt.
This Debt/Worth or Leverage Ratio indicates the extent to which the business is
reliant on debt financing.

Formul Year
Sl. a for
Ratio
No. calcula 2008 2009 2010 2011 2012
tion
1 Debt/Equity Long
Ratio Term
Liabilities
(Debt), / 19.89% 11.90% 14.94% 13.65% 11.24%
Stock
Holders
Equity

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2 Times EBIT /
Interest Interest 7.42 3.48 1.97 5.96 5.24
Earned Payment times times times times times
Ratio

CURVE OF DEBT / LEVERAGE RATIOS

From the table and graph it ids clear that Debt / Leverage Ratios ratio are decreasing
which show the high efficiency of JBL. In 2008 it was high but 2012 it decreased to
(7.42 and 19.89) and (5.24 and 11.24) which is a good sign. Here the creditors are
interested in low ratio. The lower the ratio the high the level of the fire’s financing
that is being provided by the shareholders.

III. ASSET UTILIZATION / ACTIVITY RATIO:

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Asset Utilization or Activity ratio measures How efficiently an organization uses
its resources and, in turn, the effectiveness of the organization’s managers.
Asset utilization delivers a reasonably detailed picture of how well a
company is being managed and led—certainly enough to call attention both
to sources of trouble and to role-model operations.

Formul
Year
Sl. a for
Ratio
No. calcula
2008 2009 2010 2011 2012
tion
1 Total Sales /
Asset Total 0.65 0.63 0.63 0.66 0.66
Turnover Asset times times times times times

CURVE OF ASSET UTILIZATION / ACTIVITY RATIO

Total Asset Turnover ratio expresses the number to times the total assets are being
turned over in a stated period. It measures the efficiency with which total assets are
employed. A high ratio means a high rate of efficiency of utilization of total asset and
low ratio means improper use of the assets. So this calculation say that, the ratio is
going high and which is a good sign and shows that JBL is utilizing its assets
efficiently.

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IV. PROFITABILITY RATIOS:

The profitability ratios are used to measure how well a business is performing in
terms of profit. The profitability ratios are considered to be the basic bank financial
ratios. In other words, the profitability ratios give the various scales to measure the
success of the firm. The profitability ratio should be compared with the relevant time
period. The profitability ratio of the industries that experience operations on the
seasonal basis should be compared properly.

Formul Year
Sl. a for
Ratio
No. calcula 2008 2009 2010 2011 2012
tion
1 Earnings Earrings
Per After Tax
Share (EAT)/
46.58 23.63 7.27 36.51 56.92
(EPS) No. of
Share
Holder
2 Gross Gross
Profit Profit or
3.80% 5.5% 5% 4.9% 5.9%
Margin EBIT /
Sales
3 Net Net Profit
Profit or
1.80% 1.98% 0.54% 2.3% 2.9%
Margin Income /
Sales
4 Return Net Profit 1.20% 1.3% 0.34% 1.5% 1.9%
On Asset or
(ROA) Income /

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Total
Asset

5 Return Net Profit


On or
24.8% 16.22% 5.379% 22.19% 23.19%
Equity Income /
(ROE)

CURVE OF PROFITABILITY RATIOS

Earnings per share (EPS) are the amount of earnings per each outstanding share of a
company's stock. From calculation and graph says that, its performance is good and
trends are upward.

Gross profit margin refers profit of the organization to its sales (interest earned in
case of Bank). From calculation it is very much clear that the gross profit margin ratio
have upward trend which shows that how much they using their deposits to earn
interest. As it is clear that this ratio going high and its indication of good performance
of JBL.

Net profit margin refers to a measure of profitability. From the calculation and graph
it is very much clear that the performance of JBL is very good and the trend is
upward. It is because of high advances the JBL has given to the people.

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Return on Asset (ROA) percentage shows how profitable a company's assets are in
generating revenue. From the calculation it is very clear that this ratio of JBL is going
high to high. It shows that JBL using its assets very professionally and also say that
how efficiently they investing the asset that’s why they are earning high profits.

Return on Equity (ROE) measures the rate of return on the ownership interest. From
the calculation it also say that the ratio have an upward trend of JBL. It’s because of
high net profit they have earned. It says that, the earning power on the shareholder’s
investments.

V. MARKET VALUE RATIOS:

Market Value Ratios relate an observable market value, the stock price, to book values
obtained from the firm's financial statements. A market-value ratio is a metric used to
gauge a company's viability in terms of such variables as profitability and the market
valuation of its stock. Some of the most useful and widely known of these ratios
include the price-to-earnings ratio (called the "P" or "P/E" ratio), and the book-to-
market ratio.

Formul Year
Sl. a for
Ratio
No. calcula 2008 2009 2010 2011 2012
tion
1 Price Market
Earning Price of
(P/E) Security / 9.66 12.27 53.61 6.98 9.20
Ratio Earnings times times times times times
Per Share
(EPS)
2 Market Market
To Book Price of
Value Share /
4.5 3.92 4.31 2.67 5.24
Ratio Book
Value of
Share

CURVE OF MARKET VALUE RATIOS

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The P/E ratio (price-to-earnings ratio) of a stock is a measure of the price paid for
a share relative to the annual net income or profit earned by the firm per share. As
from the above calculations it is understandable that this ratio decreased tremendously
in 2009. It is because of the reason that earning per share increased resulting is
decreasing price to earning ratio. From calculation it says that, it has a downward
slope as a consequence of increase in earning per share.

Market to Book Value Ratio identifies undervalued or overvalued securities by


taking the book value and dividing it by market value. From the calculation it is clear
that, this ratio overvalued for JBL.

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6.2: H ORIZONTAL ANALYSIS

Horizontal analysis refers to a type of fundamental analysis in which a financial


analyst uses certain financial data to assess a company’s performance over time. The
analyst compares the same items or ratios for a particular company over a period of
time in order to assess the company’s growth during that time. Horizontal analysis can
also be performed on multiple companies in the same industry, to assess a company’s
performance relative to its competitors.

Jamuna Bank Ltd.


Comparative Balance Sheet
For the Year Ended 31 December, 2012, 2011, and
2010

Increase or
Year
Particular Decrease (%)
s 2012- 2011-
2012 2011 2010
2011 2010
ASSET:
Cash: 3211254058.00 1864959818.00 1379174865.00 72.19% 35.22%
Banks with
other banks:
Investment: 2174083913.00 2343451681.00 1877145119.00 (7.23%) 24.84%
TOTAL 8503440297.00 4238625873.00 5390032112.00 100% (21.36%)
ASSET:
133888778268.00 8447037372.00 8646352093.00 64.42% (2.31%)

LIABILITIE
42356203563.00 27307936141.00 20924021090.00 55.11% 30.51%
S:

STOCKHOL
DERS

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EQUITY: 1313265200.00 1225714200.00 23.50% 7.14%
Common 1621882500.00
Stock:
Surplus in 313915658.00 9391741.00 96.16% 3242.4%
Profit & Loss 615781504.00
A/C:
TOTAL 1627180858.00 1235105941.00 37.51% 31.74%
2237664004.00
STOCKHOL
DERS
EQUITY:

TOTAL
LIABILITIE 28935116999.00 22159127031.00 54.12% 30.58%
44593867567.00
S &
STOCKHOL
DERS
EQIUTY:

F INDINGS O F T HIS S TUDY

Once upon a time the human civilization needs were limited but due to the increased
demand of time and with the rapid expansion economic an activity mans need are
diversified in unlimited spheres. With this realization as a service oriented concerns
bank scopes of performance are diversified. With this diversification Banks tries to
provide better service to its customers and clients. In this case banks facing some
problems in which some are traditional and some are new. As a new generation bank
Jamuna Bank limited is also facing some problems. But it’s not all and final. The
authority is hardly trying to solve the problems.

Problems Faced By the Bank:

Jamuna Bank limited as a new generation commercial bank has facing a lot of
problems in compare with the other banks. These problems are related to operation of
daily banking activities, opening new branches, Bangladesh Banks rules and
regulations, customer services, customer behavior, maintenance of liquid assets, lack
of experienced personnel etc. The problems faced by the bank are recorded as
follows:

 The first problem is related to increasing market competition. As a new bank


JBL has facing some problems in case of compete with some well-set banks.

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 The overall high cost of capital is a barring to its market expansion and due to
this the operational expenses are increased.

 All customers are not concerned about the latest technology based services
and all are not readily interested to accept the technology-based services.

 Incase of online banking low speed of network is a problem and it consumes


valuable time of the busy customers.

 Due to BB order among every five branch one branch should be open in the
rural area. But these branches are always not able to produce the expected
return to the bank.

 Overall political unrest is an indispensable problem to the bank to provide


regular service to its customers.

 Due to increased competition JBL has to facing increasing promotional and


advertising cost and it is an obstacle to rapid expansion to reaching the large
people at a time.

During internship period in Jamuna Bank Limited Banani Branch tile


following problems are observed. These are:

 Human resource of any organization is considered as a valuable


asset. But human resources, in the branch, are not equipped with
adequate banking knowledge. Majority of the human resources have
lack of basic knowledge regarding money, banking finance and
accounting. Without proper knowledge in these subjects, efficiency
cannot be optimized. Bank can arrange training program on these
subjects.

 There is shortage of computer in general banking section.


Sometimes the shortage of computer makes some unfortunate event in that
section.

 Flora On-line banking software is used by JBL and this is quite difficult
to use for the employee as the employees are not well trained.
 Since a number of new banks are coming to existence with their
extended customer service pattern in a completely competitive
manner. Customer-services must be made dynamic and prompt. Now
a days, people especially business people have very little time to
waste. So the bank should make its service prompt so that people need
not give more time in the banking activities

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R ECOMMENDATIONS O F T HIS S TUDY

The Jamuna Bank Limited is now known as one of leading bank in Bangladesh. If this
Bank can be more profitable, they should follow some recommendations:
 Now a day's on-line banking is not a very uncommon service 1,01-ally private
commercial bank. JBI, provide On-line banking service but they take
source charge for it, if the customers do not use his/her mother branch. To
encourage customers to use On-line banking facility this service charge
should not be taken charge from the customers.
 Though JBL using very popular software i.e. Flora bank on--line software
but the use of it is quite difficult for the employee. (According to the
statement of some employee of JBL who has the experience to use more
then one banking software).
 JBL are not taking their clearing cheque for other- They are using IBC/OBC
systems to take that kind of clearing cheque.
 JBI, not providing the credit cards in market which now a days one of
the most important part of banking. So for it they are loosing too many
customers.
 Customer service of bank has a greater impact on its customer. To
provide smarter customer service they need a call center
department is very popular now a day.

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 Foreign exchange operations of other banks are more dynamic and less
time consuming. JBL should take some initiative to compete with those banks.
 In our country financial problem is a great constraint in foreign trade. JBL
is very conservative for post-shipment finance. 11' it stays in liberal
position the exporters can easily over-come their financial constraint.

Some suggestions for Jamuna Bank Limited are:

 Employment: The recruitment system should be quite scientific in this


leading company. Include high qualified & matured employers. After this
institution will be success.

 Trading & Development: Trading & Development program is the very good
decision for Jamuna Bank employers. Should be increase the time of training
program, after then employers will be more effective.

 Service: At this moment Jamuna Bank have 56 branches in all over the
country. Should be increase their branches and give appointment experienced
employers.

 BI7 (Business Inelegancy): Business Intelligence version 7, BI Content is a


preconfigured set of role and task-related information models that are based on
consistent metadata in SAP Business Intelligence. BI Content provides
selected roles within a company with the information that the roles need to
perform their tasks.

This information model includes integral roles, workbooks, queries, Info Sources,
Info Cubes, Data Store objects, key figures, characteristics, update rules, and
extractors for SAP applications.
BI Content can:
 Be used in specific industries without the need to modify it
 Be adapted so that you can work with it to any degree of detail
 Serve as a template or as an example for customer-defined BI Content.

BI7 Content for SAP Business Intelligence offers quick and cost-effective
implementation. It also provides a model that is based on experience gained from
other implementations that can be used as a guideline during implementation. If
Jamuna Bank follow BI 7 then it will be also effective for Jamuna Bank service
systems.

Finally identified that, if Jamuna Bank will follow these points then it will be one of
the most profitable & favorable bank in country and also set their position with
foreign country.

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C ONCLUSION O F T HIS S TUDY

From the very of civilization of time Banking activities is a critical job and the present
days banking business is very competitive and complex. Banking sector, as a service
sector of Bangladesh continues to contribution to a great deal in the economy of
Bangladesh.

Modern Commercial Banking is exacting business. The reward are modest, the
penalties for bad looking are enormous. And Commercial banks are great monetary
institutions, important to the general welfare of the economy more than any other
financial institution. It has a vastly sobering and exacting responsibility.

But all things around us are changing at an accelerating rate. Today is not like
yesterday and tomorrow will be different from today. Given the fast changing,
dynamic global economy and the increasing pressure of globalization, liberalization,
consolidation and disintermediation, it is essential that commercial bank has a robust
credit risk management policies and procedures that are sensitive to these changes.

Jamuna Bank Ltd. (JBL) is well known reputed Bank in Bangladesh. They are serving
in Bangladesh since 2001 with its various products and services. The Bank’s banking
practice is based on a network of relationship with its employees, customers,
suppliers, business associates, shareholders, regulatory authorities and the community.
So that they need to take care of the people those are involved with the bank and also
to the community to gain success. To achieve the goal and customers’ faith and
awareness JBL contributes some activities to the community and people. But the Bank
is conducting the operations are limited and are contributed by other competitors also.

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There are certain sectors of the country those are needed to be developed. They should
also think about it. If they can find out the casual problem of those undeveloped
sectors effectively, they can gain the attention of people and also achieve the goal.

This report is being done on the subject of “Analysis of banking industry in


Bangladesh: A study on JAMUNA BANK LTD.” From the survey and observation of
the study I try to gain some practical experience on critical banking system. From the
observation of the study I have gain some practical knowledge on account opening,
cash receipt and payment, sanctioning of loan and advances, foreign trade and foreign
exchange mechanism, local and foreign remittances, complex clearing process etc. I
think this experience will set me in the advantageous position in future.

The purposes of a business are not to make a profit. It is to make a profit so that the
business can do something more or better. That “something” becomes the real
justification for the business. It is a moral issue. To mistake the means for the end is to
be turned in on oneself, which Saint Augustine called one of the greatest sins. It is
salutary to ask about any organization, “If it did not exist, would we invent it?” “Only
if it could do something better or more useful than anyone else” would have to be the
answer, and profit would be the means to that larger end.

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Appendix: 1

Banking Performance Indicators


(Table: I-VI)
Sources: Bangladesh Bank Annual report July 2011 - June 2012

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Appendix: 2

BALANCE OF PAYMENT

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Appendix: 3

BANKING SECTOR
PERFORMANCE

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