CHAPTER: 01

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1.0 INTRODUCTION 1.1 Origin of the Report The report entitled General Banking Activities of EXIM Bank LTD the result of three months internship program in Export Import Bank LTD (EXIM), Mirpur Branch, which is an integral part for the completion of BBA Program under Faculty of Business, Bangladesh University of Business and Technology (BUBT). 1.2 Objectives of the Report 1To focus on products service and financial condition of EXIM Bank Ltd. 2To acquire sufficient knowledge on general banking activities 3To identify the problems regarding general banking activities of EXIM Bank Ltd. 4To make some recommendations to the problems regarding general banking activities of EXIM Bank Ltd. 5To familiarize with practical job environment. 1.3 Scope of the Report As I was sent to EXIM Bank, Mirpur Branch, the scope of the study is only limited to this branch. This report covers General banking activities of EXIM Limited that include Customer Service, Remittance, Cash, Accounts and Deposit Sections. While preparing this report, I had a great opportunity to have an in-depth knowledge of General Banking activities perspective of a leading private bank in Bangladesh. This report covers the experience of General Banking Department at Mirpur Branch. 1.4 Methodology For preparing this report, I have undergone group discussion and collected data. I also studied different circulars and files of the bank. I hope these criteria will be enough to find out different picture of financial performance of the selected bank (EXIM Bank). During my study I followed some methodology to find out the fact and feature of the bank, which are given as follows. Data Collection Procedure 2

I have collected information/data from the following sources, which helped me to make this report. The source has divided by two parts. Such as: Primary Sources Sample size: 20 Employees 15 & Manage 5 1Oral interview of the responsible officers. 2Personal experience gained by visiting different desks during internship period.3.

Official Records of EXIM Bank ltd.

Secondary Sources 1Annual Reports of EXIM Bank ltd 2Relevant papers and different books. 3Manual of different departments. 4Periodical publications. EXIM Bank ltd. 5Prior research reports. 6Bangladesh Bank Report 1.5 Limitations of the study: Despite the diligent efforts given in preparing the report, it succeeded only to skim through the surface of the ocean on this subject. Therefore the views expressed in this report are likely to be restricted by limitations. After completing the institutional experience, practical performance in real life becomes difficult. So, my lack of experience greatly influenced in preparing this report. 1It is too much difficult to comment and suggest based on only the annual report and information supplied by the organization. 2In many cases the relevant authorities are not aware about internship. 3Unwilling to provide data because of confidentiality. 4Web site of the Organization wasnt up to date to gather valuable information.

3

CHAPTER: 02

ORGANIZATIONAL PART 4

2.1: Historical Background of EXIM Bank Ltd: EXIM Bank Limited was established in 1999 under the leadership of Late Mr. Shahjahan Kabir, founder chairman who had a long dream of floating a commercial bank which would contribute to the socio-economic development of our country. He had a long experience as a good banker. A group of highly qualified and successful entrepreneurs joined their hands with the founder chairman to materialize his dream. In deed, all of them proved themselves in their respective business as most successful star with their endeavor, intelligence, hard working and talent entrepreneurship. Among them, Mr. Nazrul Islam Mazumder became the honorable chairman after the demise of the honorable founder chairman. This bank starts functioning from 3rd August, 1999 with Mr. Alamgir Kabir, FCA as the advisor and Mr. Mohammad Lakiotullah as the Managing Director. Both of them have long experience in the financial sector of our country. By their pragmatic decision and management directives in the operational activities, this bank has earned a secured and distinctive position in the banking industry in terms of performance, growth, and excellent management. The authorized capital and paid up capital of the bank are Tk. 1000.00 Million and Tk. 313.87 million respectively. The bank has migrated all of its conventional banking operation into Shariah based Islami banking since July/2004. 2.2: Vision Vision of EXIM Bank Ltd. is as follows: 1To be the finest bank in the banking arena of Bangladesh under the Shariah guidelines. 2To maintain corporate and business ethics. 3To become a trusted repository of customers' money and their financial advisor. 4To make our stock superior and rewarding to the customers/share holders. 2.3: Mission Mission of EXIM Bank Ltd. is as follows: 5To display team spirit and professionalism. 5

6To have a Sound Capital Base. 7To provide high quality financial services in export and import trade. 8To provide excellent quality Customer service

2.4 Organogram of Exim Bank Ltd. (Mirpur Branch)

2.5: SWOT Analysis: SWOT analysis is the detailed study of an organizations exposure and potential in perspective of its strength, weakness, opportunity and threat. This facilitates the organization to make their existing line of performance and also foresee the future to improve their performance in comparison to their competitors. As though this tool, an organization can also study its current position, it can also be considered as an important tool for making changes in the strategic management of the organization. S- STRENGTHS W-WEAKNESS O-OPPORTUNITIES T-THREATS

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Here is the SWOT analysis of EXIM Bank Bangladesh Limited: STRENGTHS 1Different types of Islamic Banking Products. 2The technology of the EXIM Bank is Up-to-date and experienced management team. 3The top management officials have all worked in reputed banks and their years of banking experience, skill, and expertise will continue to contribute towards further expansion of the bank. 4EXIM Bank has an interactive corporate culture. 5EXIM Bank has the reputation of being the provider of good quality services too its, potential customers. WEAKNESS 1Insufficient Islamic Investment Risk Analysis and measurement methodology by the employees. 2Insufficient number of ATM Booth. 3Some of the job in EXIM Bank has no growth or advancement path. So lack of motivation exists in persons filling those positions. This is a weakness of EXIM Bank that it is having a group of unsatisfied employees. 4In terms of promotional sector, EXIM Bank has to more emphasize on that. OPPORTUNITIES 1Latent demand of different type of Islamic banking services. 2A large number of private banks coming into the market in the recent time. In this competitive environment EXIM Bank must expand its product line to enhance its sustainable competitive advantage. 3In order to reduce the business risk, EXIM Bank has to expand their business portfolio like merchant banking or diversify into leasing and insurance sector. 4EXIM Bank can introduce special corporate scheme for the corporate customer or officer who have an income level higher from the service holder. 5Wide banking networks.

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THREATS 1Increased competition from fellow Exim Bank and Other Commercial Banks. 2Lack of Control and supervision by the Central Bank on the basis of Islamic Shariah. 3The default risks of all terms of loan have to be minimizing in order to sustain in the financial market. Because default risk leads the organization towards to bankrupt. 4The low compensation package of the employees from mid level to lower level position threats the employee motivation. As a result, good quality employees leave the organization and it effects the organization as a whole. 2.6: Product & Services of Exim Bank Ltd. 2.6.1: Investment / Finance: 1Corporate Finance 2Industrial Finance 3Project Finance 4Syndicate Investment 5Mode of Investment Murabaha Bai Muazzal Izara Bil Baia Wazirat Bil Wakala Quard Local Documentary Bill Purchased Foreign Documentary Bill Purchased 2.6.2: Mudaraba Savings Scheme: 2.6.2.1: Monthly Savings Scheme (Money Grower) Objective of the scheme: 1A monthly savings scheme. Secure your future with ease. A small savings of today will provide you comfort tomorrow. 2Savings Period and Monthly Installment Rate: 3The savings period is for 5, 8, 10 or 12 years. 8

4Monthly installment is Tk.500/-, 1000/-, 2000/- or 5000/-. 5Not less than 65% of investment income shall be distributed among the Murabaha Depositors as per weight age. The deposit will bear weight age 1.16, 1.17, 1.18, 1.19 respectively. Bank reserves the right to change the weight age of deposit & percentage of distribution of Investment Income. Monthly Installment Deposit: 1The savings amount is to be deposited within the 10th of every month. In case of holidays the deposit amount is to be made on the following day. 2The deposits may also be made in advance. 3The depositor can have a separate account in the bank from which a standing instruction can be given to transfer the monthly deposit to the scheme account. 4If the depositor fails to make the monthly installment in time, then 5% on overdue installment amount will be charged. The charged amount to be added with the following month(s) installment and the lowest charge will be TK. 10/- (Taka Ten). Withdrawal: 1Generally, withdrawal is not advised before a 5 (five)-year term, but if it is withdrawn before the above term, profit will be paid at savings rate. However, no profit will be paid if the deposit is withdrawn within 1 (one) year of opening the account. 3In case the depositor wishes to withdraw between the 5, 8, 10 or 12 years period then full profit will be paid for a completed term and savings rate will be applicable for the fractional period. Quard Advantage: After 3 (three) years of savings in this scheme the depositor (if adult) is eligible for a quard up to 90% of his/her deposited amount. In that case, profit rates on the quard will be applicable as per prevailing rate at that time. 2.6.2.2: Monthly Income Scheme (Steady Money) Objectives of the scheme: 1A monthly scheme that really makes good sense. A sure investment for a steady return. Actually, steady money makes your money work for you. 9

2Proper utilization of savings from stipend, wage earning, retirement benefit and so on. 3Higher monthly income for higher deposit. Formalities of opening an account: 1An account is to be opened by filling up a form. 2The Bank will provide the customer a deposit receipt after opening the account. This receipt is non-transferable. Highlights of the scheme: 1Minimum deposit TK.1,00,000.00 2The scheme is for a 3 (three)-year period. Table: 2 Deposit Amount 1,00,000/Income (TK.) 1,000/-

1The income is estimated which may be more or less at the year end and accordingly the same shall be adjusted. The deposit will bear 1.15 weight ages. 2Not less than 65% of Investment Income shall be distributed among the Mudaraba Deposit holders as per weight age. 3Bank reserves the right to change the weight age of deposit & percentage of distribution of Investment Income. Quard facility: A depositor can enjoy investment facility (excluding Quard) up to 80% of the deposited amount under this scheme complying investment norm of the bank. In this case, profit, will be charged against the investment facility as per Bank's norms. During the tenure of the investment, the Monthly Income will be credited to the investment account until liquidation of the invested amount inclusive of profit. 2.6.2.3: Super Savings Scheme Objectives of the Scheme: Savings help to build up capital and capital is the principal source of business investment in a country. That is why savings is treated as the very foundation of development. To create 10

more awareness and motivate people to save, EXIM Bank offers super savings scheme. Terms and Conditions of the Scheme: 1Any individual, company, educational institution, government organization, NGO, trust, society etc. may invest their savings under this scheme. 2The deposit can be made in multiples of Tk.5,000.00. 3Any customer can open more than one account in a branch in his/her name or in joint names. A Deposit Receipt will be issued at the time of opening the account. 4The Deposit will approximately be double in 6 (six) years.

Highlights of the Scheme: 1Some examples are given in the table below. Any amount can be deposited in multiples of Tk.5,000.00

Table: 3 Deposit 5,000.00 10,000.00 20,000.00 50,000.00 1,00,000.00 2,00,000.00 5,00,000.00 20,004.00 40,008.00 1,00,020.00 2,00,040.00 4,00,081.00 10,00,203.00 Payable (approximately) at maturity 10,002.00

1Savings will be treated as projected and it will be adjusted after the declaration of profit at the end of the year. The weight age of deposit will be 1.17. 2Not less than 65% of investment income shall be distributed among the Mudaraba Deposit holders as per weight age of deposit.

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Premature encashment of the scheme: 1In case of premature encashment before 1 year no profit shall be paid. 2In case of premature encashment after 1 year but before 3 years profit shall be paid at Savings Rate plus 0.75%. 3In case of premature encashment after 3 years but before maturity profit shall be paid at Savings Rate plus 1.00%. In case of any unexpected situation: 1In case of death of depositor before the term, the amount will be given to the nominee according to the rules of premature encashment. In the absence of nominee, the heirs/ successors will be paid as per succession certificate. 2In case of issuing duplicate receipt the rules of issuing a duplicate receipt of Term Deposit will be applicable. 3The nominee may, at his option continue the scheme for the full term. Additional terms and conditions: 1Bank reserves the right to change the weight age of deposit & percentage of distribution of Investment Income. 2At the time of payment, Income Tax shall be deducted upon profit 2.6.2.4: Multiplus Savings Scheme Objective of the scheme: To gather public's idle money in exchange of high return within the shortest possible time. Terms and Conditions of the Scheme: 1Any individual, company, educational institution, government organization, NGO, trust, society etc. may invest their savings under this scheme. 2The deposit can be made in multiples of TK. 5,000.00. 3Any customer can open more than one account in a branch in his/her name or in joint names. A Deposit Receipt will be issued at the time of opening the account. 4The period of deposit is 10 (ten) years.

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Highlights of the Scheme: Some examples are given in the table below. Any amount can be deposited in multiples of TK. 5,000.00. Table: 4 Deposited Amount 5,000.00 10,000.00 50,000.00 1,00,000.00 Amount payable approximately after maturity 15,879.00 31,758.00 1,58,793.00 3,17,587.00

2.7: Other Deposit Accounts 1Al-Wadia Current Deposit 2Mudaraba Savings Deposit 3Mudaraba Short Term Deposit 4Mudaraba Term Deposit 2One Month 3Three Months 4Six Months 5Twelve Months 5Twenty Four Months 6Thirty Six Months The Bank on non-fund business and fee based income. Bid bond/ bid security can be issued at customers request. Our Bank is posed to extend L/C facilities to its importers / exporters through establishment of correspondent. 2.8: E-Cash/ ATM Service: The bank is currently providing Credit Card Service (MasterCard) to the privileged customers of the bank in collaboration of Prime Bank. Floating VISA card for both Debit and Credit card service is under process. 2.9: Achievements: It is a great pleasure that by the grace of Almighty Allah, we have migrated at a time all the branches from its conventional banking operation into Shariah based Islami banking 13

operation without any trouble. Lot of uncertainties and adversities were there into this migration process. The officers and executives of our bank motivated the valued customers by counseling and persuasion in light with the spirit of Islam especially for the non-Muslim customers. Our IT division has done the excellent job of converting and fitting the conventional business processes into the processes based on Shariah. It has been made possible by following a systematic procedure of migration under the leadership of honorable Managing Director. 2.10: Social Commitment: The purpose of our banking business is, obviously, to earn profit, but the promoters and the equity holders are aware of their commitment to the society to which they belong. A chunk of the profit is kept aside and/or spent for socio-economic development through trustee and in patronization of art, culture and sports of the country. We want to make a substantive contribution to the society where we operate, to the extent of our separable resources.

CHAPTER: 03

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FINANCIAL ANALYSIS OF EXIM BANK LTD. 3.1: Financial Position As a commercial Bank, EXIM bank does all traditional Banking business including the wide range of savings and credit scheme products, retail banking and ancillary services with the support of modern technology and professional Excellency. But main focus of EXIM Bank is, for obvious reason, on export and import trade handling and the development of entrepreneurship and patronization of private sectors Following table depicts the financial conditions of EXIM Bank Limited: Table: 5 Financial Condition of EXIM Bank Ltd.: Figures In Crore SL NO PARTICULARS 1. Authorized Capital 2. Paid-up Capital 3. Reserve Fund 4. Deposits 5. Investment(General) 2003 100.00 31.39 22.82 1524.30 1228.91 2004 100.00 62.78 35.73 1907.82 1933.20 2005 100.00 87.90 57.00 2831.9 0 2604.6 0 2006 350.00 171.38 81.09 3503.2 0 3264.1 3 15

6. 7.

Investment(Shares & Bonds) Foreign Exchange Business a) Import Business b) Export Business c) Remittance Operating Profit Loan as (%) of total Deposit No. of Foreign Correspondent Number of Employees Return on Assets Number of Branches

237.70 3461.96 1926.00 1512.46 23.50 56.27 80.62% 185 627 3.15% 19

154.30 4931.24 2678.10 2241.84 11.31 83.58 101.97 % 200 768 3.44% 28

163.30 7294.0 0 4143.2 0 3128.5 0 22.30 117.58

223.33 9617.5 1 4949.6 7 4623.4 6 34.38 137.87

8. 9. 10. 11. 13. 12.

91.97% 93.18% 222 934 1.65% 28 246 1020 1.73% 30

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CHAPTER: 04

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Working Part 4.0 General Banking Activities 4.1 Introduction General banking department is the heart of all banking activities. This is the busiest and important department of a branch, because funds are mobilized, cash transactions are made; clearing, remittance and accounting activities are done here. I have surveyed in this department through my whole internship period. 4.2 Activities of General Banking Department Since bank is confined to provide the services everyday, general banking is also known as retail banking. In EXIM Bank Ltd. Mirpur Branch, the following departments are under general banking section: 1Account opening section 2Deposit section 3Cash section 4Remittance section 5Clearing section 6Accounts section 4.2.1 Account Opening Section Account opening is the gateway for clients to enter into business with bank. It is the foundation of banker customer relationship. This is one of the most important sections of a branch, because by opening accounts bank mobilizes funds for investment. Various rules and regulations are maintained and various documents are taken while opening an account. A 18

customer can open different types of accounts through this department. Such as: 1. Al Wadia (Current) account. 2. Mudaraba Savings (SB) account. 3. Mudaraba Short Term Deposit (MSTD) 4.2.1.1 Types of Accounts with Terms and Conditions 1. Al- Wadia (Current) Account: Current account is purely a demand deposit account. There is no restriction on withdrawing money from the account. It is basically justified when funds are to be collected and money is to be paid at frequent interval. Some Important Points are as follows1Minimum opening deposit of TK.1000/- is required; 2There is no withdrawal limit. 3No interest is given upon the deposited money; 4Minimum Tk.1000/= balance must always maintain all the time. 2. Mudaraba Savings (SB) Account: This deposit is primarily for small-scale savers. Hence, there is a restriction on withdrawals in a month. Heavy withdrawals are permitted only against prior notice. Some Important Points are as follows1Minimum opening deposit of Tk.5000/= is required; 2Minimum TK. 1000/= balance must always maintain all the time; 3Withdrawal amount should not be more than 1/4th of the total balance at a time and limit twice in a month. 4If withdrawal amount exceed 1/4th of the total balance at a time no interest is given upon the deposited money for that month. 3. Mudaraba Short Term Deposit (MSTD) Account: Normally various big companies, organizations, Government Departments keep money in MSTD account. Frequent withdrawal is discouraged and requires prior notice. The deposit should be kept for at least seven days to get interest. The interest offered for MSTD is less 19

than that of savings deposit. Interest is calculated based on daily minimum product and paid two times in a year. Interest rate is 4.50%. 4.2.1.2 Account Opening Procedure: Step-1: The account should be properly introduced by any one of the following: 1An existing Current Account holder of the Bank. 2Officials of the Bank not below the rank of an Assistant officer. 3A respectable person of the locality well known to the Manager/Sub-Manager of the Branch concerned. Step 2: Receiving filled up application in banks prescribed form mentioning what type of account is desired to be opened Step 3: 1The form is filled up by the applicant himself / herself Two copies of passport size photographs from individual are taken, in case of firms photographs of all partners are taken 2Applicants must submit required documents 2Application must sign specimen signature sheet and give mandate 3Introducers signature and accounts number verified by legal officer Step 4: Authorized Officer accepts the application. Step 5: Minimum balance is deposited only cash is accepted. Step 6: Account is opened and a Cheque book and pay-in-slip book is given. 4.2.1.3: Documents Required For Opening Account Individual / Joint Account: 20

1. Introduction of the account. 2. Two photographs of the signatories duly attested by the introducer. 3. Identity (copy of passport). 4. Joint Declaration Form (For joint a/c only). 5. Employees Certificate (in case of service holder). Partnership account: 1. Introduction of the account. 2. Two Deed). 4. Partnership Deed duly certified by Notary public. 5. Registration (If any). 6. Updated Trade license. Proprietorship account: 1. Introduction of the account. 2. Two passport size photographs of the signatories properly attested by the introducer. 3. Valid copy of Trade License. 4. Rubber stamp. 5. TIN number certificate. 6. Identity (Copy of passport). 7. Permission letter from DC/ Magistrate (in case of newspaper) 4.2.2 Deposit Section Deposit is the lifeblood of a bank. From the history and origin of the banking system we know that deposit collection is the main function of a bank. Accepting deposits: photographs of the signatories duly attested by the introducer. 3. Partnership letter duly signed by all partners (Sign should be similar as stated Partnership

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The deposits that are accepted by EXIM Bank like other banks may be classified in to: a) Demand Deposits. b) Time Deposits. Demand deposits: These deposits are withdrawn able without notice, e.g. current deposits. EXIM Bank accepts demand deposits through the opening of a) Current account. b) Savings account. c) Call deposits from the fellow bankers. Time deposits: A deposit which is payable at a fixed date or after a period of notice is a time deposit. EXIM Bank accepts time deposits through Fixed Deposit Receipt (FDR), Short Term Deposit (STD) and Bearer Certificate Deposit (BCD) etc. While accepting these deposits, a contract is done between the bank and the customer. When the banker opens an account in the name of a customer, there arises a contract between the two. This contract will be valid one only when both the parties are competent to enter into contracts. As account opening initiates the fundamental relationship & since the banker has to deal with different kinds of persons with different legal status, EXIM Bank officials remain very much careful about the competency of the customers. Fixed Deposit: The Local Remittance section of EXIM Bank also issues FDR. They are also known as time deposit or time liabilities. These are deposits, which are made with the bank for a fixed period, specified in advance. The bank need not maintain cash reserves against these deposits and therefore, the bank offers higher of interest on such deposits.

Opening of fixed Deposit Account: 22

The depositor has to fill an account form where in the mentions the amount of deposit, the period for which deposit is to be made and name/names is which the fixed deposit receipt is to be issued. In case of a Joint name EXIM Bank also takes the instructions regarding payment of money on maturity of the deposit. The banker also takes specimen signatures of the depositors. A fixed deposit account is then issued to the depositor acknowledging receipt of the sum of money mentioned there. It also contains the rate of interest and the date on which the deposit will fall due for payment. Fixed deposit: 3 (three) month SL no. 01 Range of amount TK 10000.00-Above Rate of Interest 11.25%

Fixed deposit: 6 (six) month: SL no. 01 Range of amount TK 10000.00-Above Rate of Interest 11.25%

Fixed deposit: 12 (twelve) month: SL no. 01 Range of amount TK 10000.00-Above Rate of Interest 11.50%

Payment of interest: It is usually paid on maturity of the fixed deposit. EXIM Bank calculates interest at each maturity date and provision is made on that miscellaneous creditor expenditure payable accounts is debited for the accrued interest. Encashment of FDR: In case of premature FDR, EXIM Bank is not bound to accept surrender of the deposit before its maturity date. In order to deter such a tendency the interest on such a fixed deposit is made cut a certain percentage less the agreed rate. Normally savings bank deposit is allowed. Loss of FDR: In case of lost of FDR the customer is asked to record a GD (general diary) in the nearest police station. After that the customer has to furnish an Indemnity Bond to EXIM Bank a duplicate FDR is then issued to the customer by the bank. Renewal of FDR: In EXIM Bank, the instrument is automatically renewed within seven days after the date of its maturity if the customer does not come to en-cash the FDR. The period 23

for renewal is determined as the previous one 4.2.3 Cash Section Banks, as a financial institution, accept surplus money from the people as deposit and give them opportunity to withdraw the same by cheque, etc. But among the banking activities, cash department play an important role. It does the main function of a commercial bank i.e. receiving the deposit and paying the cash on demand. As this department deals directly with the customers, the reputation of the bank depends much on it. The functions of a cash department are described bellow: Functions of Cash Department: 1. Cash payment is made only against cheque Cash Payment 2. This is the unique function of the banking system which is known as payment on demand 3. It makes payment only against its printed valid Cheque 1. It receives deposits from the depositors in form of cash Cash Receipt 2. So it is the mobilization unit of the banking system 3. It collects money only its receipts forms Cash packing: After the banking hour cash is packed according to the denomination. Notes are counted and packed in bundles and stamped with initial. Allocation of currency: Before starting the banking hour all tellers give Reserve sheet at the end of the sheet. 4.2.4 Remittance Section requisition of money through Teller cash

proof sheet. The head teller writes the number of the packet denomination wise in day, all the notes remained are recorded in the

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Carrying cash money is troublesome and risky. Thats why money can be transferred from one place to another through banking channel. This is called remittance. Remittances of funds are one of the most important aspects of the Commercial Banks in rendering services to its customers. Types of remittance: 1Between banks and non banks customer 2Between banks in the same country 3Between banks in the different centers. 4Between banks and central bank in the same country 5Between central bank of different customers. The main instruments used by the EXIM Bank for remittance of funds are: 1Payment order ( PO) 2Demand Draft ( DD) 3Telegraphic Transfer (TT) So the basic three types of local remittances are discussed below Points Explanation Pay Order Pay Order gives the payee the right to claim payment from the issuing bank Demand Draft Demand Draft is an order of issuing bank on another branch of the same bank to pay specified sum of money to payee on demand. TT Issuing branch requests another branch to pay specified money to the specific payee on demand by Telegraph/Telephon e Payment from ordered branch Anywhere in the country

Payment from

Payment from issuing branch only Generally used to Within the Remit fund clearinghouse area of issuing branch

Payment from ordered branch Outside the clearinghouse area of issuing branch. Payee can also be the purchaser Payment Process Payment is made 1. Confirm that the of the paying through clearing DD is not forged

1.Confirm branch

issuing 25

bank

Charge

Only commission

one. 2.Confirm with sent advice 3.Check the Test Code 4.Make payment Commission + telex charge

2.Confirm Payee A/C 3.Confirm amount 4.Make payment 5.Receive advice Commission Telephone +

4.2.5 Clearing Section Cheques, Pay Order (P.O), Demand Draft (D.D.) Collection of amount of other banks on behalf of its customer are a basic function of a Clearing Department. 1Clearing: Clearing is a system by which a bank can collect customers fund from one bank to another through clearing house. 2Clearing House: Clearing House is a place where the representatives of different banks get together to receive and deliver cheque with another banks. Normally, Bangladesh Bank performs the Clearing House in Dhaka, Chittagong, Rajshahi, and Khulna & Bogra. Where there is no branch of Bangladesh Bank, Sonali bank arranges this function. 4.2.5.1 Member of Clearing House: EXIM Bank LTD. is a scheduled Bank. According to the Article 37(2) of Bangladesh Bank Order, 1972, the banks, which are the member of the clearinghouse, are called as Scheduled Banks. The scheduled banks clear the cheque drawn upon one another through the clearinghouse. 4.2.5.2 Types of Clearing: A. Outward Clearing: When the Branches of a Bank receive cheque from its customers drawn on the other Banks within the local clearing zone for collection through Clearing House, it is Outward Clearing. 26

B. Inward Clearing: When the Banks receive cheque drawn on them from other Banks in the Clearing House, it is Inward Clearing. 4.2.5.3 Types of clearing house: There are two types of clearing house: Those are 1) Normal clearing house 2) Same day clearing house 1. Normal clearing house: 1st house: 1st house normally stands at 10 a.m. to 11a.m 2nd house: 2nd house normally stands after 3 p.m. and it is known as return house.

2. Same day clearing house: 1st house: 1st house normally stands at 11 a.m. to 12 p.m. 2nd house: 2nd house normally stands after 2 p.m. and it is known as return house.

3) Who will deposit cheque for Clearing: Only the regular customers i.e. who have Savings, Current, STD & Loan Account in the bank can deposit cheque for collection of fund through clearing house. 4) Precaution at the time of cheque receiving for Clearing, Collection of LBC, OBC & Transfer: 1) Name of the account holder same in the cheque & deposit slip. 2) Amount in The cheque & deposit slip must be same in words & in figure 3) Date in the cheque may be on or before (but not more than six months back) clearing house date. 4) Bank & Branch name of the cheque, its number & date in the Deposit slip. 5) Cheque must be signed. 27

6) Signature for confirmation of date, amount in words / in figure Cutting & Mutilation of cheque. 7) Cheque should be crossed (not for bearer cheque). 8) Account number in the deposit slip must be clear. 9) Depositors signature in the deposit slip. 4.2.5.4 Return house: Return House means 2nd house where the representatives of the Bank meet after 3 p.m. to receive and deliver dishonored cheque, which placed in the 1st Clearing House. 4.2.5.5 Dishonoring Cheque: 1) 2) 3) 4) 5) 6) 7) 8) Insufficient fund. Amount in figure and word differs. Cheque out of date/ post- dated. Payment stopped by the drawer. Payees endorsement irregular / illegible / required. Drawers signature differs / required. Crossed cheque to be presented through a bank. Other specific reasons not mentioned above.

The dishonor cheque entry in the Return Register & the party is informed about it. Partys signature required in the return register to deliver the dishonor cheque. After duration, the return cheque is sent to the partys mailing address with Return Memo. If the cheque is dishonored due to insufficiency of funds then EXIM Bank charges. 25/=as penalty. 4.2.5.6 Responsibility of the concerned officer for the Clearing Cheque: 1) Crossing of the cheque. 2) (Computer) posting of the cheque. 3) Clearing seal & proper endorsement of the cheque. 4) Separation of cheque from deposit slip. 28

5) Sorting of cheque 1st bank wise and then on branch wise. 6) Computer print 1st branch wise & then bank wise. 7) Preparation of 1st Clearing House computer validation sheet. 8) Examine computer validation sheet with the deposit slip to justify the computer posting 9) Copy of computer posting in the floppy disk. 4.2.5.7 Bills Collection: In modern banking the mechanism has become complex as far as smooth transaction and safety is concerned. Customer does pay and receive bill from their counterpart as a result of transaction. Commercial banks duty is to collect bills on behalf of their customer. Types of Bills for Collection Outward Bills for Collection (OBC). Inward Bills for Collection (IBC).

Outward Bills for Collection (OBC) OBC means Outward Bills for Collection .OBC exists with different branches of different banks outside the local clearing house. Normally two types of OBC: OBC with different branches of other banks OBC with different branches of the same bank 1. Procedure of Outward Bills for Collection (OBC): 1) Entry in the OBC register. 2) Put OBC number in the cheque. 3) Crossing seal on the left corner of the cheque & payees account will officer. 4) Dispatch the OBC cheque with forwarding. 29 be credited on realization seal on the back of the cheque with signature of the concerned

5) Reserve the photocopy of the cheque, carbon copy of the forwarding and slip of the cheque in the OBC file. Inward bills for collection (IBC)

deposit

When the banks collect bills as an agent of the collecting branch, the system is known as IBC. In this case the bank will work as an agent of the collection bank. The branch receives a forwarding letter and the bill. 4.2.6 Accounts Section Accounts Department is called as the nerve Centre of the bank. In banking business, transactions are done every day and these transactions are to be recorded properly and systematically as the banks deal with the depositors money. . Improper recording of transactions will lead to the mismatch in the debit side and in the credit side. To avoid these mishaps, the bank provides a separate department; whose function is to check the mistakes in passing vouchers or wrong entries or fraud or forgery. This department is called as Accounts Department. If any discrepancy arises regarding any transaction this department report to the concerned department. Besides these, the branch has to prepare some internal statements as well as some statutory statements, which are to be submitted to the Central Bank and the Head Office. This department prepares all these statements. Workings of Accounts Department: 1Recording the transactions in the cashbook. 2Recording the transactions in general and subsidiary ledger. 3Preparing the daily position of the branch comprising of deposit and cash. 4Preparing the daily Statement of Affairs showing all the assets and liability of the branch as per General Ledger and Subsidiary Ledger separately. 5Recording inters branch fund transfer and providing accounting treatment in this regard. 6Preparing the monthly salary statements for the employees. 30

7Preparing the weekly position for the branch which is sent to the Head Office to maintain Cash Reserve Requirement (C.R.R) 8Preparing the monthly position for the branch which is sent to the Head Office to maintain Statutory Liquidity Requirement (S.L.R) 10Recording of the vouchers in the Voucher Register. 11Packing of the correct vouchers according to the debit voucher and the credit voucher.

31

CHAPTER: 05

5.0 Investment Operation: In my report I have concentrated on main three modes of investment activities of EXIM Bank 32

Bangladesh Limited. These are: 5.1 Mudaraba 5.2 Bai Muajjal 5.3 Izara Bill Bia. 5.1 MUDARABA 5.1.1 Definition of Mudaraba: The term Mudaraba refers to a contract between two parties in which one party supplies capital to the other party for the purpose of engaging in a business activity with the understanding that any profits will be shared in a mutually agreed upon. Losses, on the other hand, are the sole responsibility of the provider of the capital. Mudaraba is a contract of those who have capital with those who have expertise, where the first party provides capital and the other party provides the expertise with the purpose of earning Halal (lawful) profit which will be shared in a mutually agreed upon proportion. This type of business venture serves the interest of the capital owner and the Mudarib (agent). The Results of Mudaraba: The two parties calculate the earnings and divide the profits at the end of Mudaraba. This can be done periodically in accordance with the terms of the agreement, subject to the legal rules that apply. Payment of Mudaraba Capital: The bank recovers the Mudaraba capital it contributed before dividing the profits between the two parties because the profit is considered collateral for the capital.

5.1.2 Rules of Mudaraba: There are some legal rules that govern the business relationship Mudaraba which are as follows: 33

It is a condition that the capital cannot be subject to indebtedness. It is a condition that capital must be in the form of currency in circulation. However, merchandise Can be contributed, so long as both parties to the business arrangement agree upon its value.

It is permissible for a Mudarib to mix his private capital with the capital of the Mudaraba, thus becoming a partner. In addition, it is also permissible for the Mudarib to dispose of capital on behalf of the Mudaraba.

It is a condition that the capital of the Mudaraba is delivered to the Mudarib. Some of the jurists permit the capital owner to withhold capital and release it gradually according to the needs of the Mudarib since the Mudaraba adjudges unrestricted disposal.

It is permissible for the capital owner to deliver capital to two Mudharibs in a single contract. It is permissible for the capital owner to vary the in profit sharing agreement between the two Mudarib based upon differences in the services provided.

It is permissible for the Mudarib to hire an assistant to perform difficult work that he is unable to perform on his own. The disposal of capital by the Mudarib is restricted to reasons that are conducive to the Mudaraba. The Mudarib must not lend or donate any of the Mudaraba capital. Further, he is not allowed to enter into indebtedness nor enter into another partnership agreement with the Mudaraba capital. However, these activities are permissible if the capital owner consents and authorizes the agent to use his discretion.

The Mudarib is not required to contribute any capital to the Mudaraba contract except when he is found to be negligent in the way the funds are handled. It is permissible to take a surety or mortgage from the Mudarib to guarantee payment in the event of negligence violation of the contract conditions. However, it is impermissible to take a mortgage as a guarantee of capital or profit.

34

It is a condition that profits be carefully and properly accounted for to avoid confusion by the parties to the contract. The contracting parties should stipulate how profits are to be shared on a percentage basis. It is impermissible to stipulate a fixed lump sum as profit.

The Mudarib shall collect his share of the profit only after obtaining the permission of the capital owner. In addition, the Mudarib can not collect his share of profit until after capital outlay is recouped. In the event the profits are split prior to the closing of the Mudaraba, any losses incurred shall be reimbursed by the distributed profits.

The Mudarib does not receive his share of the profits until the final settlement of the Mudaraba. Once the Mudaraba has been settled, neither party is liable to the other without a new agreement being made.

The Mudaraba agreement may be terminated if one of the two parties decides to cancel the agreement. This is possible because the Mudaraba is an optional nonbinding agreement.

5.1.3 Procedures of Opening Mudaraba It is very difficult to successfully operate a Mudaraba business since actual financial position may not be reflected, profit may be manipulated and legal coverage may not be available. As such at the moment Bank may go for specific purpose Mudaraba only on a very selective basis. In this regard the following procedures shall be observed:

5.1.4 Selection of Mudarib (agent): The criteria for selection of Mudarib shall be as under: The Mudarib must be an honest man of active good habits with firm commitment having capability to generate income. His/her integrity and honesty must be unquestionable and shall possess a good moral character. He/she must be sufficient experienced in the line of business he/she proposes to undertake. No Mudaraba fund will be available for any experimental initiative. He/she must be prudent and man of foresight to predict future market conditions. 35

The venture to be undertaken must have social utility and shariah permissibility.

5.1.5Processing and Appraisal Mudaraba investment may be made for any Halal item. This mode will be very much convenient for providing Capital to the rural have notes for their acquiring profitable items for generation of income. Prepare Appraisal Report and ensure that all the information particulars, figures and statistics are incorporated correctly in the report. Analyze lending risk covering among others the following points: i. Honesty, integrity, social position and reputation of the client. ii. Location of business site/residence and experience of the client. iii. Composition of assets of the client where necessary. iv. Extent and nature of liabilities of the client. v. Value of his/her liquid and fixed assets where necessary. 5.1.6 Sanction On completion of appraisal if found suitable prepare a Mudaraba Sanction Advice in quadruplicate. If the proposal is within the discretionally power delegated to the branch by head office, send Mudaraba investment Sanction Advice to the client in duplicate and one copy to concerned Department of Head Office relating one copy with the Branch. If the proposal is beyond the discretionary power of the branch, forward the same to Head Office/Zonal Office with Appraisal Report in duplicate together with all other required papers and documents giving specific comments and recommendations. Head Office/Zonal Office will send back one copy of the Appraisal Report duly sanctioned to the Branch. On receipt of the Head Office/Zonal Office advice branch will issue Mudaraba investment advice or issue regret letter to the client under intimation to Head Office/Zonal Office. 36

Obtain one copy of Mudaraba Investment Advice from the client duly accepted. This should be preserved with documents of the investment concerned.

5.1.7 Disbursement The Loan is disbursed through the following steps: Allot an account number to each proposal sanctioned. For this purpose, use Investment Account Opening Register. This register will be maintained modewise. Execute the appropriate documents including agreement and arrange their safe keeping. Open file client-wise. Attach Investment Account in each file and in the related papers. Enter the proposal in the Mudaraba Investment. Complete all the ledger heads particulars and get them authenticated bay an Officer. Make the disbursement as per Sanction Advice.

5.1.8 Concluding Remark It is an investment-based form of financing. The provider of capital in Mudaraba has no role in the management of the capital. However, he has to bear the risk of capital loss as well as the opportunity cost of capital for the entire period of the contract. The rate of return is quite uncertain and the cost of capital is also uncertain. 5.2 BAI-MUAJJAL (Deferred Sale) 5.2.1 Meaning of Bai-Muajjal The terms "Bai" and "Muajjal" are derived from the Arabic words 'Bai' and Ajal. The word 'Bai' means purchase and sale and the word 'Ajal' means a fixed time or a fixed period. "BaiMuajjal" is a sale for which payment is made at a future fixed date or within a fixed period. In short, it is a sale on credit. 37

The Bai-Muajjal may be defined as a contract between a buyer and a seller under which the seller sells certain specific goods, permissible under Shariah and law of the country, to the buyer at an agreed fixed price payable at a certain fixed future date in lump sum or in fixed installments. 5.2.2 Important Features of Bai-Muajjal The main important features of Bai-Muajjal investment are: It is permissible and in most cases, the client will approach the bank with an offer to purchase a specific good through a Bai-Muajjal agreement. It is permissible to make the promise binding upon the client to purchase the goods from the bank. In other words, the client is required to either satisfy the promise or to indemnify the bank for damages caused by breaking the promise without excuse. It is permissible to take cash/collateral security to guarantee the implementation of the promise or to indemnify the bank for damages caused by non-payment. It is also permissible to document the debt resulting from Bai-Muajjal by a Guarantor, or a mortgage or both, like any other debt. Mortgage/Guarantee/Cash security may be obtained prior to the signing of the Agreement or at the time of signing the Agreement. Stock and availability of goods is a basic condition for signing a Bai-Muajjal Agreement. Therefore, the bank must purchase the goods in accordance with the specifications of the client, prior to signing the Bai-Muajjal Agreement with the client. All goods purchased on behalf of a Bai-Muajjal agreement are the responsibility of the bank until they are delivered to the client. The bank must deliver the goods to the client at the time and place specified in the contract. 38

The bank may sell the goods at a higher price than the purchase price to earn profit. The price is fixed at the time of the agreement and cannot be altered. The bank is not required to disclose the profit made on the transaction.

5.2.3 Application Obtain application in duplicate form all types of clients in prescribed form. Application for investment under different Schemes shall be made in prescribed forms developed for each of the Schemes. Obtain and attach attached photograph(s) of the proprietor/partners/directors on the top right corner of the application form. Scrutinized the application of the client to see that: i All columns are properly filled in. ii. iii. Particulars and information given therein are complete and correct. All required documents/papers as listed in the footnote of the application

form are submitted. 5.2.4 Processing and Appraisal If not secured by first class collateral securities, investment under Bai-Muajjal mode is more risky than investment under other modes, which may be kept in mind. The following points should receive attention before making any investment decision under Bai-Muajjal mode: Obtain invoice of Goods to be purchased & ensure that, the goods against which investment is made are readily saleable and have constant and effective demand in the market so that the client does not face any difficulty in marketing the goods and pay the price of the goods sold by the Bank. In case of clients failure to adjust the investment account on due date, the bank may require to take possession of the goods on the basis of letter of Hypothecation and Trust Receipt and dispose of the same to realize the outstanding amount of investment. 39

That, the prices of the goods are in conformity with the prevailing wholesale price & are not subject to violent changes. That, the goods are not subject to rapid deterioration due to storage for ling period. That, the quantity and other specifications of the goods as desired by the client can be ensured. That, the bank will be in a position to procure the goods in time at a negotiated price. Sale price of the goods is payable by the client at a specified future date in lump-sum or installments as per agreement. Goods delivered to the client & also clients own stock of business remains hypothecated to the bank. Client shall not repay any liability existing or future out of the goods delivered by the Bank before adjustment of the dues of the bank & in no way shall divert the sale proceeds.

Sale price of goods to be determined thorough bargaining with the client & profit mark up shall not be less than the rate of profit fixed by Head Office from time to time.

The profit to be included in the sale price must be comparable with the Rate of Return prescribed by Head Office and must be sufficient to cover the cost of operations and a sizeable margin to declare handsome amount of profit to the depositors and to the equity holders.

Pay visit to the business site of the client and ensure his NET WORTH and INTEGRITY. Obtain additional information, particulars, facts and figures if required. Hold talk with businessmen and important personalities of the locality in order to ascertain clients honesty, integrity and business dealings. Request for Confidential Report on the client from Local Bank branches. Confidential Reports should also be obtained from local financial and credit institutions. Obtain report from Credit Information Bureau (CIB) of Bangladesh Bank through Head Office Investment Division as per latest Instruction Circular issued by Head Office in this regard.

Forward documents, title deeds and other relevant papers to the approved lawyer of the Bank for examination and furnishing his opinion. 40

5.2.5 Sanction & Disbursement Investment made to the industrial undertakings for supply of raw materials etc., investment made to individual to firms for trading purposes, import goods from abroad and for supply of seeds, fertilizers etc. to agricultural sectors shall be termed as Commercial. Proposal of Bai-Muajjal investment under different schemes shall be appraised on the formats developed for each type of schemes. 5.2.6 Some Observations This type of financing by the bank is considered to be more risky than the other Islamic modes of investment previously discussed. Therefore, the application/proposal for BaiMuajjal investment must be reviewed very carefully to ensure the client can ultimately make payment. The following steps may be taken to ensure the Bai-Muajjal Investment is a good proposition for the bank: ** The bank may meet with the prospective client regarding his investment needs and business experience prior to an application /proposal is submitted. ** The bank may review the clients past performance and other financing arrangements he may have had with the bank in the past. ** The bank may review its current investment policy regarding this type of financing arrangement to ensure the proposal meets bank guidelines. ** It should be remembered that if the Bai-Muajjal investment is not secured by first class collateral securities, it becomes more risky than investments under other modes of Islamic banking. 5.2.7 Causes of over dues of Bai-Muajjal Investment 41

The main causes of over dues of Bai-Muajjal investment are: a)Party Must have shop: Bai-muajjal investment should not be allowed to anyone who doesnt have own shop. The shop must be visited by the responsible official to ascertain his overall business position. b)Assessment of investment need: Since Bai-miuajjal investment amounts to cash loan therefore the need of Bai-muajjal investment shall be carefully determined. Investment should not be more than 30% of own investment of the client. c)Supervision: Banks officials must pay regular visit to the shop of the investment clients so that the investment client feel obliged to make regular transaction in current account as well as repay investment in time. d)Stock in Business: Stocks in Business are not verified by obtaining Stock Report at regular intervals. Monthly stock-report should invariably be obtained from the clients. e)Proper and adequate collateral: Proper adequate and easily saleable collateral securities are to be obtained. Value of the collateral security is to be properly assessed and forced sale value thereof should be ascertained correctly. f)Insurance: Insurance shall have to be obtained covering risk of fire RSD etc. on hypothecated stock which many branches dont obtain. g)Follow-up: Follow up and frequent contact before due date and constant persuasion on or before due date are to be made by the branches for timely adjustment and to avoid over dues. However, Bai-Muajjal is an important investment both for Bank and Customers. But it needs greater supervision and monitoring. Skilled man power is a vital for the success in this case of investment. 5.3 IJARAH BILL BIA

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5.3.1 Definition of Ijarah Jurists have defined Ijaraha as ownership of a benefit for consideration. This is also known as lease or Hire contract. Al-Ijarah is an Arabic term. This has been derived from the Arabic term Ujr or Ujrat which means consideration or return or wages. According to Islamic Shariah (jurisprudence), Ijarah is a contract between two parties the lessor and the lessee, where the lessees (Hirer or Mustajir) have the right to enjoy/reap a specific benefit against a specified consideration/rent/wages from the lessor the owner (Muajjir). 5.3.2 Elements of Ijarah The wording: This includes offer and acceptance Contracting parties: This includes a lessor, the owner of the property, and a lessee, the party that benefits from the use of the property. Subject matter of the contract: This includes the rent and the benefit. The lessor (Mujjir) The individual or organization who leases out/rents out the property or service is called the lessor. The lessee: (Mustajir) The individual or organization who hires/takes the lease of the property or service against the consideration rent/wages/remuneration is called the lessee (Mustajir). The Benefit (Maajur) The benefit that is leased/rented out is called the benefit (Maajur). The rent (Ujrat) The consideration either in monetary terms or in quantity of goods fixed to be paid against the benefit of the goods or service is called the rent or Ujrat or Ajr. 5.3.3 Rules for Ijarah Rules of Ijarah are mentioned below: ** It is condition that the subject (benefit/service) of the contract and the asset (object) should be known comprehensively. ** It is a condition that the assets to be leased must not be a fungible one (perishable or consumable) which can not be used more than once, or in other words the asset(s) 43

must be a non-fungible one which can be utilized more than once, or the use/benefit/service of which can be separated from the assets itself. ** It is a condition that the subject (benefit/service) or the contract must actually and legally be attainable derivable. It is not permissible to lease something, the handingover of the possession of which is impossible. If the asset is a jointly owned property, any partner, according to be majority of the jurists, may let his portion of the asset(s) to co-owner(s) or the person(s) other than the co-owners. However, it is also permissible for a partner to lease his share to the other partner(s), It is a condition that the lessee shall ensure that he will make use of the asset(s) as per provisions of the Agreement or as per customs/norms/practice, if there is no expressed provision. The lease contract is permissible only when the assets and the benefit/service derived from it are within the category of Halal or at least Mobah as per Islamic Shariah. The lessor is under obligation to enable the lessee to the benefit from the assets by putting the possession of the asset(s) at his disposal in useable condition at the commencement of the lease period. In a lease contract, the period of lease and the rental to be paid in terms of time, place or distance should be clearly stated. Everything that is suitable to be considered a price, in a sale, can be suitable to be considered as rental in a lease contract. It is a condition that the rental falls due from the date of handing over the asset to lessee and not from the date of contract or use of the assets. It is permissible to advance, defer or install the rental in accordance with the Agreement. It is permissible to review the lease period or the rental or the both, if the lessor and 44

the lessee mutually agree to do so. The leased asset is a trust in the hands of the lessee. He will maintain the asset(s) with due prudence and shall not be held responsible for the damage or destruction of the asset without transgression, default or negligence, otherwise he must be responsible for the same. It is permissible to make the lessee bear the cost of ordinary routine maintenance, because this cost is normally known and can be considered as part of the rental. It is permissible for the lessee to let the asset to a third party during the lease period whether for the same rental or more as long as the asset is not affected by the change of user and not barred/restricted by the Lease Agreement/customs to do so. It is permissible to purchase an asset bearing a lease contract. The lease contract may continue since the purchased agrees to its continuity up to the end of the lease term. All rights and liabilities emanating from the lease contract will transfer to the new owner. But if the sale-contract is drawn and the purchaser is oblivious of the lease contract, he has the right to rescind the purchase contract and the lease continues. As soon as the lease period terminates the lessee is under obligation to return the Asset to the owner or if the lessor agrees he may enter into a fresh lease contract or purchase if from the lessor on payment of agreed upon price as per market rate. The lease contract is binding and no one party shall unilaterally rescind except reasons that abrogate binding contracts such as damage or destruction. If the leased asset is damaged or destructed by the act of Allah and if the lessor offers a substitute with the same specifications agreed upon in the lease contract, the contract does not terminate. 5.3.4 Custody and control of the assets:

45

The asset shall remain at the custody and control of the client. It shall however, be seized by the bank if the client violates the terms and conditions of the Hire Purchase Agreement.

The client will be asked to produce transport/vehicle for physical inspection at least once in a month or more frequently as deemed necessary till full adjustment of Hire Purchase Agreement.

Asset supplied to any client on Hire Purchase basis and subsequently seized on account of violation of the terms and conditions of Hire Purchase Agreement shall be kept under Banks own watch.

5.3.5 Follow-up, supervision and recovery: Complete the file client-wise with the copies of Application, Appraisal Report, Izara Bill Bia Investment Advice and other documents and papers viz., Trade License, Income Tax Payment Certificate, Partnership Deed/Memorandum of Articles of Association etc. submitted by the client with the original application. Copy of all correspondences made and reply thereto shall be chronologically preserved in this file. Maintain a Due Date Diary showing therein, interalia, the date of repayment of installment and rent. This diary shall be reviewed by the incumbent-in-charge of the Branch daily at the opening of business hours. If the client defaults in payment of installment & rent, he shall be reminded invariably on the next day of due date to deposit the amount of arrears installment & rent. The client shall in particularly be advised that unless the amount of arrear installment and rent is paid immediately the bank shall seize the take charge of the asset in terms of Agreement. The asset supplied on Izara Bill Bia basis shall be inspected regularly. If any misuse or improper handling is noticed in course of inspection, the client will be advised to use/handle the same properly. 5.3.6 Causes of overdue of IZARA BILL BIA The main causes of overdue are mentioned below: Obtaining equity: 46

Equity as per norms and practice is not being recovered before disbursement of investment. Proper and adequate equity should invariably be obtained supported by collateral security for the rest amount. Model and Make:

Machinery and Vehicle of recent model and make shall have to be procured. Before procuring machinery and vehicle, its technical feasibility must have to be ascertained. From the experience it is observed that unless machinery and vehicle, is found technically viable the investment client cannot repay the investment as per schedule. In case of vehicle it must be getting registered in banks name only and insurance cover note, road permit, tax token must be obtained in banks name. Supervision:

The vehicle/machinery must be inspected at least once in a month so that the same cannot be shifted elsewhere/another route/place without banks knowledge. Renewal of insurance:

On expiry of previous insurance fresh insurance cover shall have to be obtained. 5.4.1 The Lending Procedure: The credit appraisal process starts with lending process, which consists of various sequential activities. The stages of lending process are done both at the branches and at the head office levels. The procedure starts when borrowers come to any branch seeking for loan and continues until the client adjusts the loan. Before sanctioning of the loan, the borrowers application is appraised in various stages. To assess the credit appraisal systems of EXIM Bank Ltd., the stages of lending procedures as shown in the above flow chart are described below in sequential order. 5.4.2 Application from the credit applicant: The procedure of credit appraisal starts when a client comes to any branch of EXIM Bank for taking loan. EXIM Bank emphasizes on borrower selection and starts at very beginning of the procedure by primary interview of the client. The client is interviewed by the investment officer whether the particular type of loan he wants is available in EXIM Bank or if he is 47

eligible for taking that type of loan. If investment officer satisfied with the client then the borrower is to apply in Banks prescribed format asking for that loan facility. If the officer is not satisfied with the client then is screened out from the facility. The initial screening is very much important for credit Appraisal system since if a bad client pointed out at the beginning then the later activities for this client is not required and the risk of non-repayment is hereby reduced. Again the time spent against a bad customer could be utilized for another good client. But there is no precise way to measure a borrower ton be good or bad. So the investment officers of EXIM Bank interviews the client very carefully to get as much information as possible and puts emphasis on the following aspects: 5.4.3 Past track record: It is considered by the following criteria Bank record: transaction records of own bank and other bank provided by the client. It is very useful for quantitative judgment of the borrower. Market Information: the borrowers reputation in the market is a better probe for the banker. Since in Islami Shariah principle for providing credit facility good must have to be bought or sold and because the maximum branches of EXIM Bank is located besides markets and the customers comes from those markets therefore the reputation of the customer in the market is good parameter for selecting client. Financial statements: these statements are not always considered primarily for selecting a customer. But if the client brings with these statements then those helps a lot to decide the business status of the client. Managerial Ability: this is the basis for selecting a right borrower. Both the conceptual skills and human skills are used for analyzing the customer. The communicative skill is very essential for getting the right information for different types of customer. EXIM Bank prefers experienced officers for this purpose; for example, the in-charge of investment department of the branch manager makes the quick decision. The 5Cs of the client: this is very commonly expressed among the bankers as parameters for selecting the right borrower and these 5Cs are as following: Character: market reputation, morality, family background, 48

and promptness in repayment. Capacity: Ability to manage the business, ability to employ the fund in the right ability to overcome unforeseen problems. Capital: Equity strength, assets & properties. Collateral: the easy marketability of the properly given as security. Condition: Overall business condition, political & economic condition etc. In these Cs are not very practical to use as parameter. In practice, these are followed literally but the information are collected and measured in different ways as stated: before

49

CHAPTER: 06

50

Diagnosis of the SituationsInformation was collected from primary source through interview, discussion with related employees & clients of EXIM Bank Ltd. A questionnaire from was designed related to the topics for collection of data with the objectives of the study. Twenty (20) numbers of individuals were supplied questions to the different category of respondents with their individual view. The relevant data collected from the respondents have been tabulated, analyzed, interpreted & presented in this chapter. Availability of Evaluation: The 100% respondents said there is a performance General banking & Foreign exchange business in the bank. 6.0 Contribution of the system The 5% respondents said that the business procedure is flexible & regular & the rest 55% the respondents said system is not flexible & regular. 6.1. General banking Among 20 respondents, 70 % thinks that this is a non government organization & the bank provides their service properly & 20% thinks that they don t provide their service properly & rest 10% respondents don t give any comments. Among the positive are respondents (70%), some thought this is a non government organization. So there is no chance of fraud. Among the negative respondents 20%, some thought there service is not well. They want to quick service. Among the respondent 10% don t give any comments.

51

GENERAL BANKING

10% 20% Satisfied Not satisfied 70% No comment

Contribution of Evaluation: The 8% respondents said that the business procedure is flexible & regular & the rest 60% the respondents said system is not flexible & regular. 6.2Investment Among 20 respondents, 55 % thinks that this is a non government organization & the bank provides their service properly & 30% thinks that they don t provide their service properly & rest 15% respondents don t give any comments. Among the positive are respondents (55%), some thought this is a non government organization. So there is no chance of fraud. Among the negative respondents 30%, some thought there service is not well. They want to quick service. Among the respondent 15% don t give any comments. 0100090000037400000002001c00000000000400000003010800050000000b0200000000050 000000c0222038b04040000002e0118001c000000fb02ceff000000000000900100000000044 0001254696d6573204e657720526f6d616e0000000000000000000000000000000000040000 002d0100000400000002010100050000000902000000020d000000320a2d000000010004000 00000008b04200320c916001c000000fb021000070000000000bc0200000000010202225379 7374656d0000000000000000000018000000010000007837f704e4040000040000002d01010 0030000000000

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CHAPTER: 07

7.0 FINDINGS AND RECOMMENDATIONS 7.1 Findings of the Report: 53

EXIM Banks General Banking and investment operating mission is to actively participate in the growth and expansion of our national economy by providing credit & foreign exchange facility to viable borrowers, efficiently delivered and competitively priced. The followings are the findings of the report: EXIM Bank mainly concentrated in Export & Import business. This Bank helps that customer who is engage in export & import business. It is does not extend any credit facility against cheque or pledge of goods. It dose not offered ATM Services for the customers. It is a great lacking for the bank. General banking side provides different types of deposit & credit department extended loan facilities to the general customer. It is follows the Islamic rules in every part of general banking. Most of the loan products of EXIM Bank are of similar types. This Bank makes loan only to reputable clients who are involved in legitimate business. This Bank does not extend credit where it does not have the industry knowledge or highly specialized skills needed to properly evaluate the proposal. Bank requires that borrowers have a source of repayment established at the inception of the credit, and that any exception must be specifically addressed in the approval of credit. It has a limited number of investment opportunities. The bank mainly provides three basic investment instruments- Mudaraba, Bai-Muajjal and Izara Bill Bia. Lack of manpower to supervise all activities of clients. Only three officials are engaged for appraisal, supervising monitoring and record keeping. It does not have networking system with all the branches within the country. It is still an unknown bank to many people. Because, it hasnt concentrated on advertisement much.

7.2 Recommendations of the Report: EXIM Bank Limited is one of successful banks in Bangladesh. By this study I have gathered 54

some practical knowledge about banking activities especially investment activities of Islami Banking System. Policy guidelines have been established and will continue to be developed from time to time taking into consideration economic makeup and market requirement. If the limitations can be removed it will become more successful than at present. As one of leading Banks in Bangladeshs I would like to recommend the followings issues to remove its limitations: As one of leading Banks in Bangladesh, EXIM Bank should give equal emphasis in every department of banking service If the entire general Banking system can be fully computerized then the bank will be able to satisfy the customer by providing faster service. If the bank can establish networking system with their branches then it will be able to easily transfer data within short time. The bank should start ATM system as early as possible for the customers to compete in market. Now a day On-line banking system is very much popular in the world and hence the bank should introduce this system with efficient people to serve the customers. Some motivational program should be taken to lower absenteeism. EXIM Bank should give more attention to advertisement to create more attraction among their customer To attract more clients EXIM Bank has to create a new marketing strategy, which will increase the total export and import business. The investment products should be increased to sustain in long run competition. Islami Bank Bangladesh Limited provides more facilities following Islami Shariah. His manpower in investment department in Mirpur Branch should be increased to lessen the sufferings of shortage of man power.

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CHAPTER: 08

Conclusion We moved a long way from the time when the banks were deposit taking and money-lending institution. The old concepts, attitudes and methods in banking have undergone a marked change all over the world. Modern Banking is an outcome development driven by changing financial activities and lifestyle. Bangladesh has not lagged behind. Banks are required to 56

participate in the nation building activities and act as agent for bringing about socioeconomic changes. In this competitive world this sector has trenched its wings wide enough to cover any kind of financial services anywhere in this world. The major task for banks, to survive in this competitive environment is by managing its assets and liabilities in an efficient way. As an internee student in EXIM Bank Bangladesh Limited at Mirpur Branch, Dhaka I have truly enjoyed my internship from the learning and experience viewpoint I am confident that three month internship program at EXIM Bank Bangladesh Limited will definitely help me to realize career in the job market. During the course of my practical orientation I have tried to learn the practical banking to realize my theoretical knowledge, what I have gathered and going to acquire from various courses. It is great pleasure for me to have practical exposure of EXIM Bank Limited, because without practical exposure it couldn't be possible for me to compare the theory with practice. Through the departments and sections are covered in the internship program, it is not possible to go to the depth of each activities of branch because of time limitation. So objectives of the internship program have not been fulfilled with complete satisfaction. However, highest effort has been given to achieve the objectives of the internship program. So, in conclusion it can be said that every organization has its positive as well as negatives and in case of EXIM Bank Bangladesh Limited existence of the later one is less then the earlier one and as the management is determined to reach the pick of success it seems that in near future the negatives will be eliminated. Eight years is a very short span of time and the organization, which can establish itself as one of the most reputed private commercial Bank in the country within this short period deserves special credit and with their able leaders EXIM Bank will reach the highest level of success very shortly. I wish the bank all success prosperity in their field.

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BIBLIOGRAPHY Booklets published by EXIM Bank. EXIM Bank Ltd. Annual Report 2005 EXIM Bank Ltd. Annual Report 2006 Web site of EXIM Bank (www.eximbankbd.com) Newsletters published by EXIM Bank 58

Prospectus of EXIM Bank Ltd.

Abbreviation EXIM: Export & Import Bank Ltd. L/C: Letter of Credit CD: Current Deposit. SB: Saving Account. MSTD: Mudaraba Short Term Deposit. STD: Short Term Deposit. FDR: Fixed Deposit Receipt. BCD: Bearer Certificate Deposit. PO: Pay Order. DD: Demand Draft. OBC: Outward Bills for Collection. IBC: Inward Bills for Collection. C.R.R: Cash Reserve Requirement. S.L.R: Statutory Liquidity Requirement CIB: Credit Information Bureau. AD: Authorized Dealer. PC: Packing Credit.

Appendix EXIM Bank of Bangladesh Limited PROPERTY AND ASSETS 2005 (Taka) 2006 (Taka) 2007 (Taka) 59

Cash In hand (including foreign 249,239,719 currencies) With Bangladesh Bank and 2,566,272,253 Sonali Bank (including 2,815,511,972 Balance With Other Banks And Financial Institutions In Bangladesh Outside Bangladesh 838,689,022 981,060,161 1,819,749,183 -1,500,480,300 132,551,279 1,633,031,579 Investments: General Investments Bills purchased Fixed Assets Other assets Non-banking Assets Total Assets 26,046,341,111 166,979,206 1,235,086,277 -33,716,699,328 32,641,270,316 178,431,761 2,002,117,585 -41,793,540,962 35,647,299,032 229,464,962 2,353,670,937 -47,497,215,730 discounted 24,668,291,723 and 1,378,049,388 30,567,133,959 2,074,136,357 33,725,423,377 1,921,875,655 945,738,588 473,605,876 1,419,344,464 -2,000,081,900 233,172,388 2,233,254,288 709,021,307 1,362,423,063 2,071,444,370 -2,250,000,000 150,694,450 2,400,694,450 3,319,122,548 4,794,641,979 foreign currencies) 3,082,999,752 4,522,701,900 236,122,796 271,940,079

Balance Sheet For The Last Three Years LIABILITIES AND CAPITAL 2005 (Taka) Liabilities: Borrowing from other banks, 500,00 0,000 financial institutions and agents 2006 (Taka) 2007 (Taka)

60

Deposits and other accounts: Al wadeah current deposits and 3,710,805,625 other accounts Bills payable Mudaraba savings bank deposits Mudaraba term deposits Call deposits Foreign Currency Deposits 235,152,485 1,338,526,248 22,933,251,563 -101,476,446 316,705,918 1,684,526,998 29,479,565,759 -87,911,318 466,93 7,230 2,050, 014,66 9 30,845 ,099,0 83 -97,053 Other liabilities 3,485,065,047 3,649,831,258 ,602 4,607, 469,59 Total liabilities 31,804,277,414 38,681,855,883 3 44,032 ,789,8 07 Capital/shareholders' equity: Paid up capital Proposed cash dividend Share premium Dividend equalization account Statutory reserve Retained earnings 878,850,000 -94,162,500 62,775,000 569,989,609 42,989,805 1,713,757,500 342,751,500 85,687,875 94,162,500 62,775,000 810,880,421 1,670,283 2,142, 196,80 0 --94,162 ,500 62,775 ,000 929,18 2,931 61 3,463,314,632 5,466, 215,63 0

Proposed issue of bonus shares 263,655,000

236,10 8,692

Total Shareholders' Equity

1,912,421,914

3,111,685,079

3,464, 425,92 3 47,497 ,215,7 30 2007 (Taka)

Total liabilities and Shareholders' 33,716,669,328 Equity LIABILITIES AND CAPITAL OFF BALANCE SHEET ITEMS Off balance sheet items Contingent liabilities: Acceptance and endorsements Letters of guarantee Irrevocable letters of credit Bills for collection Other contingent liabilities -1,105,021,299 7,229,973,800 753,339,064 6,853,192,634 2005 (Taka)

41,793,540,962

2006 (Taka)

-1,574,148,312 7,452,716,000 1,308,859,198 8,658,363,853

-1,676, 356,27 0 8,311, 294,99 2 1,248, 914,00 1 10,034 ,720,2 59 21,271 ,285,5 22 21,271 ,285,5

Total contingent liabilities Other commitments Total off balance sheet items

15,941,526,797 -15,941,526,797

18,994,087,363

18,994,087,363

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22

Export Import Bank of Bangladesh Limited Profit and Loss Account For The Last 3 Years Particulars Investment income Profit paid on deposits, borrowings, etc. 2005 (Taka) 2,461,367,2 18 (1,821,822, 543) Net investment income Income from investment in shares/securities Commission, exchange and brokerage Gain on sale of investment in shares Other operating income 22,516,584 361,980,8 04 110,615,092 -64,143,64 Total operating income Salaries and allowances Rent, taxes, insurance, lighting, etc. Legal expenses Postage, stamp, telegram and telephone Stationery, printing, advertisement, etc. Managing Director's remuneration Managing Director's fees Directors' fees Depreciation on and repairs to Bank's 24,529,314 property Other expenses 3,150,000 280,000 12,562,64 8 2,298,000 120,000 63 182,875 1,578,911 26,452,682 1,219,255 19,988,60 7 16,653,161 1,611,569,2 2 867,158,5 1,174,264,1 80 211,922,49 7 39,296,146 1,003,010 20,986,156 2006 2007

(Taka) (Taka) 1,737,497, 2,318,525,2 004 97 (1,332,112 (1,775,384, 316) ,903) 543,140,98 1 21,868,900 473,874,15 1 52,337,098 83,043,050

639,544,675 405,384,1 85,705,616 01 35,650,00 753,187,250 3

17 50 231,722,416 176,908,5 58,202,759 47 33,499,60 1

2,271,210 28,140,866 59,295,106 1,650,000 56,500 643,700 18,844,74 5 36,947,72 Total operating expense Profit before provisions Provisions: For Investments Provision for diminution in value of share 107,501,315 49,166,57 4,963,123 7 41,703,57 6 Total provisions Profit before tax Provision for tax 112,464,438 90,870,15 1,063,298,6 40 3 473,967,0 65 79 260,681,8 86 42,989,80 9 435,806,139 302,321,3 1,175,763,0 78 32 564,837,2 18

1,259,865 27,380,129 66,941,426

387,860,39 0 786,403,79 0 194,891,24 2 --

194,891,24 2 591,512,54 8 238,771,70 4 352,740,84 4 1,670,358 354,411,20 2 118,302,51 0 118,302,51 0 236,108,69 2 64

467,873,466 213,285,1 Profit after tax Retained earnings brought forward 595,,425,17 4 6,887,359 Profit available for appropriation Appropriations: Statutory reserve

5 602,312,533 303,671,6 91 212,659,728 94,793,41 212,659,728 3 94,793,41 3 389,652,805 208,878,2 78

Retained earnings carried forward

Earnings per ordinary share Export Import Bank of Bangladesh Ltd. Statement of Cash Flow For The Last 3 Years Particulars A)Cash flows from 2005 (Taka) operating activities: Investment income receipts Profit paid on borrowings Dividend receipts Fees and commission receipts Cash payment to employees Cash payment to suppliers Income tax payments activities 112,782 753,187,250

48.61

45.63

32.93

2006 (Taka)

2007 (Taka)

2,458,029,331

1,741,352,506 (998,085,823) 3,398,803 361,980,804 (178,558,547) (3,302,156) (319,364,269) 64,143,642 (123,762,785) 547,802,175

2,392,012,797 (1,451,646,778) 3,510,994 473,874,151 (214,220,497) (1,930,216) (466,724,609) 147,507,054 (169,364,711) 713,018,185

deposits, (1,654,526,857)

(234,872,416) (2,253,352) (229,715,408)

Receipts from other operating 131,438,879 Payments for other operating (178,021,486) activities Cash flows before changes in 1,043,378,723 operating liabilities Changes in operating assets and liabilities: (Increase)/decrease operating assets: Statutory deposit Trading security shares Investments to customers Other assets (89,662,631) (8,364,138,528) (5,352,745) in --assets and

--(59,869,124) ---(1,713,308,697) (35,518,666)

--88,708,938 --(3,010,030,714) 43,613,973 65

Investments to other banks ----

Increase/(decrease) operating liabilities: Deposits from other banks Deposits from customers Liabilities customers on account

in 891,622,211 8,349,414,367 of --(1,024,693,596) 4,236,861,882 --300,000,000 (656,045,413) 86,215,468 3,807,080,121 --500,000,000 200,237,851

Trading liabilities (borrowing) --Other liabilities 427,086,024

Net

cash

from

operating 2,252,347,421 from of --of --(39,081,759)

1,595,228,561

2,428,843,822

activities B) Cash Receipts Payment securities

flows sale

investing activities: from for ----(28,676,656) 1,381,726 (27,294,930) --(250,000,000) (51,517,635) 211,250 (301,306,385) securities-Treasury Bill purchase

Purchase of fixed assets

Sale proceeds of fixed assets 1,705,801 Net cash from investing (37,375,958) activities C) Cash flows from --

financing activities: Issue of ordinary share ---1,567,933,631 4,635,741,455 ---2,127,537,437 4,738,548,912 Dividend paid in cash -Net cash from financing -activities D) Net increase in cash and 2,214,971,463 cash equivalents (A+B+C) E) Cash and cash 2,420,769,992 equivalents at beginning of the period F) Cash period (D+E) G) Cash and cash 4,635,741,455 6,203,675,086 6,866,086,349

equivalents at end of the and cash 66

equivalents Cash Balance with other banks Prize bonds 2815,511,972 1,819,749,183 480,300 4,635,741,455 4,214,841,495 1,988,746,191 87,400 6,203,675,086 4,794,641,979 2,071,444,370 -6,866,086,349

Export Import Bank of Bangladesh Limited Statement of Changes in Equity For the period ended 30 June 2007 Paid up Capital (Taka) Balance at 30 June 2006 period during Dividend paid 263,655,000 ---during the period from 571,252,500 --------878,850,000 Profit after tax for the - Share Premium (Taka) 94,162,500 -Statutory Reserve (Taka) 664,783,022 -Dividend Equalization Account (Taka) 62,775,000 --

Prop issue bonu (Tak --

263,6

(263,

Issue of Rights Dividend period Transfer paid from 428,439,300 to -2,142,196,800 -94,162,500 264,399,909 929,182,931 -62,775,000 ---

share during the period

January-June'07 statutory reserve Balance at 30 June 2007

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Questionnaire Name: s Position/Title:

Department:

Job Location

Reporting to:

Date:

General Banking & Investment: 1 Which account you use - current, savings or fixed? Ans. 2. Your transaction on the basis of daily, monthly or quarterly? Ans. 3. How does the employee of the bank corporate with the customers? Ans. 4. Do you satisfy with the interest of bank loans? Ans. 5. Do you like the idea of running your own businesses? Ans.

6. Do you face any problem in the bank?

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Ans. 7. If you face any problem please mention? Ans. 8. Which type of loan is most preferable small entrepreneurship, business, firm or personal loan? Ans. 9. Do you satisfy with the profit rate of your account? Ans. 10. What kind of changes do you recommend in order to improve the service of EXIM Bank? Ans.

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