1.

1 ABSTRACT Social Islami Bank Limited (SIBL) is a banking company registered under the comp anies Act 1994 with its head office 15 Dilkusha C/A, Dhaka-1000. The bank operat es as a scheduled bank under a banking license issued by the Bangladesh Bank. Th e Bank started its operation from 22, November 1995. SIBL is a capitalized new g enerating Bank with an authorized capital of Taka 4000 Million in 2008 and paid up capital of Taka 585 million in 2008 and also 585 million respectively as of D ecember 2007. In the formal corporate sector, this Bank would, among others, off er the most up-to date banking services through opening of various types of depo sit and investment accounts, financing trade, providing letters of guarantee, op ening letters of credit, collection of bills effecting domestic and internationa l transfer, leasing of equipment and consumer durables, hire purchase and instal lment sale for capital goods, investment in low-cost housing and management of r eal estates, participatory investment in various industrial, agricultural , tran sport, educational and health projects and so on. In the Non-formal non-corporat e sector, it would, among others, involve in cash Waqf Certificate and developme nt and management of WAQF and MOSQUE properties, and Trust funds. For coordinati ng my internship I have been placed in Social Islami Bank Limited, IDB Bhaban Br anch, and Dhaka. There are 03 sections in IDB Bhaban Branch. They are: 1) Genera l Banking .2) Investment Department 3) Foreign Exchange Department. Accordingly I shall work all of the sections. I shall devote my utmost effort and attention to learn bankers functions. After completion of the internship, I will render my all knowledge to present the report on Overall banking System of Social Islami B ank Limited- A Special Focus on Fund Management.The report is divided into Seven Chapters. 1) Introduction 2) Organization 3) Branch operation 4) Online banking 5) Performance, Ratio and SWOT Analysis 6) Project Analysis Fund Management 7) Concluding Remarks. In the organizational part will briefly describe overview of the organizations historical background, functions, business philosophy, owners hip pattern, foreign correspondents and overseas operations and benefits provide d to customers by the organization. Branch operation part will describe the prod uct and service provided to the customers by a branch. 1.2 ORIGIN OF THE REPORT The BBA program conducted by Pataskala Science and Technology University has bee n introduced to provide a number of fresh graduates in business sector; this pro gram has been designed to facilitate the students and the executive to provide b asic theoretical knowledge and practical in the job activities in the context of Bangladesh. 1.3 SCOPE OF THE STUDY I have been assigned in the IDB Bhaban Branch of Social Islami Bank Ltd., and th us covered me the way to get myself familiarized with the banking environment fo r the first time. Indeed, I have had an opportunity to gather experience by work ing in the different departments of the branch. The area of concentration of thi s report is confined to investigating different aspects of the banking transacti on as well as problems and prospects and by this way an endeavor is made to give recommendations for removing the problems. 1

1.4 OBJECTIVE OF THE STUDY This reposting study is aimed at focusing on Islamic Banking operational system in Bangladesh. In addition to this a comparative observations would be made with other commercial banking operation. The objectives are: To be acquainted with h ow bank perform its operation. To know about the modes of investment of Islamic Banks. To focus on products, services and financial condition of SIBL. To expose strengths and weakness of SIBL in comparison with competitors. 1.5 METHODOLOGY OF THE STUDY In order to make the Report more meaningful and presentable, two sources of data and information have been used widely. 1.5.1 Sources of Data /Information Prima ry sources Face-to-face conversation with the respective officers and staffs of the Branch. Informal conversation with the clients. Observing banking activities for three month. Secondary sources Annual Report of SIBL. Periodicals published by Bangladesh Bank. Various book, articles, compilations etc. Prior research re ports. Website Information. 1.5.2 Analysis of data /Information Two approaches have been mainly used in this report. Conceptual Approach. Empirical Approach. 1.6 AREA OF STUDY This project is limited in overall banking system of the bank. All three functional areas of the bank are taken to the scope of study. General Banking. Foreign Exchange Are a. Investment Area. 2

1.7 LIMITATIONS OF THE STUDY It is obvious that every study has some limitations . The study I have made is of great importance and required me huge work. Those limiting factors that hampered my smooth workings in bank and finally in prepari ng this report are as follows: The organization maintains strict confidentiality about their financial and other information. They are afraid of any type of inf ormation leakage to their competitors. So there was always difficulty to have ap propriate information from them. Duration of this study was too short to have a sound understanding of the overall banking. Scope of my study is so wide that an alytical and comprehensive study is not possible. Lack of sufficient books, pape rs and journals etc. Web site of the Organization isnt up to date to gather valua ble information. 1.8 REPORT PREVIEW This project is short one providing only the facts and figure s of current situation of operational activities and performance of the bank. 3

2.1 INTRODUCTION Since the establishment of Social Islami Bank Limited has come forward as a private commercial bank and very encourage has come forward as the stimulator of economic activities in the country. The bank has been entrusted wi th the responsibility of undertaking various steps related to the development of the countrys commercial, industrial and agricultural sectors. The banking sector of a country is called the economic barometer of the country. As a pioneer comm ercial bank in the private sector in Bangladesh, Social Islami Bank provides con siderable financial helps to the business sector that imports industrial goods a nd/or exports excess production outside the country for profit. Thus for imports the Social Islami Bank provides LIM (Loan against Import Merchandise) and LTR ( Loan against Trust Receipt) facility and for exports provides both pre shipment and post shipment finances. Thus with these bank helps the prospects in the busi ness sector has increased more than ever before. 2.2 HISTORICAL BACKGROUND OF SI BL Social Islami Bank Limited (SIBL) is a banking company registered under the comp anies Act 1994 with its head office in 15 Dilkusha C/A, Dhaka-1000. The bank ope rates as a scheduled bank under a banking license issued by the Bangladesh Bank, Central Bank of the country. The Bank started its operation from 22, November 1 995. SIBL is a capitalized new generating Bank with an authorized capital and pa id up capital of Taka 585 million in 2007 and also. 585 million respectively as of December 2006.Currently the bank has 24 branches of which 12 in Dhaka, 4 in C hittagong, 1 in Sylhet, 2 in Narayanganj, 1 in Bogra, 1 in Khulna, 1 in Rajsahi, 1 in Sirajgonj. The bank undertakes all types of banking transaction to support the development of trade and commerce in the country. SIBL services are also av ailable for the entrepreneurs to set up new venture and BMRE of industrial units . To provide clientele services in respect of international trade it has establi shed wide corresponded banking relationship with local and foreign banks trade a nd financial interest home and abroad.Since the very inception, Social Islami Ba nk Ltd. is working with the philosophy of serving the nationals as an ideal and unique financial house. Every organization has some objectives of its own. The p rime objective of Social Islami Bank Ltd. is to earn profit throw undertaking th e responsibility of providing financial help for the development of the countrys commercial and industrial sector. 2.3 FORMATION OF SOCIAL ISLAMI BANK 2.3.1 Formation The Bank was incorporated in Bangladesh in the year 1995 as a banking company under the companies Act, 1994, all types of commercial banking services as provided by the Bank from time to t ime besides as a matter of policy the Bank conducts its Business on the principl es of Mushataka, Murabaha, Bai-Muazzal and Hire Purchase transaction approved by Bangladesh Bank. 4

2.3.2 Branches Information At present, 24 (twenty four) branches are in operatio n all over the country. A list of branches is appended below: SL. No. Name of the Branch Address Telephone No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Principal Branch Agrabad Branch Khulna Branch Sylhet Branch Rajshahi Branch Guls han Branch Babu Bazar Branch Moulvi Bazar Branch Bogra Branch Sirajgonj Branch I DB Bhaban Branch Khatunganj Branch Panthapath Branch Chandaikona Branch Sonargao n Branch Foreign Exchange Branch Halishahar Branch Hasnabad Branch Dhanmondi Bra nch Nawabpur Road Branch Jubilee Road Branch Uttara Branch Fatullah Branch Mirpu r Branch 15, Dilkusha C/A, Dhaka. 103, Agrabad C/A, Chittagong. 2 Sir Iqbal Road, Khulna. Central Plaza, Amberkhana, Sylhet 219 Shahe Bazar Main Road, Rajhahi. 125, Guls han Avenue, Dhaka. Sultan super Market 18/4, Armanin Street, 77/7 Wahid Center, Moulvi Bazar, Tin Potty, Borogola, Bogra. Zaman Complex, S.S. Road Sher-E-Bangla Nagar, Dhaka. 96, Khatungonj, Chittagong. Bashundhara City Shopping Mall, Pabna Bazar, Royganj Sirajgonj Mograpara, Sonargaon, Narayangonj. BIWTA Bhaban, 141-1 43, Motijheel C/A, VIP Plaza, Plot # 15/A, Road # 2, Block-G Hasnabad Super Mark et,Keranigonj. House # 84, Dhanmondi R/A, Dhaka. 82 Nawabpur Road. 610/11, jubil ee Road, Chittagong. Plot # 27, Road # 7, Sector # 3, Uttara Fatullah Bazar, Nar ayanganj Block Kha, Sec 6, Main Road 1 01713-018779 031-714041 041-722133 01711-946325 0721-812317 01819-215161 7395118 -9 01911-350966 051-65833 0751-63203 8115789 01819-315328 01913-088821 01715-805 435 01819-251709 01817-530004 01819-345299 01711-565893 01819-274072 7174994-5 0 1819-326288 8961124 01911-358157 01819-403982 2.3.3 Capital Structure Capital structure of Social Islami Bank Ltd. is as under : 1. Authorized capital : (4000.00 million, ordinary shares of Tk 1000 each) 2. Paid up capital : (585.00 million, ordinary shares of Tk 1000 each) The director s may revise the capital structure from time to time according to the need. 5

2.4 OBJECTIVES and GOALS OF SIBL Sectoral objectives The key sectoral objectives are: a. To humanize corporate finance in the formal sector through participatory mark et mechanism with collateral. b. To socialize non-corporate finance in the non-f ormal sector through nonmarket and participatory custom-tailored micro-level cre dit package without collateral. c. To monetize voluntary sector through particip atory financing mainly on joint ownership basis. d. To integrate these three sec tors operational activities of the Bank to various will-conceived and well-plann ed Social Assignment and Investment Schemes or Social Fund for making them economica lly and ethically transparent and revealed Overall Operational goals The key thrusts of the operational goals are as follows: a. Empowering the family of the poor b y creating income opportunities as well as strengthening the family of the rich for a better future generation. b. Achieving sustainable participatory economy, Social Security, and peace for a society. 2.5 MISSION OF SIBL High quality financial services with the latest technology. Fast , accurate and satisfactory customer service. Balanced & sustainable growth stra tegy. Optimum return on shareholders equity. Introducing innovative Islamic banki ng products. Attract and retain high quality human resource. Empowering real poo r families and create local income opportunities. Providing support for social b enefit organizations- by way of mobilizing funds and social services. 2.6 VISSION OF SIBL Social Islami Bank Ltd started its journey with the concept of 21 st Century Islamic participatory three sector banking model: i) Formal Sec tor- Commercial Banking with latest technology; ii) Non-Formal Sector - Family E mpowerment Micro-Credit & Microenterprise program and iii) Voluntary Sector - So cial Capital mobilization through CASH WAQF and others. Finally, "Reduction of P overty Level" is our Vision, which is a prime object as stated in Memorandum of Association of the Bank with the commitment "Working Together for a Caring Socie ty". 6

2.7 FUCNTIONS OF SIBL Mobilization of idle resources of the country by accepting Deposits from the gen eral public. Granting Loans and Advances to the individual firms and companies f or activating and developing trade, commerce and industries and other productive activities in the country. To give facilities to the client and shareholders in a systematic way. Give encouragement to the people for savings. To increase inv estment. To make easy transfer of foreign currency. To identify consumers demand and fulfill their demand by supplying money. To improve economy by borrowing fin ancial facility. To assist capital market. 2.7.1 Management Hierarchy CHAIRMAN MANAGING DIRECTOR DEPUTY MANAGING DIRECTOR EXECUTIVE VICE PRESIDENT SEN IOR VICE PRESIDENT VICE PRESIDENT SENIOR ASSISTANT VICE PRESIDENT ASSISTANT VICE PRESIDENT FIRST ASSISTANT VICE PRESIDENT SENIOR EXECUTIVE OFFICER EXECUTIVE OFF ICER SENIOR OFFICER OFFICER JUNIOR OFFICER ASSISTANT OFFICER 7

2.7.2 The Ownership Pattern This is a private sector commercial Bank providing comprehensive range of bankin g services. The bank is owned as follows: Promoters 50% Government 5% Public 45% At present the Bank has an amount of Tk.4000.00 million of Authorized Capital a nd Tk. 585.00 million of Paid-up Capital. 2.7.3 Human Resource There is no alternative to skilled and trained manpower in service Industry. Bea ring this in mind the well educated, promising and honest workers are being appo inted and trained. Bank has given top priority to develop skilled manpower and i ntroduce them with modern technologies with the purpose of developing quality cu stomer services. The Bank has undertaken program to train up its employees of al l strata at its own Training Institute. A highly experienced person was appointe d as Director (Training) of the Institute in the year 2001 with the task of form ulating various training modules. Steps are being taken to shift the Institute t o separate premises for facilitating training activities. Side by side, both inl and and foreign training also imparted during the year as usual. A highly experi enced, well educated and motivated workforce is playing vital role towards the g rowth of the Bank deserve appreciation. The number of Executives and Officers as on 31st December 2008 was 512 as against 455 as on 31st December 2007. 2.7.4 Training Institute Well educated peoples are needed to achieve the objectives of a firm. With a vie w to build enthusiastic and skilled work force, Social Islami Bank Training Inst itute was established in 24th October, 1996 at Shyamoli, Dhaka. Every year the I nstitute trains sufficient number of employees. By the side of the new employee/ officer, it is possible to trained SIBLs existing employee/officer. There is a li brary in SIBL. There is about 2 thousand books remain in this library. Accountin g, Management, Marketing, and Computer related books are in this library. In 200 7, 1383 officer and no-officer was trained. 2.7.5 Foreign Correspondents of SIBL In order to gain maximum advantage from Foreign Exchange related business, the Bank has entered into correspondent relationship with almost all major 122 Banks of 109 countries of the world like Standard Chartered Bank, American Express Ba nk Limited, HSBC, HBZ Finance, Mashreq Bank PSC, Dresdner Bank AG and with local banks in Pakistan, India, Nepal and Bhutan etc with whom we have advising, reim bursing and confirming arrangement. 9

2.7.6 Overseas Operations of SIBL Social Islami Bank has set up joint venture Exchange Company named Gulf Overseas Exchange Co. Ltd, in Oman contributing 25% of its paid up capital. The present paid up capital of the company is Riyal Omani 1, 82,000.00. The Chairman of the company is the ex-minister of the government of Oman. The exchange company, esta blished in 1985, now has three branches in Oman and is being managed fully by of ficials of SIBL. The company is running in profit. SIBL is also exploring possib ilities of opening branches in the Middle East, Switzerland and USA. SIBL has en tered into the Management contract with a Kuwati Exchange company to provide man agement and technical services. SIBL has acquired equity and management of Nepal Arab Bank Ltd. which is the largest and highly profitable Private Commercial Ba nk in Nepal. 2.7.7 Products & Services Mudaraba Term Deposit. Mudaraba Savings Deposit. Al-Wa dia Current Account. Mudaraba Notice Deposit. Mudaraba Scheme Deposit. Cash Waqf . Mudaraba Hajj Savings Deposit. Mudaraba Monthly Savings Scheme. Mudaraba Speci al Deposit Pension Scheme (5 Years). Mudaraba Monthly Profit Deposit Scheme. Mud araba Education Deposit Scheme. Mudaraba Home Saving Scheme. Mudaraba Millinery Deposit Scheme. ATM Service. Locker Service. One Line Banking 2.8.8 Non-Formal a nd Voluntary Sector Banking Programs Since the opening of the Bank on 22nd Novem ber 1995, Non-Formal sector has started implementing its programs in various are as. Those are as follows: A. Environment-friendly program: Tokai Project: The project has a special strate gic value. Till December 1995 only one group consisting of six members was forme d at Hossain Marker, Utter Badda, Gulshan Thana. Group savings from the members is under process. Formation of more groups of Tokai Pannaya Bavshee (Tokai goods T raders) is under process at different areas including Hossain Market. 10

B. Real Life Non-formal School of Management: As a part of environmentally frien dly program, the bank is committed to educate the Tokai and this has a worldwide strategic value. Till December 1995 one Tokai Nonformal School has been started at Hossain Market, Uttar Badda, Gulshan, and Dhaka with 30 students with a view to giving them real-life education with Islamic orientation. In the process of learning, the Tokai developed propensity for savings. As a result they are regul arly depositing a small portion of their income as savings. C. Mosque Property D evelopment Program: Construction of Mini Market at Kazi Bari Mosque, Uttar Khan, Uttara, Dhaka, consisting of 4 shops has been completed where Bank has invested Tk.1.28 laces. Recovery rate in this sector is 100 percent. D. Capital Market I nstruments-Securitization of voluntary sector: In the voluntary sector, the bank is in the process of organizing Voluntary Capital Market Operation for mobiliza tion of necessary fund and in the process of developing the following financial instruments with different sets of rules in con formality with Shariah: Waqf Pro perties Development Bond (specific and general). Cash Waqf Deposit Certificate ( specific and general). Family Waqf Certificate. Mosque Properties Development Bo nd (specific and general). Mosque Community Share. Quarn-e-Hasana Certificate (s pecific and general). Zakat/Ushar payment Certificate. Non-Muslim Trust Properti es Development. Municipal Properties Development Bond (specific and general). Th e value of all the bonds and Qurd-e-Hasana Certificate are guaranteed by the Ban k against surrender of the instruments on maturity. 2.7.9 Rural Credit Program A griculture is the main driving force of economy in Bangladesh. And the whole eco nomic growth of the country depends on the development, modernization and invest ment of money in this connection. As a non-Government financial institution SIBL has been actively participation in rural credit program in the economic activit ies for large population of the country since 1992. SIBL has been working intens ively in collaboration with Barindra Multipurpose Development Authority by condu cting the Rural Credit program particularly in Rajshahi, Naoga, Chapainowabgong, and the northern part of the country in general. In the last 10 years bank has distributed the credit for Tk.69.85 million. The recovery of loan in this projec t is 94%. In 2001 bank has distributed the loan for Tk.7.00million. This is the first program for any private bank. Moreover, SIBL has been participating in Agr o Based Industries and Technology Development project Loan financed by USAID sin ce 1996. 11

2.8 OPERATING PERFORMANCE Total Operating Income of the Bank as on 31st December 2008 stood at Tk. 1,291,706,859 million against Tk. 902,503,334 million of the preceding year. The Bank made an operating profit of Tk. 787,364,550 million in 2008 against Tk.480, 782,904 million of 2007. A summary of operating result of t he Bank as on 31 st December 2008 vis--vis the position as on 31.12.2007 is shown below: Operating result of the Bank as on 31st December 2008 (Taka in millions) Particulars 31.12.2008 31.12.2007 Growth Rate % Income from Investment Profit paid on Depositors Net Investment Income Commissio n, Exchange & Other Income Total Operating Income Total Operating Expenses Profi t Before Provision Total Provision Profit Before Tax Profit After Tax 2,732,256,352 2,071,378,746 660,877,606 450,879,515 1,291,706,859 504,342,309 78 7,364,550 432,551,257 354,813,294 202,068,294 2,092,951,320 1,705,054,119 387,897,201 350,231,722 902,503,334 421,720,430 480, 782,904 212,920,488 267,862,416 30.54562 21.48463 70.37442 28.73749 43.12489 19.59162 63.76717 103.1515 32.46102 34.67892 150, 037,061 12

3.1 GENERAL BANKING AREA Financial institution intermediary that mediates or sta nds between ultimate borrowers and ultimate lenders is knows as financial instit ution. Banks perform this function in two ways- taking deposits from various are as in different forms and lending that accumulated amount of money to the potent ial investors in other different forms. General banking department aids in takin g deposits and simultaneously provides some ancillaries services. General bankin g is the front-side banking service department. It provides those customers who come frequently and those customers who come one time in banking for enjoying an cillary services. In some general banking activities, there is no relation betwe en banker and customers who will take only one service form bank. On the other h and, there are some customers with who banks are doing its business frequently. SIBL General banking is divided into six sections. 1. Account opening section. 2 . Bills and clearing section. 3. Remittance section. 4. Cash section. 5. Locker Service. 6. Closing of an account. 3.1.1 Account Opening Section Under this sect ion, SIBL officer opens different types of accounts on the request of clients. T he procedure of opening account is given below. Procedure for Opening of Accounts Before opening of a current or savings account , the following formalities must be completed by the customer: 1. Application fo r the prescribed form 2. Furnishing photographs 3. Introduction by an account ho lder 4. Putting specimen signatures in the specimen card 5. Mandate if necessary After fulfilling the above formalities, SIBL provides the customer a pay-in- sl ip book and a checkbook. 13

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

In case of Co-operative Society/ societies Limited,a) Copy of Bye-law duly certi fied by the Co-operative officer. b) Up to date list of office bearers. c) Resol ution of the Executive Committee as regards of the account. d) Certified copy of Certificate of Registration issued by Registrar, Co-operative Societies. In cas e of Non- Government College/School/ Madrasha/ Muktab,a) Up to date list of the Governing Body/ Managing committee. b) Copy of resolution of the Governing Body/ Managing Committee. In case of Trustee Board,a) Prior approval of Head Office o f the Bank. b) Certified copy of Deed of Trust, up to date list of members of th e Trustee Board and Certified copy of the Resolution of Trustee Board to open & operate the account. In case of Minors Account,a) Putting the word MINOR after the title of the account. b) Recording special instruction of operation of the accou nt. c) The account opening form is to be filled in and signed by either of the p arents or the legal guardian appointed by the Court of Law & not by the Minor. I n case of Limited Company,a) Certified true copy of the Memorandum & Articles of Association of the company. b) Certificate of Incorporation of the company for inspection and return with a duly certified photocopy for banks records. c) Certi ficate from the Registrar of the Joint Stock Companies that the company is entit led to commence business (in case of Public limited Co. for inspection and retur n) along with a duly certified photocopy for Banks records. d) Latest copy of Bal ance Sheet. e) Extract of Resolution of the Board. General Meeting of the compan y for opening the account and authorization for its operation duly certified by the Chairman/ Managing Director of the company. a) List of Directors with addres s (a latest photocopy of the form-xii). b) Authorized signature. c) Name. 15

General conditions of governing Current / Savings Account,(a) Minimum Balance to be maintained in current account Tk. 10,000 /- and in Savings account Tk. 5.000 /- . (b) A suitable instruction by an introducer acceptable to the Bank is requi red prior to opening an account. (c) Recent photographs of the Account openers d uly attested by the Introducer must be produced. (d) When cheques deposited are payable by other banks or outstation they are available after clearing or collec tion only, Service charge will be charged @ Tk, 100 /- in Current account and Tk 50 /- in Savings account yearly or as charged by the Bank from time to time as and when required. Provisional profit rate for Savings Account (SB) @ 6.85% (Hal f years compounding). Deposits Accepted by SIBL Mudaraba saving Deposit (MSD) Th ese are profit bearing deposit accounts. The drawings are restricted in respect of both the amount of withdrawal and the frequency thereof so that the payment o f interest does not become any compensating for the banker. Some time the restri ctions are ignored against the depositors written confirmation to forgo his claim for interest on the total balance for the whole month of withdrawal. Special Sa ving Scheme Mudaraba Hajj Saving Scheme Hajj is one of the basic pillars of Isla m- the complete code of life. SIBL has introduced a scheme in the name & style Mu daraba Hajj Saving Scheme to facilitate the intending Muslims to perform Hajj pro perly at appropriate age. This is purely a saving scheme for Hajj. Any Muslim in tending in perform Hajj by building up deposit required for meeting Hajj expenses will select one of the 20 alternative choices based on duration of period from 1 year to 20 years for building- up savings by monthly installments under this s cheme. Mudaraba Education Scheme SIBL being encouraged by the success of the Mud araba deposit accounts, has introduced another savings scheme namely Mudaraba Edu cation Scheme Initial Deposit 25,000 25,000 25,000 25,000 Maturity Period 7 Years 10 Years 15 Years 20Years Total Payment 55,000 77,000 136,000 240,000 Monthly E ducation Allowance 1,000 1,500 2,500 4,500 16

Mudaraba Millionaire Scheme People of Bangladesh are the followers of Islam. The y are mostly interested to make interest free deposits. Taking these facts into consideration SIBL a joint venture Islamic bank introduced a monthly installment based "Mudaraba Millionaire Scheme" Rules and regulations of this scheme: Tk. 5 50/-, Tk. 1050/- or Tk. 2050/- is taken as monthly installment under Mudaraba pr inciples of Islamic Shariah. Duration of this scheme will be 15, 20 and 25 yrs. After maturity an estimated amount will become as follows: Duration Monthly Inst allment Estimated amount after maturity 15 20 25 2,050/1,050/550/Tk. 10 lac Tk. 10 lac Tk. 10 lac The amount in the above is an estimated amount and may vary at maturity. After s tarting of operation of this scheme size of installment cannot be changed Mudara ba Special Savings (Pension) Scheme Any Bangladeshi person aged above 18 yrs and having sound mental condition can may open this scheme. To open this account th ere must be a signature of a valued introducer. Parents or legal guardians can o pen this scheme in the name of their underage children. After maturity estimated profit will be applied as follows: Monthly Installment Estimated amount after m aturity 5 years 10 years 100 8,000 22,500 200 300 400 500 1000 16,000 24,000 32, 000 40,000 80,000 45,000 67,000 90,000 1,12,500 1,25,000 Mudaraba Monthly Profit Deposit Scheme The features of this scheme are as follow s: 1. Tk. 1, 00,000/-, 1, 10,000/-, 1, 20,000/- or 1, 25,000/- or any amount mul tiple can be deposited under this scheme. 2. The duration of the amount should b e for Five years. 17

3. Profits shall be distributed under this scheme as follows: a. 1,00,000/- Tk. 900 (net) b. 1,10,000/- Tk. 1000 (net) a. 1,20,000/- Tk. 1,100 (net) b. 1,25,000 /- Tk. 1150 (net) 4. The payable profit will become due after 1 month of deposit . But the amount will be deposited to account in the last week of the month. 5. Generally, a depositor cannot withdraw the amount before 5 years. But, in unavoi dable circumstances the depositor can withdraw the amount and in that case the d epositor will have to submit the duly filled application form of the scheme. Mud araba Term Deposit Mudaraba Term Deposit is one, which is repayable after the ex piry of a predetermined period fixed by him. The period varies from 1 month to 1 year or above. These deposits are not repayable on demand but they are withdraw ing able subject to a period of notice. Hence, it is popularly known as Mudaraba Time Deposit or Time Liabilities. Normally the money on a fixed deposit is not repa yable before the expiry of a fixed period. In case of MTDR Account the Bank need s to maintain a cash reserve. So SIBL offers a high interest rate in MTDR accoun ts. The Interest rates followed by SIBL For 1 month For 3 months For 6 months Fo r 1 year or above @10.50 @11.75 @12.00 @12.25 18

Al Wadiah Current Deposit 1. ALWADIAH Current Deposit A/cs are opened proper intr oduction with minimum initial deposit fixed by the Bank. 2. ALWADIAH Deposit is accepted on ALWADIAH principles which mean al Amanah with permission to use. Acc ording to this principle Bank can use the fund of the account along with other f unds as per Shariah at bank s own risk. Account holder(s) will not share any pro fit/loss. 3. The Law and regulation of Bangladesh, usual customs and procedures common to banks in Bangladesh including Islamic Banking Principles shall apply t o and govern the conduct of account opened with the Bank. 3.1.2 Bills and Clearing Section SIBL Local Office branch performs the bill clea ring function through Local office. SIBL Local office acts as the agent of all S IBL branches for the clearing house of the Bangladesh Bank. There are two types of cheque which are1. Inward clearing cheque 2. Outward clearing cheque. Inward Cheques: Inward cheques are those ones drawn the respective branch which have be en presented on other banks and will be cleared / honored through the clearing h ouse of Bangladesh Bank. For example the cheque drawn on SIBL Local Office Br, t hen the cheque is called inward cheque of SIBL Local Office Br, Accounting treat ment: Customers A/C Debit. SIBL General A/c Credit Outward Cheques: Outward chequ es are those ones drawn on other bank branches which are presented on the concer ned branch for collection through clearing house of Bangladesh Bank. These chequ es are called outward cheques. For example, the cheque drawn on Mercantile Bank LTD, Kawran Bazar Br has been presented on SIBL Local Office Br. This cheque is called the outward cheque of SIBL Local Office. Hence it is said that the cheque which is the inward cheque of one bank is the outward cheque of another bank. 19

Outward Bills for Collection (OBC) By OBC, we mean that those cheques drawn on o ther banks which are not within the same clearing house. Officer gives OBC seal on this type of cheques and later sends a letter to the manager of the branch of the some bank located in the branch on which cheque has been drawn. After colle ction of that bill branch advises the concerned branch in which cheques has been presented to credit the customer account through Inter Branch Credit Advice (IB CA). In absence of the branch of the same bank, officer sends letter to manager of the bank on which the cheques is drawn. That bank will send pay order in the name of the branch. This is the procedure of OBC mechanism. Clearing The schedul ed banks clear the cheques drawn upon one another through the clearinghouse. SIB L 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 Schedul ed Banks. This is an arrangement by the central bank where every day the represe ntative of the member banks gathers to clear the cheques. The place where the ba nks meet and settle their dues is called the clearinghouse. The clearinghouse si ts for two times a working day. The SIBL Local Office Br sends the instruments t hrough Inter Branch Debit Advice (I.B.D.A). SIBL Local Office acts as an agent i n this case. For this, Local Office branch gives the following entries, SIBL Gen eral A/C (Local Office Br) ---------------Dr. Customers A/C--------------------------------Cr. If the instrument is dishonored, the instrument is returned to th e Local Office branch through I.B.D.A. along with the following entries, Custome rs A/C---------------Dr. SIBL General A/C------------------Cr. 20

Receiving Cheques for Collection In SIBL, cheques of its customers are received for collection from other banks. In case of receiving cheques, following points should be checked very carefullyThe cheques should not carry a date older than t he receiving date for more than 6 months. In that case it will be a stale cheque a nd it will not be allowed for collection. Again the date of the cheque should no t be more than 1 days forward than the receiving date. a. The amount in figures a nd words in both sides of the pay-in-slip should be same and it should also be s ame with the amount mentioned in figures and words in the cheque. b. The name me ntioned in the cheque should be some in both sides of the pay-in-slip and it sho uld be the same with the name mentioned in the cheque. c. The cheque must be cro ssed. Cheque and Crossing A Cheque is a bill of exchange drawn on a specified bank er and not expressed to be payable otherwise than on demand. [According to secti on-6, Negotiable Instrument Act, 1881]. A cheque may be classified into: a) An o pen cheque which can be presented for payment by the holder at the counter of th e drawers bank. b) A crossed cheque which can be paid only through a collecting b anker. Crossing cheque: A cheque is said to be crossed when two transverse paral lel lines with or without any words are drawn across the face. Crossing may be g eneral, special or restrictive. Issuing Cheque Book Following procedures are mai ntained by SIBL, Local Office for issuing checkbook. (a) Firstly the customer wi ll fill up the check requisition form. (b) The leaves of the checkbook under iss ue are counted to ensure that all the leaves and the blank requisition slip are intact. (c) The officer writes A/C number and branch name on all the leaves of t he checkbook. (d) The name and the A/C number of the customer are than entered i n the checkbook register against the particular checkbook series. (e) Then the o fficer sightseer, checkbook, and requisition slip (f) Lastly the checkbook is ha nded over to the customer after taking acknowledgement on requisition slip. A co ver file containing the requisition slip is effectively preserved as vouchers. I f any defect is noticed by the ledger keeper, he makes a remark to that effect o n the requisition slip and forward it to the cancellation officer to decide whet her a new checkbook to be issued to the customer or not. 21

3.1.3 Remittance of Funds: Remittance of funds is ancillary services of SIBL. It aids to remit fund from one place to another place on behalf of its customers a s well as non- customers of bank. SIBL has its branches in the major cities of t he country and therefore, it serves as one of the best mediums for remittance of funds from one place to another. The main instruments used by SIBL, Local Offic e Br for remittance of funds. -Pay Order/ Bankers check. -Demand Draft. -Telegrap hic Transfer. Banks cheque/ Pay order The pay order is an instrument issued by ba nk, instructing itself a certain amount of money mentioned in the instrument tak ing amount of money and commission when it is presented in bank. Only the branch of the bank that has issued it will make the payment of pay order. The bankers c heque must become the branch for payment wherever it is presented. Issuing of Pa y Order The procedures for issuing a Pay Order are as follows: 1. Deposit money by the customer along with application form. 2. Give necessary entry in the bill s payable (Pay Order) register where payees name, date, PO no, etc is mentioned. 3. Prepared the instrument. 4. After scrutinizing and approval of the instrument by the authority, it is delivered to customer. Signature of customer is taken o n the counterpart. Cancellation of a Pay Order If a buyer wants to cancel it, he should submit a letter of instrument in this regard and also return the instrum ent. Bank Draft The person intending to remit the money through a pay order has to deposit the money to be remitted with the commission which the banker charges for its services. The amount of commission depends on the amount to be remitted . On issue of the pay order, the remitter does not remain a party to the instrum ent i) Drawer branch ii) Drawee branch iii) Payee. This is treated as the curren t liability of the bank as the banker on the presentation of the instrument shou ld pay the money. The banker event on receiving instructions from the remitter c annot stop the payment of the instrument. Stop payment can be done in the follow ing cases: i) Loss of draft before endorsement: in this case, Draft reported to b e lost, payees endorsement requires verification is marked. ii) Loss of draft afte r endorsement: In this case, the branch first satisfies itself about the claiman t and the endorsement in his favor. 22

Charges A commission of 0.15% is taken on the draft value & Tk.50/= is taken as postal charge. Mail or Telex Transfer (TT) Telex transfer is another widely used mode for remittances of funds. In case of telex transfer the message for transf er of funds is communicated through tested telex. SIBL generally recovers from t he telex charges in addition to the usual service charges. Issuing of TT SIBL fo llows the following procedures: i) The customer deposits money with SIBL to be s ent. ii) The customer obtains a cash memo containing TT serial number. iii) TT s erial number, notifying part name is mentioned in the telex message. iv) The Tel ex Department confirms transmission of the telex. Accounting entries for TT Cash A/C, Clients A/C -----------------------Dr. SIBL General A/C (Local Office branc h) ---------------Cr. Procedures for the incoming TT After receiving the telex, it is authenticated by test. TT Serial number is verified by the TT in-Concern br anch register. The following entries are given in the vouchers,SIBL General A/C ( Local Office branch) -----------------------Dr. Clients A/C-----------------------------------------Cr. Tk. 50/= is taken as postal charge. The minimum commissi on is Tk. 50/= or o.15% of the amount whichever is higher. 3.1.4 Cash Section Th e cash section of any branch plays very significant role in general banking depa rtment. Because, it deals with most liquid assets The SIBL Local Office Br has a n equipped cash section. This section receives cash from depositors and pay cash against cheque, draft, PO, and pay in slip over the counter. Receiving Cash Any people who want to deposit money will fill up the deposit slip and give the for m along with the money to the cash officer over the counter. The cash officer co unts the cash and compares with the figure written in the deposit slip. Then he put his signature on the slip along with the cash received seal and records in the cash receive register book against A/C number. At the end of the procedure, the cash officer passes the deposit slip to the counter section for posting purpose and delivers the duplicate slip to the clients. 23

Account treatment Particulars Cash A/C Customers A/C Dr./Cr. Dr. Cr. Disbursing Cash The drawn who wants to receive money against cheque comes to the payment counter and presents his cheque to the officer. He verifies the followi ng informationa) Date of the cheque b) Signature of the A/C hold c) Material alt eration d) Whether the cheque is crossed or not e) Whether the cheque is endorse d or not f) Whether the amount in figure and in word correspondent or not Then h e checks the cheque from computer for further verification. Here the following i nformation is checked: 1) Whether there is sufficient balance or not 2) Whether there is stop payment instruction or not 3) Whether there is any legal obstructi on (Garnishee Order) or not After checking everything, if all are in order the c ash officer gives amount to the hold and records in the paid register. Account t reatment: Particulars Dr./Cr. Customers A/C Dr. Cash A/C Cr. The cash section of SIBL deals with all types of negotiable instruments, cash and other instruments and treated as a sensitive section of the bank. It includes the vault which is u sed as the store of cash instruments. The vault is insured up to Tk. 60 laces. I f the cash stock goes beyond this limit, the excess cash is then transferred to Head Office. When the excess cash is transferred to SIBL Head Office. The cash o fficer issues IBDA. Account treatment: SIBL General A/C Dr. Cash A/C Cr. When ca sh is brought from SIBL Head Office then, Account treatment: Cash A/C SIBL Gener al A/C Dr. Cr. 24

3.1.5 Locker Service SIBL Local Office Br is providing facility of locker servic e for the purpose of safeguarding the valuable property of customers. The person or the organization that has any account in bank branch can enjoy this service. They can keep their valuable assets in bankers custody. Customers have right to look after with a key of their individual locker provided by bank. SIBL maintain s the following types of lockers: ------ Large locker. ------ Medium locker. ----- Small locker. For enjoying this service, clients have to give charge yearly Tk. 1500, Tk. 1250 and Tk. 700 for large, medium and small locker respectively. 3.1.6 Closing of an Account For two reasons, one can be closed. One is by banker and other is by the customer. By banker: If any customer doesnt maintain any tra nsaction within six years and the A/C balance becomes lower than the minimum bal ance, banker has the right to close an A/C. By customer: If the customer wants t o close his A/C, he writes an application to the manager urging him to close his A/C. Different procedures are followed in cash of different types of A/C to clo se. Fixed deposit A/C is closed after the termination of the period. Closing pro cess for current & savings A/C: i. After receiving customers application the offi cer verifies the balance of the A/C. ii. He then calculates interest and other c harges accumulated on the A/C. iii. If it bears a credit balance, the officer wr ites advice voucher. He gives necessary accounting entries post to accounts sect ion. iv. The balance is returned to the customer. And lastly the A/C is closed. But in practice, normally the customers dont close A/C willingly. At times, custo mers dont maintain any transaction for long time. Is this situation at first, the A/C becomes dormant and ultimately it is closed by the bank 25

3.2 FOREIGN EXCHANGE BANKING AREA 3.2.1 Foreign Exchange Foreign trade Foreign t rade constitutes a sizable portion of international transactions of a country. P ayment received for exports and made for imports form a substantial part of its remittances from and to other countries. In our country a major share of the cur rent balance of payments is made up of exports and imports of merchandise on pri vate and government account. Thus, trade is the most important factor giving ris e to payments between countries. Foreign trade is a type of specialization, whic h like other forms of specialization increases productive efficiency and standar d of living of the people of the country concerned. Need for foreign trade Foreign trade enables a country to have a much larger flo w and much more diversified form of wealth than what is possible without it. The residents of a country are able to enjoy the use of commodities which otherwise may not be available to them at all. There is a wide difference in respect of t he material and human resources, stage of technical and scientific progress, and possession of capital equipment in different countries. No country is in a posi tion to produce everything in quantities large enough to provide its people a re asonably high standard of living. A country, therefore, enters into trade relati ons with other countries on account of certain basic differences due to topograp hical reasons in its economy from theirs. Commodities are imported because eithe r they cannot be produced in the country at all or can be produced at a very hig h cost. Import of such commodities is a convenient and cheaper way of getting th em. In exchange for imports, a country has to export certain articles because no rmally imports can be paid for only by exports. A countrys exports usually compri se commodities the cost of production of which is less than the cost of importin g them. Thus the need of the people of a country for its scarce resources and in exchange the surplus of some of their resources constitute the import and expor t stimulate the foreign trade which is intern mobilized by foreign exchange proc eedings. Types of Foreign trades Dealt in Banks Foreign trades are mainly of two types. T hese two are: Import Trade & Export Trade. The import and export trade of Bangla deshis is controlled under the Import and Export Control Act, 1950. In normal se nse the imports involve outward remittances and the export involves inward remit tances. The terms and conditions of contracts between the importers and the expo rters and the eventual remittances in foreign countries are subject to such rest rictions and formalities as are laid down from time to time by the Import and Ex port Control and Exchange control in their respective jurisdiction which the imp orters and exporters must comply with. 26

Import Trade When a particular country wishes and does bring in some goods and s ervices from another country, trade occurring between these two countries is cal led import trade. Import trade means procurement and purchase of goods and servi ces from another country or countries. Therefore, purchasing function of interna tional trade is called import trade. Export Trade Selling of goods and services or other sales related function for the transfer of surplus goods or services fo r a value or just to merchandise them abroad trade occur between countries. Thus export or sale of additional goods and services or surplus goods and services i s called export trade. There is another peculiar type of export trade named ReEx port Trade. Import The bank defines import as to bring in, from abroad, somethin g in kind of goods or services (to behave lawfully). It includes the following s ervices: 1. Letter of Credit (L/C) opening. 2. Presentation/Retirement of import documents. The import mechanism first involves the issuing of a L/C as an instr ument by a bank on behalf of one of its customers, authorizing an individual or a firm to draw draft on the bank or on one of its correspondents for its account under certain conditions stipulated in the credit. Secondly the bank import mec hanism involves the retirement of import mechanism on receiving the payment or u nder certain conditions against the security of payments made by the importer in documents stipulating an advance payment date. Import Operation Actually the im port procedure is a result of a two-party negotiation or contract. Once the impo rter has accepted the suppliers offer, he agrees to open a Letter of Credit in fa vor of the latter. Thus the import procedure of the bank starts with the opening of the credit. The entire import mechanism of this branch is enumerated below. Terms of Credit First of all the concerned banker asks the importer to present a nd show the terms of the credit that the importer wishes to issue. The terms of the letter of credit are based on the contract between the importer and the expo rter and the import license or the authorization permits for import under free l ist as the case may be, issued in the name of the concerned importer. The terms of the credit specify importantly, amount of the credit, name and address of the beneficiary and the opener, particulars of the goods, their make, quantity and price basis, tenor of bill of exchange, period and mode of shipment, whether par t shipment allowed, port of shipment and of destination, nature of credit, expir y date, names and number of sets of shipping and other documents. 27

Letter of Credit Application For the purpose of the opening the credit the impor ter is required to fill up and sign a stamped Letter of Credit application, whic h, in addition to recording the full details of the credit including instruction for booking exchange, serves as an agreement between the banker and the opener. Presentation of the application for Opening of the Letter of Credit When the im porter requests the bank for the opening of a L/C, by agreeing to the request, t he bank makes a promise of payment to the supplier by issuing it. But the import er must make out an application for this purpose. The application must be writte n in a plain paper or Letter Head pad and it should be submitted being attached with the following certificates and papers: If the importer is an individual 1. Current Deposit A/C No., 2. Partnership Deed and Solvency Certificate (If partne rship firm), 3. Article of Association (If Private Limited Company ), 4. Memoran dum of Association (If Private Limited Company), 5. Certificate of Commencement of Business (If Public Limited Company), 6. Photocopy of Trade License (valid), 7. Photocopy of VAT Registration Number, 8. Photocopy of Tax Identification Numb er (TIN certificate), 9. Import Registration Certificate from CCI&E, (Renewed an d valid). 10. Required amount of Registration Fee. IRC (Import Registration Cert ificate) issue fee IRC Issuing Fee Tk. 500 Tk. 1500 Tk. 3000 Tk. 5000 Import Lim it Highest annual imports limit 5 Lac. Highest annual imports limit 15 Lac. High est annual imports limit 50 Lac. Unlimited annual import capacity. Bank Scrutiny of the Documents before Opening of the Credit On receipt of the ap plication form with other required documents submitted by the opener they are th oroughly scrutinized. The points, which are carefully scrutinized, are following s: 28

1. Indenting the registration number. 2. That the IRC is updated or renewed and valid. 3. That the goods are marketable and legally importable and that it is no t difficult for the beneficiary to comply with all terms and conditions to be in corporated in the L/C. 4. That the L/C is not going to be opened in favor of the importer. 5. That the importer signs it, agreeing terms and conditions. 6. That the Insurance Cover Note specifies the date of shipment. 7. That it encloses Ra dioactivity Report in case of food item. 8. That the Import Permission (IMP) for ms is dully filled in and signed. 9. That the liability, as being applied, is un der appropriate limit. 10. That the amount does not exceed the L/C value and is identical with invoice amount and that the amount in figure and in word is same. 11. That it encloses credit report of the beneficiary in cases when the L/C val ue is more than US $ 20,000. Export Exports, for obvious reasons, are listed in the priority sector in all developing economies. There is no doubt in this fact that export trade constitutes the most substantial base for sustaining the long term development and prospect of a countrys economy. Bangladesh is also now a dev eloping country. So this fact is equally relevant to the concerned economic soun dness of Bangladesh. We all know about the Balance of Payment. If a countries tota l import outweighs its total export, the country is called to be facing drastic negative (unfavorable) balance of payment. A continuous negative balance of paym ent of country makes it totally dependent on others. And thus the economic stand ing and structure of that country gradually collapse. On the other hand a positi ve (favorable) balance of payment shows the greater amount of export by a countr y against its total import and shows a sound economic motion. Thus export is a m ost import mechanism that helps a country to be dependent and to produce goods o r merchandise either through its internal resource or through procuring resource from external sources. Whatever the source is the export helps a country to bui ld its capital reserve more promisingly. Bangladesh is also now very much keen t o boost up its export. But the most stumbles blocking the process is the non-avai lability of required finance. There is neither adequate capital in the hands of the exporter to meet up their foreign trade requirements nor their exists an org anized capital market to extend fair hand as help for the finance. In view of th is, commercial banks of this country are the only real friendly base, which rece ntly have started playing a challenging and pivot role in the business sector th rough extending both pre and post trade finance to the exporters and importers. 29

Export Policy 1997-2008 Target 1. To attain highest national growth by increasin g export to regional and international markets; 2. To reduce gradually the gap b etween export and import expenditure; 3. To produce export commodity at a compet itive price aimed at market retention and promotion; 4. To avail the opportunity to enter in liberalized and globalize Post-Uruguay Round International Market; 5. To make goods exportable and more suitable for foreign markets by diversificati on and quality improvement; 6. To establish backward linkage industry and servic es and identify higher value added goods; 7. To develop infrastructure for expor ts; 8. To create skilled manpower in export sector; 9. To upgrade the quality an d grading of commodity to an internationally recognized level. The normal export mechanism is much like the procedure maintained in a typical import mechanism. Whereas in case of import the party is the importer and the bank acts as the ope ner of his credit, in case of export the party is the exporter and the bank acts as the negotiator of his documents. In our country the most promising exporters are the garments industries. About 76% of the total exports of our country are made by the garments sector. The underlying reason of success of this sector in exports is the availability of the huge amount of cheap labor. But because of in adequate supply of locally produced quality fabrics and accessories, we have to import about 60% of the fabrics and accessories from abroad for use in the garme nts industry. This is actually a time consuming and costly process for the garme nts sector. So considering the significant contribution of the garments sector i n the export trade the private commercial banks have undertaken an especial arra ngement to provide them with export finance, which is called the foreign Back to Back Letter of credit (BTB). BANK MECHANISM IN EXPORT As stated earlier, the fo reign trade plays a vital role in the economic advancement process of nation. So the trend or parameters of foreign trade i.e., import and export is of great co ncern to the government of a country. By the term Export we mean carrying of anyth ing from the country of origin to another country in return for a value. The ban kers define Export as the sending of visible things outside the country for sale. The export is important because with the export earnings we met our import bills . Normally a bank provides the following services as with the party in case of e xport needs. 30

Obtaining of Export Registration Certificate (ERC) When the party or the exporte r receives any export order after negotiation with the importer, he comes to the bank and asks negotiate his transaction with the importers correspondent. In suc h a case the bank first advises him to obtain Export Registration Certificate fr om CCI&E (Chief Controller of Import and Export). Procedure for obtaining ERC Fo r obtaining Export Registration Certificate (ERC), intending Bangladeshi Exporte rs are required to apply to the Controllers/Joint Controller/Deputy Controller/a ssistant Controller of Imports and exports in the prescribed form along with the following documents: Nationality and Assets Certificate of the Proprietor/Partn ers/Directors; Registered Partnership Deed in case of Partnership Concerns; Memo randum and Article of Association and Incorporation Certificate in case of Limit ed Company; Bank Certificate; and Income Tax Certificate; Copy of valid Trade Li cense and Copy of Rent Receipt or the Business Premises. On receipt of necessary advise from the Offices of the concerned Controller of Imports and Exports, app licants of Export Registration Certificate are required to deposit Registration Fee of Tk. 1000 (subject to change) in to the Government head of account 24- Trad e and Commerce-Fees Realized under Import and Export Control Act, 1950 through Ba ngladesh Bank or Government Treasury Sonali Bank. Copies of Treasury Challans sh owing payment of fees should be sent to the concerned offices of the CCI&E for e nabling them to issue Export registration Certificate. Once it has been register ed, the exporters are to make annual payments of Tk. 1000 (subject to change) on ly for having the ERC renewed. 31

Receiving Advising of Letter of Credit Normally the exporter receives Letter of credit in two forms 1. Cable 2. Original The imported terms and conditions of th e L/C are communicated by the L/C opening bank to the exporters bank through cabl e, which is followed by the original L/C. The L/C received through cable general ly covers the following points: 1. The name of the importer; 2. The name of the exporter; 3. Description of goods (in short detail); 4. Expiry date of the Lette r of Credit; 5. Shipment date, etc. Issuing of EXP (Export) Form After the recei pt of the advising banks letter, the exporter is required to issue an Export Form by the Authorized Dealers. The EXP Forms are numbered serially and issued in quad ruplicate. Before the export forms are lodged by the exporters with the Customs/ Postal Authorities, they should get all the copies endorsed by the Authorized de alers. For delay in repatriation of export proceeds or non-realization of export proceeds, the exporters render themselves for action under Foreign Exchange Reg ulation Act, 1947. Authorized Dealers and their officials who certify the export forms also render themselves on such action by the Bangladesh Bank. Examination of the Documents After the issuing of the EXP form the exporter procee ds for the shipment of the goods to the buyers destiny. As soon as the shipment o f goods is made, the exporter prepares the bill of exchange and submits it with other export documents to Authorized Dealer for negotiation of the same. As the banker deals only with documents not with the commodity, they should be very muc h careful about the genuineness and correctness of the documents evidencing ship ment of the respective commodities. The banker is to ascertain that the document s are strictly as per the terms of L/C. before negotiation of the export bill, t he banker is to scrutinize and examine each and every document with great care. Negligence in the part of the banker may put the importer abroad into unnecessar y troubles. 32

DOCUMENTS USED IN FOREIGN TRADE RELATING TO BILLS Every import and export involv es documentary transaction of goods and services between or among the parties in volved (or between or among their supporting banks). Most of the foreign trade a nd their exchanges are now held in the form of documentary Letter of Credit (LC) . Documentary letters of credit issued to finance the shipment of goods involve the drawing of bills of exchange, which have to be accompanied by what is known as full set of shipping and non-shipping documents. The attachment of these docume nts to the bill is an essential obligation of the seller and the buyer so as to serve the purpose. These typical documents can be divided into two main parts. T hese documents are Shipping documents and Non-shipping documents. These document s are the followings: Shipping Documents Shipping documents are those documents, which are mainly given by the exporter to the importer after the shipment of th e goods or services as been negotiated. It is impossible to release the goods or commodity from ship/port without these documents. These documents are described below: Bills of lading The bill of lading is one of the most important shipping documents, which accompany bills of exchange drawn under letters of credit. It is an evidence of the fact that the exporter has dispatched the goods and gives the exporter title to the goods and enables him to collect them on arrival at th e destination. The bill of lading is more like a transferable debenture. It is a document signed and issued by the shipping company or its agent acknowledging t he receipt of specified goods for carriage and embodying an undertaking that the goods will be delivered to a consignee named in the bill, or to his order or as signs, or merely to order. The document specifies the port of shipment, the dest ination, and the conditions under which the goods are received for carriage.

Clean and Claused Bill of Lading A bill of lading that indicates that the goods are in apparent good condition without any without any qualification is known as a cl ean bill of lading. If, on the other hand, it bears some remark relating to a def ect in packing, such as three bags torn, some cases broken, received in dampened cond ition, goods not sufficiently packed, etc., it is known as a foul or dirty bill of lad ng. It is also known as a claused bill of lading. A claused bill of lading is not an acceptable document, unless specifically provided for in the sale and purchase contract. Such remarks protect the carrier against any claim for losses attribut able to bad packing. They also protect everyone else who comes in possession of the bill of lading for value. 33

On Board and Received for Shipment Bill of Lading When shipping space is ample and s ailings are regular this type of certificate is easy to get. An on board bill of l ading is satisfactory from the viewpoint of the all the parties concerned. The c onsignor is assured that the goods have been loaded and will reach the destinati on. The consignee has equal assurance when he receives the documents that the go ods will arrive in time and will be available to him on surrender of the documen ts. Received for shipments bills of lading have, therefore, vital lacunae and are not acceptable to buyers and bankers. The buyer receives the documents but may n ot be sure that he will get the goods in time. The merchandise may consist of pe rishable goods, which, if delayed in transit, may not remain saleable. Buyers an d banks, therefore, ask for on board bills of lading. Through Bills of Lading Someti mes, when goods are carried overland and overseas, or during the sea voyage have to be transshipped at an intermediate port, the carrier that takes the goods fi rst issued a through bill of lading. A railway company may issue a through bill of l ading that serves both as a railway receipt and some kind of bill of lading for the sea voyage. Such a document, however, lacks authority to bind the ship owner who undertakes the sea portion of the carriage. This kind of the bill does not provide any assurance that actual shipment on the named vessel took place. The b anker has a right to reject such a bill in connection with a credit, which calls for delivery of a bill of lading, unless there is a specific authorization for its acceptance. Straight and Order Bill of Lading A straight bill of lading is one, wh ich is made out in the name of a consignee. At the port of destination it is not necessary to present a straight bill of lading to take the delivery of goods, e xcept where it is necessary for the purpose of identification. An order bill of la ding is one, which is made out to the order of the consignor or supplier. It can be transferred by endorsement to other parties. Such a bill of lading usually c ontains a condition directing the shipping company to notify the consignee when the goods arrive. Charter Party Bills of Lading This is a contract for the hire of whole ship or part of a ship setting forth in detail the rights and obligatio ns of the owners and liners or chatterers. Charters are usually arranged by ship brokers. They are for their services charging a small commission on the total amo unt agreed upon for hire. Charters are divided into time charters and voyage charter s. The former is for specified period of time, while the latter is for particula r voyage. A charter party specifies, among other details, the particular ports t o which the ship is to go, the cargo to be carried, and the freight to be paid f or the hire of the ship. 34

Stale Bill of Lading A bill of lading is said to be stale if it bears a date subse quent to the expiry date of the credit under which the goods are shipped. It sho ws that the goods were put on board the vessel on a date later than that authori zed under the credit. A bill of lading may also be considered stale if it is pre sented so long after the sailing of the carrying vessel that the goods will be r eaching the port of destination long before the buyer will get possession of the goods when they arrive at destination. Insurance Policy There are many risks in volved in the import and export business as the goods are shipped and travel tho usands of miles and often more than that to the buyers destiny. There are obvious risks of damage, loss, or destruction of goods during transit by sea, air or by road. For this reason, the buyer asks insurance of goods to be shipped to him f rom the exporter or seller of them. Insurance policy is a kind of agreement betw een exporter and Insurance Company to reduce the risk. Exporter sends this docum ent with shipments to the importer. Marine Insurance Policy A marine insurance p olicy is a contract between the insurer and the insured whereby the former, in c onsideration of the payment of a premium by the latter, agrees to indemnify the latter against loss incurred by him in respect of goods exposed to perils of the sea or to the particular perils insured against. The marine insurance is the resp onsibility of the buyers (consignee) under F.A.S., F.O.B. and C&F contracts and of the seller (consignor) under C.I.F. contract. The sum insured should be the C .I.F. value of the goods. Where the C.I.F. value cannot be ascertained the amoun t should not be less than the amount of the drawing under the credit or invoice value of the goods. Like a bill of lading it must be negotiated and endorsed whe re it is payable to order. Bill of exchange The Payment for the goods exported u nder a letter of credit is received by the seller or exporter through the medium of a bill of exchange (commonly called bill or draft) drawn on the buyer for th e amount depending on the credit. It is known as a documentary bill when it is d rawn under a documentary credit and hence is accompanied by other shipping docum ents. Through this bill of exchange the exporter orders the importer to pay the value of the goods shipped through this document. Importer or the respective ban k acting on behalf of the importer must sign on this document. The bill is usual ly drawn in duplicate of sets of two with the original copy being known as the F irst of Exchange and the duplicate the Second of Exchange. 35

Invoice The invoice is the important document of the letter of credit. It is the sellers bill for the merchandise. In other words, the invoice is a document cont aining the description of the goods shipped, their marks, make, quantity, and pr ices, charges for packing, freight, insurance etc. as are applicable as per term s of the contract as well as the name of the carrying vessel and the date of sai ling. There are different types of invoices in use. Such as: The Commercial Invo ice The commercial invoice is a statement of accounts drawn by the seller addres s to the buyer giving the details of the amount stated therein which is based on the terms of the contract entered into between the buyer and the seller. The ex porter must dully sign a commercial invoice. Details found in a typical commercial invoice are name and address of the buyer and the seller, the vessel of shipment, port of discharge etc. Also the shipment import and export permit numbers, the number of contract and invoice and other essential details of the transaction are recorded on the invoice. The financial terms of the sale, such as whether under letter of credit, sight drafts etc., ar e given. The number of packages and the identifying mark and numbers of them are clearly indicated. The goods contained in the packages are detailed and prices are given item by item. The commercial invoice is neither a document of title, n or it is negotiable. Its main utility is that it acts as a bookdevice for both s eller and buyer. The Consular Invoice Another special type of invoice named cons ular invoices are required depending upon the trade regulations in importing cou ntry. It is made out in a prescribed format, certified and signed by an individu al of the importers country national working as a consulate in the exporter count ry. In some cases it is also seen that exporters own invoice is authenticated by the embassy or consulate instead of issuing consular invoice. This type of invoi ce is called legalized invoice. The Certified Invoice Certified invoice is an in voice, which bears a signed statement, by someone in the importers country who ha ve inspected the goods and found them in accordance with those specified in the contract. 36

The Certificate of Origin The regulations in force in some countries require a c ertificate of origin of imported goods to be produced before clearance of by cus toms and assessment of duty. The certificate is usually required where goods fro m certain countries receive preferential treatment, or the import of goods from some countries is partially or wholly prohibited. This is generally issued by th e Chambers of Commerce of the exporting country and is arranged by the exporter. Sometimes, the certificate of origin is endorsed on the back of the relative in voice, in which case the whole document is known as a certified invoice. The Packing List A packing list serves to indicate the exact nature, quantity, a nd quality of the contents of each package in a shipment. The list helps the imp orter to identify the goods and check them against his order. Banks may require such a list when they have financial interest in the merchandise. Clearance of g oods through customs is also facilitated by packing list. The Other Certificates Some other certificates are also required with of particular commodities. A weig ht certificate, signed by a public agency, is often necessary with goods sold in bulk, such grains, oils and similar products. The importing country may insist o n a food inspection certificate from an official inspecting service of the exporti ng country when certain foodstuffs of perishable nature such as meat, edible fat s etc., are imported. A nondumping certificate showing the comparative difference in the domestic and export selling prices, is sometimes required with imports in some countries to ensure that goods are not being sold at very much lower price s in the importing countries than the domestic markets of the exporting country. Inspection Certificate This is normally issued by an independent inspection com pany located in the exporting country certifying or describing the quality, spec ification or other aspects of the goods, as called for in the contract and/or th e L/C. Quality Control Certificate Sometimes the sale contract may demand a cert ificate issued by a standards institute or quality control agency in the exporti ng country indicating the quality of the merchandise shipped. This is known as a quality control certificate. GSP Certificate When tariff concession is sought f rom those developing countries providing preferential treatment to exporters of the developing countries, a GSP certificate should be obtained from the Export P romotion Bureau (EPB). Besides the usual shipping documents required under the L etter of Credit or a contract entered into, the shipping documents in our countr y are incomplete without being supported by Exchange Control Forms. 37

Non-shipping Documents There are a number of other documents, which have importa nce in dispatch of goods in foreign trade. A brief discussion on these documents is given below: The Documentary Letter of Credit A Letter of Credit is issued b y a bank (Issuing Bank) at the request of an importer (applicant) in favor of an exporter (beneficiary) from whom the importer has contracted to purchase some c ommodity or commodities. The importer, the exporter, and the issuing bank are, t hus, obviously parties to a Letter of Credit. There is, however, one or more tha n one bank that is involved in various capacities and at various stages to play an important role in the total operation of the credit. The Ships Reports In the ships report the following information is found: (a) The name of the ship. (b) T he name of the registered port and the registration number. (c) Nationality of t he ship owner or the name of the state belonging to the ship. (d) The name of th e loading port. (e) The name of the captain of the ship or the principal of the ship. (f) Number of the employees and the officers of the ships. (g) Reports of things used by the employees, captain and officers of the ship. (h) Detail repor ts of the transported merchandise. (i) The name and address of the exporter. FINANCIAL ASSISTANCE PROVIDED BY THE BANKS In international trade the most two i mportant terms are the export and the import. As the mostly dependable financial institution banks are in a position to provide sufficient financial assistance to the importer and more commonly the exporter so as to conform smooth flow of a large bulk of foreign trade. Now a day, both the importers and the exporters of our country receive and/or enjoy a considerable amount of financial assistance from commercial banks and other financial institutions. Pre-Shipment Finance Pre-shipment finance in taka, more popularly known as Packin g Credit Advance, is short-term working capital finance specially provided to an exporter against the documentary evidence of having entered into export commitme nts. The packing credit is granted at a pre-shipment stage, i.e., at the stage p rior to the goods being shipped and the credit is given for procuring raw materi al, for paying manufacturing and packing charges and payment of insurance premiu m and freight. As and when the goods are shipped and shipping documents are obta ined, the pre-shipment finance is to be liquidated against the proceeds of expor t documents tendered. 38

Post-Shipment Finance The post-shipment finance is the financial facility extend ed by the banks after the goods have been shipped and against the submission of export documents evidencing the dispatch of goods. Post-shipment finance portfol io is in existence since the day international trade has been known, but more pr ecisely after the First World War. After that the international trade is ever in creasing, and the shipping documents against which the exporters are getting fin ancial facilities are well accepted. 3.2.2 FOREIGN REMITTANCE According to Forei gn Exchange Regulation Act 1947, the commercial banks or the authorized dealer w ho has the Bangladesh Bank authorization can do Foreign Exchange. According to t his Act, TC (Traveler Cheque), Drafts are included in Foreign Exchange. SIBL, Fo reign Exchange Branch provides its customer with the foreign remittance faciliti es by issuing Foreign Demand Drafts, Traveler Cheque, Endorsing passport for cas h etc. Travelers Cheque It is the safest way to carry money from one country to a nother. It can be change in any country of the world. Even if the Traveler Chequ e (TC) is lost then the holder of the T.C can inform it to the bank and the bank will inform it to the agencies so that no one can encash the T.C while issuing a Traveler Cheque (T.C) a signature is needed, so that no one can en-cash it exc ept the holder and also another signature is needed in encashment in front of th e banker. So Traveler Cheque (T.C) is the safest way to carry outside the home c ountry. A customer is permitted to endorse maximum US$ 3000 per year for travel in countries other than SAARC countries and US$ 1000 for travel in SAARC countri es. If SAARC countries are to be visited by road then maximum US$ 500 can be end orsed per passport per year. At a time cash cannot be endorsed over US$ 500. Iss ue of Travelers Cheque There are some requirements, which are to be fulfilled by the TC publisher: 1. Passport holder himself to be present to issue TC purchasi ng. 2. The passport has to be a valid one. 3. Air ticket has to be confirmed. 4. Steps involved in issue of TC: 5. After verifying all these documents, the cust omer as asked to fill up prescribed application form. 6. In the application the customer states the amount he is willing to endorse and it is to be verified tha t his required amount is within the stipulated amount. 7. Then the customer pays cash or by debiting hid account the Travelers Cheque is issued. 39

8. Endorsement is given on the passport and on the ticket. Customer fills up the Travel and miscellaneous form. 9. Purchase application form is prepared and han ded over to the purchaser along with the Traveler Cheque. 10. Entry is given in three registers: Foreign Currency Issue Register, Travelers Cheque On Hand Registe r and Foreign Currency In Hand Register. Payment of Travelers Cheque When a custom er wants to encase his TC, he has to show his passport and it is to be verified from the passport that he has traveled outside the country. Then 1. The TC will have to be scrutinized very strictly; 2. If everything in the TC is in order the n the customer will be asked to give signature on the place of Counter Signature; 3. If the signature agrees with the one in place of the signature of the holder th en the payment will be made through giving cash to the customer or crediting his A/c; 4. Travelers Cheque will be crossed and endorsement given on the back of t he received TC. Endorsement of Cash Cash Foreign Currency can also be remitted t hrough endorsement in the passport. In case of endorsing cash on passport, the r equirements are same as in case of travelers cheque. But the only exception is th at the passport holder is not required to be present by himself. Foreign Currenc y Account The accounts maintained in foreign currencies are known as foreign cur rency account. The Authorized Dealers may open foreign currency accounts in the names of followings without prior approval from Bangladesh Bank. a) Bangladesh n ationals residing abroad. b) Foreign nationals residing in Bangladesh and also t he foreign firms registered abroad and operating in Bangladesh or abroad. c) For eign Missions and their expatriate employees. Branches are mainly deals with two types of foreign currency accounts, namely: a) Non-Resident Foreign Currency De posit Account (NFCD). b) Resident Foreign Currency Deposit Account (RFCD). Non-R esident Foreign Currency Deposit Account (NFCD) All nonresident Bangladesh natio nals and persons of Bangladesh origin including those having dual nationality an d ordinarily residing abroad, may maintain interest bearing time deposit account s named Not-Resident Foreign Currency deposit (NFCD)Accounts with the Ads. 40

Eligible persons a. Bangladesh nationals working and earning abroad. b. Banglade sh nationals serving with Embassies /High Commission of Bangladesh in foreign co untries including officers /Staff of Govt. / Semi Govt. Autonomous/nationalized sector posted/ deputed abroad. c. Shore staff posted abroad (Crew of BSC not ent itled). d. Foreign nationals and companies registered and /or incorporated abroa d, institutional investors and 100% (Hundred Percent) Foreign owned industrial u nit of EPZ (Minimum Amount USD 25000/- or equivalent). Resident Foreign Currency Deposit (RFCD) Ordinary resident of Bangladesh may open and maintain Resident F oreign Currency Deposit (RFCD) accounts with foreign exchange brought-in at the time of their return from travel abroad. Any amount brought in with declaration to Custom Authorities in form FMJ and up to US$ 5000/- brought in without any de claration can be credited to such accounts. Deposit The depositors must submit a declaration mentioning the date of return from abroad and the amount of Foreign exchange brought in at the time of crediting to RFCD account to the effect that Foreign exchange (i) is not a receipt against export of goods or services from Bangladesh (ii) is not a commission due from abroad arising from business in Ban gladesh. 41

3.3. CREDIT BANKING AREA One of the core functions of commercial banks is to cre ate the claim against individual borrower or real the purpose of sanctioning cre dit. Bank grants loan in the form of different securities. By the primary securi ty, we mean the financial claim of holder against the real sector of economy. In banking the sector, the financial claim of bank against issuer, (called investo rs, borrowers and deficit units). This core function of a bank is performed by t he credit department of the bank. In this case, the relationship of bank and cus tomer is that of the creditor and debtor. 3.3.1. Types of loans and Advances off ered by SIBL Types of advances Secured Overdraft (SOD) Loan (General) House Building Loan (st aff) House Building Loan (General) Transport Loan (Staff) Transport Loan (Genera l) Demand Loan Industrial Credit Cash Credit (Hypothecation) Code 14 Interest rate 11.25%-16% Features Continuous advance facility given for one year but can be renewed after the expiry of the time. Given against I.C.B. unit, FDB, Sanchaypatras and Work Orders. Given against Personal guarantee, Hypothecation of goods and land and bu ilding. Given against Personal guarantee, land and building. 13 12 12%-16% 7% 24 12.75%-16% Given against Personal guarantee, land and building. 32 17 16 22 7% 15% 7%-14.5% 12.5%-16% 18 11%-16% Past Due Bills Loan against Trust Receipt (LTR) 31 15 15% 11%-15% Given against Personal guarantee and Hypothecation of vehicles. Given against Pe rsonal guarantee and Hypothecation of vehicles. Given against Personal guarantee , and cash collateral securities. Given against land and building along with mac hinery, Personal guarantee of Directors and Hypothecation of raw materials. A sh ort term arrangement by which a customer is allowed to borrow money up to a cert ain limit is sanctioned by the bank for a certain time. Given against Registered mortgage of land and building, hypothecation of goods and personal guarantee of Directors. Given against Bills Receivables. Advance allowed for retirement of s hipping documents and release of goods imported through L/C. The goods are hande d over to the importer under trust with the arrangement that sale proceeds shoul d be deposited to liquidate the advances within a given period. Given against Bi lls Receivables, hypothecation of imported goods, Trust receipt, personal guaran tee, and registered mortgage of land and building.

42

3.3.2. Procedure for Giving Advance 1) The potential borrower will submit applic ation to SIBL for loan by filling up of a specific Application form. The Applica tion form (request for Credit Limit) contains following particulars: a) Name of the Borrower----b) A/C No.------------c) Bunnies address (with telephone no.) [R esidential address and Permanent address]-------d) Introducers name, A/C no. & ad dress----e) Date of establishment/ incorporation-----f) Trade license number, da te and expiry date (Photocopy of trade license enclosed)-------g) GIR/TR no. & a mount of income tax paid last year-----h) Constitution/ Status (Mention whether sole proprietorship/ partnership/ Public Ltd. company/ Private Ltd. company)------i) Particulars of individual/ Proprietor/ Partners/ Directors (Name & Designa tion, fathers/ Husbands name, present & permanent address with Telephone no., % of shares held)------j) Experience and background of Individual/Proprietors/ Partn ers/ Directors-----k) Full particulars of assets in the personal name of Individ ual/ Proprietor/ Partners/ Directors with valuation----------l) Names of Subsidi aries/ Affiliates, percentage of share holding and nature of business--------m) Nature and details of business/ products (for which credit facility is applied f or), Markets (Present market price per unite, Factory price), Estimated sales fo r next one year............ n) Credit facilities required (type, amount, period, purpose, and mode of adjustment).......... o) Details of securities offered wit h estimated value (Primary security, Collateral security, market value of the se curity).......... p) Details of liabilities in the name of the client or in the name of any other partners/Directors or Subsidiaries/Affiliates Nature of advanc e, amount, security and validity of limit)..... q) Balance Sheet/ Income Stateme nt of Statement of Accounts of the following years attached (Preferably last 3 y ears)........ r) Other relevant information......... s) Proposed debt/equity rat io......... t) Signature of the Applicant.............. 43

2) After receiving the loan application form, SIBL sends a letter to Bangladesh Bank for obtaining a report from there. This report is called CIB (Credit inform ation Bureau) report. This report is usually collects this report if the loan am ount exceeds Tk. 50 Lac. But SIBL usually collects this report if the loan amoun t exceeds Tk.10 Lac. The purpose of this report is to being informed that whethe r the borrower has taken loan from any other bank; if yes then whether these loans are classified or not. 3) After receiving CIB report if the Bank thinks that th e prospective borrower will be a good borrower, then the bank will scrutinize th e documents. In this stage, the Bank will look whether the documents are properl y filled up and signed. 4) Then comes processing stage. In this stage, the Bank will prepare a Proposal contains following information a) Name of the Borrower b ) Nature of Limit c) Purpose of Limit d) Extent of Limit e) Security f) Margin g ) Rate of Interest h) Repayment Branch incumbent (Local Office Br.) has the disc retionary power to sanction loan (SOD) up to Tk. 25 Lac against financial obliga tions by informing Head Office. But in that case, the Branch Manager has to give attention to the following matters: - The interest rate of the loan must not be less than 4.5% and - The borrower must maintain 10% margin. Except this case, t he branch has to send the proposal to the Head Office. Head Office will prepare a minute and submit it before the Executive Committee (EC). The minute has to be passed by EC. After passing the minute, it will be sent to Bangladesh Bank for approval in case of following: If the proposed limit exceeds 15% of Banks equity; If the proposed limit against cash collateral securities exceeds 25% of Banks eq uity. 5) After the sanction advice, Bank will collect necessary documents (charg e documents). These documents are-------a) Joint Promissory Note b) Single Promi ssory Note c) Letter of Undertaking d) Loan Disbursement Letter 44

3.3.3. Feasibility Report This report is from borrowers point of view. He prepare s this report and submitted to the bank. 3.3.4 Credit Line Proposal In this step of the term loan the branch sends a credit line proposal to the head office for approval of the term loan. The credit line proposal contains the following part iculars: Fresh/Renewal/Revision of the term loan Borrower name Types of business Capital structure Particulars of previous transaction Movement of the accounts Liabilities of sister concerns 3.3.5. Project Appraisal It is the reinvestment a nalysis done by the banker before a project he approved. Project appraisal in th e banking sector needed for the following reasons: To justify the soundness of an investment To ensure repayment of bank finance To achieve organizational goals To recommend if the project is not designed proper ly 3.3.6. Techniques of Project Appraisal An appraisal is a systematic exercise to establish that the proposed project is a viable preposition. The appraising offi cer checks the various details submitted by the promoter in first information sh eet, credit application form, feasibility report. SIBL considers the following a spects in apprising: 1. Entrepreneur 2. Viability of the project A. Technical vi ability (location and site of the project). B. Commercial viability (This study indicates evaluation of a projects feasibility in terms of market). C. Financial viability. D. Economic Viability. E. Management and organization viability 45

3.3.7 Lending Risk Analysis (LRA) Lending Risk Analysis (LRA) is a technique by which the risk of the loan is calculated. Banker must analyze LRA when loan appl ication is above 1 core. This analysis is done by experienced people of Credit d epartment in SIBL. It is a ranking whose total score is 140. Among this score, 1 20 is for Total Business Risk and 20 for Total Security Risk. In case of busines s risk, if the score falls--------Between 13-19, then------- Poor risk Between 2 0-26, then --------Acceptable risk Between 27-34, then-----Marginal risk Over 34 , then ------ Good risk. In case of security risk, if the score fall Between 20 to 15 then Between 14 to 0, then ------------ Acceptable risk Between 0 to 10, t hen -------------Marginal risk Over 10, then -----------------Good risk. In LRA, following aspects are analyzed Supplies risk 1) Sales risk 2) Performance risk 3) Resilience risk 4) Management ability. 5) Level of Managerial teamwork 6) Man agement competent risk 7) Management integrity risk 8) Security control risk 10) Security risk cover. 3.3.8. Securities SIBL charges the following two types of security, 1. Primary security 2. Collateral security. 3.3.9. Document and Docume ntation A document is a written statement of facts of proof or evidence arising out of particular transaction which placement may bind the parties there to answ erable and liable to the court of law for satisfaction of the change in question . The execution of documents in proper form and according to the law is known as documentation. 46

Steps in documentation Obtaining the documents. Stamping (Stamp Act-1899) Witnes sing. Execution of Documents. Registration of Documents (assignment on the body of an insurance Policy, Mortgage deed, Advance to a limited company etc.) Common Compulsory Documents Letter of Acceptance about the terms and conditions laid d own in Sanction Advice. D.P. Note (Depending on the types of borrowers) Letter o f Arrangement. Besides, there are other documents that are to be obtained depend ing on the types of Advance. Such asIn case of loan 1. Letter of Disbursement. 2 . Letter of Authority (if required) 3. Letter of Hypothecation (when goods are h ypothecated as security) 4. Insurance Policy (if required). 5. Any other documen t as stated in Sanction Advice. In case of overdraft 1. Letter of Continuity. 2. Letter of Authority (if required) 3. Letter of Hypothecation (when goods are hy pothecated as security) 4. Insurance Policy (if required) 5. Any other document as stated in Sanction Advice. In case of cash credit 1. Letter of Continuity. 2. Letter of Authority (if required) 3. Letter of Pledge/Hypothecation. 4. Insuran ce Policy under Banks Mortgage clause. 5. Letter of disbursement incase of renewe d go down. 6. Any other document as stated in Sanction Advice. Transport Loan 1. Letter of hypothecation of vehicles (in separate form) 2. Photocopy of blue boo k 3. Photocopy of rote permit 4. Insurance policy under Banks mortgage clause 47

Legal Mortgage 1. Mortgage deed (certified copy) 2. Registration receipt in 3. C hain of documents for title (original if available) 4. C.S,S.A and R.S parcha 5. Up to date Rent Receipt 6. Non-encumbrance certificate 7. Power of Attorney (if asked for) 8. Legal opinion 9. Valuation Certificate 10. Location plan etc./Sit e plan etc Equitable mortgage 1. Chain of documents for title 2. original title deed 3. C.S, S.A A and R.S parcha 4. Up to date Rent Receipt 5. Memorandum of de posit of title deed 6. Registered power of Attorney 7. Legal opinion 8. Valuatio n Certificate 9. Location plan etc 10. Non-encumbrance Certificate 3.3.10 Credit Monitoring, Follow-up and Supervision SIBL Officer checks on the following poin ts: 1. The borrowers behavior of turnover 2. The information regarding the profit ability, liquidity, cash flow situation and trend in sales in maintaining variou s ratios. 3.3.11. Loan Classification Like other banks, all types of loans of SI BL fall into following four scales: 1. Unclassified: Repayment is regular. 2. Su bstandard: Repayment is stopped or irregular but has reasonable prospect of impr ovement. 3. Doubtful debt: Unlikely to be repaid but special collection efforts may result in partial recovery. 4. Bad/Loss: very little chance of recovery. 3.3 .12. Provision Type of classification Rate of provision Type of classification Rate of provisio n Unclassified Substandard 1% 20% Doubtful Bad debt 50% 100% 48

3.3.13 Statements Prepared by the Credit Department Monthly Statements prepared by Credit Department for Bangladesh Bank. Quarterly Statements prepared by Credi t Department for Bangladesh Bank. Monthly Statements prepared by Credit Departme nt for Head Office. 3.3.14 Deviations between Theories and Practices Following d issimilarities have been observed in the credit department: 1. In case of method of granting security against loan, hypothecation is much risky as compared with other charging security. But it is being used massively in SIBL Local Office Br . It is risky because neither the ownership nor possession is passed on it, only a right or interest in the goods is created in favor of the bank. Theoretically , bank provides two types of credit facilities--- direct facilities (funded) and indirect facilities (non-funded). But bank is being covered indirect facilities fully but not direct facilities. For example, Demand Loan is not available in b ank practically. 2. In case of mortgage, only equitable and legal mortgage are c ommonly used as the charging security in immovable property but theoretically th ere are another types of mortgage like mortgage by the condition of sales, Engli sh mortgage, fractural and anomalous mortgage are not applied in practice. 49

ONLINE BANKING Information technology (I.T.) is a well known word, The developed countries of the world reached to the peak of information technology. SIBL have no alternative to expand of information technology. Tight now, SIBL are facing uneven competition with many foreign banks in the country. For this, SIBL will h ave to take necessary preparation form this moment. Information Technology and F low of Information is become very important in the present world. Social Islami Bank needs to develop all their banking transaction with the help of this techno logy and need to introduce online banking. 4.1 What is Online Banking? Most people heard a lot about online banking but pro bably haven t tried it themselves. People still pay their bills and deposit chec ks at banks branch, much the way their parents did. They might shop online for a loan, life insurance or a home mortgage, but when it comes time to commit, peopl e can feel more comfortable working with his banker or an agent they know and tr ust. Online banking isn t out to change ones money habits. Instead, it uses today s computer technology to give people the option of bypassing the time-consuming , paper-based aspects of traditional banking in order to manage finances more qu ickly and efficiently. 4.2 Origin of Online Banking The advent of the Internet a nd the popularity of personal computers presented both an opportunity and a chal lenge for the banking industry. For years, financial institutions have used powe rful computer networks to automate millions of daily transactions; today, often the only paper record is the customer s receipt at the point of sale. Now that i ts customers are connected to the Internet via personal computers, banks envisio n similar economic advantages by adapting those same internal electronic process es to home use. 4.3 Brick-to-Click Banks Today, most large national banks, many regional banks and even smaller banks and credit unions offer some form of onlin e banking, variously known as PC banking, home banking, electronic banking or In ternet banking. Those that do are sometimes referred to as "brick-to-click" bank s, both to distinguish them from brick-and-mortar banks that have yet to offer o nline banking, as well as from online or "virtual" banks that have no physical b ranches or tellers whatsoever. The challenge for the banking industry has been t o design this new service channel in such a way that its customers will readily learn to use and trust it. After all, banks have spent generations earning our t rust; they aren t about to risk that on a Web site that is frustrating, confusin g or less than secure. 50

Most of the large banks now offer fully secure, fully functional online banking for free or for a small fee. Some smaller banks offer limited access or function ality; for instance, you may be able to view your account balance and history bu t not initiate transactions online. As more banks succeed online and more custom ers use their sites, fully functional online banking likely will become as commo nplace as automated teller machines. 4.4 Virtual Banks If anybody don t mind for egoing the teller window, lobby cookie and kindly bank president, a "virtual" or e-bank may save very real money. Virtual banks are banks without bricks; from t he customer s perspective, they exist entirely on the Internet, where they offer pretty much the same range of services and adhere to the same federal regulatio ns as corner bank. Virtual banks pass the money they save on overhead like build ings and tellers along to you in the form of higher yields, lower fees and more generous account thresholds. 4.5 SIBL will get Advantage from Online Banking Con venience: Unlike a corner bank, online banking sites never close; they re availa ble 24 hours a day, seven days a week and they re only a mouse click away. Ubiqu ity: If anybody out of state or even out of the country when a money problem ari ses, he can log on instantly to his online bank and take care of business, 24/7. Transaction speed: Online bank sites generally execute and confirm transactions at or quicker than ATM processing speeds. Efficiency: One can access and manage all of his bank accounts, including IRAs, CDs, even securities, from one secure site. Effectiveness: Many online banking sites now offer sophisticated tools, i ncluding account aggregation, stock quotes, rate alerts and portfolio managing p rograms helps to manage all of the assets more effectively. Most are also compat ible with money managing programs such as Quicken. 4.6 Feature that can be gives in SIBL Online Banking Making payments Tracking payments Stop payments by block cheque Review personal account details, including balances and transactions Pay bills online with the optional Online Bill Payment service View images (front a nd back) of cleared checks and deposit slips Receive e-mail notifications to ale rt to selected account activity Schedule single one-time transfers or multiple t ransfers 51

Set up email notifications to be sent for balance amounts, specific checks clear ed or maturity dates Transfer money Open Accounts Apply for loans Make loan paym ents 52

PERFORMANCE ANALYSIS 5.1 Performance of the Bank (SIBL): A brief review of the a ctivities I take this opportunity to place before you the present overall operat ional activities of the Bank as follows: a) Alhamdulillah during 2008 Bank has m ade a net profit after tax of Tk. 202,068,294 after providing provision as per r equirements of Bangladesh Bank. Business performance of 2009 shall be much bette r, inshallah. b) The growth rate in formal sector-Deposit in 2008 was significan t, based on actual expected growth rate of deposit in 2008would be much better. c) Banking with the poor (that is mainly with street children and poor family) u nder micro credit and micro enterprise under family empowerment credit program a ctivities is increase very rapidly Deposit Deposit of the Bank was increased to Tk.19, 753,940,163 million during 2008 against total deposit of Tk. 16,170,514,6 27 million in 2007, compared to growth rate of 22.16 % in the Banking Sector of the country. In view of the fact that the main target group of SIBL is lower and middle class people, this model of Banking is capable of absorbing abnormal flu ctuation of stock market due to this target group of depositors. Investment Bang ladesh experienced worst flood in the century and volatile economic situation du ring the year under report, investment activities stood Tk16,440,259,305 million in various sector as at the end of 31st December, 2008.as against Tk.15,312901, 478 million in 2007 Alhamdulillah, there was no as such overdue or classified in vestment as at 31 st December, 2008. Liquidity Liquidity maintained in the form of cash in hand and balance with Bangladesh Bank including foreign currency note s stood at Tk.1, 702,267,359 million as at 31st December, 2008 against Tk. 1,384 ,245,001 million last year. Total liquidity increased was Tk.318022358 million. Balance held with other banks stood at Tk.4, 602,084,949 million as on 31 st Dec ember, 2008 as against Tk 1, 572,218,612 million last year. 53

Foreign Exchange Business Foreign Exchange Business stood at Tk.23903.80million in 2008 as against Tk.23280.00 million in 200. The breaks up of foreign exchange business are as follows: Taka in million Particulars Import Export Remittance Total 2003 2004 2005 2006 2007 2008 Growth Rate 14.34 % -0.0702 % -40.65 % 2.67 % 11124.85 14908.90 13363.07 11576.71 11791.00 13482.30 2287.64 107.57 4035.90 120 .30 4500.23 224.82 5528.40 10714.00 332.96 775.00 9961.60 459.90 13520.07 19065.10 18088.12 17438.07 23280.00 23903.80 Source: Annul report of SIBL (2003, 2004, 2005, 2006, 2007 & 2008) 54

5.1.1. DEPOSIT The deposit of Social Islami Bank Limitedhas rapidly increased fr om 2007 to 2008. The deposit of SIBL in 2007 was Tk. 16,170,514,627 million wher e it was Tk19, 753,940,163. Million in 2008. Table-1 Year Deposit in million tak a 2003 15141.332 2004 19709.31 2005 19704.16 2006 16,862.57 2007 16,170.51 2008 19,753.94 Source: Annul report of SIBL (2003, 2004, 2005, 2006, 2006, & 2008) 55

5.1.2 INVESTMENT Investment of SIBL is increasing rapidly. In the year 2008 the amount of investment was Tk. 16440.25 million which was Tk. 15312.90 million in 2007. Table-2 Year Advance in million taka 2004 10059.11 2005 12887.27 2006 1509 6.83 2007 15312.90 2008 16440.25 Source: Annul report of SIBL (2004, 2005, 2006, 2007, &2008) 5.1.3 COMPARATIVE GROWTH IN DEPOSITS AND INVESTMENT The growth rate of deposit i n 2008 was 22.16 % where the growth rate in investment was 7.36 % in 2008. The g rowth rate in Deposit was higher than the growth rate deposits in 2007. 56

5.1.4 IMPORT BUSINESS The import business of SIBL Tk. 13482.30 million in the ye ar 2008 that was Tk. 11791 million in the year 2007. The growth rate of import b usiness in 2007 was 14.34 %. Table-3 Year Amount in million Taka 2003 11124.85 2 004 14908.90 2005 13363.07 2006 11576.71 2007 11791.00 2008 13482.30 Source: Annul report of SIBL (2003, 2004, 2005, 2006, 2007 &2008) 5.1.5 EXPORT BUSINESS The export business of SIBL is decreasing trend. The growt h rate of export business in the year 2007 was -7.02 % Table-4 Year Amount in mi llion taka 2003 2287.64 2004 4035.90 2005 4500.23 2006 5528.40 2007 10714.00 200 8 9961.60 Source: Annul report of SIBL (2003, 2004, 2005, 2006, 2007& 2008) 57

5.1.6 GROWTH IN NET PROFIT Earning net profit is increasingly of SIBL. In the ye ar 2008, the net profit after tax of the Bank was Tk. 150037061 million and the growth rate of net profit was 160.34 % in 2008. Table-5 Year Amount in taka 2004 83,857,707 2005 13,936,185 2006 57,631505 2007 150,037,061 2008 202.068,294 Source: Annul report of SIBL (2004, 2005, 2006, 2007 & 2008) 58

5.1.7 COMMENTS Though Social Islami Bank Limitedis a new bank, which started its operation in the last half of the year 1995; it has now become a reputed bank. Its deposits and investment are increasing rapidly. Its number of branches has i ncreased up to 24. Its foreign exchange business is also very credible. In a few days, it is well known in the banking sector that SIBL gives a higher standard of banking services. During my precaution orientation program in Local Office br anch, I went through many experiences that made me think SIBL-a bank of a very h igh standard. 5.2 RATIO ANALYSIS Formula Major Ratios Profitability Ratios Net Profit Total Assets. Net Profit Be fore Tax Total Assets. Net Income Before Tax Shareholders Equity. Profit Before In terest and Tax Working Capital Profit Before Interest and Tax Fixed Assets Net I ncome Total Equity Net Profit after Tax Number of ordinary share Outstanding Mar ket Share Price Earning Per Share. Income to Total Assets Return on Assets Retur n on Investment Return on Working Capital Return on Fixed Assets Net Income to E quity Earnings Per Share Price Earnings Ratio-Times Leverage Ratios Total Debts Total Assets Debt to total Assets Ratio 0.932 13.740 0.950 19.079 0.954 21.055 0 .957 22.700 0.0589 1.09% 18.02% 0.171931 2.0288 0.7991 17.60 28.79 0.00292 0.61% 4.90% 0.8029 0.8744 0.6372 9.85 18.27 0.00068 0.27% 0.48% 0.000296 0.3534 0.245 1 24 76 0.00389 .074% 14.00% 0.126 1.0984 1.559 143 26 2008 2007 2006 2005 Total Liabilities Stockholders Equity Debt to Equity Ratio Liquidity Ratio Curre nt Assets Current Liabilities Working Capital Current Assets Current Ratio Curren t Test Ratio 0.288 -0.247 0.164 0.392 0.2215 -0.0351 0.0388 1.57 5.2.1 Interpretation of Ratio Analysis Liquidity Ratio Liquidity Ratio covers th e four most important ratios. Current ratio express that almost in the five year s SIBL has sufficient current asset respect with the current liabilities. Quick ratio is also fine but not so much enough in respect with the current liabilitie s. Cash ratio are also fine from my point of view because cash has opportunity c ost also. So huge amount of idle cash is not so good for any company. Operating Cash Flow ratio is also fine. They are generating approximately 8% cash from the ir operation. 59

Profitability Ratios Profitability Ratio mainly covers how much profit the organ ization conducts or achieved by its operation. And we know that Islami Banks main concentration is not for profit. So for the particular Islami Bank profitabilit y ratio is not so much important. But its profitability ratios are good from the year of 2004 to 2008. Leverage Ratios Leverage Ratio covers the area in which w e are discussing that how much borrowed capital the bank gathered in respect to their own equity of shareholders equity. In this particular bank the leverage rat io, we can see that their almost dependent on external liabilities rather than i nternal liabilities or shareholders equity. 5.3 SWOT ANALYSIS SWOT analysis is th e detailed study of an organizations exposure and potential in perspective of its strength, weakness, opportunity and threat. This facilitates the organization t o 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 o rganization can also study its current position, it can also be considered as an important tool for making changes in the strategic management of the organizati on. S- STRENGTHS W-WEAKNESS O-OPPORTUNITIES T-THREATS Here is the SWOT analysis of SIBL: Strength Social Islami Bank is a new commercial bank in banking sector but it has built strong reputation in short time. It provides extra ordinary ser vices to its customers. The financial condition of Social Islami Bank is very st rong, its loan and deposit quality is better than any other commercial banks of Bangladesh. It has a strong network throughout the country and it provides servi ces of good quality to every level of customers. Their corresponding relationshi ps with more than 200 international and local banks of different countries have created global accessibility and relationship with people. Installation and use of highly sophisticated, automated system that enables the bank to have on time communication with all branches reduces excessive paper work and time for valued customer transaction. 60

Social Islami Bank is a new commercial bank in banking sector but it has built s trong reputation in short time. It provides extra ordinary services to its custo mers. The financial condition of Social Islami Bank is very strong, its loan and deposit quality is better than any other commercial banks of Bangladesh. It has a strong network throughout the country and it provides services of good qualit y to every level of customers. Weakness One of the greatest weaknesses for Socia l Islami Bank is shortage of manpower in every division. During the working hour of banks the employees cannot provide proper attention to the customers that en hances customer dissatisfaction. Higher service charge in some areas of its bank ing operation discourages customers from opening or maintaining accounts with th is bank. Social Islami Bank is facing some problems from their competitors becau se competitors are giving a higher interest rate in deposits without any reason which will deteriorate its position than it was before. Because of this a lot of depositors are leaving Social Islami Bank. There is a very little practice for increasing motivation in the workers by the management. The SIBL was listed as a problem bank in 2005 by the central bank mainly due to shortfall of capital, li quidity crisis and classified loans. The bank has now a surplus capital of TK. 3 1 core In 2005, the banks classified loan was over 11 percent of total outstandin g loans whereas its current classified loan is below 4 percent of the total loan s. Opportunity There is a great opportunity to take new dimension of banking suc h as Islamic banking, specialized banking. Otherwise, there are many sectors whe re this can give special privileges. The credit facility offered by Social Islam i Bank has attracted security and status conscious businessmen as well as servic e holders with higher income group. 61

Threats The emergence of several private and foreign banks within the past few y ears offering similar services with less or free charge for the facilities can b e a major threat for the bank. Social Islami Bank. Sometimes the restrictions im pose barrier in the normal operations and policies of the bank. Rival banks easi ly copy the product offering of SIBL. Therefore, this bank is in continuous prog ress of product innovation to gain temporary advantages over its competitors. So metime political loans are the threat for this banking service. 62

6.1 SOURCE OF FUND Capital The authorized capital of Bank is 4000 million. The p aid-up capital and equity of the Bank stood at Taka 585.00 million and taka 980. 70 million respectively as at 31st December 2007. (Taka in Millions) 01 02 03 04 05 06 Paid up capital Statutory Reserve Retained Earnings 1% provision on unclassified investment Investment loss off setting Reserve Exchange Equalization 585.00 290.98 90.44 147.33 8.15 6.12 CLASSIFICATION OF SHAREHOLDER BY HOLDING Year 2007 shareholding range Folio Shar e 1-10 675 4493 11-50 462 11073 51-100 82 6533 101-500 104 25708 501-1000 30 235 05 1001-5000 50 119707 5001-10000 13 94610 10001-20000 12 154780 20001-50000 3 9 4146 50001-99999 1 50445 Total 1,432 58,5000 Percentage 0.77% 1.89% 1.12% 1.39% 4.02% 20.46% 16.17% 26.46% 16.09% 8.62% 100.0 0% 6.1.2 Deposit Since deposit is the life blood of the Bank, we drew-up service of action plan, both short term and long term to raise the deposit base of the Ban k in line with the directives of the Bangladesh Bank. The short-term action plan included launching of special drive like service months, deposit mobilization m onths; customers get together etc. during AprilJune and September-December 2007. in the service months new deposit of Tk.382.84 crore was mobilized. Alongside t he treasury operation of SIBL was made prudently. Resultantly, there was an incr ease in client deposit by Tk. 170.47 crore and avoid dependency on Bank deposits as compared to 2005. Besides, borrowings of Tk.177 crore from Bangladesh Govern ment Mudaraba Islamic bond found has added qualitative value in liquidity manage ment of SIBL. Therefore, we could efficiently save the Bank from manage the foun d and liquidity mishap despite liquidity crisis in 2007 in the market. As a resu lt of continuous evaluation and monitoring we could significant improve the depo sit mix in 2007. 63

The deposit of Social Islami Bank Limitedhas rapidly increased from 2007 to 2008 . The deposit of SIBL in 2007 was Tk. 16,170,514,627 million where it was Tk19, 753,940,163. Million in 2008. Table 6.1: Year wise fund distribution in... Year Deposit in million taka 2003 15141.332 2004 19709.31 2005 19704.16 2006 16,862.5 7 2007 16,170.51 2008 19,753.94 Source: Annul report of SIBL (2002, 2003, 2004, 2005, 2007&2008) 6.1.3 Borrowed Fund Banks collect funds from both short-term and long-term borro wings. Banks collect longterm funds from long-term borrowings by following conte mporary rules and regulations. Loan-term funds thus act as capital. The instrume nts through which bank collects shortterm funds are selling of securities with a repurchase agreement, borrowing from central bank and borrowings from sister ba nks. This type of loan facility may have maturity of one or two days. Interest p ayable on these borrowings depends on the demand for and supply of such funds. 6 .2 FUND IMPLEMENTATION 6.2.1 Investment The investment portfolio of the bank was propelled efficiently in 2007 as per directives of Bangladesh Bank. The total i nvestments of the Bank at Tk. 15312.90 million in various sectors as at 31st Dec ember, 2007 against Tk.15096.83 million of 2005 registering a growth by 1.43% th at signifies the confidence of the clients on the Bank. The increases in investm ent by Tk. 216.07 million as compared to 2005 were due to expansion of business. We are now concentrating our efforts to increase Free-based and Exchangebased i nvestments to expedite the earnings of the Bank side by side to facilitate the i nvestment earnings. It is mentionable here that the asset quality of some of our Branches have deteriorated since 2004 resulting in the increase of classificati on but we have successfully made up the provision shortfall to Nil as on 31.12.2 007 against classified investment as depicted in the Audit Report. 64

To overcome the situation, we launched special drives to recover the sticky and classified investments. The following graphs show the year wise position of inve stment: Investment of SIBL is increasing rapidly. In the year 2008 the amount of investment was Tk. 16440.25 million which was Tk. 15312.90 million in 2007. Tab le 6.2: Year wise fund distribution Year Advance in million taka 2004 10059.11 2 005 12887.27 2006 15096.83 2007 15312.90 2008 16440.25 Source: Annul report of SIBL (2003, 2004, 2005, 2007, &2008) Liquidity Liquidity in the form of Balance with Bangladesh Bank, Sonali Bank (as the agent of Bangladesh Bank) and cash in hand including foreign currency stood at Tk. 1384.25 million as at 31st December 2007 as against Tk. 1079.25 million in last to your maintain cash & statutory liquidity. The Bank is committed to ma intain the cash and statutory liquidity requirement to effectively manage the as set & liability portfolios of the Bank in order to maximize the profit. As per g uideline of the Bangladesh Bank ALCO(assets liquidity committee) was formed in 2 005 under Assets Liability management project, which is highly concerned with prop er liquidity management under the close supervision of senior management. The Ba nk has a policy guideline on liquidity management as approved by its Board of Di rector. 6.3 INVESTMENT RETURN AND DISTRIBUTION TO CONCERNED PARTIES Particulars 31.12.2008 Profit paid on Depositors 1,705,054,119 Total Operating Expenses 421, 720,430 Total Provision 212,920,488 Taxes Paid to Government 267,862,416 Earning s per share (EPS) Net profit after tax Number of ordinary shares outstanding Ear nings per share (EPS) 57,631,505 585,000 99 65

6.4 INFLOWS / OUTFLOWS OF FUNDS Inflow of Funds Deposit Borrowing from other Ban k, Financial Institutions Capital / Shareholders Equity Amount (BDT) 6,170,514,6 27 ,770,000,000 Outflow of Funds Investments (Loans & Advance) B A N K Amount (BDT) 15,312,901,478 Investments (Shares & Securities) 501,061,600 980,699,959 F Cash in Hand 1,384,245,001 Other Assets 783,620,421 Source: Annul report of SIBL 2007 6.5 CAMEL RATING Supervisors gather private in formation, such as details on problem loans, with which to evaluate a bank s fin ancial condition and to monitor its compliance with laws and regulatory policies . A key product of such an exam is a supervisory rating of the bank s overall co ndition, commonly referred to as a CAMELS rating. The acronym "CAMEL" refers to the five components of a bank s condition that are assessed: Capital adequacy, A sset quality, Management, Earnings, and Liquidity. CAMEL C Capital Adequacy A As set Quality FORMULA Equity Capital+ Loan Loss Reserve Total Assets 100 Commercial &Industrial Loans Total Assets 100 Changing loans during the past 5 year (increas e) Income before securities gains and loans Avg. total Assets 100 Total Assets Tot al Loans Total Assets 100 2007 5.73 % 77.76 % 2005 5.23 % 74.15 % 10.81 % 1.48 % 2 2.24 % 1.02 % 25.85 % M Management Quality E Earnings L Liquidity 66

FINDINGS Bank is a financial institution. The service of a bank is considered as its product. Bank is financial intermediary dealing in accepting surplus saving s as deposits and extending funds to those who can approach the bank with bankab le projects. Amount of funds can be increased or decreased depending on the prof essional skill of the bank executives. Efficiency of customer service is related with progression of operation. Social Islami Bank Ltd operations are increasing gradually. Each year deposits and investment growth indicates SIBL better movem ent in the banking field, which is satisfying clients. As a result, clients are increasing and ultimately equity is increasing. Gradually banks operation is incr easing. Investment is rising rapidly and a good response is getting from the cli ents is different investment scheme. SIBL rising movement is generating increasi ng profit. Clients satisfaction depends on the efficacy of customer service. All operational improvement with profit leads us to say that value of customer servi ce of SIBL is in the positive situation. General Banking Department In general b anking department they follow the computerized banking system. They are using Da ta Base Networking in Information Technology (IT) Department. So they can transf er data from branch to branch and branch to head office by using one line. Loans and Advance Departments Political influence is one of the major problems in Ban gladesh. Due to political involvement the bank becomes bound to provide loans in some of the cases, which are rarely recovered. Bank has to face this in conveni ence situation almost every year and the percentage of such loans is about 20% T he loans and advance department takes a short time to process a loan because the process of sanctioning loan is done by computerized system. If is in average 10 working days. CIB report is not readily available from Bangladesh Bank. Foreign Exchange Department In foreign exchange department, it is required to communica te with foreign banks frequently and quickly. To make the process easily, Teleco mmunication Network is established in all branches. A scheme is operating in the name of Instant Cash Scheme. Through this scheme, Non Residence Bangladeshi can send money from any parts of the world. 67

Financial Performance and Fund Management The financial performance of the bank is satisfactory. According CAMEL rating the bank position is C Grade in 2008. In 2008 SIBL total assets was BDT 24546.55 million and in 2007 it was BDT 19691.53 million. So the growth rate increase in total asset is 24.67%. In 2008 SIBL Inc ome for Investment was BDT2, 092,951,320 million and in 2007 it was BDT 1,898,66 3,277 million. So the growth rate increase in Income for Investment is 10.23%. I n 2008 SIBL Profit paid on Depositors was BDT1, 705,054,119 million and in 2007 it was BDT 1,596,612,146 million. So the growth rate increase in total asset is 6.79%. In 2008 SIBL total Investment was BDT 164440.26 million and in 2007 it wa s BDT 15312.90 million. So the growth rate increase in total investment is 7.36% . In 2008 SIBL total Deposit was BDT 19753.94 million and in 2007 it was BDT 161 70.51 million. So the growth rate increase in total deposit is 22.15% Bank has a good amount of no cost fund in its deposits breakdown. Return on assets and ret urn on equity is in lowering trend, but above the acceptable rate. Return on inv estment is inconsistent throughout the year (2004-2008). Foreign exchange contri bution is appreciable to total income. 68

RECOMMENDATIONS The banks are actually service organizations. The main objective s of the world famous and successful banking organizations are to make profit th rough addressing the clients time to time with new pieces of service instruments . However my little experience earned through this internship program took me to customers varying demands. I had several frank discussions with the clients and officials, which have helped me to know about the aforesaid findings and draw th e following recommendation: As one of leading Banks in Bangladesh, SIBL Bank sho uld provide equal emphasis in each department of banking service. SIBL may also indulge in Tele Marketing. This will smooth the progress of them to expand their sales. SIBL should pursue an aggressive marketing to come up into limelight. Ca mpaign in order to build up a strong image reputation among the potential custom ers. Campaign such as ad in the newspaper & magazine, billboard, neon signs, pub licity message. SIBL can pursue promotion campaign with its customers particular ly the corporate clients to build up a strong report. TV ad is also a major meth od for attracting the potential customers. As it is an old bank, a strategy of e xposing the bank to the public must be taken so that general people will aware a bout the emergence and growth of the bank. Sponsor in organizations picnic and ar range or sponsor in cricket match can be method of advertise. For monitoring and inspection of the current status of all the division for omitting there lacking . SIBL should appoint customer service officers in all branches. They solve cust omers problem, answer inquiry of customers etc. SIBL should differentiate its ser vices adopting the modern facilities and diversify products. To achieve the goal , a bank must establish and adhere to adequate policies, practices and procedure s for evaluating the quality of asset and the adequacy of loan provision and res erve. 69

CONCLUSION Now a day banking organizations are one of most vital parts of an eco nomy. Now banks provide various services for individual, different firms, compan ies even for cultivation. Banks offer a great accumulation of loans for personal and industrial purposes. SIBL is running successfully and for its good deposit performance the bank occupies 2nd position in the Islamic Banking Sector. Taken all in all, it can be safely said that SIBL action program is directed towards d evelopment of an authentic participatory Economy beyond Market Economy. The fami ly empowerment credit program of Social Islami Bank is gaining ground at the gra ss root field level in Bangladesh. Family Empowerment micro credit and micro ent erprises program must be designed in a manner so as to make a) finance, b) produ ction, c) marketing, d) trading, e) local specific survey and research as well a s moral integrity in one package. In SIBL approach, credit conveys the totality in life and clearly linked to social context and cultural setting in conformity with Shariah. There is a better chance in provision for social subsidy. De-secul arizing credit may lead to re-writing new economics. It is thus felt that the li nking credit to social goals and assignments will have far-reaching theoretical implications for development of an alternative concept of new theories of income , output and employment. This bank expresses its sincere thanks to the governmen t of the Peoples Republic of Bangladesh and Bangladesh Bank for their co-operatio n and valuable guidance to the bank. SIBL also takes this opportunity to their v alued clients, patrons, well wishers, correspondents and the shareholders for th eir support and patronization extended during the year under review. SIBL also r ecords its appreciation for the services rendered by the executives and the memb ers of the staff for the stability and growth of the bank. SIBL needs further ac tive support and continued cooperation of Bangladesh Bank, ministry of finance a nd other government agencies, executives and employees of the bank, valued partn ers, clients and the community at large in accomplishing difficult tasks ahead o f it. BIBLIOGRAPHY 1. Social Islami Bank Annual Report. 2. Operational manual 3. Lectu re sheet serve from SIBL training institute 4. www.siblbd.com 5. www.bangladeshi nfo.com 6. www.google.com 7. www.valki.com 70