A Rare Combination of Shariah and Modern Banking CHAPTER-01 INTRODUCTION 1.1INTRODUCTION: Al Arafah Islami Bank Ltd. is able to provide innovative service to the customers of a developing country such as deposit products and services, commercial banking activities, foreign exchange and foreign trade. Based on the knowledge of practical field I prepared my internship report entitled of “General banking activities with special reference to Al Arafah Islami Bank Ltd.” 1.2 ORIGIN OF THE REPORT: The internship program is a mandatory requirement for the students who wish to be a B.B.A graduate. In the internship program, I was attached to host organization name Al Arafah Islami Bank Ltd. this report prepared on my practical experience on the day to day banking activities, theoretical experience and under close supervision of my internal support as well as my official supervisor. 1.3 OBJECTIVES OF THE REPORT: 1
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A Rare Combination of Shariah and Modern Banking
CHAPTER-01
INTRODUCTION
1.1INTRODUCTION:
Al Arafah Islami Bank Ltd. is able to provide innovative service to the customers of a
developing country such as deposit products and services, commercial banking activities,
foreign exchange and foreign trade. Based on the knowledge of practical field I prepared my
internship report entitled of “General banking activities with special reference to Al
Arafah Islami Bank Ltd.”
1.2 ORIGIN OF THE REPORT:
The internship program is a mandatory requirement for the students who wish to be a B.B.A
graduate. In the internship program, I was attached to host organization name Al Arafah
Islami Bank Ltd. this report prepared on my practical experience on the day to day banking
activities, theoretical experience and under close supervision of my internal support as well as
my official supervisor.
1.3 OBJECTIVES OF THE REPORT:
Broad objectives: Broad objectives of this report are to meet the partial requirement
for the fulfillment of B.B.A program.
Specific objective: In specific objective I have to prepare a sound report that must be
reliable and dependable for the bank officials.
The specific objectives to help in exchanging the broad objectives are as follows:
To raise the ability to cope with new organization environment.
To analyze the performance of the specific branch and the bank as a whole
Highlighting the process of banks to deal with overall banking
To analyze total procedure of Al Arafah Islami Bank Ltd. in general banking
Identifying the major contribution of overall business in Bangladesh
To suggest remedial measure for the development of Al Arafah Islami Bank
To relate theoretical knowledge with practical field
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To improve quality of evaluation
To create the ability to recommend to the branch and its bank based on the gathered
knowledge
To improve the quality of communication
To know about the different scheme, policy, procedures of AIBL
1.4 METHODOLOGY OF THE REPORT:
From my educational background I have learned different methodology in research process.
So in this study I had the opportunity to implicate may educational knowledge in practical
field. I have collected data from many sources:
Figure: Sources of data collection
Primary sources:
Personal interview- face to face conversation and in depth interview with the
respective officers of the branch
Personal observation- observing the procedures of banking activities followed by each
department
Practical work exposure on different areas of the branch
Informal conversation with the client or customers
Relevant documents related to the study as provided by the officers
Secondary sources:
Annual report of AIBL
Periodical published by Bangladesh bank
Internet is also used as a theoretical sources of information
Website and news letters are also used as major sources
Sources of data
Primary sources Secondary sources
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1.5 SCOPE OF THE REPORT:
In this internship period and preparing of the report, there is lot of learning points are
available, such as organizational structure of Al Araafah Islami Bank Ltd. and its branch,
organizational environment and culture, its deposit products and services, commercial
banking activities and foreign exchange and foreign trade, general banking .
1.6 LIMITATIONS OF THE REPORT:
To prepare a report on the achieved practical experience in a short duration (only three
months) is not an easy task. In preparing this report some problems and limitations have
encountered which are as follows:
The main constraint of the study are insufficiently of current information, relevant to
the study
Consolidated date related to the study are not available in the mind of the year
All required information are not available in any specific branch of the bank and there
are also limited opportunity to visit more then one branch
Due to time limitations many of the aspects could not be discussed in the present
report
Confidential information
Lack of experience in internship report writing
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CHAPTER-02
OVERVIEW OF THE AIBL
2.1 HISTORICAL BACKGROUND OF THE AIBL:
The bank stared its operation on June 18, 1995 as a commercial bank in the name and style
of Al Arafah Islami Bank Limited. The prime objective of Al Arafah Islami Bank Limited is
to serve the people for attainment of their economic goal and success in life here and here
after. AIBL faced a several set backs in respect of business. With active initiative taken by
the number of the board and the management team, the company could overcome the
problem and get it converted into a full fledged commercial.
Problem on 2001 after obtaining license from Bangladesh Bank as Al Arafah Islami Bank
Ltd. the authorized capital of the bank was fixed at Tk. 100 million and paid up capital at Tk.
100.12 million of which 20.50 million was subscribed by the sponsors at that time. At present
the bank is operating through 94 branches of the country.
2.2 COMPANY PROFILE:
Full name Al Arafah Islami Bank Limited
Nick Name AIBL
History/Overview With a vision to emerge as the leading bank Islami
Bangladesh. Al Arafah Islami Bank was founded by a
number of religious personalities from trade and industry.
To a significant contribution to the national economy for
sustainable growth is another bank program. AIBL offers all
its services and products in accordance with Islamic law
(sharia). A powerful sharia council is composed of
recognized Islamic scholars and economists of the country
and the board carefully examines every service and products
Islam provides a complete lifestyle. Main objective of Islamic lifestyle is to be successful
both in mortal and immortal life. Therefore in every aspect AIBL follow the doctrine of Al-
Quran and lifestyle of Hazrat Muhammad (Sm,) for supreme success. AIBL bear the mark of
Sunnah of Prophet Muhammad (Sm.), of faith and conviction, values and attitudes towards
life and that the entire environment of AIBL is conformity with Sunnah.
3.2 CUSTOMER SERVICES:
AIBL firm commitment to excellent customer service delivery has resulted to remarkable
progress in all areas of operation during 2006. The bank believes in maintaining personal
relationship with its clients. One of the major goals of the bank is to build long term
relationship with the customer and to create value for them. To maintain this relationship,
AIBL sometimes waive high charges for those valued clients who are linked with the bank
for a long period of time.
3.3 SHORTCOMINGS:
Technology
One of the major weaknesses of AIBL is the technology used by the bank. With the change of
time, technological advancement is essential to survive in the competition. Hence, AIBL is
lagging far behind in this area. Most of the branches are not well equipped. There are not
enough computers, telephones or fax machine in the branches which often slower the pace of
work. AIBL is the best ‘Online Banking’ but the online facility which the bank is providing
currently is not up to the standard.
Remuneration
The pay scale of employees in AIBL is not competitive compared to other private banks of
the country. The employees of AIBL get compensation of around 60% of what other private
banks, for example, Dhaka Bank, Mercantile Bank, Southeast Bank, etc. offer to their 14
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employees. This creates dissatisfaction among the employees which carries the risk of rise in
employee turnover rate. Those who cannot switch bank are often discouraged to give their
best effort in the job.
Promotion
When an employee gets a promotion to the next level, he/she gets more compensation. AIBL
is regular in giving promotion, but the employees get late effect of this promotion. Often
there is a long gap, for example a six month gap in getting the effect.
Less emphasis on advertising through the electronic media
AIBL does not promote their brand or products on a regular basis. They seem to be over
confident over their company’s publicity. They some times see it as an extra expenditure.
They also don’t do much electronic media advertising. On the other hand competitor’s like-
Islami Bank Bangladesh Ltd, EXIM Bank Ltd, Dhaka Bank Ltd, Dutch Bangla Bank Ltd,
Standard Chartered Bank Ltd, Jamuna Bank Ltd and others do the opposite frequently come
up with creative adds for their banks. This is a big weakness for AIBL which may prove to be
very big mistake in the future. To company should concentrate more on its promotional
activities.
Agency Problem
Sometimes, some of the branches employees are often found not to be too keen on taking
care of their customers. Though they have a short employee line in some branch, their loyalty
to the company and their ethics level are not very satisfactory. Some of the employees always
think about their own interest, which proves that agency problem is there. Some of them
create unofficial groups through which they solve each other’s problem and support each
other to achieve their personal goals, not too much concern about their personal interest.
3.4 FUTURE PLANS:
AIBL providing many facilities to the customer mainly deposit sector. At present time
customer’s needs technology in the banking sector, they want to do banking in the internet,
card, e-business etc. AIBL using Ababil software, which have lots of functions but now all
the functions are not activated, AIBL has goodwill in the deposit side but technology side is
not well. AIBL has not available ATM booth. So AIBL future plan is develop its software
and activate available ATM booth.
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AIBL revised its plan of launching a TK. 100 crore Islamic mutual fund. Under the revised
plan the bank as sponsor will subscribe 10 percent of the AIBL of the 1st Islamic mutual fund.
The bank said 50 percent of the fund will be raised through initial public offering (IPO) and
the rest 40 percent through pre-IPO placement.
3.5 CORPORATE SOCIAL RESPONSIBILITY:
Al-Arafah Islami Bank Foundation:- The Bank has a Foundation launching
philanthropic activities. Al-Arafah Islamic International School & College and Al-
Arafah Islami Bank Library are major two wings for launching philanthropic
activities.
Al-Arafah Islamic International School & College:- Al-Arafah Islamic
International School & College has been established by the Al-Arafah Bank
Foundation with a view to building next generation according to the ideals of peace
and equality of Islam and to establishing banking and other aspects of life in the way
of Islam. The prime aim of this Islamic International School & College is to
contribute towards building human resource and in the broader sense to ensure human
welfare. With the view Al-Arafah Islami Bank Foundation has established Al-Arafah
Islamic International School & College at Dhanmondi in 1998. Such institution up to
O level of its kind is for the first time in Bangladesh
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CHAPTER-04
STRATEGIC, SWOT, PEST & CAMEL ANALYSIS
4.1 STRATEGIC ANALYSIS OF AIBL:
Corporate level strategy:-To create value, a corporate strategy should enable a
company, one, or more of its business units, to perform one or more of the value
creation functions at a lower cost, or perform one or more of the value creation
functions in a way that allows for differentiation and a premium price. But the AIBL
does not have any corporate level strategy.
Business level strategy:-Business level strategy refers to the plan of action that
strategic managers adopt for using the company’s resources and distinctive
competencies to gain a competitive advantage over its rivals in a market or industry.
AIBL is currently following low cost generic business level strategy. All most all
competitors are following same business level strategy. It can be categorize as low
cost strategic group.
Functional level strategy:-Functional level strategies aimed at improving the
effectiveness of a company’s operations and thus its ability to attain superior
efficiency, quality, innovation and customer responsiveness. AIBL has perused its
functional-level strategy for building competencies in low cost for its services
divisions.
4.2 SWOT ANALYSIS OF AIBL:
SWOT analysis means analyzing the strengths, weakness, opportunities and threats of the
Organization to know the present condition. This is very common analysis to determine the
company's capabilities of doing effective business. This help to know the possible advantages
and disadvantages of the firm that it has compare to compare to others. The SWOT analyses
are briefly given in the below:
Strength Weakness Better Commitment of Employees
Fewer default loan
Some inexpert and laggard assistant
officers
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Good banker-customer relationship
Energetic work force
Huge business area
Maintaining a strong capital base
Liquidity risk of the bank is low
and it makes its position stronger.
Good balance between the
administration and the employees.
Online banking service
personnel-training institute with
good resources
Existing manual vouchers
Lack of customer credit scheme
Existence of other new private bank
Not enough efficient administration
Weak in marketing
Online facility which the bank is
providing currently is not up to the
standard.
No Variation in Products
No facility of Debit & Credit Card
Opportunity Threat Growth sales volume
Introducing ATM card
Strong business brand image
Growing very quickly all over the
country
SWIFT & other Technology
Branch Network
Increase of Competitors Political instability hampers the
environment of the business society Advertisement & Promotion of
Competitive Banks
Still mostly dependent on manual
work rather than technology.
compensation package of AIBL is
not attractive
4.3 PEST ANALYSIS
Every organization operates in a larger macro environment of forces that shape opportunities
and pose threats to the company. The four major forces, that is, Political, Economic, Social
and Technological forces that affect the banks and the banking industry as a whole are
discussed below:
4.3.1 Political forces
The Political forces include laws, government agencies and pressure groups that influence
and limit various organizations and individuals in a given society. There are lots of rules and
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regulations created by the government for several reasons, first of all to protect companies
from each other, to protect consumers from unfair business practices and to protect the
interest of the society.
The banking industry is heavily affected by political forces. The political situation is not
stable in this country. Whenever a new Government comes, there is a change in profit rates or
interest rates of deposit, loans, etc. The tax situation is affected. There are new policies
regarding Export, Import and other activities which might affect the industry negatively. For
example, Bangladesh Bank has directed other banks to reduce lending price to encourage
industrialization. The SLR has been reduced from 20% to 18%. This has created a serious
threat for the lending business of the banks. In another case, the corporate income tax has
been increased from 40% to 45% which affected the profit of the banking industry.
4.3.2 Economic forces
Economic forces are the factors that affect the consumer buying power and spending patterns.
Some countries have subsistence economies where the consumers consume most of their own
agricultural and industrial output. At the other extreme there are industrial economies, which
constitute rich markets for many different kinds of goods.
Banking industry is directly related to the economic factors, especially the consumer
spending and savings pattern. Spending is very deeply related to income. As family income
rises, the percentage spent on food declines, percentage spent on housing remains almost
constant and savings increase. That means with a strong economy in the country the banking
industry can expect the customers to deposit more.
If we look at the Bangladesh Economy, it performed fair enough mainly due to contribution
in the agriculture sector. The real GDP grew by 6.63% in 2009-2010 compared to 6.5% in
2008-2009. There was growth in all the sectors 7.7% in industry, service sector 5.7%, 9.4%
in export and 13% in import.
There had been much change in the banking sector due to economic forces. The industry
witnessed changes, which stabilized wide swings in the call money market. Bangladesh Bank
introduced long dated government bonds distributed by primary dealers. These bondholders
can borrow by pledging these instruments. It had no longer a pre-announced rate band for
transaction with banks. There is excess liquidity in the banking sector as a whole but
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investors are discouraged to invest due to lack of security. Because of this reason, the
banking industry might have a back push.
4.3.3 Social forces
These are the forces related to society’s basic values, perceptions, preferences and behavior.
People grow up in a particular society that shapes their basic belief and behavior pattern.
These forces affect the survival and success of an industry.
As banking industry is a service-based industry, it mainly deals with the people coming from
various demography of a society. There are differences in the size, density, location, age,
gender, race, occupation and other statistics of the human population. As a result, their
perception and behavior patterns also vary. So it is a difficult task to deal with different target
markets and to handle the social forces. For example, in many societies, there is no culture or
trend to save money. In those societies, it is hard for the banks to operate. Some religious
societies might be against the banking business as it gets profit from the interest rates. There
could be a behavior pattern among a group of people who are not risk takers. They might not
take the risk of investing though they have surplus money. These social phenomenon’s have
great impact on the banking industry as a whole.
4.3.4 Technical forces
It is a common saying that today’s world is a world of technology and only those will survive
who can be up-to-date with the technology. Technological forces are those that create new
advancement, create innovative products and market opportunities. Technology has released
wonders as well as blunders. The attitude of the people depends on whether people are more
impressed with its wonders or its blunders.
Like any other industry, technology has deep impact in the banking industry. Using
technology, banking has become fast, smooth, less risky and easier. The credit card, ATM
machine, online banking, E-banking, etc. are the blessings of technology. Advance banking
soft wares have made banking operation much easier. At the same time these technologies
pose threat to those competitors who are still left behind. Technology gives an extra
advantage to the banks to be ahead of time. So, technological forces might really rule the
banking industry real soon.
To operate in the macro economic environment, the banking industry should be careful about
these forces and by getting acquainted with these forces, the industry would be able to make
it strength rather than take is as a threat.
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4.4 CAMEL FRAMEWORK
CAMEL framework is used widely to determine the performance in banking sector. This
involves evaluation of bank under five criteria. After analyzing the position and performance
of each category, a bank is ranked. Till the year 2009, AIBL has been categorized as no. 1
rated bank of Islami Bank under Capital, Asset, Management, Earnings and Liquidity
(CAMEL) rating by Bangladesh Bank and rated as a strong bank.
4.4.1 CAPITAL ADEQUACY
Capital adequacy provides a safety net to depositors and other providers of business holder
against losses that the bank might occur. The banking industry is required to maintain a
minimum capital adequacy ratio is 9.95%. Though the foreign banks are having a capital
adequacy ratio above 15% on average, the private banks are also doing well with an average
ratio of 10%.
Among these private banks, AIBL is maintaining a strong capital base with a capital
adequacy ratio of 11.25% in 2009 and 14.49 in 2010. The bank is maintaining its capital
adequacy position above the industry average. The bank had a target to have Tk. 6000 million
of capital fund by the year 2012, whereas it reached capital fund of almost Tk. 5000 million
by 2010 and its total capital is Tk. 10,512,800,000 positioning the bank as one of the strong
capital based bank of Bangladesh.
4.4.2 ASSET QUALITY
In order to encourage depositors to deposit money in the bank, it is required for the banks to
have good asset quality. That means, the bank should not have too much of bad debts from its
borrowers. The asset quality of a bank depends on certain ratio, for example, the net
provision of loan losses to total loan, sector wise loan distribution, ratio of classified loan to
total loans, etc.
10.4.3 MANAGEMENT EFFICIENCY
Since all banks fall under the service industry thus most of their operations and functions
require more involvement of its employees. Therefore, it is very important for banks to have
an efficient management body. Sound management is the most important pre-requisite for the
strength and growth of any financial institution. It is difficult to draw any conclusion
regarding management soundness on the basis of monetary indicators, as characteristics of
good management are rather qualitative in nature. Nevertheless, the performance of the
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management should be reflected in the overall financial strength and capability of the bank,
therefore the total operating expense to total operating revenue ratio, the employee
productivity ratio, are generally used to measure management soundness. For example a high
and increasing expenditure to income ratio could be interpreted as operating inefficiency that
could be due to flaws in management.
4.4.4 EARNINGS & PROFITABILITY
ROA (Return on Asset), ROE (return on Equity) and NPM (Net profit Margin) are widely
used indicators that measure the profitability and earnings of a bank. A strong earnings and
profitability profile of a bank reflects its ability to support present and future operations.
More specifically, this determines the capacity to absorb losses by building an adequate
capital base, finance its expansion and pay adequate dividends to its shareholders.
The earnings and profitability ratios of AIBL are falling from the previous year; however, it
is still high comparing to the other banks of the industry. ROE of PBL is 31.55% in 2010,
27.32% in 2009, 21.07% in 2008 & 27.39% in 2007 whereas most of the other private banks
have ROE of 20 to 25%.
4.4.5 LIQUIDITY
Liquidity is a measure of how quickly the bank can meet its financial obligations. Shortfall of
cash may drag down the bank to borrow at a huge rate. At the same time the excess liquid
asset will keep banks away from earning enough. Therefore banks make a trade-off to
maximize return while minimizing risks. Banks try to keep this part of the asset as low as
possible so that they meet the Central Bank requirement and make a safeguard against
liquidity shortfall and at the same time try to take all the opportunity of the investment and
earning with its assets.
In conclusion, it can be said that, AIBL is performing well enough in CAMEL framework.
However, the bank should keep in mind that, its performance under CAMEL framework has
been diminishing from the previous years which pushed it down to the 2nd position from no. 1
position. Though the bank is still performing fairly, it should focus on this issue immediately.
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CHAPTER-05
HRM, TRANING, MOTIVATION & PUNISHMENT
5.1 HUMAN RESOURCE MANAGEMENT:
In order to achieve highest goal and to ensure highest standard of updated banking services to
its clients and stakeholders SBL authority maintained a standard ethics through a competitive
recruitment criteria.
Among the living creatures on earth the greatest creation of the Almighty is man. Allah has
given man immense power of knowledge, wisdom, intelligence, consciousness and so on.
These qualities have made them different from others. By the best use of these qualities in
men it has been possible for our world of today to reach this stage of modern science and
technology. Of all existing powers, manpower is the most in valuable in our daily life, in
organizational needs and in diversified fields of action towards advancement. So, Human
Resource division in any organization plays a very vital role in formulating policies, practices
and in achieving its goal.
Human resource is AIBL prime asset. It is neither the machine nor the technology alone, but
the invaluable mix of man -machine interface that makes technology work. AIBL strongly
believe while the capacity of machine is limited, the potential of human being is unlimited.
The qualities of loyalty to the company and to the customers, tenacity to learn
more and the commitment to perform characterize our human resource. AIBL employees
with outstanding quality are rewarded in the Bank. As a result, AIBL staff morale is very
high. They show good performance in the Bank. The management frequently communicates
with the employees and listens to their new ideas and suggestions. A major factor behind
AIBL success in 2011 and in the preceding years is AIBL employees.
The Human Resource Division of Head Office is responsible for fixing principles and
policies concerning personnel and certain areas of administration. The division is responsible
for employee relation, staffing succession, planning, training, employee benefits, 23
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compensation and their social security. The salary and compensation package for all levels of
our employees was reviewed and revised last year to be competitive with all local private
sector Banks and financial institutions in the country. It is targeted to attract and retain good
performers in the Bank. AIBL recruited 243 fresh entrants and 20 experienced Bankers
during the year 2011 through a transparent recruitment process to fulfill the manpower
requirement in the Bank. The Bank also sent 01 employee to BIBM, 04 employees abroad, 38
employees to Bangladesh Bank for training in different fields to upgrade themselves with the
latest techniques of modern banking. AIBL have 1,807 staff in the Bank of whom 77 are
executives, 1,382 are officers and 384 other staffs as on December 31st 2011.
Sl. No. Designation Category Number
01 Executives 77
02 Officers 1382
03 others 348
Total 1807
The Bank Plans to rationalize per-Branch employee by equitable Manpower distribution of
human resource amongst the existing and future branches. As a part of social commitments
Bank accommodated 388 students from different renowned universities for doing internship
program in our Bank during the year 2011. The Bank has recruited experienced new
manpower to strengthen its large scale operations. Total manpower employed in the Bank
including Managing Director is 1,807 at 31 December 2011; which was 1,711 at the end of
the last year
5.2 TRANING AND MOTINATION FOR THE EMPLOYEES:
Training is one of the most effective and well-recognized weapon in developing human
resources. Training programs are being carried out for the Probationary Officers, Assistant
Officers, Junior Officers, Branch Managers and Officers of different grades and Executives
by Al-Arafah Islami Bank Training & Research Academy from its very inception. AIBTRA
sets training-plans from the early hours of the year and every year a training calendar is
prepared and approved by the Management. Training
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Academy conducts training Courses / Workshops simultaneously at Dhaka as well as outside
Dhaka.
Training courses, workshops, In-house training etc., are tabled and conducted on current day
updated banking aspects concerning new ideas, procedures and techniques of banking. In the
training sessions lecture methods as well as discussions, group discussions, case study,
exercise, practical works, simulation method etc. are followed. Training materials e.g., course
folders; CD etc comprising hand-out are delivered to the participants. For enhancing
effectiveness, modern training aids e.g. multimedia projector, power point presentation, flip
chart etc. are used. For the purpose of assessing trainees' knowledge and skill pre-course and
post course evaluations are done. Evaluation of the trainers is also conducted secretly by the
participants for making training more effective. In 2011 total number of 1974 trainees were
trained at training Academy through 47 training courses / workshop consisting of 157
working days. A total 379 executives/officials have been trained on different subject through
5 out reach and 31 "In-house training at Branches". In these programs, training sessions were
conducted by resource persons from Bangladesh Bank, BIBM and many other government
and private Banks and financial institutions. 1(One) officer has received training from
Bangladesh Institute of Bank Management (BIBM). At the same time, 38 officers and
executives have been trained in several training institutes including Bangladesh Bank
Training Academy. Moreover, 4 executives of the Bank participated in training courses in
Thailand, India and China in the year 2011.
5.3 PUNISHMENT FOR THE EMPLOYEES:
One or one more increment permanently postponed
Removed from service
Compulsory retirement
Demotion in lowest rank
Bent down in lowest scale of salary scale
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CHAPTER-06
PRODUCT & SERVICES OF AIBL
6.1 VARIOUS TYPES OF DEPOSIT ACCOUNT:
Al-Arafah Islami Bank Ltd. offers following types of deposit account:
Mudaraba Savings Deposit Account (MSD)
Mudaraba Current Deposit Account (CD)
Mudaraba Term Deposit Receipt Account (MTDR)
Short Notice Deposit Account (SND)
Installment Term Deposit (ITD)
Mudaraba Haj Deposit Account (MHD)
Mudaraba Pension Deposit Scheme (PDS)
.Mudaraba Lakhpoti Deposit Scheme (LDS)
Mudaraba Millionaire Deposit Scheme (MDS)
Mudaraba Kotipoti Deposit Scheme (KDS)
Mudarab Double Benifit Deposit Scheme (DBDS)
6.1.1 CONDITIONS:
Mudaraba Savings Deposit Account (MSD): In savings deposit account, profit is payable to the customer. The profit for savings
account is 4 percent
Profit is calculated on a monthly basis on the lowest balance in the account during the
month
Customer can withdraw twice in a week and maximum limit per transaction is BDT.5
Lac and withdrawal beyond this limit requires 7(seven) days prior notice. If the total
withdrawal without notice is allowed twice in a week up to 25% of the balance in the
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account subject to maximum limit of BDT.5,00,000 withdrawal beyond the
maximum limit will require 7(seven) days prior notice, failing of which profit will not
be allowed for the month in which the withdrawal occurs
Profit rate may be subject to change without notice to customer. Profit will be credited
to customers account on half-yearly basis.
The minimum account opening balance is Tk.500. The minimum balance must be
maintained in the account. The amount of minimum initial deposit is the minimum
balance for maintenance. The account maintaining fee is Tk.500 and charged twice a
year. If the balance falls below Tk.500, bank will charge minimum balance charge
Tk.250 half-yearly
The bank reserves the right to realize an incidental charge and or/ to close the account
without prior notice to the customer(s), if he/she/they fail to maintain the minimum
balance.
Mudaraba Current Deposit Account (CD):
No profit is payable in current accounts
Current account has advantages over savings account. Advantages are - no such
withdrawal limit and overdraft facility.
The minimum account opening balance is Tk.2000. The minimum balance must be
maintained in the account.
The account maintaining fee is Tk.500 and charged twice a year.
If the balance falls below Tk.2000, bank will charge minimum balance charge Tk.250
half-yearly.
Mudaraba Term Deposit Receipt Account (MTDR):
Mudaraba Term Deposit Receipt (MTDR) is a profit bearing account intended for
those customers who can deposit money for fixed period of time
These deposits are repayable subject to a period of notice and hence known as time
deposits or time liabilities meaning thereby that these are withdraw able subject to a
period of notice and not on demand.
The Bank has defined its MTDR products in various time slabs, which are as follows:
Mudaraba Term Deposit – 1 month
Mudaraba Term Deposit – 3 months
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Mudaraba Term Deposit – 6 months
Mudaraba Term Deposit – 12 months
Mudaraba Term Deposit – 24 months
Mudaraba Term Deposit – 36 months
Profit rate varies according to the above defined time slabs
No profit on MTDR is paid against the deposit for less than 1 (One) month.
In other cases of pre-mature encashment the time duration of the deposit is divided in
nearest slab. Like, if a client makes a MTDR for 24 months and tries to en cash in 18
months time then his/her MTDR is treated for profit calculation as follows:
*For 12 months time 12 months MTDR profit rate is applied
*For next six months 6 months MTDR profit rate is applied
This is a profit and loss bearing product.
Profit is calculated on daily basis and credited on term end using the provisional rate
of profit.
After year end the accounts are adjusted with actual rate of profit. If the actual profit
rate is greater than that of provisional then the extra profit is credited to the accounts
or to sundry account if any account has closed during the year. In case where the
actual rate is lower than the provisional rate the loss amount is debited from the
client’s account or notice can be send to the client to rebate the loss amount if the
account is closed during the year.
After profit is being credited to accounts income tax is deducted / debited from the
accounts. The rate of income tax is 10%.
Depending on the amount of deposit there is a yearly excise duty to be charged on this
type of account.
There is also a specific amount of service charge, chargeable on half-yearly basis.
Loan can be taken against MTDR. The Bank may sanction about 80% of the MTDR amount.
This is a non-cheque bearing product.
Short Notice Deposit Account (SND): Deposits held for 7 days to 89 days, which is withdraw able on notice, are specified as
Short Notice Deposit. In SND deposit account, profit is payable to the customer
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The profit rate for SND account is 4 percent. Profit is calculated on daily basis on the
balance in the account during the month. But customer will only receive profit if the
balance is 5 lac or above. Profit will be credited to customers account once in a
calendar year at the end of December. To qualify for profit any credit into the account
must remain deposited for at least 07 days.
The minimum account opening balance is Tk.5,000. The minimum balance must be
maintained in the account
The account maintaining fee is Tk.500 and charged twice a year. If the balance falls
below Tk.5,000, bank will charge minimum balance charge Tk.250 half-yearly
Installment Term Deposit (ITD):
An exciting chance to save monthly a certain amount and get attractive return along
with profit after tenure
Deposit can be made by convenient monthly installment depending on your income
Installments can be deposited in any working day of the month. Even advance
installment may be deposited
Profit will be calculated on daily basis upon your deposit.
To make it more attractive deposited amount will be weighted 1.05, which is 0.05
percent higher than 3 years term deposit
Duration of the deposit will be 5, 8, 10 or 12 years along with installment amount of
either Tk. 200/-, 300/-, 500/-, 1000
Any person above 18 can open this magnificent scheme. Even an ITD can be opened
on behalf of a minor!
This worthwhile scheme will make your deposit to grow in the following ratio:
Tenor 5 years 8 years 10 years 12 years
Deposit Gross return (Deposit + Profit) at maturity (Projected)
200 16182/- 31095/- 44003/- 59910/-
300 24273/- 46457/- 65894/- 89737/-
500 40410/- 77524/- 109970/- 149787/-
1000 80818/- 155157/- 219862/- 299499/-
1500 121272/- 232780/- 329801/- 449414/-
2000 161632/- 310285/- 440069/- 599765/-
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3000 242484/- 465661/- 660280/- 900179/-
4000 323395/- 621209/- 880760/- 1200981/-
5000 404213/- 776540/- 1100915/- 1501083/-
Mudaraba Haj Deposit Account (MHD): Al-Arafah Islami Bank Limited has introduced a Monthly installment based Hajj
Deposit for the middle class pious Muslims
In this scheme, your sacred wish for pilgrimage will be fulfilled with relatively
smaller monthly deposits
One can open only one Hajj account in his/her name which will be operated by the
rules of Mudaraba
One can prepare for the Hajj within one to twenty years and accordingly he/she can
select the amount of monthly installment from the following chart
The main attraction of the scheme is the profit based on daily stay of your deposit. In
fact it holds 0.06 more weightage than a 3 years deposit
In the year 2012 the estimated expenditure for Hajj is Tk.2,55,500/- and for the
upcoming years it has been gradually incremented in the rate of 5%.
A variety of maturity period and installment size will give you the option to make it
your own affordable scheme
If the depositor wants to go for Hajj before maturity period, he/she can amend the
residual amount with the deposit and fulfill his/her holy wish.
Estimated expenditure for Hajj for next 20 years after 2008 and the relative
installment amounts will be as under:
Year Monthly Installment Estimated Expenditure & Saving for Hajj
20 750/- 635000/-
19 800/- 605000/-
18 880/- 590000/-
17 950/- 556000/-
16 1020/- 531000/-
15 1070/- 485000/-
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A Rare Combination of Shariah and Modern Banking
14 1170/- 466000/-
13 1375/- 450600/-
12 1450/- 436000/-
11 1600/- 414000/-
10 1770/- 390000/-
9 2050/- 380000/-
8 2360/- 367400/-
7 2680/- 342980/-
6 3140/- 323000/-
5 3900/- 316500/-
4 4880/- 297500/-
3 6600/- 284800/-
2 10000/- 270000/-
1 20000/- 255500/-
Mudaraba Lakhpoti Deposit Scheme (LDS):
Al-Arafah Islami Bank Limited has brought this tremendous scheme to make the
dream of becoming a "hundred thousand taka" true
One can select the maturity period from 3, 5, 8, 10 or 12 years
This eye catching scheme is lucrative because it will accumulate profit on your
deposit in a daily-stay basis with a weightage 0.05 more than that of a 2 years deposit.
A single person can open more than one account in the same branch
Tax will be applicable on the deposited amount along with profit according to the
country law
Monthly installment can be deposited on any working day from any branch. One can
give standing order to make payment of the installment from his savings account
maintained with the branch.
Period Monthly Deposit Estimated return after maturity
3 years 2,325/- 1,00,000/-
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5 years 1,275/- 1,00,000/-
8 years 645/- 1,00,000/-
10 years 450/- 1,00,000/-
12 years 330/- 1,00,000/-
Mudaraba Millionaire Deposit Scheme (MMDS):
With this excellent scheme your deposit will increase to million taka
The size of monthly installment may be 24400/-17530/-13500/-10800/-8800/-5400/-
4100/-2870/-1700/- taka
The main attraction of this Mudaraba-based scheme is that, profit will be accumulated
on your deposit in a daily-stay basis. To make it a more important scheme it will have
a weightage of 1.05, which is 0.05 more than that of a 3 years deposit.
Monthly installment can be deposited on any working day from any branch. One can
even give standing order to make payment of the installment from his savings account
maintained with the branch. Advance deposit is also possible
This scheme comes with exciting investment facility. One can take advantage of 80%
of his/her deposit as investment facility.
Tax will be applicable on the deposited amount along with profit according to the
country law
Period Monthly Deposit Estimated return after maturity period
3 Years 24400/- 10 Lacs (1 Million)
4 Years 17530/- 10 Lacs
5 Years 13500/- 10 Lacs
6 Years 10800/- 10 Lacs
7 Years 8800/- 10 Lacs
10 Years 5400/- 10 Lacs
12 Years 4100/- 10 Lacs
15 Years 2870/- 10 Lacs
20 Years 1700/- 10 Lacs
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Mudaraba Kotipoti Deposit Scheme (KDS): With the help of Kotipoti scheme, your savings will rise to a mammoth amount of 10
million taka.
Various installment amounts along with different maturity periods are available in this
scheme, which will definitely match your requirement
Any person above 18 can open this magnificent scheme. Even an MKDS can be
opened on behalf of a minor!
The main attraction of this Mudaraba-based scheme is that, profit will be accumulated
on your deposit in a daily-stay basis. In this scheme, profit will be given with a
weightage of 1.05, which is 0.05 more than that of a 3 years deposit
Monthly installment can be deposited on any working day from any branch. One can
even give standing order to make payment of the installment from his savings account
maintained with the branch. Advance deposit is also possible.
Tax will be applicable on the deposited amount along with profit according to the
country law
This scheme comes with an exciting investment facility. One can take advantage of
80% of his/her deposit as investment
Period of Deposit Monthly Installment Expected return after maturity period
3 Years 244000/- 1 Crore
4 Years 175300/- 1 Crore
5 Years 135000/- 1 Crore
6 Years 108000/- 1 Crore
7 Years 88000/- 1 Crore
10 Years 54000/- 1 Crore
12 Years 41000/- 1 Crore
15 Years 28600/- 1 Crore
18 Years 20700/- 1 Crore
20 Years 16900/- 1 Crore
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Figure: Percentage of Account
6.2 LOCKER SERVICES:
Al-Arafah Islami Bank Ltd. has been providing 'Safe Deposit Locker' services for a long period of time. At present five of
our fifty branches have these facilities. The numbers, rent and other information is given in the following table:
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Locker sizes Security/unit(taka) Rent/unit(taka)
Large 10,000.00 2,500.00
Medium 10,000.00 2,000.00
Small 10,000.00 1,500.00
No. of lockers
Locker
sizes
Banani
Branch,
Dhaka
Dhanmondi
Branch,
Dhaka
Uttara
Model
Town
Branch,
Dakkhinkhan
Branch,
Dhaka
Narayangonj
Branch
Feni
Branch
Large 12 30 12 12 15 12
Medium 48 87 48 24 33 48
Small 36 66 36 25 48 36
The valuables kept in the lockers are also insured with coverage of the following amount
under a group insurance policy:
Locker sizes Insurance coverage (taka)
Large 1,50,000.00
Medium 1,00,000.00
Small 50,000.00
6.3 ATM SERVICES:
Head Office,
Card Division
Motijheel
Branch
Uttara
Branch
Gazipur Mirpur Dhanmondi
Branch
36, Dilkhusha
C/A. (9th Floor)
Dhaka-1000
161,
Motijheel
C/A,
Dhaka-
1000
H # 13, R #
14/A, Sec-4,
Uttara
Model
Town,
Uttara,
Holding
# k-280,
BIDC
Road
Gazipur
1 no super
market,
Asha Plaza,
Mirpur-1,
Dhaka-1216
House # 54/1,
Road # 4/A
Dhanmondi,
Dhaka-1209
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Dhaka-1230
Narayangonj
Branch
Cox's bazar Zindabazar Khulna
Branch
Jessore
71,
Bongobondhu
Road,
Narayangonj
Honeymoon
Resort,
Block#B,
Plot # 04,
Kolatoli R/A,
Cox’s bazar
Idris
Market,Hol
ding # 4/A
Zindabazar,
Sylhet
A Hossain
Plaza, 4,
Sir Iqbal
Road
Khulna
50, Rail
Road,
Kotowali,
Jessore
ATM NETWORK
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CHAPTER-07
GENERAL BANKING ACTIVITIES
7.1 GENERAL BANKING:
General banking division usually performs a lot of important banking activities. General
banking division is the division, which is mostly exposed to the maximum number of bank
customers. It is the introductory department of the bank to its customers. All business
concerns earn a profit through selling either product or a service.
A bank does not produce any tangible product to sell but does offer a variety of financial
services to its customers. AIBL has all the required sections of general banking and this
section are run by manpower with high quality banking knowledge.
This section is consists of activities of open of account, issue of cheque, payment, clearing of
inter bank transaction; inter branch transaction, and closing of account. Open of account is
one kind of technique of collection of deposits from customers.
"Deposits are Debts"- The money deposited with the banker is not held by him in trust but as
his debts to the depositors and the relationship that exists between the banker and the
depositor is strictly that of debtor and creditor. The deposits are accepted by the banker
through current and saving accounts withdrawable by cheques. Deposits are also accepted
against deposit a receipt, which is deposited against term deposit accounts. Those are primary
source of fund of a bank.
Saving Accounts Current Accounts Term Deposits
Fund
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Figure: Primary Sources of Bank Account
Negotiable Instrument Act, 1881 provides-
The deposits accepted by the banker are repayable on demand or otherwise and withdrawable
by cheque, draft, and order or otherwise. The total deposits held by the banker are broadly
classified as demand deposits and time deposits, the former being payable on demand and the
latter as per terms of the deposits.
"Customer"- The Negotiable Instrument Act has not defined a 'customer' but from section
131 of NIA and different court decisions as quoted in books of banking, it appears that only
those constituents of the banker are customers who have some sort of an account with him
duly introduced for the purpose, with the deposits put therein being withdraw able by
cheques.
Since bank is confined to provide the services every day, general bank is also known as .retail banking.
General Banking01 Cash section
02 Accounts opening section
03 Cheque clearing section
04 Remittance section
7.2. CASH SECTION:
Cash department is the most vital and sensitive organ of the branch as it deals with all kinds
of cash transactions. This department starts the day with cash in vault. Each day some cash
that is opening cash Al-Arafah Islami Bank are transferred to the cash officers from the cash
vault. Net figure of this cash receipts and payments are added to the opening cash Al-Arafah
Islami Bank. The figure is called closing Al-Arafah Islami Bank. This closing Al-Arafah
Islami Bank is then added to the vault. And this is the final cash Al-Arafah Islami Bank
figure for the bank at the end of any particular day.
7.2.1 Functions of cash department
Cash Payment Cash payment is made only against cheque.
This is the unique function of the banking system which is
known as payment on demand.
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It makes payment only against its printed valid Cheque
Cash Receipt It receives deposits from the depositors in form of cash.
So it is the .mobilization unit. of the banking system
It collects money only its receipts forms
7.2.2 Cash payment or Cheque cancellation process:
Step-1 Receiving Cheque by the employee in the cash counter
Step-2 Verification of the followings by the cash Officer in the
computer section
Date of the Cheque (it is presented within 6 month from
issue date)
Issued from this branch
Amounts in figure and sentence written does not differ
Signature of the drawer does not differ
Cheque is not torn or damage
Step-3 Gives pay cash seal and sends to the payment counter
Step-4 Payment officer makes payment
7.2.3 Books maintained by this section
Vault Register It keeps account of cash Al-Arafah Islami Bank in
vault in the bank.
Cash Receipt Register Cash receipt in whole of the day is recorded here
Cash Payment Register Cash payments are made in a day are entered here
Rough Vault .Register Cash calculation for final entry in vault register is
done here, as any error and correction here is not
acceptable.
Cash Al-Arafah IslamiBankance Book
Al-Arafah Islami Bankance here is compared with
vault register. If no difference is found, indicates no
error
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7.3 RECEPTION AND ACCOUNTS OPENING SECTION (FRONT
DESK):
This section welcomes the customers and clients with smiling face. The staff and officer of this section:
Opens the new accounts (all types)
Maintains subsidiary day books
Gives various types of information to the customers.
This section opens different types of account for their valued customers. Selection of
customer is very important for the bank because bank’s success and failure largely depends
on their customers. If customers are bad they creates fraud and forgery by their account with
bank and, this destroys the good will of the banks. So, this section takes extreme caution in
selecting its valued customer.
Function of this department:
Account Opening
Sending Thanks letter
Cheque Book issue.
Account Closing
Create Pay Order, TT and DD. (Work of Remittance Department)
Cheque Collection for Clearing, I.B.C and O.B.C.
7.3.1 Who can open Account?
Minor (Minor can open the account in the name of the minor's guardian or jointly
with the guardian)
Discharged bankrupt
Proprietorship firm
Partnership firm
Limited company
Non-trading concerns
Co-operative society
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Corporation and public body
Figure: Age Level
This pie chart shows the age level of the customers. It’s about different ages of the people. It
shows clearly that, 28-32 years age people usually come to their Dakkhin khan branch at a
big numbers. More than 38 years and the range of 23-27 years people usually come to their
bank as well and it’s about 25%.
7.3.2 Who can't open Account?
Minor (Minor is not allowed individually open account)
Drunker
Undischarged bankrupt
Insane
Lunatic
7.3.4 Accounts opening process
Step-1 Receiving filled up application in bank’s prescribed form
mentioning what type of account is desired to be opened
Step-2 The form is filled up by the applicant himself / herself
Two copies of passport size photographs from individual are
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taken, incase of firms photographs of all partners are taken
Applicants must submit required documents
Application must sign specimen signature sheet and give
mandate
Introducer’s signature and accounts number verified by legal
officer
Step-3 Authorized Officer accepts the application
Step-4 Minimum Al-Arafah Islami Bankance is deposited only cash is
accepted
Step-5 Account is opened and a Cheque book and pay-in-slip book is
given
7.3.5 Required documents:
Individual or sole proprietorship firm:
Photograph of the signatories 2 copies.
Photograph of the nominee 1 copy each (attested by account holder).
Photocopy of passport (first 5 pages).
Photocopy of national ID.
Copy of valid trade license.
Income Tax Certificate
Transaction Profile
Rubber stamp of the firm. (if it is a sole proprietor firm)
Partnership business:
Photograph of the signatories 2 copies.
Photocopy of passport (first 5 pages).
Copy of the valid trade license.
Transaction Profile
Rubber stamp of the firm.
Copy of Partnership Deed.
Income Tax Certificate
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Limited company:
Certified true copy of the memorandum and article of association of the company.
Certificate of incorporation of the company of inspection and return (along with a
duly certified photocopy for bank’s records).
Certificate from the register of joint stock company that the company is entitled to
commencement business (in case of public Ltd .co.).
Extract of the resolution of the board/general meeting of the company for opening the
account and authorization for its operation duly certified by the Chairman/Managing
Director of the company.
List of Director/Authorized officer along with designation and specimen signature
who will operate the account.
Photograph of the signatories and all Directors.
Photocopy of passport (first 5 pages).
Photocopy of national ID.
Copy of the valid trade license.
Director’s particulars.
Transaction Profile
Income Tax Certificate.
7.3.6 Special Caution or the documents from the Account opener of the following types:
Partnership Firm Partnership deed must be taken
Mandate from the partners is essential,
Indicating who will operate the account
Public LimitedCompany
Certificate of Incorporation
Copy of Memorandum and Articles of Association
Certificate of Commencement
Copy of Resolution of the Board of Directors
Private LimitedCompany
Certificate of Commencement is not necessary
Certificate of Incorporation
Copy of Memorandum and Articles of Association
Copy of Resolution of the Board of Directors
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7.3.7 Thanks Letter:
After initial deposits the banker doesn't issue cheque at the same time. Bank sends Thanks
Letter to thanking the account openers to open accounts in its branch. This letter treats
customers as honorable persons as well as it create good faith and relationship with, the bank.
But most important thing of this letter that it is one kind of technique to verify the validity of
the customers given information. Because, when the registered letter is returned because of
wrong information about their name or addresses, it can not be explained that there is a
possibility of fraudulent. And then banker must have to stop the accounts and issue of the
cheques.
7.3.8 Cheque Book Issue:
Bank provides a cheque book one day after requisition. The name of account holder, account
number and cheque number are printed on the book and leaves. Bank usually issue cheque
book containing 20 leaves for savings account, 50 leaves for current account. A charge for
cheque book is Tk.3.00 per leaf. So, Tk.60.00 charged for 20 leaves cheque book and
Tk.150.00 for 50 leaves cheque book.
7.3.9 Cheque:
A cheque is an unconditional order of the drawer in writing bearing a date, to the banker
maintaining his account to pay on demand, to a named person, his order or bearer, a certain
specified sum of money, expressed in both figures and words.
Parties to Cheque
There are three parties are available to a cheque. They are Drawer, Drawee, and Payee.
Drawer: Drawer is the person who draws the cheque i.e. the depositor of money in
the bank.
Drawee: Drawee is the drawer's banker on whom the cheque has been drawn.
Payee: Payee is the person who is entitled to receive the payment of a cheque.
When a cheque is drawn 'pay to self or 'pay cash' the payee is the drawer, his endorsee or
bearer, as the case may be depending on the form in which it is drawn namely, order or
bearer. A cheque is Payable forthwith on production and no presentment thereof is
required as in the case of a bill of exchange or pro note. The payee or endorsee who is in
possession of a cheque or the bearer thereof is the holder. A holder becomes a holder is 44
A Rare Combination of Shariah and Modern Banking
due course when he possesses the instrument for consideration, before it became over-due
and without notice that the title of his transferor was defective.
7.3.10 Conditions of cash/ cheque deposit:
The pay-in- slip shall not be treated as valid until is duty sealed and signed by
the authorized officers of the bank. Besides, it is only a memorandum of
deposit of item(s) described therein
The cheque shall be deposited by crossing only
After deposit of cash, the depositor should make sure that the authorized
officer has signed and stamped the carbon copy/duplicate copy of the deposit
slip. If otherwise, that must immediately be brought to the notice of the head
of the branch
Deposit slip folio should be exclusively used for bankwise/branchwise deposit
of cheques and cash
The depositor must put his or her signature on the deposit slip in the space
provided for
After deposit of cash/cheque the carbon/duplicate copy of the deposit slip
should be retained for future
In receiving the cheques or any other instrument for deposit including cheques
drawn AIBL or other banks, the bank acts only as the depositor’s collecting
agent and assumes no responsibility for the realization of such item(s). if
payment of the amount of any item is not received by the bank for any reason
whatsoever such amount will be charged back to the depositor’s account
including incidental charges. All items for deposit are accepted by the bank on
the understanding that the depositor assumes full responsibility for the
genuineness, validity and correctness of all signatures and endorsements
appearing thereon
The account holder should get computer print out of the account statement on
monthly or quarterly basis and should reconcile the entries with the carbon
copy of the deposit book. Any discrepancy must be reported immediately to
the branch
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7.3.11 Bank Account Statement & Certificates
All types of bank statements and certificates such as solvency certificates, income tax
certificates, B.O. certificates etc. are issued by the bank on favor of the customers. As per
customer’s instruction the bank dispatch the account statement/advice to his/her/their address.
Moreover, on customer’s request, bank provides statement and certificates related to the
account.
7.3.12 Account Closing
Account closing is also done by account opening section. The customer may close
his/her/their account(s) at any time giving notice to the bank. Similarly, the bank on genuine
ground may close customer(s) account giving reasonable notice for the action or without any
notice if the conduct of the account is not satisfactory to the bank or any reason(s)
whatsoever. In either case, bank will realize a closing charge from the customer’s account.
The usual closing charge is Tk. 300 + 15% VAT. But, the closing charge of account within
three months of opening is Tk.500 + 15% VAT.
To close an account:
Account holder requires applying in a specific form with full signature.
He/she/they must surrender the unused leaves/cheque book provided by the bank.
Verification of signature and approval by operation head.
Close the account.
On closure of the account, the bank will pay the credit balance (if any) of the account and any
profit due to the customer(s). The customer(s) shall surrender the unused cheque
books/leaves along with the requisition slip and other materials (if any) supplied by the bank
for operation of the account.
7.3.13 Account Transfer
Account opening section also transfers account to from one branch to another on customer’s
request. The steps are:
Application for account transfer
The customer(s) shall surrender the unused cheque books/leaves along with the
requisition slip and other materials (if any) supplied by the bank for operation of the
account.
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Verification of signature and approval of operation head.
Inform the respective branch.
Forward the documents.
Close the account.
7.3.14 Local Remittance Section
Remittance of funds
Remittance of funds means transfer of remitted funds to a particular person or his order in a
particular branch of the same Bank or on other banks with which it may have agency
arrangement. This facility is available to the customers of a bank as well as non-customers.
Modes of Remittance
Various modes have been evolved by the banks for remittance of funds from one place to
another. Generally the banks in three ways affect such remittance, namely:
Demand Draft (DD)
Mail Transfer (MT)
Telegraphic Transfer (TT)
7.14.1 Demand Draft
A banker's demand draft (DD) is an unconditional order of the banker's one office to another
to pay to the named person or order the amount mentioned therein on demand. The remitter
of funds can purchase a banker's draft making the amount payable to anyone including
himself. If the draft is not crossed, the payee can draw the amount in cash upon production of
the same to the drawee office with satisfactory evidence of his/her identity or can draw the
money by depositing it to his/her account there or any other banker. The draft being payable
to certain particular person or order the banker must satisfy himself as to the title of the
person presenting it for receiving the payment. The banker is discharged from liability only
by payment in due course.
7.14.2 Mail Transfer Advice
Where the remitter desires the banker to remit the funds to the payee instead of purchasing a
draft himself, the banker does it through a Mail Transfer Advice. The transfer is so called as
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the advice is dispatched to the paying office by ordinary mail. The payee must have an
account with the paying office as the amount remitted in such a manner, is meant for credit to
the payee's account and not for cash payment.
7.14.3 Telegraphic Transfer
Sometimes the remitter of the funds requires the money to be available to the payee
immediately. In that case, the banker is requested by him to remit the funds telegraphically.
Such a remittance is effected by the banker through a coded telegram attested by secret check
signal, on receipt of which the paying office pay the amount to the payee in cash through a
telegraphic payment order or credit his account, as the case may be.
It is also in practice with the banker to purchase telegraphic transfers from another banker of
first class standing up to a certain specified limit under prior arrangement detailing the terms
and conditions. This selling of telegraphic transfer is resorted to by the latter banker when he
or she faces shortage of funds locally. The news of purchase and receipt of reimbursement by
the respective office are required to be conveyed to the concerned receiving and purchasing
office telegraphically in view of larger amounts being generally involved.
But, the “Local Remittance Section” of AIBL performs the following functions:
Pay order (PO)
Bills Collection
MTDR
AIBL has online banking facility; DD, MT and TT are not practiced now.
7.14.4 Pay Order (P.O)
Issued by a branch of the banks is, technically speaking, not a mode of remittance. It appears
to be a remittance to the local creditor. A Pay Order is not a negotiable instrument and hence
it can neither be endorsed nor crossed like a banker’s Draft or Cheque. PO is called the
“Manager’s Cheque” because it never bounces. It has no time limit for its validity like six
months for cheques.
The PO application form is stored as a record and at the same time a PO issuing register is
maintained. If cash makes the payment, then the application form is stored by “Cash section”.
And when the payment is made through cheque or debiting customers account, then the
application form is stored by “Remittance section”.
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Banks provide remittance facility to transfer funds by charging a commission. Commissions
charged for remittance vary from bank to bank. But VAT charged by the government is same
for all the banks. Usually, VAT is 15 percent of the commission charged by a particular bank.
The commissions charged by AIBL and VAT on these commissions are given below:
Amount (in taka) Commission (in taka) VAT (15% on Commission)
1 - 10000 20 3.00
1,0001 – 500,000 30 5.00
500001 – Above 100 15.00
Figure: PO commission rate and VAT of AIBL.
Issuance of PO
Application in prescribed form
Receiving cash deposit, cheque or debiting customer’s account
Writing PO without alteration
Check and signed by two authorized officer.
Handover to customer with acknowledgement
Entry into PO issuing register
Preserve the application form.
During issuance, two authorized officer signs the PO. After their signature, they use a P.A.
number for preventing fraud and forgery.
Issuance of Duplicate PO
Application with reason
Verify the signature with the original application form.
Ensure PO amount not paid.
Obtain indemnity bond
Issuance of duplicate PO 49
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Note in register and application form
Message to the branches.
Preservation of application and indemnity bond.
Payment of PO
Usually it is payable at the issuing branch itself. Due to their online service, any other branch
of AIBL all over Bangladesh can pay PO purchased from any branch. For purchasing PO, a
customer has no need to have an account. But for encashment, it is necessary to have an
account in the bank. Because PO is only payable to payee i.e. the instrument is “Account
payee.”
Stop Payment of PO
Application with reason
Signature verification
Ensure PO amount not transferred to the payee
Obtain indemnity bond
Issuance of duplicate PO
Note in register and application form
Message to the branches.
Preservation of application and indemnity bond
Cancellation and Refund of PO
If the payment of this order has not been completed and refund is requested, AIBL will
endeavors to notify the appropriate office, branch, correspondent or agent to cancel the
transaction. The cancellation process in brief is as below:
Application with instrument
Signature verification
Ensure PO amount not transferred to the payee
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Confirmation about duplicate issue
Obtain cancellation charge
Note in PO register and application form
Cancellation of instrument.
7.14.5 Bills Collection
AIBL collects the payment of cheques deposited by their customers. Usually, inter-branch
collection is made through online, but inter-bank collections are made through “Clearing
House.”
Process of collection
When a branch receives cheques for collection, they can collect it directly through the
“Clearing House” or through other branches. Each branch has a zone for collection. If the
cheques of different banks received from customers are within their clearing zone, they
collect it directly through their “Clearing Section.” But if the cheques are outside their zone,
they forward these cheques to another branch of that area with forwarding slip named for
collection. This is called Outward Bills Collection (OBC).
The process of forward cheques to other branches i.e. OBC is as below:
Receiving cheques from cash section and entries are made to OBC register.
Then, stamp OBC on cheques with OBC serial number.
Crossing and Endorsement.
Confirmation of endorsement by authorized signature.
Making a forward slip narrating the number of cheques, total amount and account
number to which the amount is to be credited.
Attach forwarding slip and cheques only and make a copy of them.
Send the cheques with forwarding slip to respective branch.
Preserve copy of forwarding slip and cheques with customer’s depository slip.
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In the same way, when a branch receives cheques or bills for collection from other branches
of AIBL then the branch in whose favor the bills are sent, collects bills for those branches.
This is called Inward Bills Collection (IBC).
The step-by-step collection process of IBC may be stated as below:
Receiving the cheques for collection.
Making DAD (Deposit Awaiting Disposal) Entries.
Making Bills section entries.
Crossing and Endorsement
Confirmation of endorsement by authorized signature.
Send to the “Clearing Section.”
Send a message to depositors whose cheques are dishonored.
Making debit and credit vouchers for honored cheques and stored.
7.14.6 Clearing
Clearing is the process by which an individual cheque/ instrument is exchanged between
collecting and paying Bank within the same station through Central Bank mechanism.
In the stations where there is no Branch of Bangladesh Bank, the clearing is done through
Sonali Bank. The claim on a particular Bank and that Bank’s claim on other Bank are settled
through Clearing House mechanism. Each member Bank has an account with Central Bank
and either it owes or some Bank owes to it shall be settled through that account.
Clearing operation is centralized at clearing Branch i.e. Branch maintaining account with
Bangladesh Bank for clearing purpose.
Clearing Process:
Cheques for clearing can be classified into two classes. One is the “Same day cheques” and
other one is “Normal day cheques.”
Same Day Cheque:
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Cheques those are required to be cleared through the clearing house on the same day,
at which it is sent for clearing, are called the “Same day cheques.” Prerequisites of
same day cheques are-
Face value of cheque should be above 5 lacs.
Paying banks should be within Motijheel area (5km around the central bank).
Normal day Cheque:
On the other hand, cheques those are required to be cleared through clearing house on the
next day at which it is sent for clearing are called the “Normal day cheques.” Normal day
cheques send to head office, next day they are send to clearing house. It takes one more day
for clearing than same day cheques. Clearing house arranged twice in a day – in morning and
after launch. In morning, 1st house starts at 9:30 a.m. and clears the normal day cheques. 2nd
house starts at 11:30 a.m. and clears the same day cheques. After launch, the dishonored
cheques are returned to the collecting banks. This is called “Return House” that starts at 2:30
p.m. The steps are as below:
Receiving the cheques for collection.
Making computer (Clearing and Online deposit) Entries.
Making a branch and bank wise summary and attach it with cheques of respective
banks.
Send to the head office.
During computer posting, the cheques deposited by customers of a branch itself, credits the
customer’s account. But this amount is not included in available balance of that account. This
credit is called “Shadow Credit.” If deposited cheques are honored, the customer’s accounts
will be auto credited by central clearing of the bank. Sometimes, a branch collects cheques
for other branch or deposited by account holder of another branch. Then, the collecting
branch credits (shadow) their own DAD account. If cheques are honored, then collecting
branch credits customer’s account directly by debiting their DAD account. If deposited
cheques are dishonored, the customer’s accounts will be auto debited by central clearing of
the bank.
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7.14.7 MTDR
Income Tax
Income tax charged by the government when the MTDR matures. Income tax rate is 10
percent of the interest received by the customer.
Excise Duty on MTDR
Excise duty is charged once in a year and in the beginning of the year. First excise duty
charged on the principal amount of MTDR. From next year, it is charged on the present value
of MTDR. A table shows the amount of excise duty as below:
Deposited Amount (in Taka) Excise Duty (in Taka)Up to 20,000 Nil20,001 to 1,00,000 1201,00,001 to 10,00,000 35010,00,001 to 1,00,00,000 1,0001,00,00,001 to 5,00,00,000 5,000Above 5,00,00,000 10,000
Process of Issuing MTDR
The process of issuing a MTDR may be stated as below:
Application in prescribed form.
Receiving cash deposit, cheque or debiting customer’s account.
Obtaining two passport size photographs (One of the purchasers and one of the
nominees).
Writing MTDR without alteration.
Check and signed by two authorized officer.
Handover to customer with acknowledgement.
Entry into MTDR issuing register and computer.
Preserve the application form.
The application form has two parts. One is account opening form and another is personal
information form. If the purchaser already has an account in AIBL, he or she needs not to fill
up the account opening form. He or she only required to fill up the personal information
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form. One can purchase MTDR in single name or joint names. In case of joint purchaser,
each purchaser required to fill up one personal information form. If the purchaser has no
account, then bank opens an account for the customer.
If the customer gives cash or cheque to AIBL to purchase MTDR, bank can issue MTDR
then and then. But if the cheque is of other banks, then the FDR is issued after the cheque has
been honored which usually takes 2-3 days.
There is no guideline about the minimum required amount to purchase MTDR. A client can
purchase MTDR worth of any amount. But in practice, banks will prefer minimum 50,000
taka for purchasing MTDR.
Payment of MTDR
Payment of MTDR may be made before maturity or after maturity.
Premature Encashment
If encashment request is received within 30 days of issuing date, the purchaser will not
receive any interest on it. Moreover, following charges will be subtracted from the principal
amount:
Premature charge : 300 taka.
VAT (15% on P. charge): 45 taka
Excise Duty : Based on principal amount.
For any premature encashment these charges are taken by the bank. After subtracting all the
charges, rest amount is given to the client.
If encashment request is received after 30 days of issuing date to any date before maturity,
the purchaser will receive interest at savings profit (6%) on it. But he/she has to pay the stated
premature encashment charges.
Matured Encashment
After maturity, a purchaser can apply for payment of MTDR. He/she can take either entire
amount i.e. principal amount plus profit or only the profit. If the purchaser wishes to draw
only the profit earned, this profit can be paid in cash or transfer to customers account. If the
purchaser wants entire amount, he/she should submit the instrument to the bank. The
payment process in brief is given below:
Instrument received with two signatures on back side.
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Signature verification from MTDR application form.
Calculation of total amount to be credited to customer after subtracting income tax
and excise duty.
Payment is made by transfer to account of customer or cash. For cash payment, a
debit voucher is issued for payment of interest credited.
Entry in MTDR issuing register and made customer account nil.
Mark paid on application form and MTDR issuing register.
Renewal of MTDR The MTDR renewal is done after its maturity if purchasers will not apply for encashment of
MTDR. During renewal, profit obtained as prescribed rate is added to principal amount. Then
income tax and excise duty is subtracted from the amount obtained earlier. The balance
amount will be the new principal amount for renewal. It should be noted that, income tax is
charged on each maturity when client receives profit and excise duty charged once in a year
and at the beginning of that year.
If the customer only takes the profit earned on maturity, the principal amount will be the
initial MTDR amount. Renewal entries are made in the MTDR issuing register and then it is
posted to the computer. The computer has automated software for MTDR renewal, which
provides a date wise list of MTDR’s with profit at the beginning of each month. According to
that list, renewal of MTDR’s is made on that day. The renewal entries are posted to the
computer only if the purchaser will not apply for encashment of MTDR and apply only for
profit earned on maturity date. For paid MTDR, no computer entry is made.
7.14.8 Foreign Remittance:
Foreign remittance is to send money of customers from one place to another, from one person
to another outside the national boundary. Though Dakkhin khan branch, Al-Arafah Islami
Bank Ltd. is a non-ad branch, it can able to serve the customers by receiving and paying their
incoming foreign remittance in the form of local currency. Foreign remittance is received by
the bank via some internationally authorized agents. There are many medium of agent for
foreign remittance at Dakkhin khan branch, Al-Arafah Islami Bank Ltd. They are –
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Moneygram:- Moneygram is a money transfer medium/agent serves both domestic &
international services. Its identification number consist 8 digits.
Eldorado:- Eldorado is another money transfer agent serves only international
services. Its identification number consist 7 digits.
The agents are identified by a serial number which has been supplied by the sender to
receiver of customer. After digit identification the dealing also verifies the receiver’s name
with documents of sender and e-mail of the agent. Verifying that, send an e-mail to the agent
and transfer the amount to the cash department for payment. Any one of the documents
required to identify the receiver are as follows:
National ID card
Voter ID card
Salary Statement
Statement of tuition fees
Academic/ organization’s ID card
Another medium of agent for foreign remittance are – Money Transfer, RIA, Kushiara, ANE
etc
CHAPTER-08
LEARNING FROM MY WORKING AREA
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8.1 MY WORKING AREA:
First of all, I was asked to work in different sections of General Banking. Here we dealt with
new customers who wanted to get information about the branch and will to deal with the
branch. This is a very interesting department because here we met people of different types
and deal with them accordingly. In this section, I observed the following functions:
8.1.1 Dispatch Section:
In dispatch section main job is keep record on inward and outward document. If any
document came into bank for various purposes from different organization or bank head
office or another branch but also if any document ,application go outward from bank these all
the record are included in dispatch section (example : foreign exchange application,
document letter of credit, joining application , a/c reopening, A/c closing ( ITD, MTD e.t.c) .
In this section particularly I work done very well.
8.1.2 Issuance of Demand Draft (DD) / Pay Order (P.O)
A demand draft is provided to the client in whom he has to specify that on which bank it is
drawn. The amount both in words and figures is written on the demand draft. Pay order is
only payable to payee. In this section I know how to write PO and what is this process.
8.1.3 Bills Remittance Department:
It is most important and interesting department. This section deals with the transfer of money
from one branch to another branch. Nearly six drafts issued daily from this department. Here
I know the amount transferred and what is the procedure. This department also deals with
T.T. transfer of money.
8.1.4 Foreign Remittance Department:
In this department one person send money in Bangladesh from outside of the national
boundary, customer come to the officer and give a PIN number. If Pin number is right bank
pay the customer those amount. My work of this department is fill up the form and collect
national ID card and other necessary papers.
8.1.4 Deposit Department:
Deposit department deals with current, saving fixed accounts for a long period. In current
account the bank does not offer any interest you can deposit or withdraw any amount during 58
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banking hours. In Fixed account people normally of old age are more interested because they
get a lump sum amount every month as a markup or interest. These accounts are normally for
one month to seventy two month.
8.1.5 Cash Collection:
In cash counter I used to collect cash from customers that they used to deposits in Saving
Accounts.
8.1.6 Assisting Customers to Open Bank Account:
I used to help customers to fill up the account opening form. Also provided information
regarding the types of papers they need to open a particular account.
8.1.7 Providing Cheque:
Customers who open new bank account have entitled to receive a cheque book after one
week of account opening. I used to collect account number from them, verified it and issue a
new cheque for them.
CHAPTER-09
FINDINGS & RECOMMENDATION
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9.1FINDINGS:
During my internship period at Al Arafah Islami Bank limited I have observed the system
following by the bank. By observing the system I have identified some problem of Al Arafah
Islami Bank limited. The findings are as follows:
AL-Arafah Islami Bank has a sound Management System. Efficient
Management, Proficient Relationship between Management and Employee,
Training and Development of the Employees and overall success are the man
potency of the Bank.
Strong financial performance such as Capital adequacy, Liquidity position, Asset
Quality, are at standard level which gives the bank as top position of Islami
Banking services
In our country, maximum Islami Bank and Conventional Bank introduced the product number mid 1990's. It is growing rapidly because; the product has the potentiality of earning huge profit to the banks. But the product has not developed in structure and statute.
AL-Arafah Islami Bank Limited has been offering several types of deposit schemes (Conventional also) by which people have got some opportunity to save their small money and bank’s also able to earn more for themselves and for their customers.
Comparatively AL-Arafah Islami Bank offers maximum number of deposit schemes. Most of the private sector banks are offering small number of deposit schemes. By which AL-Arafah Islami Bank is successful to capture and retain large number of customers.
Though Bangladesh is a Muslim country, maximum people have no real Islamic knowledge and Islamic finance. So, people easily go to other conventional bank for their services.
There are many illiterate clients of AIBL.
Has not enough strong market policy
Promotional activities are very poor
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There is no customer care section
Though AIBL using banking software but its processing very slow
Shortage of officers
9.2RECOMMENDATION:
Though conducting this study I have acquired some practical knowledge about banking
system and other relevant matters. Now I would like to provide some recommendation, which
may be helpful to promote the performance of Al Arafah Islami Bank Ltd.
SWOT analysis shows with what types of weaknesses the Al Arafah Islami Bank Ltd. Based
on the SWOT analysis some recommendations are given below:
Decisions from Professionals: To achieve goal of an organization like bank,
organization have to depend on the decision that are made by professional
bankers, who have great knowledge and experience in their field. Organization
should not take any adventurous decisions based on the unprofessional person's
opinion. It ensures the bank take decision on the point, not over the point.
Co-operative Decision: To take a decision Al Arafah Islami Bank Ltd. and its
branches have to introduce co-operative decision making system, where each staff
will give their opinion regarding the problem to solve it. This system can help the
bank to take best decision.
Advance Security System: To secure the branch from any types of threats like
robbery, thief, and loss from fire etc., the branch has to install security camera,
adequate fire defensive instrument and other security system. That will give
confidence and trust in the mind of customers.
Strong Promotional Activities: To create a brand image in the mind of the
people, the bank has to take strong promotional activities as soon as possible.
Aggressive Strategy: Remove the defensive strategy from the mind and take
aggressive strategy is the best decision for AIBL and its branches. Because,
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defensive strategy does not make the bank leader of this sector, only it can help
the bank to survive.
Introduce R&D Division: Introduction of Research and Development Division
(R&D Division) will be a best decision for this organization. Because, this
division can especially help the bank to create not only new deposit and loan
products but also other new services by research in the field, which will give the
organization competitive advantage over its competitors.
Differentiated Marketing: Al-Arafah Islami Bank Limited practices mass
marketing. This is not appropriate for targeting all market segments. The bank
needs to identify and then build up communication strategies based on those needs
about Islamic financing
To establish Customer welfare -oriented Banking System:
Customers are the hearts of the organization. They should provide more space in
the office and if possible, they should have some entertainment facility.
Each branch should be decorated with Electronic Display Board, which will show
that which table is performing what function and now, whom is serving? The
branches should be decorated with proper Sound System facility, which will be
helpful to communicate with the clients or customers more easily. This system
will decrease the confusedness of the customer, which ultimately will increase the
efficacy of customer service.
Al-Arafah Islami Bank Limited should try to continuous improvement of the
quality of human resources. So, Management should manage continuous training
& motivation.
Al-Arafah Islami Bank Limited should try to satisfy customer with the price
charged.
Most of the customers are 25-50 years old. Al-Arafah Islami Bank Limited
should target these customers about their investment for here & hereafter.
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BIBLIOGRAPHY:
Reports:
Annual Report of AIBL, 2010
Annual report of AIBL 2011
Web Sites:
www.google.com
www.wikipedia.com
www.aibl.com
Newspaper
Face to face conversation with employees & clients
