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pects and challenges

INTRODUCTION
Background of the Report
After completing my BBA from BANGLADESH UNIVERSITY. I wanted to do
Internship in a reputed Bank that would be helpful for my future professional
career. I got the opportunity to perform my internship in the NATIONAL BANK
LIMITED. I worked in MOHAKHALI BRANCH. Since I worked here I used the
chance fully. It was a three months long practical orientation program. This report
is originated as the requirement of National Bank Ltd.
Generally by the word "Bank" we can easily understand that the financial
institution deals with money. But there are different types of banks like. Central
Banks, Commercial Banks. Savings Banks, Investment Banks, Industrial Banks,
Cooperative Banks etc. But when we use the term "Bank" without any prefix, or
qualification. It refers to the 'Commercial Banks'. Commercial Banks are the
primary contributors to the economy of a country. So we can say Commercial
banks is a profit-making institution that holds the deposits of individuals &
business in checking & savings accounts and then uses these funds to make loans
For these people and the government is very much dependent of these banks as
the financial intermediary. As, banks are profit-earning concern; they collect
deposit at the lowest possible cost and provide loans and advances at higher cost.
The differences between two are the profit for the bank.
Banking sector is expanding its hand in different financial events every day, at the
same time the banking process is becoming faster, easier and the banking arena is
becoming wider. As the demand for better service increases day by day, they are
coming with different innovative ideas & products. In order to survive in the
competitive field of the banking sector, all banking organizations are looking for
better service opportunities to provide their fellow clients. As a result, it has
become essential for every person to have some idea on the bank and banking
procedure.
Internship program is essential for every student, especially for the students of
Business studies which helps them to know the real life situation. For this reason a

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pects and challenges

student takes the internship program at the last stage of the master's degree, to
launch a career with some practical experience.
Deregulation of interest rates, raising competition from bank and non-bank
competitors and continuing development of innovative ways to provide financial
services are all contributing to a growing interest in evaluating bank performance.
Various groups of individuals are particularly interested in evaluating bank
performance.
First, bank shareholders are directly affected by bank performance. Investors take
advantage of bank information to develop expectations concerning future
performance that can be used to price common shares appropriately.
Second, bank management traditionally is evaluated on the basis of how well the
bank performs relative to previous years and compared with similar banks. Hence,
employees salaries and promotions are frequently tied to the performance of the
banks. Bankers also need to be informed the condition of other banks with which
they have dealings.
Third, regulators concerned about the safety and soundness of the banking system
and the preservation of public confidence, monitor banks using on-site
examinations and computer oriented early warning systems to keep track on
bank performance.
Fourth, depositors may be interested in how well the bank is doing, especially if
they hold deposits in excess of the insured amount and must depend on the banks
funds for their continued operations.
Fifth, and last, the business community and public should be concerned about
their banks performance to the extent that their economic prosperity is linked to
the success or failure of their bank.

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pects and challenges

1.4 Methodology
Research approaches and techniques to be applied to conduct systematic and
smooth completion of the whole assignment up to the submission of research
report along with the suggestion were as follows:
1. My first task was to prepare a comprehensive research program covering
all aspect of the National Bank Ltd.
2. Work out a rationale systematic selection procedure as per available
information & standard sampling method, which are considered to be
reliable base for giving my recommendation about the population
parameter.
3. Discuss with cardholders and merchants about the master card. Complete
the assignment by specified time and submission of research report by the
following procedure.
4. Collect available management policy, guidelines, project document and
necessary dates from credit card division of National Bank Ltd.

A. Data Collection
In order to accomplish the successfully completion of the report and to form an
opinion on the research along with the necessary recommendations for solving the
problem adequate data and information are necessary for the effective termination
of the research work.

B. Study sample
I have to be design sampling in accordance with International Auditing Guideline
# 19. Dhaka city was divided form the viewpoint of commercial area. There are 6
commercial area and one hundred cardholders ware selected (randomly) from
Dhaka for sample survey.

C. Instrument to be used

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pects and challenges

Questionnaire method was followed for data collection. In case of data collection,
I was follow individual basis either in interview or in filling up the questionnaire.
That means I was visit cardholders and merchants to collect data.

D. Processing data and Prepare report


a) Registration of field in instrument: After the data collection data should be
register in a book.
b) Packages to be used: Some computer packages were used in the study.
These are:
Microsoft word: Ms Word used for word processing and to write my
report.
Microsoft excel: Ms excel was used for analyzing of data.
c) Data was verified, which have already entered in computer.
d) Find out the recommendation and prepare report.

1.5 Limitation of the study


There were several constrains while preparing this report. Only 12 weeks were not
sufficient to visit all the desks of the division. So some desk were remained
unvisited moreover some officers in some desk were found non-cooperative. Such
desks remain unexposed. The division also refuses to provide on its performance,
especially on commission earned. The division provides only information of two
years; it is not sufficient for this report. It is also not possible to go the depth of
each activities of credit card division because of time limitation. Therefore, it very
difficult to carry out the whole analysis.

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The National Bank Limited


The National Bank Limited (NBL) has a prolonged and glorious heritage in the
banking industry in Bangladesh. It is the pioneer in the local private commercial
was inaugurated on March 1983 under the supervision of Bangladesh Bank. A
glorious fact of the National Bank Limited is its approval as first private
commercial bank from Bangladesh Bank in our country.
Economic development activities in the post liberation period required service
from private commercial Banks. To fulfill this demand as well as to improve the
commercial banking ser-vice in Bangladesh, the National Bank Limited emerged
as a private limited company. The National Bank Limited is a remarkable addition
to the private sector branch banking in Bangladesh. Aiming at offering
commercial banking service to the customer's door around the country, the
National Bank Limited established 100 branches up to this year. This is the
highest number for any private commercial bank operating in Bangladesh. This
organization achieve customer's confidence immediately its establishment in
domestic and international markets.
NBL took participation in Nepal Arab Bank Limited, Nepal in 1995.Under a
technical service agreement, NBL is extending management services to NBIL, in
1997. Bank opened a representative office in Yangoon, Myanmar. NBL is proud to
be, first private Bank in Bangladesh who introduce credit card (Master Card) both
local and international. The Bank has made agreement with Western Union
Remittance services for speedy transfer of money allover the world.
The National Bank limited provides financing in capital market, Credit line and
project financing, investment counseling, Underwriting any guarantee, Port folio
management etc along with traditional banking service, Sanchay Prokalpo and
Bonus Deposit scheme are- - praiseworthy banking service for the middle and
lower income group. Recently, this organization has taken operational decision of
two projects: Consumer Credit scheme and Credit Card marketing to widen its
service and customer base. The National Bank Limited is always emphasizing the

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improvement of banking service and betterment of living standard of the general


people of Bangladesh.

2.1 Vision
The vision of the National Bank Limited is to develop Bangladesh's economy by
profitable investment of public money and build up their confidence to the private
institution.

2.2 Mission
The missions of the National Bank are as follows:
We aim to come one of the leading Banks in Bangladesh by our prudence,
fair and quality of operation.
We intend to meet the needs of our clients and enhance our profitability
by creating corporate culture.
We believe in strong capitalization.
We aim to ensure our competitive advantages by upgrading banking
technology and information system.
We maintain high standard of corporate and business Seth's.
We provided high quality financial services to strengthen the well being
and success of individual, industries and business communities.
We intend to plat more important role in the economic development of
Bangladesh and its finical relations with the rest of the world by interlining
both domestic and international l operations.

2. 3 Objective & Goals


NBL is always ready to maintain the highest quality of services by
upgrading banking technology prudence management banking and by
applying high standard of business ethics through its established
commitment and heritage.

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The objective of NBL is not only earn profit but also to keep the social
commitment and to ensure its co-operation to the person of all level, to the
businessman, industrialist -especially who are engaged in establishing
large scale industry by consortium and the agro-based export oriented
medium and small industries by self inspiration.
NBL is committed to ensure its contribution to national economy by
increasing its profitability through professional and disciplined growth
strategy for its customer and by creating corporate culture in international
banking area.
NBL believes in building up strong-based capitalization of the country.
NBL is the first and largest private bank is committed to continue its
endeavor by rapidly increasing the investment of honorable shareholders
into assets.
NBL has been working from the very beginnings to ensure the best uses
of its creativity, well disciplined, well manage and perfect growth.
NBL is playing a vital role in socio-economic development of Bangladesh
by was of linkage with rest of the world by developing worldwide network
in domestic and international operation.
NBL is preoccupied to encourage the investors for purchasing its share by
creating the opportunity of long-term investment and increasing the value
of share through prosperity as developed by day.
NBL is committed to continue its activities in the new horizon of business
with a view to developing services oriented industry and culture of
morality and its maintenance in banking.

2.4 Management structure of National Bank Ltd.


In 2001 National Bank Limited made commendable progress in all business, like
deposit, credit, fund management, investment, foreign remittance, credit card &
foreign exchange related business. Bank has expended business activities as
holding previously & parallel by diversification its investment to a new product.
As a major financier remarkable portion of total exports of the country. The total

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st

assets of the bank were Tk. 48732.1 million as on 31 December 2001, which is
higher than Tk. 1584.02 million than the previous year. This is the sign of good
management. The management processes are as follows:

Planning:
The strategic planning approach in NBL is top-down. Top management formulates
strategy at the corporate level, and then it is transmitted through the division to the
individual objectives. Board of directors or Executive committee usually takes the
decision. In this process lower level manager are detached in making process,
even brainstorming of lower level manager is absent in decision-making and
planning process.

Organizing:
Organizing of the National Bank Limited is based on Departmentalization. The
organization is divided into twelve departments headed by Executive vice
President or Senior Vice President. In the National Bank Limited the whole
operation is centralized and authority is delegated by written guidelines. These
guidelines are:
Operational manual approved by Head Office, where each aspect or
banking operation is elaborately defined.
Advance manual including advances limit for different management level.
Bad and doubtful recovery manual.
Code of conduct.
Foreign banking guidelines.
Central bank directives.
Different management position holders in departments and branches practice their
authorized power in different cases with administrative loophole.

Staffing:
Entry-level recruitment process of the National Bank Limited is conducted in
three ways.

One way is recruitment of probationary officer. Each probationary

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officer has one year probation period. After completion of probation period the
officer joins as officer grade III (b). The career path of probationary officer is
headed toward different management positions. Second way of recruitment is to
recruit non-probationary officer who joins as an assistant officer. The career path
of an assistant officer is lengthier than probationary officer. The third way of
recruitment is recruitment of staff and sub-staff such as typist, messenger, driver,
guard, attendant, cleaner and other lower level positions. Promotion policy of
NBL is basically based on seniority basis. Sometimes, employees are promoted to
the higher position for their outstanding performance. However, it is found that
the average length of a position held by an employee is around five years.

Controlling
The bank has strict control over its all-organizational activities. The Bangladesh
Bank directives indicate some control measures. The central bank conducts credit
inspection by a team. The National Bank Limited has audit and inspection
department to take controlling measures in internal operations. Audit and
inspection team send to the branches now and then and is responsible for
preparing report that will be submitted to the chief Administration to take
necessary actions.

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Department in Head Office of the National Bank Limited

Audit & Inspection


Division

Audit & Budget &


Monitoring Division

Computer Division

Credit Division

Credit Card Division

Dispatch Division

Financial
Administration Division

Human Resource Division

International Division

Merchant Banking
Division

Share Division

Law & Recovery Division

Marketing Division

System & Operation


Division

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pects and challenges

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Organogram of NBL
CHAIRMAN
Board Secretariat

BOARD OF
DIRECTORS

Research and planning

Monitoring &
Implementation

COMMITTEES
Budget & Exp. Control

Special audit &


Inspection

MANAGING
DIRECTOR

Law & Recovery

DMD
Operation
DMD
Admin & Establishment
EVP

VP

EVP

Public
Relation

AVP NBL
Train. Ins

VP

EVP

VP Gen.
Banking

VP
Computer

EVP

SVP

EVP
CCD
SVP

VP
Industrial
Credit

AVP
Audit

EVP

SVP

SVP

AVP Acc
& Fin

VP
Develop
AVP
Admin.

VP
Establis
h

VP Gen.
Credit

AVP
Inspection

AVP
OS.
DEPWING

AVP
F.MAN&
OS.OP

AVP

AVP
RECON&ST

GERMENTS

AVP FORNTRADE &


CORP BANKING

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pects and challenges

Organizational Structure and Department


Organizational setup of the National bank Limited is consisting of three
organizational domains. Firstly the central top management, which contains Board
of Directors, Managing Director, Additional Managing Director and Deputy
Managing director, Major responsibilities of this are to take central decision and
transmit it to the second step. Secondly, Central executive level management,
which contains executive vice president, senior vice president, vice president and
Assistant vice president. Major responsibilities of this part are to supervise and
control division/ department. Thirdly, branch operation management, Which
contains branch manager and other mid/ lower level management. Major
responsibilities of this part are to the 75 branches of this bank and report to the
Head office from time to time.

2.5 Highlights on 2001


Despite monetary and economic crisis in the whole world due terrorist attack in
USA in 11th September 2001, the over all growth trend of the bank continued in
2001 during the year under review considerable progress was achieved in deposit
of loans and advances and foreign trade. The predominance in the field of foreign
remittance was also satisfactory. These factors contributed to consolidate the
bank's financial position.

Capital and Reserve fund:


The authorized capital of the bank is Tk. 1000.00 million and raid-up capital of
the bank remained static TK.430.27 million. However, reserve of tl1e bank stood
f'"~: TK.l.271.56 million, which was TK.1126.20 million as on 31-12-2000
showing an increase 12.9%.

Board of Directors

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Board of directors consists of 19 directors, Chairman and Management Director.


Form the list of the directors of the board it will be seen that the bank has high
officials compare to other bank.

Profit
In 2001 NBL earned profit of Tk. 1016.64 million, which is higher the previous
Year by 92.48 million.

Deposits and Advances:


Deposits of the bank raised Tk. 236i6.28 million in 2000 from Tk. 24896.64
million of the previous year revealing an increase of Tk. 1280.36 million with a
growth rate of 5.42%. Such increases result from increased fixed deposits and
savings. The total advance (:s of the bank stood at Tk. 20200.64 million as 0113112-2001 in comparison to Tk. 18553.66 million in the last year with a growth rate
of8.87%.

Dividend:
The board of director recommends 30% cash dividend from profit of2001 of the
shareholder.

Import:
In 2001, NBL handled import business worth Tk. 20773.20 million as against Tk.
2420.04 million in the previous year.

Export:
In 2001 total export was Tk. 22071.00 million, which is higher by Tk. 22420.04
million from the previous year.

Fixed Assets:

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The fixed assets of the rose to Tk. 797.81 million in 2001 from Tk. 485.64
million of 2000 The bank owns a ten-storied building in KDA C/A, khulna, a
five-storied building in Rampura, Dhaka and commercial valuable land Kawran
Bazar and at Agrabd CA Chittagong.

Book value and Earning Per Share:


The book value of share stands at rflc.395.52. The change was in positive terms in
comparison to 2000, Earning per share fell Tk.63.78 in 2001.fron1 Tk.53.13 and
the change comparison to 2000.

Consortium Financing:
To the country industrialized a large amount of money should invest. It is a
challenge of 21st century for any individual bank it is very hard and risky to face
the challenge. The bank is giving credit facilities in productive and priority sectors
with the policy guidelines of its own and Bangladesh Bank, side by side the bank
has invested in large-scale industries in consortium with other bank. Among these
with the notable private sectors- E TV, Pepsi-cola, Pacific Bangladesh Telecom
limited, Apollo Hospital, etc.

Sources and Uses of Fund:


The major source of bank's fund is deposits and also borrowing from Bangladesh
Bank and call loan form different banks. The bank used major portion of this fund
for investment in loans and advances.

Rural credit program:


NBL has been working intensively in collaboration with Borindra Multipurpose
Development Authority (BMDA) by conducting rural credit program particularly
in Rajshahi and the northern part of the country in general. In the last 10 years
bank has distributed the credit for Tk.69.8 million amongst the 10291 customers.
The recovery of loan in this project is 95%. Irl2001, Bank has distributed the loan

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for TK.7.00 million. Moreover, NBL has been- - participating in Agro Based
Industries and Teleological Development Project

Loan (ATDP) financed by

USAID since 1996, NBL has got the fund Tk.140.00 million as agriculture credit
from that ATDP project and along With its respective fund the bank has
distributed the total amount to the sub- sector through selective branches in 2001.

Training and Training Institute:

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The bank continued to endeavor in building up a efficient and knowledge


workforce through imparting in service modern banking training. For this, Bank
developed a training institute in Shaymoli in 1987 for its own to train-up its
employees. During the years under review 225 employees attained training
programs arranged by the training institute of the bank. In every batch, 25 trainees
can attain in training program with residential facilities. Up to 2001 from the
beginning of the institute 3283 employees have trained-up.

2.6 Expansion of Customer Service


Saving Insurance Scheme (SIS)
NBL is going on with contribution to perform social commitment inspire of being
profit based commercial bank of which saving insurance is one of them. Under
this scheme the depositor shall enjoy death risk twice the amount of the deposit on
his/ her normal death and trice the deposit amount on the depositors accidental
death. Apart from death risk cover the depositor shall get usual rate of interest as
prescribed for this amount.
Under this scheme, the beneficiary get equal the deposit in case of natural death of
the account holder whereas in the event of accidental death of the account holder
the beneficiary will receive twice the deposit. As for example if a customer picks
up easy class (Tk. 50000/-) he/ she will get Tk. 50000/- for natural death and Tk.
100000/- for accidental death apart from his/ her deposited amount and interest.
Class

Deposit

Normal Death Benefit


(Including

Easy
Convenient
Classic
Standard

50000/100000/200000/500000/-

Deposit)
100000/200000/400000/1000000/-

Accidental

Death

Benefit

own (Including own Deposit)


150000/300000
600000/1500000/-

Monthly Saving Scheme (MSS)


This scheme is specially designed for the benefit of the limited income group
member. Monthly saving scheme is welfare of the bank. Under this scheme the

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depositor shall get the amount of Tk. 40100/- and Tk. 1125000/- depositing Tk.
500/- per month for the duration of 5 years or 10 years respectively and in the
same way depositor get Tk. 80100/-and Tk. 224500/- for depositing Tk.1000/- per
month for the duration of 5 years and 10 years respectively.

Monthly

Return

Installment
500.00
1000.00

year
40100.00
80100.00

after

5 Return

after

10

year
112500.00
224500.00

Western Union Money Transfer


Joining the world largest money transfer service, NBL has introduced Bangladesh
to the fastest track of money remittance. Western Union is a Very familiar name in
the world of money transfer for sending speedy money from one country to
another country in a few minutes. NBL has made an arrangement with Western
Union Remittance Services, which has over 127 years experience for speedy
remittance or money with more than 140 countries, Now NBL is on line to
establish trade and communication with the prime international banking
companies of the world. As a result NBL will be able to build a strong root in
international banking horizon. Bank has been drawing arrangement with well
conversant money transfer service agency Western Union. It has a full time
arrangement for speedy transfer of money all over the world.

Credit Card Activities:


National Bank Limited is the first local bank that introduced credit card: Master
Card in Bangladesh in both local and international market in 1997. Master Card
captured 35% of credit card through the world. However present market analysis
reflects that a large number of people whose average income ranges in above
Tk.10000 are using the credit card. Credit card division is continuing there all
possible efforts for the participation in the globalize Master Card Program and the
number of users of the credit cards huge been increasing day by day.

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During the year the bank has ousted a profit of Tk. 96.70 million from credit card
business. NBL also get licenses from international brand Visa Card, very soon, it
will lunched.

NBL ATM Service:


National bank limited introduced ATM service to its customer. The card will
enable to save our valued customers from any kind of predicament in emergency
situation and time consuming formalities. NBL ATM card will give our
distinguished clients the opportunity to withdraw cash at any time, even in
holidays, 24 hours a day a week.

NBL Commitment to the society:


NBL always shows a strong and positive commitment to the services of the
society. IN 1998, the bank donated Tk. 5.50 million to prime minister Relief fund
for the flood- affected people of Bangladesh.

General Banking
1. opening section (set numbering)
2. Deposit section
3. Cash section
4. Remittance section
5. Clearing section
6. Accounts section

3.1Acc
In NBL Motijheel Branch, the following departments are under general banking
section:

Account Opening section

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Account opening is the gateway for clients to enter into business with bank. It is
the foundation of banker customer relationship. This is one of the most important
sections of a branch, because by opening accounts bank mobilizes funds for
investment. Various rules and regulations are maintained and various documents
are taken while opening an account. A customer can open different types of
accounts through this department. Such as:

Account opening procedure


Step 1

The account should be properly introduced by Any one of the following:


An existing Current Account holder of the Bank.
Officials of the Bank not below the rank of an Assistant officer.
A respectable person of the locality well known to the manager/Sub-

Step 2

Manager of the Branch concerned.


Receiving filled up application in bank's prescribed form mentioning what

Step 3

type of account is desired to be opened.


The form is filled up by the applicant himself / herself.
Two copies of passport size photographs from individual are taken; in
case of firms photographs of all partners are taken.
Applicants must submit required documents
Application must sign specimen signature sheet and give mandate.

Step 4
Step 5
Step 6

Introducer's signature and accounts number - verified by legal officer.


Authorized Officer accepts the application.
Minimum balance is deposited - only cash is accepted.
Account is opened and a Cheque book and pay-in-slip book is given.

3.2Documents required for opening account

Individual /Joint Account:

1. Introduction of the account.


2. Tow photographs of the signatories duly attested by the introducer.
3. Identity (copy of passport).
4. Joint Declaration Form (For joint a/c only).
5. Employee's Certificate (in case of service holder).

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pects and challenges

Partnership Account:

1. Introduction of the account.


2. Two photographs of the signatories duly attested by the introducer.
3. Valid copy of Trade License.
4. Rubber stamp.
5. TIN number certificate.
6. Identity (Copy of passport).
7. Permission letter from DC/Magistrate (in case of newspaper)

Limited company:

1. Introduction of the account.


2. Two photographs of the signatories duly attested by the Introducer.
3. Valid copy of Trade License.
4. Board resolution of opening A/C duly certified by the Chairman/Managing
Director.
5. Certificate of Incorporation.
6. Certificate of Commencement (In case of Public limited company).
7. Certified (joint stock) true copy of the Memorandum and Article of
Association of the Company duly attested by Chairman or Managing Director.
8. List of directors along with designation & specimen signature.
9. Latest certified copy of Form - xii (to be certified by register of joint stock
companies) (In case of Directorship change).
10. Rubber Stamp (Seal with designation of each person)
11. Certificate of registration
(In case of Insurance Company Obtained from department of Insurance
form the Peoples Republic of BD.)

Club / societies account:

1. Introduction of the account.


2. Two photographs for Opening A/C duly certified by President/Secretary.
3. Board Resolution for Opening A/C duly certified by President/Secretary.

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4. List of Existing Managing Committee.


5. Registration (if any).
6. Rubber Stamp.
7. Permission letter from Bureau of N.G.O. (In case of N.G.O. A/C).

3.3Deposit Section
Deposit is the lifeblood of a bank. From the history and origin of the banking
system. We know that deposit collection is the main function of a bank.

Accepting deposits
The deposits that are accepted by NBL like other banks may be classified in to,a) Demand Deposits
b) Time Deposits

Demand deposits
These deposits are withdrawn able without notice, e.g. current deposits. National
Bank Limited accepts demand deposits through the opening of
a) Current account
b) Savings account
c) Call deposits from the fellow bankers

Time deposits
A deposit which is payable at a fixed date or after a period of notice is a time
deposit. National Bank Limited accepts time deposits through Fixed Deposit
Receipt (FDR), Short Term Deposit (STD) and Beard Certificate Deposit (BCD)
etc. While accepting these deposits, a contract is done between the bank and the
customer. When the banker opens an account in the name of a customer, there
arises a contract between the two. This contract will be valid one only when both
the parties are competent to enter into contracts. As account opening initiates the
fundamental relationship & since the banker has to deal with different kinds of

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persons with different legal status, National Bank Limited officials remain very
much careful about the competency of the customers.

Cash Section
Banks, as a financial institution, accept surplus money from the people as deposit
and give them opportunity to withdraw the same by check, etc. But amount the
banking activities, cash department play an important role. It does the main
function of a commercial bank i. e, receiving the deposit and paying the cash on
demand. As this department deals directly with the customers, the reputation of
the bank depends much on it. The functions of a cash department are described
bellow:

3.4Functions of Cash Department


Cash Payment

1. Cash payment is made only against Cheque


2. This is the unique function of the banking system which is
known as "payment on demand".

Cash Receipt

3. It makes payment only against its printed valid Cheque


1. It receives deposits from the depositors in form of cash
2. So it is the "mobilization unit" of the banking system
3. It collects money only its receipts forms

3.5Allocation of currency
Local carrying cash money is troublesome and risky, that's why money can be
transferred from one place to another through banking channel. This is called
remittance. Remittances of funds are one of the most important aspects of the
Commercial Banks in rendering services to its customers.

3.6 Types of Remittances


Between banks and non banks customer
Between banks in the same country
Between banks in the different centers.
Between banks and central bank in the same country

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pects and challenges

Between central bank of different customers.


The main instruments used by the NBL of remittance of funds are
payment order (PO)
Demand Draft (DD)
Telegraphic Transfer (TT)

So the basic three types of local remittances are discussed below


Points
Explanation

Pay Order
Demand Draft
TT
Pay order gives Demand Draft is an order of Issuing
branch
the payee the issuing bank on another requests
right to claim branch of the same bank to branch
payment

another
to

pay

from pay specified sum of money specified money to

the issuing bank

to payee on demand.

the specific payee


on

demand

by

Telegraph/
Payment

payment

from

issuing

Generally

only
Within

used to
Remit fund
Payment

from Payment

from

Telephone
ordered Payment

branch branch

from

ordered branch

the Outside the clearinghouse Anywhere in the

clearinghouse

area

of

issuing

branch. country

area of issuing Payee can also be the


branch.
payment

Process of

made

the paying

clearing

purchaser.
is 1. Confirm that the DD is 1. Confirm
through

bank

not forged one.


2. Confirm

with

issuing branch
sent 2. Confirm Payee

advice
3. Check the 'Test Code'
4. Make payment

A/C
3. Confirm
amount
4. Make payment

Charge

Only
Commission

Commission + telex charge

5. Receive advice
Commission +
telephone

25
pects and challenges

Western Union Money Transfer


Joining the world largest money transfer
service, NBL has introduced Bangladesh
to the fastest track of money remittance.
Western Union is a Very familiar name in
the world of money transfer for sending
speedy money from one country to another
country in a few minutes. NBL has made
an arrangement with Western Union
Remittance Services, which has over 127
years experience for speedy remittance or
money with more than 140 countries, Now
NBL is on line to establish trade and
communication

with

the

prime

international banking companies of the


world. As a result NBL will be able to
build a strong root in international banking
horizon. Bank has been drawing arrangement with well conversant money transfer
service agency Western Union. It has a full time arrangement for speedy
transfer of money all over the world.

3.7 Clearing Section


Cheque, Pay Order (P.O), Demand Draft (D.D.) Collection of amount of other
banks on behalf of its customer are a basic function of a Clearing Department.
Clearing:
Clearing is a system by which a bank can collect customers fund from
one bank to another through clearing house.

26
pects and challenges

Clearing House:
Clearing House is a place where the representatives of different banks
get together to receive and deliver cheques with another banks.
Member of clearing House:
National Bank LTD is a scheduled Bank. According to the Article 37(2)
of Bangladesh Bank Order, 1972, the banks, which are the member of
the clearinghouse, are called as Scheduled Banks. The scheduled banks
clear the Cheque drawn upon one another through the clearinghouse.
Types of Clearing:
A) Outward Clearing: When the Branches of a Bank receive Cheque
form its customers drawn on the other Banks within the local clearing
zone for collection through Clearing House, it is Outward Clearing.
B) Inward Clearing: When the Banks receive cheques drawn on them
from other Banks in the Clearing House it is Inward Clearing.
Types of clearing house: There are two type of clearing house: Those are
1) Normal clearing house
2) Same day clearing house

Normal clearing house


1) 1st house: 1st house normally stands at 10 am to 11 am
2) 2nd house: 2nd house normally stands after 3 p.m. and it is known as
return house.

Same day clearing house


1) 1st house: 1st house normally stands at 11 a.m. to 12 pm
2) 2nd house: 2nd house normally after 2 p.m. and it is known as return
house.
Who will deposit cheques for Clearing: Only the regular customers i.e. who
have Savings, Current, STD & Loa Account in the Bank can deposit cheques
for collection of fund through clearing house.

27
pects and challenges

Precaution at the time of cheques receiving for Clearing, Collection of LBC,


OBC & Transfer:
1. Name of the account holder same in the Cheque & deposit slip.,
2. Amount in The cheque & deposit slip must be same in words & in figure
3. Date in cheque may be on or before (but not more than six months back)
clearing house date.
4. Bank & Branch name of the cheque, its number & date in the Deposit slip.
5. Cheque must be signed.
6. Signature for confirmation of date, amount in words / in figure Cutting &
Mutilation of cheque.
7. Cheque should be crossed (not for bearer cheque).
8. Account number in the deposit slip must be clear.
9. Depositor's signature in the deposit slip.

3.7(A) Return House


Return House means 2nd house where the representatives of the Bank meet after 3
p.m. to receive and deliver dishonored cheques, which place in the 1 st Clearing
House.
Cheques may be dishonored for any one of the following reasons:
1) Insufficient fund.
2) Amount in figure and word differs.
3) Cheques out of date/ post- dated.
4) Payment stopped by the drawer.
5) ..................Payee's endorsement irregular/ illegible / required.
6) Drawer's signature differs / required.
7) Crossed cheque to be presented through a bank.
8) Other specific reasons not mentioned above.
The dishonored cheque entry in the Return Register & the party is informed about
it. Party's signature required in the return register to deliver the dishonor cheque.
After duration, the return cheque is sent to the party's mailing address with Return
Memo.

28
pects and challenges

Responsibility of the concerned officer for the Clearing Cheque:


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

3.7(b)(1) OBC
OBC means Outward Bills for Collection. OBC exists with different branches of
different banks outside the local clearinghouse.
Normally two types of OBC:
1) OBC with different branches of other banks
2) OBC with different branches of the same bank

Procedure of OBC
1) Entry in the OBC register.
2) Put OBC number in the cheque.

29
pects and challenges

3) "Crossing seal" on the left corner of the cheque & "payees account will
be credited on realization" seal on the back of the cheque with signature of
the concerned officer.
4) Dispatch the OBC cheque with forwarding.
5) Reserve the photocopy of the cheque, carbon copy of the forwarding and
deposit slip of the cheque in the OBC file.

3.7(b)(2) IBC
IBC means Inward Bills for Collection. When the banks collect bills as an agent
of the collecting branch, the sys tem is known as IBC. In this case the bank will
work as an agent of the collection bank. The branch receives a forwarding letter
and the bill.

Procedure of IBC:
1. IBC against OBC: To receive the OBC cheque first we have to give entry in
the IBC Register. The IBC number should put on the forwarding of the OBC
with date.
2. Deposit of OBC amount: OBC cheque amount is put into the "sundry deposit
sundry Creditors account", prepare debit & credit vouch of it. If the OBC
cheque is honored, send credit advice (IBCA) with signature & advice number
of the concern branch for the OBC amount.
3. If the OBC cheque is dishonored, the concerned branch is informed about it.
4. Again place in the clearing house or send the OBC cheque with Return Memo
to the issuing branch according to their information.

3.8Accounts section
Accounts Department is called as the nerve Center of the bank. In banking
business, transactions are done every day and these transactions are to be recorded
properly and systematically as the banks deal with the depositors' money.
Improper recording of transactions will lead to the mismatch in the debit side and
in the credit side. To avoid these mishaps, the bank provides a separate
department; whose function is to check the mistakes in passing vouchers or wrong

30
pects and challenges

entries or fraud of forgery. This department is called as Accounts Department. If


any discrepancy arises regarding any transaction this department repot to the
concerned department. Besides these, the branch has to prepare some internal
statements as well as some statutory statements, which are to be submitted to the
Central Bank and the Head Office. This department prepares all these statements.

3.8(a)Workings of this department


Recording the transactions in the cashbook.
Recording the transactions in general and subsidiary ledger.
Preparing the daily position of the branch comprising of deposit and cash.
Preparing the daily Statement of Affairs showing all the assets and liability of
the branch as per General Ledger and Subsidiary Ledger separately.
Making payment of all the expenses of the branch.
Recording inters branch fund transfer and providing accounting treatment in
this regard.
Preparing the monthly salary statements for the employees.
Preparing the weekly position for the branch which is sent to the Head Office
to maintain Cash Reserve Requirement (C.R.R)
Preparing the monthly position for the branch which is sent to the Head Office
to maintain Statutory Liquidity Requirement (S.L.R)
Make charges for different types of duties.
Preparing the budget for the branch by fixing the target regarding profit and
deposit so as to take necessary steps to generate and mobilize deposit.
Checking of Transaction List.
Recording of the vouchers in the Voucher Register
Packing of the correct vouchers according to the debit voucher and the credit
voucher.

31
pects and challenges

Loans And Advances


4.1Types of Investments
The different types of Investments and Investment that NBL offers are as follows:
1. Secured Overdraft (SOD)
2. Investment against Imported Merchandise (LIM)
3. Investment against Trust Receipt (LTR)
4. Payment Against Document (PAD)
5. House Building Investment
6. House Building Investment (staff)
7. Term Investment.
8. Investment (general)
9. Bank Guarantee
10. Export Cash Credit
11. Cash Credit (Hypo)
12. Cash Credit (Hypo)
13. Foreign Documentary Bill Purchase (FDBP)
14. Local Documentary Bill Purchase (LDBP)

4.1(a)Secured Overdraft (SOD)


It is a continues advance facility. By this agreement, the banker allows his
customer to overdraft his current account up to his credit limits sanctioned by the
bank. The profit is charged on the amount, which he withdraws, not on the
sanctioned amount. NBL sanctions SOD against different security.

SOD (general)

32
pects and challenges

Advance allowed to individual/ firms against financial obligation (i.e. lien on


FDR/PSP/BSP/ insurance policy share etc.) This may or may not be a continuous
Credit.

SOD (Others)
Investment allowed against assignment of work order or execution of contractual
works falls under this head. This advance is generally allowed for a definite
period and specific purpose i.e. It is not a continuous credit. It falls under the
category "others".

SOD (Export)
Advance allowed for purchasing foreign currency for payment against L/Cs (Back
to Back) where the exports do not materialize before the import payment. This is
also an advance of temporary period that is known as export finance and under the
category "commercial lending".

4.1(b) LIM (Investment against Imported Merchandise)


Investment allowed for retirement of shipping documents and release of goods
imported through L/C taking effective control over the goods by pledge in go
downs under Banks lock & key fall under this type of advance. This is also a
temporary advance connected with import, which is known as post-import
financing, falls under the category "Commercial lending".

4.1(c) LTR (Investment against trust receipt)


Advance allowed for retirement of shipping documents, release of goods imported
through L/C falls under trust with the arrangement that sale proceed should be
deposited to liquidate within a given period. This is also a temporary advance
connected with import, which a known as post-import financing, falls under the
category "commercial lending".

4.1(d) PAD (Payment against document)

33
pects and challenges

Payment made by the Bank against lodgment of shipping documents of gods


imported through L/C falls under this head. It is an interim advance connected
with import and is generally liquidated against payments usually made by the
party fort retirement of the documents for release of imported goods from the
customer's authority. It falls under the category "commercial Bank".

34
pects and challenges

4.1(e) House building Investment (General)


Investments allowed to individual/ enterprise construction of house (residential or
commercial) fall under this of advance. The amount is repayable by monthly
installment within a specified period. Investment is known as Investment (HBLGEN).

Introduction:
House building Investment is one of the common credit pokiness of
banking sector. There was only one institution in our country, which is
specified in HBFC, Bangladesh House Building Finance Corporation. Now
days, besides this bank many commercial banks and Leasing Company
provides house-building Investment to the customers.

Profit rate:
Profit rate may changes from time to time depending on the market profit
rate. From the customer point of view this changes have an adverse impact
on the customers. Some times if thy have to bear a higher profit one he
principal amount which causes a great burden on them.

Made of repayment:
The Investment shall be adjusted by monthly installment basis. The
repayment will start from 6 (Six) months, of the date of first disbursement
(it may change according to the terms and conditions of the agreement).

Collateral:
The land and the contraction on the land are normally given as collateral. It
may changes:

The documents to be obtained:


1. DP note.
2. Letter of disbursement

35
pects and challenges

3. Letter of installment.
4. Letter of guarantee.
5. Letter of under taking.
6. Letter of agreement.
7. Irrevocable general power of attorney.
8. Memorandum of deposit of title deed.
9. Any other documents if considered

4.1(f) House building Investments (staff)


Investment allowed to the Bank employees for purchase/construction of house
shall be known as Staff Investment (HBFC-STAFF).

4.1(g) Term Investment


National Bank considers the Investments, which are sanctioned for more than one
year as term Investment. Under this facility, an enterprise is financed form the
starting to its finishing. i.e. from installation to its production.

4.1(h) Investment (General)


Short term and long term Investments allowed to individual/firms/industries for a
specific purpose but a definite period and generally repayable by the installments
fall under this head. These types of lending are mainly allowed to accommodate
financing under the categories.
a) Large and Medium Scale Industries.
b) Small and Cottage Industries, Very often term financing for agriculture
and others are also included here.

4.1(i) Bank Guarantee


The bank is very often requested by his customer to issue guarantees on their
behalf to a third party- committing to make an unconditional payment of certain
amount of money to the third party, if the customer (on whose behalf it gives
guarantee) becomes liable, or creates any loss or damage to the third party.

36
pects and challenges

4.1(j) Export cash credit (ECC)


Financial accommodation allowed to customer for exports of goods falls under
this head is categorized as "Export Credit". The Investment must be liquidated out
of export proceeds within 18 days

4.1(k) Cash Credit (Hypothecation)


The mortgage of movable property for securing Investment is called
hypothecation. Hypothecation is a legal transaction whereby goods are made
available to the lending banker as security for a debt without transferring either
the property in the goods or either possession. The banker has only equitable
charge on stocks, which practically means nothing. Since the goods always remain
in the physical possession of the borrower, there is much risk to the bank. So, it is
granted to parties of undoubted means with the highest integrity.

4.1(l) Cash Credit (Pledge)


Bailer in this case is called the "Paw nor" and the bailee is called the "Pawnee". In
a contract of pledge, Paw nor must deliver the goods pledged to the Pawnee either
actually or constructively. Transfer of possession in the judicial sense is essential
in the valid pledge. In case of pledge, the bank acquire the possession of the goods
or a right to hold goods until the repayment for credit with a special right to sell
after due notice to the borrower in the event of non-repayment.

The formalities for Opening cash credit:


The intending cash credit holder should submit the following documents and
being fulfill properly:
1. Stock report, Rent receipt.
2. Trade license.
3. Up to date income tax clearing certificate.
4. Charge documents
5. Letter of continuity
6. Letter of arrangement

37
pects and challenges

7. DP (Demand Promissory) note.


8. Letter of guarantee
9. Letter lien
10. Limit sanctions advice.
11. Non-encumbrance certificate
Observing the documents the bank authority prepares a CC proposal from
that contains the following information.
Nature of business.
Banking with National Bank Ltd.
Transaction with CD account by the client.
Allied deposit with SB/STD account.
Number of adjustment (S) (applicable only for renewal of CC)
Recycling: It is the ration of total credit summation to the limit. If the ration is
higher it is better from bankers point of view.
Turn over in the account.
Based on the above-mention information the dealing officer of the
Investments and Investment department prepares recommendation about
the prospect of granting the CC Investment to the Client.

4.1(m) Foreign Documentary Bill Purchased (FDBP):


Payment made to a customer through purchase/negotiation of a foreign
documentary bills falls under this head. This temporary advance is adjustable
from the proceeds of the shipping/export documents. Its falls under the category
"Export Credit".

4.1(n) Local Documentary Bill Purchased (LDBP):


Payment made against documents representing sell of goods to local export
oriented industries, which are deemed as exports, and which are denominated in
Local currency/foreign currency falls under this head. The bill of exchange is held

38
pects and challenges

as the primary security. The client submits the unasked bill and the bank discounts
it. This temporary liability is adjustable from the proceeds of the bills.

4.2 Investment Classification


Investment classification is a process by which the risk or loss potential associated
with the Investment accounts of a bank on a particular date is identified and
quantified to measure accurately the level of reserves to be maintained by the
bank to provide for the probable loss on account those risky Investment.
Like other banks, all types of Investments of National Bank fall into following
four scales:
Unclassified: Repayment is regular.
Substandard: Repayment is stopped or irregular but has responsible prospect
of improvement.
Doubtful debt: Unlikely to be repaid but special collection efforts may result in
partial recovery.
Bad/Loss: Very little chance of recovery.

4.2.1Creation of charges for securing investment:


For the safety of Investment, bank requires security from the Investment so that it
can recover the Investment by selling security if borrower fails to repay. Creation
of a charge means making it available as a cover for an advance. The method of
charging should be ledger, perfect and complete. Importance of charging security:
Protection of profit'
Ensuring the recovery of the money lent
Provision against unexpected change
Commitment of the borrower

4.2.2Securities:
To make the Investment secured, charging sufficient security on the credit
facilities is very important. The banker cannot afford to take the risk of non-

39
pects and challenges

recovery of the money lent. National Bank charges the following two types of
security.
1. Primary security: These are the security taken by the ownership of the items
for which bank provides the facility.
2. Collateral security: Collateral securities refer to the securities deposited by the
third party to secure the advance for the borrower in narrow sense. In wider
sense, it denotes any type of security on which the bank has a personal right of
action on the debtor in respect of the advance.

4.2.3Modes of Charging Security:


There are different modes of charging the bank exercises security:
1. Pledge:
Pledge in the bailment of the goods as security for payment of a debt or
performance of a promise. A pledge may be in respect of goods including
stocks and share as well as documents of title to goods such as railway
receipt, bills of lading, dock warrants etc. duly endorsed in bank's favor.

2. Hypothecation:
In case of hypothecation the possession and the ownership of the goods
both rest the borrower. The borrower to the banker creates an equitable
charge on the security. The borrower does this by executing a document
known as Agreement of Hypothecation in favor of the lending bank.

3. Lien:
Lien is the right of the banker to retain the goods of the borrower until the
Investment is repaid. The banker's lien is general lien. A banker can retain
all securities in his possession till all claims against the concern person are
satisfied.

4. Mortgage:

40
pects and challenges

According to section (58) of the Transfer of Property, Act, 1882 mortgage


is the "Transfer of a profit in specific immovable property for the purpose
of secreting the payment of money advanced or to be advanced by way of
Investment, existing or future debt or the performance of an engagement
which may give rise to a pecuniary liability". In this case the mortgagor
dose not transfer the ownership of the specific immovable property to the
mortgagee only transfers some of his rights as an owner. The banker
exercises the equitable mortgage.

Analyzing of NBL Performance with financial ratios


Ratio Analysis
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the
indicated quotient of two mathematical impressions and as the relationship
between two or more things. In financial analysis, a ratio is used as benchmark for
evaluating the financial position and performance of a firm. We are describing
some ratios for the measurement of the performance of the bank.

Profit Ratio
1. Return on Equity (ROE)
The rate of return on equity is a good condition last five years. ROE
indicates the rate of return on equity capital. Generally bank stockholders
prefer ROE to be high. Here, ROE is increased last four years, but last
years ROE indicates lower than previous year. It is possible, however, that
an increase in ROE indicates increased banks risk.
Return on Equity (%) = Net Income/Total Equity Capital*100
Year

Net Income (In

Total Equity

ROE (%)

1999
2000
2001
2002
2003

Tk.)
788500
2286200
2744400
1461900
881200

Capital
2581888.77
3241190.04
3308687.04
3604555.39
3666895.56

30.53
70.54
82.94
40.55
24.03

41
pects and challenges

From the table we can see that ROE of NBL increasing except 2003. ROE of NBL
were 30.79%, 70.54%, 82.94%, 40.55%, and 24.03% in the year 1999, 2000,
2001, 2002 and 2003 respectively. ROE has been increased as Net Income of the
Bank has been increased over the years.

2. Return on Asset
The rate of return on assets (ROA) measures the ability of management to
utilize the real and financial resources of the bank to generate returns. ROA
is most commonly used to evaluate bank management.
Return on Asset = Net Income/Total Asset*100
Year

Net Income (In

Total Assets

ROA (%)

1999
2000
2001
2002
2003

Tk.)
78,8500
228,6200
274,4400
146,1900
88,1200

36,545,2800
47,148,0800
48,732,1000
45,719,1300
47,929,5700

1.21
1.48
1.56
2.58
2.61

From the table we can see that ROA of NBL has been increased and decreased
over the year from 1999 to 2003. Both ROA and TA of NBL over the last five
years.

Net Profit Margin


Net profit margin ratio establishes a relationship between net income and
operating income that indicates management efficiency in providing services,
administrating

and selling the product. It reminds us that bank can increase

their earnings and their returns to their stockholders by successfully controlling


expenses and maximizing revenues.
Net Profit Margin = Net Income/ Operating Revenues*100
Year

Net Income

Operating

Net Profit Margin

42
pects and challenges

1999
2000
2001
2002
2003

Revenues
5936394
178201875
416072285
683963080
679432070

78,8500
228,6200
274,44000
146,19000
88,120000

(%)
13.28
1.28
6.59
2.13
12.96

Asset Utilization
The asset utilization ratio represents the ability of management to employ asset
effectively to generate revenue. The more income generated per Taka of assets,
the more profitable is the bank.
Asset utilization = Operating Revenue/ Total Asset
Year

Operating

Total Assets

Revenues
1999
2000
2001
2002
2003

Asset
utilization

5936394
178201875
416072285
683963080
679432070

36,545,2800
47,148,0800
48,732,1000
45,719,1300
47,929,5700

0.01
0.37
0.85
1.49
1.41

Unraveling Profit
1st Formula: The relationship between the ROE and ROA can be expressed by the
following formulaROE = ROA * Equity Multiplier
Net Income/ Total Equity = Net Income/ Total Assets* Total assets/ Total
Equity
This formula shows that ROE as the product of ROA and a ratio indicating the
extent to which the bank is using financial leverage, known as the equity ( or
leverage) multiplier
Year
1999
2000
2001

ROA (%)

Equity

ROE (%)

1.21
1.48
1.56

Multiplier
14.15
14.54
14.72

17.12
20.33
29.86

43
pects and challenges

2002
2003

2.58
2.61

12.68
13.07

33.69
34.11

2nd Formula: Another useful formula for unraveling profit ratio is as follow
ROE = Profit Margin* Asset Utilization* Equity Multiplier
Net Income/Total Equity = Net Income/ operating Revenue*Operating
Revenue/Total Assets *Total Assets/Total Equity
This formula breaks down ROA into product of profit margin and asset utilization.
Together these two ratios enable the bank analyst to gain insight into the
derivation of ROA.

Year
1999
2000
2001
2002
2003

Net Profit Margin

Asset

Equity

(%)
13.28
1.28
6.59
2.13
12.96

utilization
0.01
0.37
0.85
1.49
1.41

Multiplier
14.15
14.54
14.72
12.68
13.07

ROE (%)
30.53
70.54
82.94
40.55
24.03

EPS-Earning per share or EPS indicates how much Taka per share earns.
EPS = Net Income/ No. Of shares
Year

Net Income (In

No. Of

EPS (Tk.)

1999
2000
2001
2002
2003

Tk.)
78,850000
228,620000
274,440000
146,190000
88,120000

Share
430273250
430273250
430273250
430273250
430273250

0.18
0.53
0.63
0.34
0.20

We can see from the table that EPS of NBL has increasing since 2001 and
decreasing 2002 & 2003. EPS indicates profit of the bank. In 1999, it was
profit only 0.18; but in 2000 & 2001 it was increasing 0.53 & 0.63. But next
two years it was decreasing 0.34 & 0.20.

Net Interest Margin

44
pects and challenges

Net Interest Margin measures the net return on the banks earning assets.
Net Interest Margin = Net Interest Income/ Average Earning Assets
Year

Net interest

Average Earning

Net Interest Margin

1999
2000
2001
2002
2003

Income
199446574
204733395
2057444277
214358977
234230989

Assets
2832451056
1603789542
2870616342
1703202877
1460551083

(%)
7.04
12.76
71.67
12.58
16.03

Risk Ratio
Provision for Loan Losses
This ratio measures the proportion of total operating income that goes to pay
for the investment loss.
Provision for Loss Ratio = Provision for Loan Loss/ Total Loan & Leases
Year

Provision for Loan

Total Loan &

Provision for Loss

1999
2000
2001
2002
2003

Losses
600,000,000
610,000,000
616,000,000
620,000,000
650,000,000

Leases
18,698,654,785
19,589,691,541
20,200,636,731
21,677,960,687
22,257,150,000

Ratio (%)
3.20
3.11
0.30
2.86
2.92

From the above table we can see Profit for Loan Losses of NBL. In 1999, it
was 3.11. PLLL of NBL has been decreasing from the year 2000 to 2003. The
bank takes PLLL ratio low, as its recovery rate is very high.

Loan Ratio
The loan ratio indicates the extent to which assets are devoted
to loan as opposed to other assets.
Loan Ratio = Total Loan /Total Assets
Year

Loans

Total Assets

Loan

45
pects and challenges

1999
2000
2001
2002
2003

18,698,654,785
19,589,691,541
20,200,636,731
21,677,960,687
22,257,150,000

36,545,280,000
47,148,080,000
48,732,100,000
45,719,130,000
47,929,570,000

Ratio(%)
51.16
41.54
41.45
47.41
46.43

From the table we can see that Loans and Advances Ratio of the bank has been
increasing and decreasing. As bank generate its major portion of income from
interest income. So, bank generates its major portion of income from interest
income. So, bank has to disburse more Loans and Advances for maximizing
their income. In the year 2003, the bank engaged 61.39% of its TA in loans and
advances.

Interest Expense RatioInterest Expense Ratio reveals how much interest expenses needed for the
bank compared to its TA. The lower the ratio indicates the better performance
of the bank.
Year

Interest

1999
2000
2001
2002
2003

Expense
1,320,789,100
1,350,691,442
1,486,691,442
1,623,175,670
1,801,186,051

Total Assets

Interest Expense

36,545,280,000
47,148,080,000
48,732,100,000
45,719,130,000
47,929,570,000

Ratio(%)
3.61
2.86
3.05
3.55
3.75

The table shows that the Interest Expense Ratio of NBL has been increasing.

Wages & Salaries RatioThis ratio indicates how much expenses required regarding Wages & Salaries
to TA of a bank. Lower the ratio indicates that the bank has been performing
well.
Year

Wages &
Salaries

Total Assets

Wages & Salaries Ratio


(%)

46

1999
2000
2001
2002
2003

300,566,100
399,888,100
486,335,427
529,271,513
555,990,256

pects and challenges


0.82
0.84
0.99
1.15
1.16

36,545,280,000
47,148,080,000
48,732,100,000
45,719,130,000
47,929,570,000

We can see that the NBL has been performing badly, as the ratio of the bank
has been increasing from the year 1999 to 2003.

Occupancy Ratio
Occupancy Ratio indicates the occupancy expenses of the Bank to its total
assets. The lower ratio indicates better performance of the bank.
Year
1999
2000
2001
2002
2003

Occupancy
75,895,100
76,987,100
79,656,977
85,015,468
84,430,658

Total Assets

Occupancy Ratio

36,545,280,000
47,148,080,000
48,732,100,000
45,719,130,000
47,929,570,000

(%)
0.20
0.16
0.16
0.18
0.17

We can see that the NBL has been lowering its occupancy ratio. So, the banks
performance is better than the previous years comparing to the year 2003.

Other Expenses RatioCash RatioCash ratio is measured by dividing cash by total assets of the bank.
Year
1999
2000
2001
2002
2003

Cash
1,988,784,969
2,066,774,122
2,073,718,685
2,417,617,968
2,589,899,555

Other Ratio

Total Assets
36,545,280,000
47,148,080,000
48,732,100,000
45,719,130,000
47,929,570,000

Cash
Ratio (%)
54.41
56.66
42.55
46.63
54.03

47
pects and challenges

Tax Rate
The tax exposure of the bank can be assessed by the following ratio
Tax rate (%) = Total tax paid/ Net income Before Tax *100
Year
1999
2000
2001
2002
2003

Total Taxes

Net Income Before

Paid

Tax

124,740,000
105,130,000
126,200,000
104,130,000
247,970,000

203,590,000
333,750,000
400,640,000
250,320,000
336,090,000

Tax rate (%)


61.27
31.49
31.49
41.59
73.78

We can see that the tax rate of NBL is 61.27% in 1999. But the rate is lower in
2000 to2002- 31.49%, 31.49% & 41.59. But the rate is very high in 200373.78.

Deposit to capital Ratio


This ratio measures Taka of deposit of per Taka capital.
Deposit to Capital Ratio = Deposit/ Total Capital
Year
1999
2000
2001
2002
2003

Total Deposit

Total Shareholders

20,258,720,000
23,616,280,000
24,896,640,000
26,327,260,000
27,762,120,000

Equity
1,495,895,002
1,504,789,564
1,572,752,012
1,628,372,451
1,635,873,211

Ratio (times)
13.54
15.89

15.56
16.16
16.97

Deposit to capital ratio of NBL has been increasing over the years. It was
13.54times in the year 1999 and 16.97 times in the year 2003. That means the
deposit of the bank has been increasing much more than its equity capital.

Deposit to Employee Ratio-

48
pects and challenges

This ratio indicates how much Taka is deposited by each employee in the
bank. Higher the ratio indicates the better the position of the banks.

Year

Total Deposit

Number of

Ratio (times)

employees
1999
2000
2001
2002
2003

20,258,720,000
23,616,280,000
24,896,640,000
26,327,260,000
27,762,120,000

1868
2025
2073
2171
2185

10845130
11662360
12009956
12126789
12705775

The table reveals that each employee of NBL mobilized deposit of TK. 10845130
in the year 1999 and it has been increased to TK. 12705775 in the year 2003. This
indicates the better performance of the bank.

Invest to Deposit RatioThe ratio indicates that how much Taka is invested to total deposit.
Year

Total

Total Deposit

Investment
1999
2000
2001
2002
2003

2371350000
2626620000
2891970000
3839600000
4044200000

Ratio
(times)

20,258,720,000
23,616,280,000
24,896,640,000
26,327,260,000
27,762,120,000

0.117
0.111
0.116
0.145
0.1456

NBL Credit Card


NBL Power Card
6.1. Credit Card Division

49
pects and challenges

Carrying of cash is not so safe in todays world. There is always a chance of


losing or hijacking of cash. On the other hand, the desire to purchase any desired
item of one may not be fulfilled for the want of cash at the time of that
willingness. To remove these problems, credit card has been introduced which is
very popular to face the mentioned problems.

6.1.1 What is Credit Card?


It is a card (usually plastic) that assures a seller that the person using it has a
satisfactory credit rating and that the issuer will see to it that the seller receives
payment for the merchandise delivered.

6.1.2 NBL & Credit Card


NBL is the first local bank, which introduced credit card & MasterCard in
Bangladesh in both local and international market in 1997. MasterCard captured
35% of credit card through the world. However present market analysis reflects
that a large number of people whose average income ranges in above Tk.l0000 are
using the credit card. Credit card division is continuing their all-possible efforts
for the participation in the globalizes MasterCard program. The number of users
of the credit cards is increasing day by day. During the year 2004 the bank has got
a profit of Tk.104.25 million from credit card business. NBL also has got the
licenses from international brand Visa Card and very soon, it will be launched in
the country.

6.1.3 Types of Credit Card


National Bank Limited offers mainly two type of credit card according to the
geographical area. These are Local credit card and International credit card.
According to the level of income the local and international credit cards are
divided into two categories viz. Gold card and Silver card. These types of credit
cards are described below:

(a) Local credit card


Local credit card is valid only in Bangladesh. Out side Bangladesh, the card is
invalid. Local card are two types. They are Gold local card and Silver local card.

50
pects and challenges

The card limit of gold local card is Tk.50000 to Tk. 100000 and silver local card
is below Tk.50000.

(b) International Credit Card


International credit card is valid mainly outside Bangladesh. But for the payment
of roaming facilities for GrameenPhone, cardholders can use International Credit
Card in Bangladesh. International credit cards are of two types. These are gold
international credit card and silver international credit card. The card limit of gold
international credit card is $ 2000 to $4000 and silver international credit card
below $2000.

6.1.4 Yearly Charges on credit card


National Bank Limited receive card fee for new card and renew card from the
cardholder. The rate of card fee for new card and renew card are the same. In case
of new card the bank receives the card fee with the next months bill. The rates of
card fee are given in below:
Table: Yearly charges on credit card
Type of card
International

Card fee
Gold US$70.00

Card
International

Silver US$ 35.00

card
Local Gold card
Tk.2000.00
Local Silver Card
Tk.1200.00
* Source: National Bank brochure 2005

6.1.5 Documentation for a credit card


Any person whose monthly income is over 10000 can be a credit card holder of
NBL. The requirements of a card are:

For Local card

51
pects and challenges

o The fulfillment of the application form.


o 2 copies of photographs. (If supplementary card is taken then 2 copies of
photographs of the nominee).
o TIN certificate.
o A security. (MSS, SDS or FDR as lien).
o Charge documents.

For International card


o The fulfillment of the application form.
o 2 copies of photographs. (If supplementary card is taken then 2 copies
photographs of the nominee).
o TIN certificate.
o A security. (MSS, SDS or FDR as lien).
o Charge documents.
o The photocopy of passport.

6.1.6 Billing of a credit card


National Bank Limited offers the cardholder 15 to 45 days credit facilities. For the
proper billing the bank divided the cardholder into three cycles. These are 0 cycle,
3 cycle and 5cycle. In 0 cycle hill are prepare and send to the cardholder 1 st day or
every month and last date of payment is 15 th day of the month. In 3cycle bill are
prepare and send to the cardholder 3rd day of every month and last date of
payment is 18th day of the month. In 5cycle bill are prepare and send to the
cardholder 5th day of every month and last date of payment is 20 th day of the
month. The cardholder can pay the bill any branch of the National Bank. If any
cardholder fails to pay the bill within the last date then he/she must pay 2%
monthly interest and his/her card stop automatically. But if the cardholder pay
minimum bill (10% of the bill) then he/she must pay the interest on the balancing
amount and can use the card as usual. On the other hand, if the card holder
withdraws any cash amount from the ATM booth (maximum limit is 20% of card

52
pects and challenges

limit) a monthly charge of 2.5% is to be charged from the date of withdraw. In that
case the card holder will not get the 45 days credit payment facility.

NBL ATM Service


National bank limited introduced ATM service to its customer. The card will
enable to save our valued customers from any kind of predicament in emergency
situation and time consuming formalities. NBL ATM card will give our
distinguished clients the opportunity to withdraw cash at any time, even in
holidays, 24 hours a day a week.

NBL Commitment to the society


NBL always shows a strong and positive commitment to the services of the
society. IN 1998, the bank donated Tk. 5.50 million to prime minister relief fund
for the flood- affected people of Bangladesh.

53
pects and challenges

NBL MULIPURPOSE FINANCING

Financing in Nakshi Katha

Financing in Cultivation

Financing in Shallow Pump

54
pects and challenges

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

Strengths:
National Bank Limited has already established a favorable reputation in the
banking industry of the country. It is one of the leading private sector commercial
banks in Bangladesh. The bank has already shown a tremendous growth in the
profits and deposits sector.
National Bank Limited has already achieved a high growth rate accompanied by
an impressive profit growth rate in 2001. The number of deposits and the loans
and advances are also increasing rapidly.
National Bank has the reputation of being the provider of good quality services
too its, potential customers.

Weakness:
The main important thing is that the bank has no clear mission statement and
strategic plan. The banks not have any long-term strategies of whether it wants to
focus on retail banking or become a corporate bank. The path of the future should
be determined now with a strong feasible strategic plan.
The bank failed to provide a strong quality-recruitment policy in the lower and
some mid level position. As a result the services of the bank seem to be Deus in
the present days.
The poor service quality has become a major problem for the bank. The quality of
the service at National Bank is not higher than the Dhaka Bank, Prime Bank or

55
pects and challenges

Dutch Bangla Bank etc. So the bank has to compete with the multinational Bank
located here.
Some of the job in National Bank has no growth or advisement path. So lack of
motivation exists in persons filling those positions. This is a weakness of National
Bank that it is having a group of unsatisfied employees.
In terms of promotional sector, National Bank has to more emphasized on the.
They have to follow aggressive marketing campaign.

Opportunity:
In order to reduce the business risk, National Bank has to expand their business
portfolio. The management can consider options of starting merchant banking or
diversify into leasing and insurance sector.
The activity in the secondary financial market has direct impact on the primary
financial market. Banks operate in the primary financial market. Investment in the
secondary market governs the national economic activity. Activity in the national
economy controls the business of the bank.
Opportunity in retail banking lies in the fact that the countries increased
population is gradually learning to adopt consumer finance. The bulk of our
population is middle class. Deferent types of retail lending products have great
appeal to this class. So a wide variety of retail lending products has a very large
and easily pregnable market.
A large number of private banks coming into the market in the recent time. In this
competitive environment National Bank must expand its product line to enhance
its sustainable competitive advantage. In that product line, they can introduce the
ATM to compete with the local and the foreign bank. They can introduce credit
card and debit card system for their potential customer.
In addition of those things, National Bank can introduce special corporate scheme
for the corporate customer or officer who have an income level higher form the
service holed. At the same time, they can introduce scheme or loan for various

56
pects and challenges

service holders. And the scheme should be separate according to the professions,
such as engineers, lawyers, doctors, etc.

Threats:
All sustain multinational banks and upcoming foreign, private banks posse's
enormous threats to National Bank Limited. If that happens the intensity of
competition will rise further and banks will have to develop strategies to compete
against an on slough of foreign the banks.
The default risks of all terms of loan have to be minimizing in order to sustain in
the financial market. Because default risk leads the organization towards to
bankrupt. National Bank has to remain vigilant about this problem so that
proactive strategies are talent to minimize this problem if not elimination.
The low compensation package of the employees from mid level to lower level
position threats the employee motivation. As a result, good quality employees
leave the organization and it effects the organization as a whole.

57
pects and challenges

RECOMMENDATION
Although the bank is making a huge amount of profit and gencratil1g a large
volume of deposit, based on my working experience at Nationa1 13ank limited,
Credit card division, I would like to put up the following recommendations.

Prospects: how to Achieve?


Credit card division should increase their marketing activities and for these
the will formulate a card marketing group and the remuneration of the
member of the group will semi variable. That's means they get a fixed
salary and get commission for every card.

The division should maintain a card marketing strategy. They must


identify which type of people get preference in issuing card, like as
bankers, exporters, importers, government high officials.

The bank may circulate student credit card and the card limit will be Tk.
5000.
The may sort out the cardholder who paid their payment regular and issue
another credit card to their spouse without any security
To increase the number of cardholder the bank may decrease the annual
fee and interest.
Credit card division should improve their customer service

Challenges: how to face these?


To avoid telecommunication problem the bank should follow modern
telecommunication system.
Bank may encourage the business firm to establish fixed price shopping
center.
Because of different type of merchant commission rate may be different
according merchants type of business.
Bank should concentrate on quickly merchant payment. For this bank may
use computerized system in preparing pay order

58
pects and challenges

Conclusion
During the 12 weeks internship program at NBL, almost all the desk has been
observed more or less. Gaining knowledge of practical banking and to compare
this practical knowledge with theoretical knowledge. Though all departments and
sections are covered in the internship program, it is not possible to go to the depth
or each activities of division because of time limitation. So, objectives of this
internship program have not been fulfilled with complete satisfaction. However,
highest effort has been given to achieve the objectives the internship program.

59
pects and challenges

Bibliography
BenTon E.Gup, James W. Kolari Commercial Banking the Management of
Risk. (Third Edition)
MasterCard book let Operation
Internet: www creditcard.com
NBL Annual Report -2003, 2004 & 2005
NBL Procedure Manual- 1990
Credit card application form of NBL
Credit card merchant of NBL
Web site of the NBL: www.nblbd.com

60
pects and challenges

ANNEXURE
TERMS USED IN THE REPORT
ABP

Accepted bill for payment

CIBT

Computer inter branch transaction

CCS

Consumer credit scheme

HBL

House building loan

LIM

Loan against imported merchandised

LRA

Lending risk analysis

LTR

Lending trust receive

PO

Pay order

PC

Packing credit

SOD

Security over draft

SDS

Special deposit scheme

TT

Telegraphic transfer