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Chapter 1: An Overview

1.1 Report Origin

As a mandatory requirement of the Masters of the Business Administration (MBA)


program under Asian University, this report entitled - "HSBC Consumer Product,
Credit Operation & Collection Procedure in Bangladesh" - is a connived depiction of
the three months long internship program at Personal Financial Services Consumer
Credit Risk (PFS CCR) in The Hongkong and Shanghai Banking Corporation Ltd.

The organization attachment started on February 15, 2000 and finished on April 15,
2000. My organization supervisor Mr. Kamruzzaman Mamun (Credit Manager,
Personal Financial Services, Anchor Tower, HSBC) assigned me the topic of the term
paper & my institution supervisor at Asian University Mr. Sirker, duly approved it.

1.2 Purpose

The purposes of this report cognates the internship purpose. The internship objective is
to gather practical knowledge and experiencing the corporate working environment
with the close approximation to the business firm and the experts who are leading and
making strategic decisions to enhance the growth of a financial institution. To this
regard this report is contemplating the knowledge and experience accumulated from
internship program. With the set guidelines and proposal by the Asian University and
with the kind advices of the organization and the internship supervisor, this report
comprise of an organization part and a project part.

The prime objective of organization part is:

To present an overview and brief introduction of HongKong and Shanghai


Banking Corporation Ltd.

The prime objectives of project part are:

Give a very brief overview of the risk analysis criteria for loan assessment.
Analysis the demography of the skip customers.
Find out if there is any relationship among the skip customers.
1.3 Scope

The scope of this report is limited to the overall description of the company, its services
and its financial performance analysis. The scope of the study is limited to
organizational setup, functions, and performances Since HSBC is still in its growth
stage in Bangladesh; it has still to go a long way to achieve its destination. The report
will mainly focus on what criteria HSBC Bangladesh is maintaining before approving
the loan facility. And if there is relationship among the customers who are defaulting to
pay the installments accordingly.

1.4 Methodology

Both the primary as well as the secondary form of information was used to prepare the
report. The details of these sources are highlighted below.

Primary Sources:
Customer database and historical data of delinquent customers.
Interviews with the approval officers as well as the sales and collection
teams.

Secondary Sources:
Internal Sources

HSBC Collection Manual

HSBC Bank's Annual Report

Group Business Principal Manual

Group Instruction Manual (GIM) & Business Instruction Manual


(BIM)

External Sources

Different books and periodicals related to the banking sector

Bangladesh Bank Circulars

Newspapers

Website information
Data collecting instruments:

In-depth interview

During the exploratory research, in-depth interviews were conducted


with managers, approval officers, mobile sales officers (MSO) &
collection tea of HSBC.

1.5 Limitations

Being an intern of Personal Financial Services MIS department of


HSBC Anchor Tower, it was difficult to stay in continuous contact with
other departments.
As per Banks compliance, as an intern I was unable to obtain indispensable
experiences of different departments.
Details of many aspects of the services of HSBC Bangladesh Limited have
been skipped in this report due to various constraints, including time and
space, security reason.

One of the main barriers in writing this report was the confidentiality of data. Though I
had access to lot of information regarding the performance of the bank, I am unable and
not authorized to use this information due to legal restrictions.
Chapter 2: Introduction to HSBC Group

HSBC Mission Statement:

We aim to satisfy our customers with high quality service that reflects our global
image as the premier international bank

Objectives of HSBC:

HSBCs objectives are to provide innovative products supported by quality delivery of


systems and excellence customer services, to train and motivate staffs and to exercise
social responsibility. By combining regional strengths with group network HSBCs aim
is to be the one of the leading banks in its principle markets. HSBCs goal is to achieve
sustained earnings growth and to continue to enhance shareholders value.

2.1 An Overview of HSBC Group

The HSBC Group is named after its founding member, The Hongkong and Shanghai
Banking Corporation Limited, which was established in 1865 in Hong Kong and
Shanghai to finance the growing trade between China and Europe.

Thomas Sutherland, a Hong Kong Superintendent of the Peninsular and Oriental Steam
Navigation Company helped to establish this bank in March 1865. Throughout the late
nineteenth and the early twentieth centuries, the bank established a network of agencies
and branches based mainly in China and South East Asia but also with representation in
the Indian sub-continent, Japan, Europe and North America.

The post-war political and economic changes in the world forced the bank to analyze its
strategy for continued growth in the 1950s. The bank diversified both its business and
its geographical spread through acquisitions and alliances.

HSBC Holdings plc, the parent company of the HSBC Group, was established in 1991
with its shares quoted on both the London and Hong Kong stock exchanges. The HSBC
Group now comprises a unique range of banks and financial service providers around
the globe.
HSBC maintains one of the worlds largest private data communication networks and is
reconfiguring its business for the e-age. Its rapidly growing e-commerce capability
includes the use of the internet, PC banking over a private network, interactive TV, and
fixed and mobile, including wireless application protocol or WAP-enabled mobile,
telephones.

2.2 HSBC History

The HSBC Group has a history, which is unique. Many of its principal companies
opened for business over a century ago and they have a history rich in variety and
achievement.

Foundation and Growth:

The inspiration behind the founding of the bank was Thomas Sutherland, a Scot who
was then working as the Hong Kong Superintendent of the Peninsular and Oriental
Steam Navigation Company. Realizing the considerable demand for local banking
facilities both in Hong Kong and along the China coast and he helped to establish the
bank in March 1865. Then, as now, the bank's headquarters were at 1 Queen's Road
Central in Hong Kong and a branch was opened one month later in Shanghai.

Throughout the late nineteenth and the early twentieth centuries, the bank established a
network of agencies and branches based mainly in China and South East Asia but also
with representation in the Indian sub-continent, Japan, Europe and North America. In
many of its branches the bank was the pioneer of modern banking practices. From the
outset, trade finance was a strong feature of the bank's business with gold bars,
exchange and merchant banking also playing an important part. Additionally, the bank
issued notes in many countries throughout the Far East.

During the Second World War the bank was forced to close many branches and its head
office was temporarily moved to London. However, after the war the bank played a key
role in the reconstruction of the Hong Kong economy and began to further diversify the
geographical spread of the bank.
The Making of the modern HSBC Group:

The post-war political and economic changes in the world forced the bank to analyze its
strategy for continued growth in the 1950s. The bank diversified both its business and
its geographical spread through acquisitions and alliances. This strategy culminated in
1992 with one of the largest bank acquisitions in history when HSBC Holdings
acquired the UKs Midland Bank plc (now called HSBC Bank plc). However, it
remained committed to its historical markets and played an important part in the
reconstruction of Hong Kong where its branch network continued to expand.

2.3 Banks under the HSBC Group

Many of the members have changed their name into HSBC, The Hongkong and
Shanghai Banking Corporation Limited to introduce the whole group under one brand
name.

Midland Bank HSBC Holdings acquired Midland Bank one of the principal UK
clearing banks in 1992. Headquartered in London, the bank has a
personal customer base of five and a half million, business customers of
over half a million, and a network of almost 1,700 branches in the
United Kingdom. Midland has offices in 28 countries and territories,
principally in continental Europe, with a number of offices in Latin
America.
Hang Seng Hang Seng Bank, in which Hongkong Bank has a 62.1% equity
Bank
interest, maintains a network of 146 branches in the Hong Kong SAR,
where it is the second largest locally incorporated bank after Hongkong
Bank. Hang Seng Bank also has a branch in Singapore and two branches
and two representative offices in China.
Marine Marine Midland Bank headquartered in Buffalo, New York, has 380
Midland Bank
banking locations statewide. The bank serves over two million personal
customers and 120,000 commercial and institutional customers in New
York State and, in selected businesses, throughout the United States.
Hongkong Bank Hongkong Bank of Canada is the largest foreign-owned bank in
of Canada
Canada and the countrys seventh-largest bank. With headquarters in
Vancouver, it has 116 branches across Canada and two branches in the
western United States.
Banco HSBC Banco HSBC Bamerindus was established in Brazil in 1997. The bank
Bamerindus
has network of some 1,900 branches and sub-branches, the second
largest in Brazil.
Hongkong Bank Hongkong Bank Malaysia is the largest foreign-owned bank in
Malaysia
Malaysia and the countrys fifth-largest bank, with 36 branches.
The British The British Bank of the Middle East (British Bank) is the largest and
Bank of the
most widely represented international bank in the Middle East, with 31
Middle East
(British Bank) branches throughout the United Arab Emirates, Oman, Bahrain, Qatar,
Jordan, Lebanon and the Palestinian Autonomous Area, including an
offshore banking unit in Bahrain. The bank also has branches in
Mumbai and Trivandrum, India, and Baku, Azerbaijan, as well as
private banking operations in London and Geneva.
HSBC Banco HSBC Banco Roberts was acquired in 1997. Based in Buenos Aires, it
Roberts
is one of Argentinas largest privately owned banks, with 60 branches
throughout the country.
Hongkong Bank Hongkong Bank of Australia has 16 branches across Australia. It is the
of Australia
flagship of the HSBC Groups businesses there, operating under the
name HSBC Australia, and providing a complete range of financial
services.
The Saudi The Saudi British Bank, a 40%-owned member of the HSBC Group,
British Bank
has 63 branches throughout Saudi Arabia and a branch in London.

Figure 1: Banks under the HSBC Group

Other associated Group banks are British Arab Commercial Bank, The Cyprus
Popular Bank and Egyptian British Bank.
2.4 Customer Segments of HSBC Group

Personal HSBC provides a full range of personal financial services, including


Financial Services current and savings account, mortgages, insurance, credit cards, loans,
pensions and investments. In 2000, residential mortgages across the
Group excluding Household grew by 15%, while non-mortgage
personal lending increased by over 20%. Credit cards in issue grew by
20% worldwide. Sales of repayment protection insurance and deposit
growth reached record levels. Current account balances in the UK
exceeded 10 billion for the first time at year-end 2000. The number of
customers registered for e-banking services via the internet and
telephone more than trebled in 2000. The internet generated sales of
over 2.3 million products and 87 million transactions.
Consumer Through Household International, Inc., HSBC is now a major provider
Finance of consumer finance and a top 10 issuer of credit cards in the USA.
Household provides consumer loans, credit cards, vehicle finance,
mortgage financing and credit insurance to middle America. During
2004, Household achieved good organic loan growth, which it
supplemented with portfolio acquisitions. The strongest growth was in
the real estate portfolio and the mortgage services business, and also in
branch-based consumer lending. Synergy benefits with HSBC included
store cards and point-of-sale financing.
Commercial The provision of services to small and medium-sized enterprises around
Banking the world is core strength of HSBC. During 2000, HSBC increased its
leading position in the UK business start-up market to 21% and attracted
record levels of business current and deposit account balances. Business
internet banking was offered in 20 countries and territories, and the
number of registered users more than doubled to 600,000. Money
transmission revenues, trade finance fees, wealth, savings and insurance
products all showing growth during 2000.
Corporate, This customer group comprises four main business lines Corporate
Investment and Institutional Banking, Global Investment Banking, Global Markets
Banking and and Global Transaction Banking which focus on long-term
Markets relationships with major international corporations and institutions.
Record results were achieved in 2000. The Global Markets business
excelled, particularly in international debt issuance, risk management
and structured products, and foreign exchange. Global Investment
Banking was entrusted with a number of landmark deals in capital
restructuring, corporate reorganization and strategic advice.
Private Banking This customer group provides world-class financial services to high net
worth individuals and their families. In 2000, Private Banking posted
improved financial results in all regions, led by Asia, which had a record
year. New business initiatives and a general improvement in investment
markets led to increased client activity across a range of products. An
increase in discretionary mandates, together with a strong demand for
client-tailored structured products, contributed to higher fee revenues
and dealing income. Funds under management grew by 18%, reflecting
both net inflows of client assets and improving market conditions.
2.5 HSBCs International Network

Fig 2: HSBCs International Networks

The HSBC Group's international network comprises of some 7,000 offices in 80


countries. A brief list is presented below:
2.6 Country Classifications

To ensure that the key resources (management time, capital, human resources and
information technology) are correctly allocated and that the exchange of best practice is
accelerated between entities, the group has classified the countries where it operates
into 3 categories: the large, the major and the international.

These classifications are a function of sustainable, attributable earnings, the number of


retail clients, balance sheet and size of operation. A brief presentation of this
classification is shown below:

Figure 3: Map of HSBC's Country Classifications

Large: United Kingdom, USA and Hong Kong SAR/Mainland China.

Definition
More than one million personal clients
Sustainable earnings greater than US$ 200 million

Business Focus

Concentrated group resources on wealth management


Be a top 10 player in any market or region served
Develop cross selling, loyalty programs and value added
products.

Major: Argentina, Canada, Malaysia, India, Kingdom of Saudi Arabia, Singapore and
United Arab Emirates.

Definition

Sustainable earnings between US$ 100 - 200 million

Business Focus

Universal banks (personal, corporate, and investment


banking with domestic business)
Platforms for international group business
Next generation of large companies
Stable self funding entities
Onshore HQ

International: The rest of the world.

Definition

Earnings below US$ 100 million


Business Focus

Platforms for international group business


Limited domestic presence
Nursery for developing management
Tomorrows major businesses
Supported by offshore HQ

2.7 International Brand

A key part of the Groups business strategy, announced in 1998, is the creation of a
global brand featuring the HSBC name and hexagon symbol. The symbol is now a
familiar sight around the world. The Group has embarked on the next phase making
the HSBC brand universally synonymous with its core values of integrity, trust and
excellent customer service.

HSBC Brand & Corporate Identity:

The Hexagon logo of HSBC derives from HSBCs traditionally flag, a white rectangle
divided diagonally. The design of the flag was based on the cross of ST.Andrew, The
Patron Saint of Scotland.

HSBC brand & corporate identity represents what HSBC wants its brand to mean to its
customer. It is derived from the group:

Corporate Character:

HSBC is a prudent, cost conscious, ethically grounded, conservative, trustworthy


international builder of long-term customer relationships.

Basic Drives:

HSBCs basic drives are Higher Productivity, Team Orientation, and Creative
Organization, & Customer Orientation.
The essence of HSBC brand is integrity, trust, and excellent customer service. It gives
confidence to customers, value to investors, & comfort to colleagues.

Through the process of listening to individuals needs and then acting in partnership to
deliver the right solutions, HSBC is committed to help the clients make the most of
their financial assets.

HSBC operate on a global basis, but also work on a local level to ensure the cross-
border differences are identified and any related benefits exploited. HSBC teams of
specialists ensure that whether you need solutions across the world, regionally, or
locally, and they have the skills, expertise, and resources to deliver them. They
automate as many functions as possible, even as ensuring retains control.

HSBC claims that they are the people to talk to if anyone wants the following: -

Global cash flow co-ordination


Enhanced risk management

Improved security and audit controls

Minimized costs and reduced operating expenses

Maximized liquidity, returns and interest benefits

2.8 Group Business Principles and Value

The HSBC Group is committed to Five Core Business Principles:

Outstanding customer service;


Effective and efficient operations;

Strong capital and liquidity;

Conservative lending policy;

Strict expense discipline;

HSBC Operates According to Certain Key Business Values:

The highest personal standards of integrity at all levels;


Commitment to truth and fair dealing;
Hand-on management at all levels;

Openly esteemed commitment to quality and competence;

A minimum of bureaucracy;

Fast decisions and implementation;

Putting the Groups interests ahead of the individuals;

The appropriate delegation of authority with accountability;

Fair and objective employer;

A merit approach to recruitment, selection, promotion;

Promotion of good environmental practice and sustainable development and


commitment to the welfare and development of each local community.

HSBCs reputation is founded on adherence to these principles and values. All actions
taken by a member of HSBC or staff member on behalf of a Group company should
conform to them.
Chapter 3: Overview of HSBC Bangladesh

3.1 HSBC Bangladesh

The HSBC Group is represented in Bangladesh by its Head Office in Dhaka


(Sonargaon Road), a second full-service branch in Chittagong (Agrabad) and two
booths in Gulshan & Motijheel with a vision to satisfy its customer with high quality
service that reflects its global image as the premier International Bank. The Bank has
recently opened another branch in Dhanmondi. The Bank has been serving customers
in Bangladesh since 1996. It has also an Offshore Banking Unit, which provides
banking services for foreign companies based in the Export Processing Zones in Dhaka
and Chittagong. In September 1999, it introduced ATM and telephone banking for
Personal Banking. Five ATMs located at the five branches, there are five off-site ATMs
located in Uttara, Dhanmondi, Banani, Shantinagar and GEC (Chittagong).

3.2 HSBC Bangladesh Overview

Name of the The Hong Kong Shanghai Banking Corporation


Organization Bangladesh LTD

Year of Establishment 1996

Head Office Anchor Tower, 1/1-B Sonargaon Road Dhaka 1205,


Bangladesh
Nature of the Multinational company with subsidiary group in
organization Bangladesh

Shareholders HSBC group shareholders

Products Savings & deposit services


Loan products
Corporate and Institutional services
Trade services & Hexagon
Management Mr. Mark Humble
Chief Executive Officer
Mr. Joo Baknner
Head of Personal Financial Services
Mr. Adil Islam
Head of Corporate Banking
Mr. Syed Akhtar Hossain Uddin
Human Resource Manager
Mr. Munir Hussain
Marketing Manager
Mr. Wasim Adnan Wahed
Chief Operating Officer
Number of Offices 4 (Dhaka, Motijheel, Gulshan, Dhanmondi, &
Chittagong)
Number of ATMs 06

Number of employees 250+

Technology Offers full online banking from branch to branch and


from Dhaka to Chittagong.

Service Coverage & Serves individual and corporate customers within


Customers
Dhaka & Chittagong.

HSBC Bangladesh currently provides services from two of its full service branches one
in Dhaka and the other one in Chittagong. Besides these offices there are two personal
banking Booth offices located at Gulshan & Motijheel, and a new branch opened at
Dhanmondi. There is currently nine ATMs operating in Dhaka and 1 in Chittagong.

3.3 Different Activities in Bangladesh

As one of the largest international banks in Bangladesh, HSBC has a long-term


commitment to its customers and provides a comprehensive range of financial services:
personal, commercial and corporate banking; trade services; cash management;
treasury; consumer & business finance; and securities, and custody services.
Personal Banking Services:

The Hongkong and Shanghai Banking Corporation Limited offers a full range of
personal banking products and services designed to take care of its customers growing
needs and requirements. HSBC in Bangladesh has launched a number of loan products
during 2000. Personal Installment Loan is an unsecured loan that does not require any
personal guarantee or cash security; Car Loan, also, does not require any down
payment or personal guarantee. The Bank has already launched Phone banking, a
state-of-the-art automated telephone banking service available 24 hours a day, 7 days a
week, and 365 days a year, which allows customers to access their account from the
comfort of the office or home. HSBC is the market leader in the local Auto pay service
with which the company can initiate bulk Taka payments to, or Taka collections from,
any HSBC current or savings accounts of counterparts for a specified sum at a specified
date, regardless of the branch. HSBC also offers Power vantage, a unique all-in-one
package of products and services designed to give total financial control to the
customer; a unique savings account, which allows the customer to do any number of
transactions without any charges being incurred or credit interest lost. To satisfy the
growing needs of real estate HSBC Bangladesh recently launched Home Loan Scheme
and a special type of deposit product named Bangladesh International for non-
resident Bangladeshi.

Corporate Banking Services:

The Hongkong and Shanghai Banking Corporation Limited offers a wide range of cash
financing, working capital, short and medium-term loans and guarantee facilities from
its Head Office and Chittagong branch. The Offshore Banking Unit (OBU) provides US
Dollar denominated working capital as well as short-term finance for capital imports to
eligible businesses. Using high-speed communication links, HSBC connects customers
to international payment systems.

Trade Services:

As the leading provider of trade finance and related services to importers and exporters
in Asia, HSBC in Bangladesh operates a highly automated trade-processing network
and offer an Electronic Data Interchange (EDI) capability through Hexagon. The Bank
also uses SWIFT, an efficient and secure mechanism for bank-to-bank global
communications used for all trade related activities including fund transfers and
issuance of DCs (Documentary Credit).

Financial Institutions:

HSBC provides global trade services and cash management services to local banks.
HSBCs worldwide network strength, with over 7000 offices in 81 countries and
territories, coupled with a world class reputation in Trade Finance (Best Trade
Documentation Bank Euro money) and an unparalleled presence in Asia (Best
Bank in Asia Euro money), places HSBC in an ideal position to render unmatched
correspondent banking services.

HSBCs commanding presence in the USA (5th largest USD clearing bank globally),
UK (largest GBP clearing bank globally), and the Euro land (largest Euro clearing bank
in the UK) both in terms of network strength and clearing ability allows the Bank to
provide first class cash management solutions in 3 major global currencies; US dollar,
Pound sterling, and the Euro.

Payments and Cash Management (PCM):

HSBC is the pioneer in introducing electronic cash management solutions in


Bangladesh, by introducing its state-of-the-art proprietary software, Hexagon, back in
1997. This was initially made available to corporate clients only but has since been
expanded to include banks and retail clients.

With Hexagon, the Banks proprietary cash management system, corporate customers
can access banking services from anywhere in the world to view account balances and
statements, make transfers and international payments, and to open documentary
credits, by using only a PC, a modem, and a telephone line.
Chapter 4: An Overview of Functional Departments

4.1 Management of HSBC Bangladesh

HSBC Bangladesh is such a company that has to overcome a lot of hurdles to reach the
position it now holds. At present, Mr. Mark Humble is the CEO; Mr. Adil Islam is the
chief of Corporate Banking; Mr. Adnan Wahed is COO, Mr. Joo baknner is the Chief of
Personal Banking or as known in HSBC, Personal Financial Services (PFS) Head, and
Mr. Syed Akhtar Hossain is the Human Resource Manager at HSBC Bangladesh.

These five men at the top carried out their management roles comprehensively and
systematically. They equally contributed to HSBCs superior leadership, by carrying
out their unique roles. They worked well together, respecting each others abilities, &
arguing openly, & without any resentment when they disagreed.

To maintain a close touch with the organization each man works in separate area of
HSBCs complex. Their offices are indistinguishable from all other cubicles where
HSBCs junior executives & secretaries work in. There are no office walls in HSBC
and all the staff starting from the CEO to the lower operating level employees shares
the same premises under one roof. There are no specialized cabins for top management
and executives and also no executive dining rooms. This has created a management
team that is unified, cohesive, & energetic.

Each and every employee of HSBC takes pride of being an employee at HSBC and his
or her pride comes from the freedom of direct communication with the top
management. The management of HSBC is supportive in the sense that the top
management deliberately supports the suggestions, values, ideas, innovation, and hard
work of the employees and officers. Again high amount of employee participation is
encouraged in the management process. There are also systems for awards, incentives,
and status for innovative ideas and hard works. Again the management style can also be
termed as collegial as high amounts of teamwork and participation exists between the
top and bottom parts of HSBC.

HSBC follows a 4 layers management philosophy in Bangladesh. These are Managers,


Executives, Officers, and Assistant Officers. The CEO is the top most authority of all
the levels. Managers are the departmental heads who are responsible for the activities
of their departments. They are the heads of the department who formulate strategies for
that department. e.g. Human Resources Manager. Executives have the authority next to
managers. They are basically responsible for certain activities & organizational
functions. e.g. Admin Executive. These two layers represent the management level of
HSBC Bangladesh.

Officers are the next persons to stand in the hierarchy list. They are the typical mid-
level employees of HSBC organizational hierarchy. These officers are responsible for
managing the operational activities and operating level employees. The operating level
employees of HSBC who are ranked as Assistant Officer fill the last layer of this
hierarchy. They perform the day-to-day operational activities of HSBC. An
organizational hierarchy chart is shown below:

Managers

Executives

Officers

Assistant Officers

Figure 4: Organizational Hierarchy

4.2 Chief Executive Committee


Figure 5: Chief Executive Committee

The organizational structure of HSBC Bangladesh is designed according to the various


service and functional departments. The Chief Executive Officer (CEO) heads the chief
executive committee, which decides on all the strategic aspect of HSBC. The CEO is
the person who supervises the heads of all the departments and also is the ultimate
authority of HSBC Bangladesh. He is responsible for all the activities of HSBC
Bangladesh and all its consequences. He administers all the functional departments and
communicates with the department heads for smooth functioning of the organization.
The HSBC Chief Executive Committee is formed with the heads of all departments
along with the CEO. Besides the CEO the CEC is staffed with 6 more managers:
Manager of Human Resources, Manager of Services, and Manager of Financial
Control Department, Chief of Personal Banking, Chief of Corporate Banking, and
Manager of Marketing.

4.3 Functional Departments of HSBC

HSBC activities are performed through functional departmentalization. So, the


departments are separated according to the functions they perform (HR, Marketing,
Personal Banking, etc.). There are 6 major functional departments at HSBC: Human
Resources Department, Financial Control, Personal Banking, Corporate Banking and
Marketing. Within these major departments there are some other subsidiary
departments that allow smooth operation of their own major departmental function. A
graphical presentation of all the departments (Major & minor) is shown below. Brief
functional descriptions of these departments are-
Chief Executive
Officer (CEO)

Human Services Financial Personal Corporate Marketing


Resources Control Banking Banking

Administration Administration Foreign DAK Branch Trade Services Direct Sales


Correspondence

Development IT Payment Chittagong Institutional Promotion


Branch Banking

Internal Treasury Dhanmondi Hexagon Marketing


Control (IC) Branch Administration

Network PCM Motijheel Booth


Service
Center
(NSC)
Gulshan
Booth
HUB

Credit
Department

Bond, ATM &


ATB

Figure 6: Functional Departments of HSBC

4.4 Human Resource Department (HR)

The Human Resource Manager currently heads this department. The major functions of
this department are strategic planning and policy formulation for Compensation,
Recruitment, Promotion, Training, and Developments, Personnel Services, and
Security. The HR department is very much concerned with the discipline that is set up
by the HSBC group. HSBC group has got strict rules and regulations for each and
every aspect of banking, even for non-banking purposes; i.e. the Dress Code. All these
major personnel functions are integrated in the best possible way at HSBC, which
results in its higher productivity. The Human resource officer monitors the employee
staffing and administration activities. The Training officer supervises training,
development, & rotation activities. The structure of the HR department is shown below:

Human Resource
Manager

Human Development
Resource Officer
Officer

AO AO AO AO
Staffing Administration Training Appraisal

Figure 7: Structure of Human Resource Department

HSBC activities are performed through functional departmentalization. So, the


departments are separated according to the functions they perform. Within the major
departments there are some other subsidiary departments that allow smooth operation
of their own major departmental functions.

4.5 Personal Financial Services (PFS)

PFS is the most flourishing department of HSBC Bangladesh. This department


basically deals with the management of products and services offered to the individual
consumers. Within a span of only five year HSBC PFS has grown tremendously and is
still growing with its innovative products and service offerings. The 3 branches and 2
booths of HSBC basically deal with the personal banking activities and provide various
accounts services to individual customers. The departments under PFS are shown in the
following diagram:

PFS
Head

Manager Manager Manager Manager Manager Manager


Bond & ATM CCR Product Branches Sales ATB

Executive Executive Executive Executive Executive


Bond & ATM Approval & Product MIS ATB
Operations

Officer Officer Officer


Bond ATM ATB

Officer Officer Officer Mobile Sales


Operations Collection MIS Officers

CSM CSM CSM CSM CSM


DAK Branch Chittagong Dhanmondi Motijheel Booth Gulshan
Branch Branch Booth

Branch Staff Branch Staff Branch Staff Branch Staff Branch Staff
Team Team Team Team Team

Figure 8: Structure of Personal Financial Services Department

Operations:
Manages daily operation

Plans and directs sales and marketing

Plans for service development

Top-level authority for customers dealings and transaction

Provides required service to the customers directly


Maintains documentation and report flow vary rapidly

Helps in planning at field level

Assists PFS Head in decision-making process and researches

Assists PFS Head day-to-day work

Keeps track and inform PFS Head in present condition of the


competition in the market

4.6 Branch Network

There are five branches of HSBC, four situated at different locations in Dhaka and one
at Chittagong. Only the Dhaka office (head office) & Chittagong branch deals with
both corporate and personal banking. Other three offices only deal with the personal
banking activities. Their functions are to provide various financial services to the
consumers. These include customer services, sale of various PFS products, opening
new accounts, providing cash, remittance, and other teller services, etc. The branches
are quite decentralized for better delivery of services to customer and have their own
premises and facilities. Branch managers head these branches. Each branch is staffed
with its own team of employees. A great deal of teamwork is seen within these
branches. ATMs are situated with each branch premises.

CSM
DAK Branch

Executive (CSO) Executive (CSO)


Front Office Back Office

Officers Officers
Front Office Back Office
Figure 9: Branch Network

4.7 Credit Department

The personal banking credit department deals with the consumer credit schemes such as
the Personal loan, Car loan, Travel Loan, Personal Secured loan, etc. which are tailored
to meet the demand of individual customers. The manager of PFS credit who approves
and administers all the activities of this department. He is staffed with five approval
officers, four operations officers, and two MIS officers. The approval officers mainly
reject or approve the credit requests. After being checked by the approval officer, the
credit requests go to the operations for further processing of the application and
disbursement. This department is a member of ALCO (Asset Liability Management
Committee), which coordinates in preparation of lending analysis and data on
concentration of risk and identifies possible lending risks. This department is also
responsible for monitoring all necessary documents and securities related to loans.

4.8 ATM Center

The ATM center ensures smooth operation of the ATM machines that are located at
Dhaka and Chittagong. The ATM center is responsible for regular replenishment of the
off-site ATMs and servicing of all the ATMs. Currently a total 10 ATMs are in
operation. The ATM center also deals with issuance, termination, and servicing of the
ATM cards. On a whole, the ATM center is the department that is solely responsible for
all the activities related to ATM and is the facilitating department that enables
customers 24 hours banking support.

4.9 Bond Department

This department is under the same manager as the ATM center. They basically deal
with all the buying and selling of government bonds and treasury bills as per customer
instruction, i.e. BSP, PSP, and TSP etc. This department keeps under its control the
transactions regarding USDB, USDIB, and WEDB.
4.10 ATB Center

ATB refers to Automated Tele Banking. This department deals with the back office
serving the HSBC phone banking services provided to customers. This department is
basically responsible for the activation of ATB, ATB pin generation, and ATB security
management, ATB blocking and troubleshooting of all ATB problems. This department
is fairly new and was constructed on January 2000. Currently this department is staffed
with two executive and two officers.

4.11 Corporate Banking

This division if HSBC provides financial services to organizational (corporate) clients.


HSBC is a worldwide leader in banking and financial services whose success is based
on its relationships with its corporate clients. Whether it is locally or around the world,
HSBC offers a comprehensive range of services that can be tailored to the individual
needs of the company. The Head of this department is the Chief of Corporate Banking.
He is also the Vice-CEO of HSBC Bangladesh. The chief of Corporate Banking
manages the activities of corporate banking of HSBC Bangladesh. Two offices of
HSBC Bangladesh offer corporate banking services to corporate clients. These are the
Dhaka Head Office and Chittagong office. Corporate Banking of HSBC Bangladesh
includes Corporate Institutional Banking (CIB), Trade Service (HTV), and Hexagon.
These sub-divisions are discussed briefly in the following sections.

4.12 Corporate Institutional Banking (CIB)

As their major customers operate internationally, HSBC services them internationally.


Operating through the major centers and in close liaison with HSBC Investment Bank,
Corporate and Institutional Banking provides the full range of the Group's capabilities
at local and global levels, with a particular focus on payments and cash management,
trade, and securities custody. HSBC also offers local financial institutions and banks
access to wide range of financial services available on an international basis. The
services are tailored to suit the needs of the companies. CIB has two separate wings:
Relationship management department and Hexagon. These are discussed below:

Relationship Management Department:


The RM department consists of various relationship managers who are assigned to
different corporate client to better satisfy their needs. These RMs communicate with
the clients and are solely responsible for the companies they deal with. Any information
regarding a corporate client must be communicated through the respective RM assigned
to that corporate client. A relationship manager may be assigned more than one
company and this decision depends on the chief of Corporate Banking.

Hexagon:

The Hexagon department deals with all aspects related to HSBCs unique banking
software product - Hexagon. It is the global Electronic Banking system of HSBC,
which offers the customers more convenient and efficient banking than ever before. It
is an innovative desktop banking system developed by the HSBC group, which
operates via the groups proprietary worldwide communications network.

4.13 HSBC Trade Services (HTV)

Trade service is known by various names in other banks, e.g. Trade Finance Foreign
Exchange, Foreign Trade etc. However, the functions are the same. As the name
suggests, this department is involved in facilitating trade, both international & within
Bangladesh. HSBC is the leading provider of trade finance and related services to
importers and exporters in Asia. Trade is considered a core business of the group. The
groups presence in 81 countries of the world gives a good opportunity to control both
ends of a trade transaction and keep the business within the Group. The various awards
it has won from the leading publications of the world acknowledge HSBCs excellence
in trade. The trade service department has two separate subsidiaries: Credit
Administration & Foreign Exchange Division.

Credit Administration:

Credit Administration department basically deals with all the documentation,


processing, administration, and disbursement of the import-export services provided to
corporate clients. This department is known to be the heart of HSBC trade services that
administers and manages all the trade tools and facilities provided by HSBC Corporate
Banking. Some important aspects of this department are LC advising, documentation,
OD facilities, guarantees, etc.
Foreign Exchange Division:

The For-ex division of trade services is solely concerned with the management of
Foreign exchange inflow and outflow. The For-ex division of trade service in relation
with NSC and FCD manages the foreign currency traffic of HSBC that originates from
Corporate Banking and trade services.

4.14 Finance Department of HSBC Bangladesh

This is considered as the most powerful department of HSBC. It keeps tracks of each
and every transaction made within HSBC Bangladesh. Manager of FCD who ensures
that all the transactions are made according to rules and regulation of HSBC GROUP
heads it. Violation of such rules can bring serious consequences for the lawbreaker.
FCD is responsible for the preparation of the Annual Operating Plan (AOP), monitoring
treasury risk limits, profit exposure, and maintaining strong liquidity. FCD is the key
member of the Asset Liabilities Management Committee (ALCO), which deals with
how efficiently the banks assets and liabilities are managed. FCD also deals with
money market matters. FCD acts as a custodian of all vouchers. FCD as the name
implies does all the banks monitoring of the banks internal compliance and all local
regulatory requirements.

The functions of FCD are briefly discussed below along with an organogram of the
department:

Manager
FCD

Executive, Executive, Executive, Executive,


FC Treasury Payments Cash Management

Officer, Officer, Officer


Accounts Financial Control Payments

Officer, Officer, Officer, Officer,


Fund Management Administration In-house PCM Out-ward OCM
Figure 10: Finance Department

4.15 Foreign Correspondence (FC)

FC keeps records of all the accounts of HSBC. All the vouchers, notes, advices and
transaction reports of the branches are sent to FC for record keeping purposes. FC also
prepares the financial statements for the banks and decided upon banks assets and
liabilities. It also deals with the returns that are submitted to the Central Bank on
regular interval.

4.16 Treasury

This department works under FCD. Their main job is to take decisions regarding
purchase and sell of foreign currency. The purpose of treasury's operations is to utilize
the funds effectively and arrange funds at a lowest possible rate of interest, through
maintaining effective relationship with other banks and following the Government rules
and foreign exchange regulations

4.17 Payment and Cash Management (PCM)

PCM deals with the inter-bank payment. PCM strategies are designed to ensure
efficiency, profitably, and comprehensive support.

4.18 Services Department of HSBC

This is an integral and vital part of the bank. The services department ensures smooth
operation and functioning within and between all the departments of HSBC. It also
provides continuous support to the core banking activities of HSBC. The Manager of
Services heads this department who formulates and manages various critical issues of
the services function of HSBC. He is followed by a group of executives who are the
heads of various subsidiary divisions that operate within the services department. The
services department is considered as the backbone of all other departments. The various
subsidiary divisions within this department are Administration, IT, Internal Control
(IC), Network Services Center (NSC), and HUB. A structure of the services
department is presented below followed by a briefing of the subsidiary divisions:
Manager
Services

Executive Executive, Executive Executive, Executive


Administration IT Internal Control NSC HUB

Officer Officer Officer Officer


BSS General Admin Internal Control HUB

Officer Officer Officer Officer


System Admin System Remittances Network Services

Figure 11: Services Department


4.19 Administration

Like any other organizations, the Admin department of HSBC makes sure that the
organizations moves on with all its departments and staffs operating according to all the
rules and regulations of the company. It also prevents any bottlenecks within the work
process and ensures smooth functioning. The admin department has two divisions
General Administration and Business Support Services.

The general admin division is pretty much similar to the admin departments of other
companies that ensure discipline and regulatory concerns. The business support
services provide supports to the departments during employee leaves and sudden
terminations so that the department can function without problems.

4.20 Information Technology (IT)

This department gives the software and hardware supports to different departments of
the bank. As HSBC is engaged in online banking, the role of IT is very crucial for the
bank. This department is the most active department of HSBC where employees always
stand by to solve any problems in the system. The managers and executives of IT
division work continuously to develop the total IT system of HSBC so that it can be
operated with ease, accuracy, and speed.

4.21 Internal Control

HSBC has internal auditors who visit on regular basis and submit the report to the
higher authority for audit purposes. This gives different departments the chance to
know their mistakes and take necessary corrective actions. Again, the Bank annually
administers a company wide audit program to evaluate the overall performance of the
bank in Bangladesh.

4.22 HSBC Universal Banking (HUB)

The HSBC banking system is called HUB. HSBC does the online banking and it is
HUB, which sets up the parameter for that. This HUB is linked with the HSBC group
via satellite and each and every transaction made by HSBC within Bangladesh is being
recorded at the HSBC Asia-pacific headquarters at Hong Kong via HUB. Thus the
HUB is the most powerful and important equipment of HSBC Bangladesh that
monitors and tracks any fraud and faults made with HSBC Bangladesh.

4.23 Network Services Center (NSC)

This department can be described as the Power House of HSBC Bangladesh. NSC
does the back office job for the bank. The main four jobs that are performed by NSC
are Clearing, Scanning of signature cards, issuing checkbooks, and sending & receiving
Remittances. NSC looks after the clearing process of HSBC and makes necessary
contact with the central bank for maintaining account flows. All the customer
signatures are scanned in this department and are entered into the system. NSC also
issues checkbooks for new and old accounts based on requisition from various
branches. Remittance is a banking term, which means Transfer of funds through
banks. When a bank remits on behalf of its customers, it is termed as outward
remittance. On the other hand, when the bank receives the remittance on behalf of the
bank, it is inward remittance. The following methods that NSC uses to remit money for
customers: Telegraphic Transfer (TT), Demand Draft (DD), & Cashiers Order.
4.24 Marketing Department

The sixth major department of HSBC is the marketing department. The marketing
department of HSBC play a vital role in fostering the continuos growth HSBC in
Bangladesh. A manager is assigned to this department who looks after the overall
marketing operation of HSBC in Bangladesh. This department is basically concerned
about marketing the companys products, services, and building a strong corporate
image. The marketing department of HSBC has three subdivisions: Direct Sales,
Promotion, & Marketing Administration.

Manager
Marketing

Executive, Executive, Executive,


Direct Sales Promotion Marketing Administration

Officer, HSBC Mobile Officer, Officer, Officer, Officer,


Sales Administration Sales Team Public Relations Advertising R&D Billing & Admin

Figure 12: Marketing Department

4.25 Amanah Finance Department

Amanah Finance is an ethical and indigenous form of community banking that is


compliant with the Shariah (Islamic law). It involves financing based on the sale
or lease of assets; i.e. the bank is a selling goods for use (trade) rather than
selling money itself. This facility is extended by the way of providing finance for
imports. The issuance of import documentary credits and the retirement of bills
are handled in compliance with the Shariah law.
The process of issuance of Amanah DCs (DCI) and handling of bills (IBR) is
very similar to the existing products, except for the exceptions detailed on the
following: Under this product the customer requests the Bank to buy goods
which the customer will buy from the Bank at a deferred sales price. The Bank
then appoints the customer as an agent (Wakala) for buying the goods so
specified. The Customer opens the DC as a buying agent, and when the goods
arrive, constructive delivery is made, buys it from the bank. The purchase price
for the Bank is the bill value and the Bank sells the goods at a profit in
consideration of the customer paying at a later date.

While the overall contract and the transaction are different, the DC itself does
not differ significantly from conventional DCs. A small number of clauses are
proposed to be mandatory in Bangladesh i.e. no TT reimbursement is allowed
and payment is made only upon receipt of documents at counter, the goods are
consigned to the order of the Bank, and the beneficiary has to notify the
applicant of the shipment. These are standard clauses in Bangladesh market and
are normal business practice and local norm.

Two additional documents are required for Amanah DC transaction compared to


the conventional DCs, the Purchase Transaction Notice and the Murabaha
Transaction Notice. In the Purchase Transaction notice the customer requests a
transaction whereby they will purchase goods as the bank agent and also
promises to buy the same goods from the Bank, which the Bank must accept to
go ahead with the transaction. In the Murabaha Transaction Notice, the customer
proposes to buy the goods on a deferred sales price, and agrees to pay a markup
over the purchase price of the goods, payable at a future date.

4.26 Overview of Process


Customer executes Master Murabaha and Wakala agreement,
the omnibus Trust Receipt and the Promise to Purchase
documents which sets the framework along with Facility Offer
Letter
Facility Set up
DC application along with Purchase Transaction Notice placed
to Bank
Bank opens DC with specific set of conditions
Exporter Prepares goods and notifies applicant
Customer submits the Murabaha Transaction Notice (MTN) to
Bank
Exporter ships goods and sends document to Bank
HSBC accepts MTN before or at least on the day the
documents are receives. Customer is advised that documents
are received.
Customer provides acceptance of documents after reviewing
them at the Banks counter. A New Bill advice is sent, and if
there are any discrepancies, customer must accept this or the
DC amended. If documents are in order but the customer does
not provide the MTN or does not wish to pay, the RM to be
referred and the conventional procedures to be followed.
HSBC retires bill by creating CLI or Customer Account Debit
and endorses documents in the name of the customer.
Customer retires the CLI by paying the pre agreed amount
equal to Bill Value + Profit.

4.27 Trade Services Operations

New Product Codes for HSBC Amanah Import Finance are:

Amanah Import Finance


Product Code Description
DCI Islamic Sight Doc Credit
DIG Islamic Usance Doc Credit
DIB Islamic Sight DC. (Back to Back)
IBR Islamic Bill Receivable
SIG Islamic Shipping Guarantees
AWI Islamic Airway Bill Release
CLI Islamic Clean Import Finance

Although the above will support a full range of DC and related products, we will
be using only DCI, IBR, SIG, AWI and CLI for the time being.

4.28 Important Notes

Discrepant Documents
Discrepant documents should be treated the same as with a discrepant document
for a conventional DC. All other Amanah procedures still apply.

Partial Shipments
For each DC, one DC application and one transaction notice are required. For
partial shipments, a separate Murabaha Notification must cover each shipment.

Late payment
For late payment, the same charges will apply as with a conventional DC. These
are generated automatically by the system. No changes are necessary in the
system, however when talking to the customer interest should not be mentioned.

4.29 Communication with Customers

Never say interest or loan to an Amanah Customer

For Interest use Profit


For Loan use Financing
4.30 Glossary Agent

Under Shariah requirements the bank will have to purchase the goods before it is
allowed to sell them on cash or deferred payment basis. The bank is
however allowed to appoint an agent who can go in the market and source
the goods for the bank. Since it is recognized that the bank is not in a
position to buy the goods itself it will appoint the customer as its
undisclosed agent (solely) for the purpose of sourcing the required goods
and purchase them on behalf of the bank. This will also include negotiation
with the seller or exporter. The bank after the purchase can sell the goods to
the customer.

Financing Requirements:

With the offer to buy or any time before receipt of the offer to buy, under
Shariah, the customer must inform the bank if they require any financing.
If the customer informs that they require any financing after the receipt of
the Offer to Buy, the transaction is not Shariah compliant. Bank still can
provide financing but the customer is aware that the transaction is not
Shariah compliant.

Master Murabaha Agreement (MMA):

It is the equivalent to a general financing agreement or, in Trade Services case,


Trade Finance General Agreement (TFGA) that has stated terms and
conditions applicable to transaction under the overall agreement.

Murabaha:

It is an Islamic-financing tool based on the idea of selling goods at a stated


profit. The crucial element in Murabaha is that there must be an underlying
asset involved. In other words, the bank is selling goods for use (which
would be trade) rather than selling money itself (which would be interest).
Murabaha Notification:

MN is essentially a formal offer from the customer to purchase the goods from
the Bank. It will stipulate that the customer has obtained goods and offers
to buy the goods on "as it is" basis on the shipment date. This is again a
Shariah requirement.

Promise to Purchase:

It is a binding agreement on the customer to unconditionally and irrevocably


purchase the goods from the Bank. It is equivalent to a promissory note.

Shariah:

Refers to the Islamic legal tradition, which is sometimes called Islamic Law
(literally it means 'a path to life-giving water')-

Transaction Notice:

It is required by Shariah to have specific notice under each shipment. The MMA
will have a general agreement and will assume that transactions will be
conducted from time to time; however Transaction Notice will ensure that
each party is aware of the details. Without a Transaction notice the DC will
not be Shariah compliant. It should be received with the DC application.

Wakala
Islamic term for agency.
Chapter 5: Products & Services

HSBC Bangladesh carries out all traditional functions, which a commercial Bank
performs such as mobilization of deposit, disbursement of loan, investment of funds,
financing export & import business, trade & commerce & so on. Besides it also offers
some specialized services to its customers. Products & services offered by HSBC can
be categorized according to the customers they serve. Thus two major groups can be
identified. They are individual customers or consumers & corporate customers or
organizations. An in-depth analysis of HSBCs product and services in Bangladesh is
presented in this section. First of all, the liability products of the bank are discussed.
After that the various products and services of personal banking division will be
presented, followed by a brief discussion of the corporate banking services offered to
corporate clients. The summary of all the products and services of HSBC Bangladesh is
displayed in the following page.

5.1 Accounts

Savings Accounts:

Maximize wealth with daily interest-

Unlike other banks there is no ledger fee and any interest accrued is not
lost
Customers can issue any number of cheque or withdraw any amount
Interest is calculated on daily credit balance (not on average credit
balance) and paid half yearly
Only condition to earn interest is maintaining a minimum balance of BDT
25,000/-
Relationship fee is BDT 300/- per quarter if average relationship falls
below BDT 50,000/- for three months.
Current Account:

This is also a depository account basically designed for various customers. This is a
non- interest bearing accounts and the features of this account are as follows:

Opening balance TK 25,000


Average balance that should be maintained: TK 25,000
No restrictions on number of transactions
No yearly ledger fee
Non interest bearing
Free ATM card and phone banking service
Documentation: various kinds of documents are needed for the companies such
as memorandum of association, board resolution, etc. however the requirements
for individuals are same as the savings account.
Can be opened only by:
Individuals (joint or single)

Proprietorship companies

Partnership companies

Limited Companies

Liaison offices

NGOs

5.2 ATM Card


Can be linked with Savings or Current Account or both
24 Hours a day from any one of the 11 HSBC ATM outlets
DAK, DMO, DGU, DHA and CHG onsite & 5 offsite.
Maximum limit BDT 20,000/- per day per card. For PVA ATM card the
maximum limit is BDT 50,000/- per day.
You can withdraw or deposit money, inquire about your balance, check last 5
transactions, transfer funds between your accounts and make payments to
other accounts with HSBC
Minimum BDT 500/- can be withdrawn;

5.3 Power Vantage

For total financial control-

Average deposit balance should be BDT 2,00,000/-


Annual fee BDT 500/-
Penalty charge BDT 500/- half yearly, if the average deposit balance falls below
BDT 2,00,000/-
Free personal accident insurance coverage for BDT 1,00,000/-
Free endorsement of foreign currency against travel quota
Special Power Vantage ATM card with enhanced cash withdrawal facility of
BDT 50,000/- per day
An all-in-one composite statement of all your accounts under the Power
Vantage package
Special loan rages for the Personal Installment Loan
Lower processing fee for Car Loan
Fee waiver for setting up standing instructions at Auto Sweep

5.4 Time Deposit


Minimum amount to open a TMD is BDT 1,00,000/- (Individual and Joint both)
Interest is paid at maturity
Cumulative Time Deposits (Principal + Interest) is also available
Automatic roll over at prevailing rate
Time deposit is offered in Time Period (Minimum 1 month and Maximum 12
months)
Standing instruction can be given (like credit interest to other accounts)
Personal Secured Loan a loan facility up to 90% of the value of the LCY and
80% of FCY time deposit for a maximum period of 5 years
Personal Secured Credit an overdraft facility up to 90% of the value LCY
and 80% of the time deposit.
Short Term Deposit (STD):

These accounts are opened mostly by the organizations. Organizations normally


maintain current accounts in the banks. They need to transact bulk amount regularly
thats why, current account fits with their requirements. As current accounts do not
provide any interests and as the organizations cannot have savings account, they are
deprived of earning any interest even though having huge deposit in their accounts.
Short-term deposit accounts enable them to earn interests from their accounts. These
kinds of accounts share some properties of both current and savings accounts. The
account provides interests, which are like the savings accounts, and the holder can
withdraw any amount any time from his account that is a property of the current
account. Individuals especially, businessmen also maintain such accounts.

Fixed Deposit:

It is also known as term deposits. These deposits are made in the bank for a fixed
period of time. This period of time should be specified in advance. The bank needs not
to maintain cash reserves against these deposits & therefore, it offers interest rates that
are higher than the savings accounts.

Monthly Interest Bearing Time Deposit:

The simple, safe, and flexible way to enjoy guaranteed monthly return-

Minimum opening amount is BDT 5,00,000/- (Individual and Joint both)


Tenure: 1-2 years
Interest is paid at a monthly basis and is transferred to another nominated
account
Automatic roll over for the 2nd year at prevailing rate.

5.5 Expatriate Account


Expatriates can open normal BDT current a/c as well as FCY current a/c
Expatriates can open convertible account if entitled to and subject to restrictions
such as they can not deposit taka in convertible A/C
Free ATM card is provided to access to their accounts to withdraw Taka from
current accounts
Expatriates can not earn interest on their BDT or FCY accounts (Regulations of
Bangladesh Bank)
Expatriates can not get any credit facilities (Regulations of Bangladesh Bank)

5.6 Non-Resident Bangladeshi (NRB)


There are some other accounts for non- resident Bangladeshi

Foreign Currency Current Account

Foreign Currency Time Deposit Account

Resident Bangladeshi

Resident Foreign Currency Current Account:

Features-

Accounts opened from funds brought in when returning from abroad


If amount exceeds USD 3,000/- or equivalent then customer must fill up
declaration form FMJ at the customs.
To be opened within 30 days of return
Minimum opening balance is USD/GBP/EURO 1,000/-
An International ATM card giving access to their funds from 8,00,000/-
ATMs worldwide. Withdrawal in local currencies.
The balance of the account is freely remittable but no inward remittance is
allowed.
Non-chequeable account chequebook will not be issued.
Can take out the money for further traveling without being subject to any
regulations.
Foreign Currency Time Deposit Account:

Features-

Accounts opened from funds brought in when returning from abroad or by


transferring from resident FCY account
To be opened within 30 days of return
Minimum opening balance is USD/GBP/EURO 1,000/-
Interest bearing time deposit account with maturities of 1, 3, 6 and 12
months
Personal Secured Credit / Personal Secured Loan an overdraft facility up
to 80% of the value of the foreign currency time deposit.
Chapter 6: Loans & Credits

6.1 Personal Installment Loan (PIL)

Any purpose loan no cash security


Minimum monthly income BDT 15,000/-, 2 years service in a well reputed,
stable company, minimum age 25 and maximum 56
Valid income proof documents must be furnished, unsecured loan, & no
personal guarantee required
Minimum loan amount is BDT 50,000/- and maximum loan amount is BDT
20,00,000/- or 4 times of salary
Interest rate will be 18% per annum
Maximum loan tenure is 36 months. If loan amount it BDT 4, 00,000/- or above
then maximum tenure is 48 months
Auto Pay customers will get discounted interest rate: 15.5% and loan amount: 6
times of salary or 2 million whichever is lower
CEPS customers will get discounted interest rate: 15.5% and loan amount: 10
times of salary or 2 million whichever is lower
Personal loans will be granted at discounted rates to employees of blue chip
companies against assignment of terminal benefits as per agreement with
employer. Loan tenure will be up to 5 years.
For salaried individuals additional income including rent will be considered,
provided these are substantiated with requisite documentation or evidence.
For businessmen the TIN certificate and CIB (Credit Information Bureau) report
will remain a mandatory document for income verification.
A current account needs to be opened by the customer before applying for
Personal Installment loan (PIL).
6.2 Travel Loan

Travel Loan is offered within the existing Personal Installment loan structure. The
purpose of launching this product is to attract and aid customers with their travel
related services.

Loan amount is minimum loan amount is BDT 50,000/- and maximum loan
amount is BDT 5,00,000/-
Interest rate: 15%
Tenure: Maximum loan tenure is 36 months. If loan amount is BDT 4,00,000/-
or above then maximum tenure is 48 months.
Loan processing fee: 1% of the loan amount or BDT 1,000/- whichever is
higher + stamps BDT 170/-
No personal guarantee is required

6.3 Car Loan


Eligibility- minimum monthly income BDT 20,000/-, 2 years service in a well
reputed, stable company, minimum age 25 and Maximum 56
Valid income proof documents must be furnished
No personal guarantee is required
Minimum loan amount is BDT 50,000/, maximum is 4,00,000/-
For both reconditioned car and new car loan amount will be maximum 70% of
the car value
Interest rate will be 14.5% per annum
Maximum loan tenure is 60 months
Loan processing fee is 1% of the loan amount or BDT 1,000/- whichever is
higher + stamps BDT 170/-
Car will be registered in Banks name (no joint registration)
Comprehensive insurance in discounted rate from selected insurance company
in Banks name is mandatory and automatically debited from customers account
every year.
CEPS salaried customers will get 0.5% discount in loan processing fee, i.e. 14%
6.4 Home Loan

Its easier than ever to own a dream home-

Eligibility- minimum monthly income BDT 40,000/-, 2 years service in a well


reputed, stable company, minimum age 25. The loan must end before
borrowers age reaching 57 years or retirement date, which ever is earlier.
This loan is provided for completed flats / apartments less than 20 years of
age
No personal guarantee is required
Minimum loan amount is BDT 7,50,000/- and maximum loan amount is
100,00,000/-
Maximum loan tenure is 15 years, loan must be repaid prior to 57 years of age
A maximum loan amount of 70% of the total value of the apartment costing up
to BDT 50,00,000/- and 60% of the total value for the apartments over BDT
50,00,000/-. The total loan value is inclusive of the registration cost.
Interest rate is 14% per annum
Loan processing fee is 1.5% of the loan amount or BDT 20,000/- whichever is
higher + stamp charge
Security: Registered mortgage and original title deed
Insurance: Fire, earthquake, flood, cyclone

6.5 Personal Secured Loan

Personal Secured Loan is a simple stand by loan against the Time Deposit and NRB
Bonds and the loan is repayable in equal monthly installment.

Standby loan against TMD and NRB bonds (WEDB/USDB)


WEDB (Wage Earners Development Bond) or USDB (US Dollar Bond) issued
from HSBC and other multinational banks are considered.
Interest rate 12.5% for loan amount below BDT 5,00,000/- and 12% for loan
amount of BDT 5,00,000/- and above
Interest rate against LCY TMD is 13%
Minimum loan amount BDT 90,000/-
Maximum loan amount 90% of LCY TMD amount or WEDB and 80% of FCY
TMD or USDB
Processing fee against certificate issued from HSBC is BDT 1,000/- + stamps
BDT 170/-

6.6 Personal Secured Credit

Credit facility against the investments-

Personal Secured Credit is a credit facility against Time Deposits and NRB Bonds that
enables customers to have the flexibility to meet short-term commitments without
unlocking their long-term investments.

Customers can borrow up to 90% of their LCY TMDs and WEDB value
WEDB and USDBs issued from HSBC and other multinational banks are
considered
Minimum loan amount is BDT 90,000/-
Maximum loan amount 90% of LCY TMD amount or WEDB and 80% of FCY
TMD or USDBs.

6.7 Credit Card

Increase the spending power-

Product Name: HSBC Prime Co-branded Master Card Gold Card

Card Type: Local Master Card Gold Card

Card Limit: Staff Card: BDT 15,000/- to 1, 00,000/-

Master Card Gold Normal: BDT 50,000/- to 1, 00,000/-

Master Card VIP: BDT 1, 00,000/- to 2, 00,000/-

Eligibility:

Primary Eligibility: Minimum BDT 25,000/- gross income from regular


sources. Bangladeshi Citizen 21-65 years of age and has account with HSBC
For Supplementary card the person has to be at least 18 years of age
Card Life: By default 2 years for all cards new and renewed
Billing Cycle: 7th day of the month
Repayment Period: 26th day of every month. Maximum 50 days interest free
period
Minimum Payment Calculation
8% of the current balance shown on the statement or BDT 500/- which ever is
higher. If current balance is less than BDT 500/-, then full payment
For over limit account: 8% of the credit limit plus exceeded amount

6.8 Corporate Banking Services

HSBC offers wide range of cash financing, working capital, short, and medium-term
loans, and guarantee facilities to its corporate customers. Its offshore banking Unit
(OBU) provides US dollar denominated working capital as well as short tem finance
for capital imports to eligible businesses. HSBC is a worldwide leader in banking and
financial services whose success is based on its relationships with its clients. Whether
locally or around the world, HSBC offers a comprehensive range of services that can be
tailored to the company's needs. Some major services provided by HSBC corporate
division are Custody services, Global payment & cash management, Trade services, &
Hexagon.

6.9 Global Payments & Cash Management (PCM)

HSBC's Global Payments and Cash Management services are designed to help its
clients to operate efficiently, profitably and with comprehensive support. The aim is to
provide a service that takes full account of the customers local needs as well as
regional and international requirements using our expertise and global resources of the
HSBC Group. PCM provides the following services to its clients:

Accounts & transaction management services: Structuring of bank accounts


to optimize the management and flow of funds within or across national
borders.
Cash & Liquidity management services: Cash is a company's most volatile
asset and HSBC provides the best service to manage its clients cash efficiently.
6.10 HSBC Trade Services (HTV)

HSBC is the leading provider of trade finance and related services to importers and
exporters in Asia. The bank operates a highly automated trade-processing network and
offers an electronic data interchange (EDI) capability through Hexagon. Some services
provided by HTV are as follows:

6.11 Import Services

A full range of import services handled by experienced staff is available, ensuring that
clients import documents are processed without delay. Some import related services
are- Import collection services, Import financing services, Import documentary
advising, Processing, and advising on shipping guarantees.

6.12 Export Services

HSBC provides advices on any aspect of export document preparation. It also provides
working capital finance to help the sourcing of raw materials. Some other export
services are- Pre-shipment Financing, Post shipment Financing, Purchase of Export
bills, Back-to-Back credit, and LC, Documentary credit advising, Documentary
checking.

6.13 Risk management

HSBC has developed a unique range of specialized products aimed specifically to


reduce a companys exposure to international trade risk. The services in this area are-

Trade Collect Service:

A dedicated US dollar export bill collection service from HSBC.

Trade Safe Service:

A major concern for many exporters is the reliability of the LC issuing bank,
particularly if shipments are going to less familiar markets. If these banks get into
difficulties, the exporter may not get paid. That's where HSBC comes in. Under the
Trade Safe Service, HSBC absorb the bank and country risk, allowing clients to
concentrate on growing business.
So these are some of the services provided by HSBC trade services.

6.14 Hexagon

Hexagon is the HSBC Group's global electronic banking service, specifically designed
for the corporate market. It gives a customer access to one of the largest banking and
financial services organizations in the world - 24 hours a day, seven days a week.

Hexagon is one of the most advanced and easy-to-use electronic banking packages on
the market today. It has been designed to make life easier for the customers; with
Hexagon businesses can become more efficient, increase accuracy, and reduce costs.

Hexagon offers an extensive and growing range of financial services, including global
cash management, trade services, foreign exchange, and securities, all from a single
PC.

Hexagon uses the HSBC Group's Global Data Network, the largest private system of its
kind in the world. Additionally, it has a comprehensive range of system security, and
control features together with its use of full data encryption, means the data is totally
secure.

Services Provided by Hexagon:

Account information:
Hexagon provides access to all the customers accounts. In addition to the latest
available balances, Hexagon offers full statement information that can be tailored to
customer requirements.

Report Writer

The account information can be quickly and easily printed using the flexible Report
Writer Service or the information can be exported to some other formats.

Export

Export allows account details to be exported in variety formats. This enables Hexagon
to act as a true financial link between the bank's computer systems and the customer
own back-office accounting packages.
Reconciliation

This service enables the customer to reconcile his/her bank accounts.

Payments:

Transfers between accounts and payments to third parties are easily achieved in more
than 60 currencies anywhere in the world. Both priority payments and low-value
automated clearing-house payment options are available in Hexagon.

Exports Documentation:

Hexagon gives the customers the ability to view outstanding documentary credits and
bills in summary or a more detailed format, including interest details where financing
has been requested. Coupled with account information, companies are able to track the
whole export process from the point when the documentary credit is opened or bill is
presented through when settlement is made.

Import Documentation:

With the import option, a customer can easily create and amend documentary credit
(DC) applications and submit them online.

So these were some of the very important services provided by HSBCs unique banking
software HEXAGON.

Other Facilities Provided to Corporate Customers:

HSBC also offers some other facilities to its customers. They are Factoring, Forfeiting,
Guarantees, Hire Purchase Finance, Leasing, Tender Bond, and Performance Bonds. All
these services and products are designed to meet the total business needs of the
corporate clients of HSBC.
Critical Functional Issues

7.1 Marketing Issues

Direct Sales (DS):

An executive is assigned to this part of the marketing department. The Direct Sales
division co-ordinate & manages the sales activities of all the Mobile sales officers
(MSO) of HSBC Bangladesh. The MSOs basically makes sales of the company
various Personal Banking products such as savings accounts, consumer loan, etc
outside the banking premises. There are a total of more than 100 mobile sales officers
(MSO) employed in the cities of Dhaka and Chittagong. MSOs are assigned to specific
branches for making sales activities more smoothly. The DS executive sets sales
strategies & targets for the sales officers and manages the whole team of MSOs in
Bangladesh. The direct sales department also decides upon the commission and
remuneration of the mobile sales officers as their salary structure is based on sales
performances. Thus this part of the marketing division is very important for the overall
growth of the Personal Banking Division.

Promotion:

This part of the marketing department deals with all the promotional activities of HSBC
Bangladesh. Prime responsibilities of this department are: Maintaining strong public
relations with various media intermediaries, advertising the companys products, and
services, building a strong corporate image of HSBC in Bangladesh.

Public Relations:

The promotion department organizes various environmental and social activities in


order to build a strong corporate image of HSBC in the minds of customers as well as
in the media. Maintaining strong relationship with news media is another major duty of
this department.
Advertising:

The promotion also coordinates all the advertising of HSBC products within
Bangladesh. Some of the advertising tools that are frequently used by the company are
as follows:

Newspapers Advertising: Regular advertisements of various products and


services of HSBC are given in some of the countries most renowned daily
newspapers.
Billboards: Huge colourful billboards with HSBC logo are found in various
major areas of Dhaka and Chittagong. These billboards emphasize on the
needs of customers and shows HSBC logo as solution to their needs.
Road Side Signposts: Medium sized multi colour signposts focusing on
various products of HSBC are found on the roadsides of various posh areas
such as, Gulshan, Dhanmondi, Baridhara, Motijheel, Banani etc.
Mails: Various product updates and new product information are regularly
sent to existing customers of HSBC.
Brochures: Various colourful brochures featuring specific products of
HSBC are being displayed and distributed to existing and potential
customers via branch offices and Mobile sales officers.

So these are some of the promotional activities managed and coordinated by the
promotion department.

Marketing Research Department:

This department formulates & executes various marketing strategies of HSBC


Bangladesh. This department also administers various marketing research activities on
the existing and potential customers of HSBC. Some research activities are as like
mystery shopping, critical incident surveys, customer suggestion surveys etc. The
results of these surveys are integrated while formulating various marketing strategies.
This department also deals with the billing and invoicing of various marketing &
advertising costs of HSBC Bangladesh.
These are the major departments of HSBC Bangladesh. Except the branches all other
departments are situated at HSBC Bangladesh head offices located at Anchor Tower,
Kawran Bazar. Most of HSBCs operation and activities are operated centrally from the
head office. But to deal with customers more completely, the branches are given
considerable authority and they operate in a more decentralized manner but subject to
verification of the respective departments.

7.2 HR Issues
Recruitment, Training and Development:

HSBC Bangladesh limited follows a standard procedure for recruitment and selection.
However there is no set time period when this recruitment and selection takes place.
Each departmental head places the requisition for recruitment to the Human resource
officer, if any vacancy is created due to (1) Retirement, (2) Resignation (3) Death, or
(4) Extra workload.

The process for the recruitment of personnel for managerial and non-managerial level
differs slightly but the basic steps are same in both the cases. Before mentioning the
steps of the selection process it is worth mentioning that there is a unique policy in the
HR department which states that a person will not be eligible to apply for any vacancy
if his or her first-cousin, brother/sister or spouse works in any of the branches of
HSBC. The steps are-

ii) Initial screening


iii) Screening by departmental heads
iv) Filling of the HSBC job application form
v) Screening on the basis of SAF
vi) Initial Interviewed
vii) Selection for written test
viii) Written test
ix) Evaluation of test papers
x) Selection of final interviewees
xi) Final interview
xii) Documentation Check
xiii) Medical examination
xiv) Probationary appointment
xv) Confirmation

In order to enhance the efficiency of the employees, HSBC gives emphasis on the both
theoretical and practical training for its personnel. All the training and development
programs are aimed at two basic reasons - (1) Skill development (2) Motivation
through counselling and persuasion to change value system. For the top management or
senior managers there is provision for overseeing training arranged by HSBC group.
For the mid-level manager or other managerial level there is provision for regional
training courses. Besides, for non-management level there are training programs
arranged in different institution and also with in the organization. For the operatives,
various on the job-training program are conducted within the company. Finally, HSBC
Bangladesh limited follows a performance based promotion system for all levels of its
employees.

Performance Appraisal:

The company follows both rating and descriptive systems for the performance
appraisal. Although the appraisal system is non-participative, the employees are
annually assessed with a joint consultation with their immediate supervisor and
departmental head.

Rating is mainly done on the following factors-


ii) Knowledge of work
iii) Accuracy and reliability
iv) Speed
v) General intelligence
vi) Sense of responsibility and duty
vii) Diligence
viii) Initiative and self confidence
ix) Readiness to work for and with others.
Welfare Activities:

HSBC has many well-structured welfare policies for its employees. These include well-
structured wage & salary policy, medical facility, sports & cultural facilities, provision
for loans, free uniform etc. These welfare policies aim at strengthening the relationship
of the employees to the organizations and make them more responsible in their
respective positions. The brief description of the major welfare policies are stated
below:

Wages and Salary Administration:

HSBC follows a well-defined wage structure and fringe benefits for its employees. The
wage structure is updated periodically (Two years terms) by the management. The
major deciding factors are-
i) Profitability of the company
ii) Average cost of living in the country due to year to year basis inflationary
trend
iii) Status of wage earners in similar organization
iv) Restrictive conditions given by the government from time to time
v) Financial benefits status in the company
vi) Components of existing wage structure:
vii) Base basic structure and conveyance allowance
Chapter 8: Industry Analysis
8.1 Industry Analysis

Industry analysis builds on customer & competitor analysis to make more strategic
judgment about a market & its dynamics. One primary objective of industry analysis is
to determine the attractiveness of a market to current & potential participants. A second
objective of a market analysis is to understand the dynamics of the market.

The need is to identify the key emerging factors, trends & threats, opportunities, &
strategic uncertainties that can guide information gathering & analysis. Porters
approach can be applied to an industry, but it can also be applied to a market or sub-
market within the industry. The basic idea is that the attractiveness of an industry or
market as measured by the long-term return investment of the average firm depends
largely on five factors.

A complete understanding of the competitive area helps to guide strategy design &
implementation.

Rivalry among Existing Competitors:

The rivalry among the competitors and the growth in the industry depends upon the
intensity of competition. A high intensity of competition is observed in the banking
sector of Bangladesh. There are more than 50 commercial banks in Bangladesh that
fight for their own share of the market. The national banks have the highest banking
network in Bangladesh. They compete against the banks with their low cost of
operation and government support. Again, Standard Chartered Bank is the largest
multinational banking network in Bangladesh that has its network in many
metropolitans of Bangladesh. There are other international banks that also take part in
the competition and aggressive in nature. This high intensity of competition makes
companies difficult to sustain in the long run.
Bargaining Power of of
Bargaining Power
Suppliers
Suppliers
Supplier concentration
Supplier concentration
Number of of
buyers
Number buyers
Switching cost
Switching cost
Substitute raw materials
Substitute raw materials
Thereat of forward
Thereat of forward
integration
integration

Threat of of
Potential
Threat Potential
Entrants The Industry
Entrants The Industry
Economies of of
Scale (Degree of of
Rivalry) Pressure from
Economies Scale (Degree Rivalry) Pressure from
Brand identity Substitute
Brand identity Substitute
Capital requirement Differentiation
Capital requirement Differentiation
Access to distribution No.No.
&&Size of of
players Price of of
substitute
Access to distribution Size players Price substitute
Regulatory policies Industry Growth Product identity
Regulatory policies Industry Growth Product identity
Switching cost Brand Loyalty Functional similarity
Switching cost Brand Loyalty Functional similarity
Reaction from existing Exit Barrier
Reaction from existing Exit Barrier
players
players

Bargaining Power of of
Bargaining Power
Buyers
Buyers
Buyer Concentration &&
Buyer Concentration
Size
Size
Number of of
Suppliers
Number Suppliers
Switching Cost
Switching Cost
Substitute Products
Substitute Products
Threat of backward
Threat of backward
integration
integration

Figure13: Porters Five Forces Model

Threat of New Entrants:


The next force highlights the possibility of new competitors entering the market.
Existing firms may try to discourage new completion by aggressive expansion & other
types of entry barriers. The banking sector of Bangladesh seriously faces the threat of
new entrants. However the threat comes from two directions. The first threat comes
with the arrival of the multinational banks and their branch expansion particularly due
to the booming energy sector. Secondly, the continuous entries of local banks with
lower cost structure also possess a severe threat to this industry.

In the context of HSBC the various new & upcoming Banks pose a significant threat,
being new entrants in the banking sector of Bangladesh. But HSBC is aware of these
potential competitors. So it is trying to expand countrywide to make the sector
unattractive & to create entry barrier.

Threat of Substitute Products:


This force considers the potential impact of substitutes. New products that satisfy the
same customer needs are important sources of competition including alternative
products in the definition of product market structure identify substitute forms of
competition.

HSBC continuously faces the threat of various substitute products launched by its
strong competitors in the market place. For example, the launch of premier banking by
SCB poses a strong threat on HSBCs premium customer group and HSBC is at a
condition where it should launch an even better product. Moreover the various
consumer credit schemes offered by various local banks with lower interest rates and
cost also poses a strong threat on the HSBC personal banking products. Again the lower
service charges at national banks also discourage a wide group of customers to hold
account in HSBC. So these are some of the threats posed by substitute products in the
market place.

Bargaining Power of Suppliers:


The fourth force is the power of suppliers that may have impact on the producers in an
industry. Companies may pursue vertical integration strategies to reduce the bargaining
power of suppliers. In the context of HSBC, suppliers are those customers and
organizations that provide financing to the firm via depository schemes. If the cost of
financing rises, then HSBC will have to increase the interest rate that it charges to its
customer in order to be remain the business. This may result in severe customer
dissatisfaction & as a result poor profitability. HSBC is aware of this devastating
situation.

Bargaining Power of Buyers:


Finally, buyers may use their purchasing power to influence the producers or service
providers. Understanding which organizations have power & influence in the
distribution channel provides important insight into the structure of competition.

In the banking sector of Bangladesh, customers have a strong bargaining power since
there are a large number of commercial banks providing similar services. Customers
have a wide range of options in deciding either go for the multinationals or turn to new
local banks for getting quality service. Others may also consider the national banks for
large credit facilities. Therefore banks have to pursue the customers with attractive
interest rates and provide them with tailor made customized services in order to attract
the customer or hunt depositors.

In the context of HSBC, the firm is more or less free from the cope of the bargaining
power of the buyers. HSBC has its own policies to carry out its operations &
employees follow those rules to deal with the customers. But too much rigidity of the
prevailing policies while dealing with the clients may under cut its client base as well
as profitability. To overcome this worst scenario a positive & personalized approach
to the needs of customer - has become HSBCs motto.

8.2 SWOT Analysis


Strengths:

Strong Corporate Identity:


HSBC is the leading provider of financial services worldwide. With its strong corporate
image and identity it can better position in the minds of customers. This image has
helped HSBC grab the personal banking sector of Bangladesh very rapidly.

Distinct Operating Procedures:


HSBC in known worldwide for its distinct operating procedure. The companys
managing for value strategy better satisfy customers needs and also keeps the firm
profitable.

Distinct Schedule:
Everyone in HSBC from the appraiser to the top management has to work to the same
schedule toward a different aspect of the same goal, interfacing simultaneously at all
level over quite a long period of time.

Strong Employee Bonding and Belongingness:


HSBC employees are one of the major assets of the company. The employees of HSBC
have a strong sense of commitment towards organization and also feel proud and a
sense of belonging towards HSBC. The strong culture of HSBC is the main reason
behind this strength.

Efficient Performance:
HSBC provides hassle free customer service to its client base comparing to the other
financial institutions of Bangladesh. Personalized approach to the needs of customers is
its motto.

Young Enthusiastic Workforce:


The selection & recruitment of HSBC emphasizes on having the skilled graduates &
postgraduates who have little or no previous work experience. The logic behind is that
HSBC wants to avoid the problem of garbage in & garbage out. & this type young &
fresh workforce stimulates the whole working environment of HSBC.
Empowered Work force:
The human resource of HSBC is extremely well thought & perfectly managed. As from
the very first, the top management believed in empowered employees, where they
refused to put their finger in every part of the pie. This empowered environment makes
HSBC a better place for the employees. The employees are not suffocated with
authority but are able to grow as the organization matures.

Companionable Environment:
All office walls in HSBC are only shoulder high partitions & there is no executive
dining room. Any of the executives is likely to plop down at a table in its cafeteria &
join in a lunch chat with whoever is there. One of the employees has said, Its exciting
to know you may see & talk to the top management at any time. You feel a real part of
things.

No Communication Barriers:
Many organizations are trying hard to avoid communication barriers & structural
bureaucracies. The little existence of authoritative barriers among the different level of
management stimulates a feeling of importance as their work get priority over the
position.

Equalization:
At HSBC, workshops are conducted periodically. On the workshops, all people
participate as equals with new members free to openly challenge top managers.

Free Exchange of Communication:


At HSBC the main objective is to setting up workshops are to remove authority from an
artificial spot at the top, & place it where the most knowledgeable people are, the
people closest to the operations. The free exchange of ideas is reinforced by a policy of
constructive confrontation. Each employee is expected to challenge ideas openly &
aggressively but never attack an individuals motives for presenting an idea.

MBO:
HSBC also has Management by Objectives (MBO) everywhere. Each person has
multiple objectives. All the employees must have to get the approval of their bosses on
what they are going to do. Later they review as how well they have performed their job
with their management as well as the peer group.

One-to-one Meeting:
The MBO makes the review a communication device among various groups. The key
to the system is a one-to-one meeting between a supervisor & a subordinate. In the
meeting, the problems in dealing with customers are put forward first & every one dug
it to solve.

Modern Equipment & Technology:


HSBC owns the best banking and information technology equipments in Bangladesh.
Its ultra modern banking systems starting from terminal pcs to HUBs are based on the
international HSBC group standards and are the latest. The Hexagon product is one of
the best examples in this context.

Visually Appealing Facilities:


HSBC has some of the best visually appealing branches and office premises in Dhaka
& Chittagong that highly attracts customers attentions and customers also feel the
international environment while banking with HSBC.

Weaknesses:
Narrow Operating Span:
HSBC has a very narrow operating span in Bangladesh. It has only 2 full service
branches in Bangladesh situated only at Dhaka and Chittagong. Various geographic
segments are currently not availing the services of HSBC due to inconvenient branch
location or absence of neighborhood branches.

Absence of Strong Marketing Activities:


HSBC currently dont have any strong marketing activities through mass media e.g.
Television. TV ads play a vital role in awareness building. HSBC has no such TV ad
campaign.

No Investment Products:
Currently, the personal banking division of HSBC does not have investment products
for its customers. Banning of investment loan by central bank posses a strong pressure
to design new products.

Lack of Customer Confidence:


As HSBC is fairly new to the banking industry of Bangladesh average customers lack
the confidence in HSBC and judge the bank as an average new bank.

Too Many Contractual Workers:


HSBC has contract workers who lack the commitment with superior quality service and
also are pretty dissatisfied as being a contractual worker. This hampers the banks
service quality as a whole.

Low Remuneration Package:


The remuneration package for the entry-level officers is considerable low. Since other
foreign and local banks offer a more lucrative salary package, it would be difficult for
HSBC to attract MBAs in future with its current salary package.

Opportunities:

High demand of Housing loans:


Since housing is one of the basic needs of people, there is a high demand of housing
loans. HSBC personal banking division can focus on this category of products and grab
these segments of customers.

Distinct operating procedures:


HSBC is noted for its distinct operating procedures. Repayment capacity as assessed by
HSBC of individual client helps to decide how much one can borrow. As the whole
lending process is based on a clients repayment capacity, the recovery rate of HSBC is
close to 100%. This provides HSBC financial stability & gears up HSBC to be
remaining in the business for the long run.

Countrywide Network:
The ultimate goal of HSBC is to expand its operations all over Bangladesh. Nurturing
this type of vision & mission & to act as required, will not only increase HSBCs
profitability but also will secure its existence in the log run.

More Experienced & Managerial Know-how:


The top management team of HSBC is expert in banking activities. The operating
policies established by them are unique & unified. All the members of the team carry
out their management roles exhaustively. They equally contributed to HSBCs superior
leadership by carrying out their unique roles. They worked well together, respecting
each others abilities, and arguing openly without any rancor when they disagree.

Diversification:
HSBC can peruse a diversification strategy in expanding its current line of business.
The management can consider options of starting merchant banking or diversify in to
leasing and insurance. As HSBC is one of the leading providers of all financial
services, in Bangladesh it can also offer these services.

Credit Cards:
This is one of the most popular and emerging products in Bangladesh, which offers
customers total financial mobility. Various other banks and institutions are currently
offering this product. HSBC can also take advantage of this product and grab the
market share.
Acquisition:

HSBC is one of the experts in acquiring various firms and organizations. In Bangladesh
it can also diversify quickly by acquiring various local established banks and
increase its total operation within Bangladesh rapidly.

Threats:

Upcoming Banks:
The upcoming private local & multinational banks posses a serious threat to the
existing banking networks of HSBC. It is expected that in the next few years more
commercial banks will emerge. If that happens the intensity of competition will rise
further and banks will have to develop strategies to compete against and win the battle
of banks.

Losing Customers:
Absence of various products such as credit card, housing loans is causing various
customers to detract from HSBC. This is a serious threat for HSBC Bangladesh.

Moderate Levels of Customer Satisfaction:


HSBC should continuously improve its customer service strategies and the overall
service quality needs to win the customer satisfaction undoubtedly.

Default Culture:
This is a major problem in Bangladesh. As HSBC is a very new organization the
problem of non-performing loans or default loans is very minimum or insignificant.
However, as the bank becomes older this problem will arise enormously and the bank
may find itself in a more threatening environment. Thus HSBC has to remain vigilant
about this problem so that proactive strategies are taken to minimize this problem.
Chapter 10: Work Experience at HSBC
Headquartered in London, HSBC is considered as one of the largest banking and
financial services organization in the world. In Bangladesh it has made its place as the
fastest growing bank. Being able to work in this world-renowned organization I find
myself lucky. I got the opportunity to work in Personal Financial Service- MIS
(Management Information) department of HSBC Bangladesh, DAK main branch.

During the three months of my internship I was placed in the PFS MIS department of
HSCB, DAK office under the direct supervision of Mr. Kamruzzaman Mamun, Credit
Manager of Personal Financial Services. I heavily enjoyed the work of this department.
The work experience gave me a good idea of the overall banking system of Bangladesh
and taught me the professionalism at work place.

10.1 Job of an Intern

During the internship at DAK office, I was placed in the Management Information
System (MIS) department and my prime responsibility was to maintain the database of
existing customers and enter new applicants data in central database as well as analysis
of data and generates different kinds of reports for the bank and Bangladesh Bank.
During this period I learned various aspects of loan assessment criteria, customers
nature etc. Also learnt about the various products and services of the company. Direct
intervention with the customers database helped me a lot in preparing my project. A
brief description of my job duties at PFS CCR MIS at HSBC are given below:

New Applications Input:


Enter in formation regarding customer name, address, profession related
data, loan related data (amount, type of loan etc).
Assigning the new application to the approval officers for assessment.
Processing Discrepancy documents:
Allocating the discrepancies to the appropriate approval officers and
update the database of that particular applicants database.
In case of receiving the UDC (Undated cheque), track down status of the
particular file and attached the UDC with the file.
If the loan is approved and all other docs are updated, after the UDC
attachment pass it to the Operation department to disburse the loan, which
means customer will have the money in his a/c and ready to withdraw
whenever as he/she wants to.
Rejected/Dropped/Deferred File Retrieve:
Kept regular tracks of rejected, dropped, and deferred files with a
particular serial number to track it down in the future.
In case of applicants written request I have to return the docs of the
rejected, dropped, deferred files, or the UDC (undated cheque).
Daily Loan-update & Different Queries:
Regular loan update twice a day by Lotus-notes- banks personal
intranet system linking all the braches of HSBC, helps the sales officers to
know about their submitted applications status and take necessary steps
accordingly.
Received regular customer calls to reschedule the tenor of the loan,
or from the collection department regarding the applicants address, phone
no., entertaining request for urgent disbursement of the loan.
Keeping Trackers & Filing of Different Reports:
Kept regular tracks of receiving statements & other documents as the
timing is very important in sense of SLA (Special Service Agreement)
with different departments and branches.
Keeping Trackers & Filing of Different Reports:
Prepared different reports according the guidelines of the Group and
Bangladesh Bank.
Report like Profit Model, ALCO graph, Delinquent customer trend
analysis, and Regional delinquency report, BIM3 report, Flash Report
helps to track the financial trend and condition of the bank and take
necessary steps.
Prepared report for Bangladesh Bank like CIB, SBS-3, Non-banking
financial institutions report, Provisioning report etc are mandatory for
compliance to the Bank Regulatory Act.
Run and generate different queries according the requirement of other
departments like Operation, Approval, Sales & Collections etc.

So these were some of the experiences I have gained during my internship at HSBC
gave me clear understanding of the Central database maintenance and the personal
banking system of HSBC.
Chapter 11: Credit Assessment Criteria

11.1 Credit Cycle

Approaching the bank:


The credit process starts from approaching to the bank. The customer must apply for
loan fulfilling the respective loan application form either through coming to the bank or
through contacting a mobile sales officer (MSO). The customer should incorporate
necessary papers so that all the criteria are fulfilled and it becomes convenient for the
approval officers to assess the loan.

Checking by the Customer Service Officers:


After receiving the application the responsibility transfers to the customer service
department of HSBC. The customer service officers check the applications carefully.
Whether all necessary information is filled in the application and whether all necessary
documents are attached with the application becomes prime concern of the customer
service officers. They also verify the signature of the customer in the system, or open
the customer a/c before forward the applications to the MIS.

MIS Receives the Applications:


HSBC operates centralized credit system. Therefore, all the loan applications along
with other cheques and documents are sent to MIS through intransit mails. MIS officers
receive these mails and give primary input of the necessary information in the database.
Thereafter MIS officers assign the approval officers according the type, amount, and
number of application equally.

Applications Assessed by Approval Officers:


The approval officers assess the applications on a priority basis due to meet the SLA
(Service Level Agreement). Usually CEPS (Corporate Employment Privilege Scheme)
and Autopay loan applications are assessed by the same day. The loan of Existing
(customers having banking relationship more than six months with HSBC) customers is
assed within 48 hours where the loan of Non-Customers (customers having banking
relationship with HSBC less than six months) is assessed within 96 hours. However,
secured loans get highest priority to all the sub sections (CEPS, AUTOPAY, and Non-
customer) of applications.

Based on various criteria approval officers approve or reject the loans. First of all, they
see whether the applicant fulfils the parameters set by HSBC and the central bank.
Thereafter, they follow the rules set by the bank to assess the applications. If any
document is not provided with the application the approval officers place discrepancy,
which is updated in the database, and the MSOs are informed about the discrepancies
through loan update and make proper adjustment. Approval officers recommend the
applications to be approved or rejected or dropped after assessment. After that
applications are sent to the credit manager for reviewing and signing the documents
before forwarded to MIS for update.

Approved Loan:
Applications signed by the credit manager forwarded to MIS for updating loan status in
the database. After status is updated the application is forwarded to Operation
department. Operation staffs check whether all docs (CIB, TIN, Loan set-off form,
undated cheques) are in order. Moreover sign on irrevocable letter of authority and
demand promissory note are also checked. If everything is in order then the loan is
disbursed means money is transferred to the applicants account. As operation officers
after disbursement assign a serial number and forward the applications to the MIS to
update the disbursement input. If the file lacks in any document then it is kept
separately until the discrepancy is updated (special cases).

Rejected / Dropped / Deferred Loan:


Rejected files also get appropriate status. After updating the loan status the applications
are assigned a serial number for future references incase of re-visit or if the customer
wants to have his submitted documents back. But after a certain period of time these
applications are sent to central storage and destroyed later on.

Flow of Credit Assessment Policy:

Customer Apply for


Figure 14: Flow of Credit Assessment Policy
Loan by MSO or Walk
in to Branches

Applications Submitted & Checked by


11.2 Factors Determining Loan(Signature
Customer Service Assessment
Approval officers inVerification, A/C Opening
case of assessing the Etc.)
loan must comply with some basic
requirements and criteria. The group itself determines these parameters and some of
them are implied due to Bangladesh Banks regulations. Parameter like security type,
New Applications Received by
bank relationship with MIS
HSBC and other banks, age, occupation, address, references,
CIB (Credit Information Bureau) and CPV (Contact Point Verification) report, previous
experience or employment history,Input,
After Primary loan repayment
Applicationstrend
are etc are considered and
forwarded
scrutinized before declaring to Respective
a customer Approval
eligible to avail the loan. Some of the important
Officers
parameters are discussed briefly to have an idea regarding loan assessment.

Assessment
A person with high net worth is considered as a good candidate for loan. When a loan is
backed by property (Flat, Car) the approval officers find the loan easy and secure to
assess. In case of secured loan, mostly the security matters. At HSBC the Personal
MIS
secured loan securities like Protirakkha Sanchaypatra, WEDB (Wage Earners Bond),
USDB (US Bond), and TMD (Term Deposits) are needed to be lien with the bank.
Applications with Approved Applications are
Discrepancy are informed to forwarded to Operation
MSO by Daily
Before Loan Update
sanctioning Department
loan the credit officers carefully for Disbursement
analyze whether the customer
(Lotus Notes)
would be able to pay out the credit when due, with a comfortable margin of error. Six
aspects of loan application usually determine this. They are character, capacity, cash,
Rejected,
collateral, condition and control. AllDropped, Deferred
these factors should be taken into consideration
Applications are sent to
before approving a loan. Central Storage
Character:
The approval officer wants to know about the purpose of the loan first. They must be
convinced that the customer has a well-defined purpose for requesting bank credit and
serious intention to repay. If the officer is not sure exactly why the customer is applying
for the loan, he may ask for the clarification and comfort ness of bank. Once the
purpose is known, the approval officers must determine whether it is consistent with the
banks current loan policy.

Every loan application form of HSBC bank consist a blank area to be filled by the
customer/ borrower describing the purpose of the loan. If any kind of inconsistency
arises the approval officers have the right to ask for the proper explanation to the MSO
or even to the customers.

Capacity:
The approval officers make sure that the customer has the legal eligibility for
requesting the loan and the legal standing to sign a binding loan agreement. In HSBC
has a parameter like the minors (age below 18 yrs) as well as the people exceeding the
age limit 55 yrs would not be eligible for a loan. At the same time in case of corporate
clients the approval officers make sure that the representative from a corporation asking
for loan has the proper authority from the companys board of directors to negotiate a
loan and sign the loan agreement binding the corporation. In case of partnership
business, the approval officer might ask to see the firms partnership agreement to
determine which individuals are authorized to borrow the firm. A loan agreement
signed by unauthorized persons can be stated as uncollectible, insecure and therefore
result in substantial losses for the bank.

Cash:
While assessing the loans the approval officers concentrate mainly on the borrowers
ability to generate cash flow either from business or from salary or other income. At
HSBC, the bank statements are considered as the proof of income. There is always a
high chance that the loan application of a borrower with a strong bank statement
(inflow to the bank account) will be approved by the credit department of the Bank. In
case of unsecured loan, since no security is kept against the loan taken by the
borrowers, their ability to generate cash flow becomes the main consideration of loan
assessment.

Collateral:
Like cash inflow collateral is also important to support loan request. A person with
high net worth is considered as a good candidate for a loan. When a loan is backed by
some property the approval officers find the loan easy to make. In case of secured loan,
the security matters mostly. At HSBC the Personal secured loans are need to be backed
by the government bonds. Other requirements are negligible in this case.

Condition:
The approval officer and credit analyst must be aware of recent trends in the borrowers
line of work or industry and how changing economic conditions might affect the loan.
For instance, at HSBC the approval officers are not very interested to entertain the
businesspeople from garments industry and buying house business since, both of these
interrelated businesses are vulnerable in nature and under uncertainty. Though the
papers (bank statement and tax papers) appear to be strong at present these might turn
into weak in near future.

Control:
The bank wants to have control on the credit they have made to their customers. The
bank watches on whether law and regulation could adversely affect the borrower. At the
same time the bank sees whether the loan request meets the banks and regulatory
authorities standards for loan quality. For example, previously HSBC bank used to
give Investment Loan to the borrowers so that the borrowers can use that money to
invest on government bond at a high interest rate. However, Bangladesh government
has made the decision that no loan should be made for investing the loan amount to the
government bond. Therefore, HSBC stopped the Investment Loan scheme and is
making alternative loan products.

Structure of the Loan:


The approval officer is responsible to both the customer and the banks depositors and
stockholders and must seek to satisfy the demands of all. This requires first drafting of
a loan agreement that meets the borrowers need for funds with a comfortable
repayment schedule. The borrower must be able to comfortably handle any required
loan payment, because the banks success depends fundamentally on the success of its
customers. If a major borrower gets into trouble because it is unable to service a loan,
the bank may find itself in a serious trouble. Proper accommodation of a customer may
involve lending more or less money than asked for over a longer or shorter period than
requested. It is because many customers do not know their own financial need and
ability. Thus, the banks approval officer must be financial counselor to customer.

At HSBC, the approval officers do not sanction the amount applied for in all the cases.
What the approval officers do is that, they analyze the financial need and capability of
the borrower and carefully determine the amount the customer is capable to repay to the
bank. In addition, HSBC has prepared a flexible repayment schedule of three, four and
five years in which borrowers repay the loan through equal monthly installment.
Therefore, HSBC is not only sanctioning the loan to the potential clients but also it is
making sure that the borrowers able to serve the loan easily.
Chapter 12: Skip Customers Demography and Trend Analysis

12.1 Delinquency and skip customers


Delinquency is one of the most difficulties that banks are facing at this moment. The
primary task of the collection department of bank is to reduce the delinquency level or
keep it under control. As the delinquency level of a bank begin to rise it worsens the
financial condition and the consequence can be fatal. As skip customers we can refer to
those who have overdue or have not paid their monthly installments on time. And there
is a basic difference between delinquent and skip customers. Skip customers are those
who have overdue and from collection point of view the due amount is uncollectible.
As example we can consider the customers who have provided false address and could
not be contacted later on, the deceased customers, customers who have shifted to
another country permanently, job less, job changed, fraud etc are skip customers.

Data regarding the Skip customers of HSBC shows that it still in a tolerable level but
showing a increasing tendency. The main reason is that some certain groups of
customers have been delinquent very often and skipping without any trace. According
to the Delinquency Cycles of HSBCs personal asset products, Skip customers are the
defaulters who have not paid EMI (Equal Monthly Installment) regularly and its not
possible to collect or repayment of overdue amount from the customers. Moreover,
once a borrower is conserved as a Skip or default customer, cheques are bounced
rendering the borrower criminally liable, legal notice served of defaulter to repay;
failing this an arrest warrant/summons is issued by the court. Finally, on failure to
repayment, those account are written off with due approval of from Manager PFS or
Manger CRM. Analyzing the nature of skip customers of personal asset products will
reveal whether there is any natural tendency among the skip customers or if there is any
correlation among them. Moreover, analysis will help to find out the steps that should
be taken to control or bring the skip customers tendency at a nominal level

In-depth interviews were conducted with credit collection officers of the department of
CCR of PFS since they are responsible to follow up customers for repaying their loans.
In detail conversation with them, eight groups have been sorted out based on skip
customers characteristics.
12.2 Skip Customers Nature

LOB - Loan Overburden:


Most of these customers have taken loans not only from HSBC but also from other
banks. Some of them invested the loan amount in own business or taken the loan for
friends and relatives. Therefore, too much loans have created over burden on them,
which results into irregular payment of loan of HSBC.

JOC - Job Changed:


This group have changed job after availing the loan. Now, they are receiving lower
salary than before, this is not enough to repay the loans.

JOL - Job Less:


These customers are currently job less. They have lost their jobs somehow after
availing the loan. Therefore, they are having serious problems in paying loan
installments.

FRA - Fraud Activities:


Post-approval verification found that these customers have taken loans by providing
false documents and information.

SAL - Salary Problem:


These customers are facing salary problems i.e. either their employers are not paying
them or they are irregularly paid which results into irregular payment of loan
installments.

IND - Intentional Defaulter:


These customers have no intention to pay off the loan. They do not want to maintain
any kind of relationship with the bank after availing the loan.

TRA - Traceless:
Customers having invalid contact no, false references and false addresses are included
in this group. Therefore, collection officers cannot contact them and force them to pay
off the loan.
STC- Shifted to other Country:
Customers have intentionally escaped or permanently shifted to other country without
informing the bank as well as not paying the overdue of the loan. In this situation after
taking every possible step to contact customers, the loan is written-off from the book
and defined as bad and loss. But bank take legal action like filing case against the skip
customers.

OTH - Others:
Customers who have other reasons like serious illness, address change, family crisis,
temporary financial problem etc. are included in this group.

There are 74 Skip customers as of February 2005 of personal asset products of


HSBC. The analysis has been done on this database and each skip customers nature
has been derived by interviewing collection officers of CCR, PFS, and HSBC.

Analyzing Nature of Skip Customers:


The following data have been collected from the Skip customers database of MIS
department and comments are supported by in-depth interviews with credit collection
officers, tele-collector and collection supervisor of the department of CCR, PFS.

Ratio of nature of Skip customers based on their characteristics:


Nature of No. of %
Customers Customers
LOB 32 42
IND 3 4
JOC 4 6
JOL 8 11
TRA 20 27
Products
STC No3 % 4
Category
FRA 4 6
CAR
Total 674 8 100
PIL 68 92
Grand Total 74 100

From the analysis we can see that about 42% of total Skip customers are having loan
over-burden problems, 4% customers are intentional defaulters, 6% customers are not
paying due to job-switching or 11% of are job-less. 27% customers are totally traceless;
therefore payments are not coming from them. Finally, 4% customers skipped as they
move to another country without repaying the loan. Some of them found fraud (6%) or
having other problems like illness, financial crisis or have passed away.

Ratio of Asset-Products of Skip Customers:

From the above table, it is found that 92% of skip customers have taken personal
installment loan and 8% have taken car loan. The ratio of skip customers of car loan is
very low since the vehicle; insurance and registration documentation are held as the
security against the loan. If a customer reaches to Grade-6, collection officers initiate
the repossession proceedings. Besides, it is noteworthy that there are no skip customers
of personal secured credit and personal secured credit since these loans are given
against the bonds. Normally the security is encashed if the customer misses three
consecutive EMIs. Since the apartment, property insurance and documents are held as
security in the case of home loan, there is no skip customer of home loan.

Ratio of CEPS/AutoPay in Skip Customers:


Customers Type No. of %
Customers
CEPS/AUTOPAY 15 20
General 59 80
Total 74 100.00

It is found that only 15% of total skip customers are having CEPS/AutoPay
background. Since Autopay customers salary is deposited in HSBCs account, their
chances of becoming delinquent are very low. In addition, customers with CEPS
background are from high-profile companies. Their loan repayment behavior has been
good over the years.

Nature of CEPS/AutoPay Customers:

Nature of CEPS/AUTOPAY %
Customers
LOB 5 8
IND 4 7
JOC 15 25
JOL 7 12
TRA 8 1
STC 10 17
FRA 6 10
Other 4 7
Total 59 100

It is found that 5% of total CEPS/Autopay customers are having loan overburden


problems, 22% customers are from job-changed and job-left group and 4% customers
are international defaulter. Finally, 8 % of the skip customers are delinquent since they
are traceless, have no intention to pay or have salary problem. It is evident that, some of
these customers have availed the loan at lower interest rate using company reputation
or autopay advantages. 10% skip customers have left the country without repaying the
loan and have no intention to pay in future. And 4% of the customers have other reason
like death, illness, mental retarded etc. However the overall ratio is satisfactory so far.

Companies in Terms of Skip Customers:


Company CAR PIL Company CAR PIL
A K Lub Oil Pvt Ltd 1 Learning Spree Era 1
Access Telecom Bd Ltd 1 Legacy Footwear Ltd 1
AIN O Salish Kendro 1 Li & Fung Bd Ltd 1
Arshi 1 M/s Kamal Enterprise 1 1
Asset Devel & Holdings Ltd 1 Macro Footwear Ltd 1
Aurora Associates 1 Malaysia Airlines 1
AZE CD & COMPUTER 1 Marks & Allys Ltd 1
Babul Traders 1 Navana Electronics Ltd 1
Bang Shilpakala Academy 1 New Horizons 1
BAT Bd Ltd 3 Newport Express Bd Ltd 2
BATA Shoe Co. (Bang) Ltd 1 Youngone (CEPZ) 2
Beximco Pharmaceuticals Ltd 1 Opex Group 1 5
Beximco Textiles Ltd 1 Orion Taxi Cab Pvt Ltd 1 1
Boichitra 1 Pathfinder Development Bd Ltd 3
Conversyl Departmental Store 2 Philips Van Heusen Far East Ltd 1
DANIDA 1 Quasem Zinc Ltd. 1
Dhaka Sheraton Hotel 3 Rangs Ltd 1
Dolphin Computers Ltd 1 Royal Brunei Airlines 1
Etcetera Bd 1 Scholastica Ent Pvt Ltd 1
Fabian Group 2 Sheba Electrinics (BD) Ltd 1
General Pharmaceuticals Ltd 1 Tex-Ebo Int Pvt Ltd 1

George Washington School 1 Travel World 1


Global Brand Pvt Ltd 1 West Wind Internatioal 1
Grameen Phone 1 Beximco Textile Ltd 2 3
GrameenSoftware Ltd 1 Grand Total 5 69
KAFCOs 2
Karnaphuli Ltd 1 Total Skip Customers 74

It is found that, Opex Group have been producing highest no (5) of skip customers and
in the second place Dhaka Sheraton Hotel, British American Tobacco, Pathfinder
Development Bd Ltd have been producing the second (3) number of delinquent
customers. From interview with collection officers, it is found that those customers are
lower level employees (mainly chefs and waiters) but receive high salary (16,000-
25,000/=). They dont have higher education, which is a major reason for unwillingness
to pay off loans. Besides, some of them have loans with other banks or they are
intentional defaulter. Whenever they get salary, they are more interested in meeting
other commitments, family needs etc but not in paying loan installments. Collection
officers have found them very problematic and commitment- breaker.
These reasons are applicable for KAFCOs (2) employees also. Though, they get
handsome salary but they are over-burdened with other loans, which create problems in
paying loan installments.
Next, Beximco Textile Ltd (2) and Youngone (CEPZ) Ltd (2) are other riskier
companies in terms of having delinquent customers. As Beximco Textile Ltd is not a
financially strong and profitable company, they do not pay their employees regularly.
They pay them once in every 3-4 months, which create problems for a customer in
paying loan installments.
Besides, in Youngone (CEPZ) Ltd, the ratio of job-left and job-switch cases are high.
More over, this company doesnt pay its employees regularly also. Therefore, there are
some delinquent customers of this company. The Ratio of rest of the companies can be
ignored but have to be monitored closely as applicants from these companies might
give a significant rise in skip customers trend.

Riskier Sectors in Terms of Skip Customers:

Sector CAR PIL %


Academy of fine & performing
arts 1 2
Airlines & Aviation 1 2
Pharmaceuticals 1 2
Buying House 3 6
Cargo & Airlines 1 2
Cellular Service Provider 1 2
Cigarette Manufac. & Mkt. 3 6
Computer Education Centre 1 2
Construction & Trading 1 2
Construction and Supply 2 3 6
Courier 1 2
Dying, Knitting & Packaging 2 4
Electrical goods import &
trading 1 2
Fabrics Manufacturing 1 2
Garments Accessories 1 1 2
Garments Item 1 2
Hotel Services 3 6
Human rights and legal aid 1 2
Industrial Thread
Manufacturer 2 4
ISP 1 2
PC accessories 1 2
Producing & Distrib. of Drugs 1 2
Real Estate developer 1 2
RMG 1 5 10
Shipping, Manufacturing 1 2
Show Retailing 1 2
Taxi Cab Company 1 1 2
Tele Communication 1 2
Ticketing and Cargo 2 4
Trading & Marketing 3 6
Grand Total 5 51 100

From the above table, it is found that 10% of total Skip customers own or work in
garment factories; dying, knitting and packaging industries or fabrics manufacturing
companies. It has been observed that, people, working in this sector are more likely to
change the job, leave the job due to irregular salary payment from the employer.
Therefore, this sector can be considered risky in giving loans.

There are about 6% skip customers in Pharmaceutical sector. From interview with
credit collection officers, it is found that, most of the people, working in pharmaceutical
companies, are sales officers. Their salary is mainly commission-based. When they fail
to reaches their sales-target, assigned by their companies, they dont get commissions.
Therefore, they face serious problems in paying loan installments.

There are 4% skip customers in dying, knitting, and packaging sector. In this sector, the
practice of job change is very apparent. Moreover it is a sensitive sector, which
fluctuates simultaneously with market-demand. Some the owners, who have taken loan
from HSBC, became skip customer due to financial instability of the firm. Another
analysis, it is found that people, who work in hotel sector, do not have good record in
loan repayment, too. Skip customers rate in this sector is like 6%, due to dependability
on the market demand heavily. Other risky sectors are Developer and Construction
suppliers sector (6%), Buying/Trading Houses (6%) etc.

People, who work in developing and construction businesses, always having shortage
of cash in hand. Whenever they get money they invest in the business as soon as
possible. Therefore, they often fail to pay loan installment due to crisis of liquid
money. The ratio of leaving job or job mobility is high in trading and marketing
business. Moreover, people who work in this sector often hide their actual salary and
avail the loan by showing their salary much higher. In addition, these people work in
sales department. Their fixed salary is very low. They totally depend on sales-
commission. Therefore, it is hard for them to pay loan installment when they are in a
bad situation.
In the ticketing and shipping cargo sector, is another sector where the rate of skip
customers is about 4%. Primary reason for this we say about their income level which
is not high and commission based. They are over-burdened with other loans taken from
either friends or from other banks. Therefore, they often face financial problem or
others difficulties in paying loan installments when there is downtrend in RMG,
construction, food supply business. Because these are the business that uses the cargo
service mostly.

Besides, some businessmen have become hardcore defaulters who work in buying or
trading companies. Usually, those buying houses financial stability have been very
poor and some of them are losing businesses. Showing false salary to avail the loan is
also a common practice in this sector. In addition, in some cases, it is found that, some
customers have taken loans by showing ownership of buying houses, though that house
does not exist at all. Moreover, some trading houses owner have availed loan by
representing false documents and information.

Finally, other risky sectors are- real estate business, cigarette manufacturing and
marketing etc. The ratio of rest of the sectors can be ignored as they have very
negligible percentage of total delinquent accounts.

Skip Customers in terms of Age, Service Tenure and Income Level:

Loan over Burden:


Service Tenure No of %
Customers
2-3 Years 9 28
3-5 Years 5 16
5-7 Years 8 25
7(+) Years 10 31
Total 32 100.00

Monthly Income No of %
Customers
15000-25000 tk. 12 38
36000-45000 tk. 8 25
26000-35000 tk. 7 22
45000(+) 5 16
Total 32 100.00
Age No of %
Customers
25-30Years 15 47
31-40Years 9 28
41(+) Years 8 25
Total 32 100.00

It is found that, 47% of total skip customers are due to loan over burden is from 25-35
years age group, 38% customers monthly income range is 15000-25000 tk, 28%
customers service tenure is between 2-3 years. 28% of total skip customers are due to
loan over burden is from 31-40 years age group, 25% customers monthly income range
is 36000-45000 tk, 16% customers service tenure is between 3-5 years. We can find a
trend from the analysis that those who are working more than 7 yrs in a company
within income range of 15000 25000 tk are overburdened more than other categories.

Analysis implies that, most of the LOB customers work experience and income level is
not very high. Moreover, they are from young age group. From interview with the
collection officers, it is found that, in most of the cases, customer deliberately
concealed the actual purpose for taking the loan and used vague terms like Purchasing
household appliances, Personal expenditure etc. Most of these customers have
personal loans with other banks or with their friends and relatives and taken loan from
HSBC just to repay those loans. Moreover, they provided misinformation regarding
their monthly income and expenditure to lower the DB ratio. For providing false
contact number and references it was not possible for the collection team to locate or
contact them.

Intentional Defaulter:
Service Tenure No of %
Customers
3 (+) Years 4 67
2-3 Years 2 33
Total 6 100.00

Monthly Income No of %
Customers
25000 (+) tk. 5 83
15000-25000 tk. 1 17
Total 6 100.00
Age No of %
Customers
36-45 Years 3 50
25-35 Years 3 50
Total 6 100.00

It is found that, 67% of total IND customers have more than 3 years work experience,
83% earn more than 25000/=, 50% belong to 36-45 age group- usually all these ratio
are considered as strength for a customer. However, IND customers have taken loans
using this strength. Even they have provided valid phone numbers, addresses and
references, but later on they found as hardcore defaulters and skipped as well. Though
having the ability to pay off the loan, they are totally unconscious about payment and
they took loan without having the intention to repay.

Job Changed:
Service Tenure No of Customers %
2-3 Years 2 50
3 (+) Years 2 50
Total 4 100.00

Monthly Income No of Customers %


15000-25000 tk. 3 75
25000 (+) tk. 1 25
Total 4 100.00

Age No of Customers %
25-35 Years 3 75
36-45 Years 1 25
Total 4 100.00

From the analysis, it evident that 50% of total JOC customers have 2-3 years work
experience, 75% earn from 15000 to 25000/= and 75% belong to 25-35 age group. It
seems that, the trend of job switching is high in young age group. Therefore, their
service tenure is not too long. Besides, 15000 -25000/=, this income group have
tendency to change job to get more salary. However, some of them have found that they
are receiving lower salary or irregular salary in the new job than before. As a result,
they are not paying loan installments. Some of them have availed loan by applying as
service-holders, which are actually small businessmen. They do this just to avoid
providing authenticated tax paper. It has been observed that people working in
pharmaceuticals, trading -buying houses, insurance companies, advertising and media
companies and construction supply have higher tendency of job change.

Job Less:
Service Tenure No of %
Customers
2-3 Years 6 75
3(+) Years 2 25
Total 8 100.00

Monthly Income No of %
Customers
15000-25000 tk. 5 63
25000(+) tk. 3 37
Total 8 100.00

Age No of %
Customers
25-35 Years 4 50
36-45 Years 3 38
45(+) Years 1 12
Total 8 100.00

It is found that, 75% of total JOL customers have 2-3 years work experience, 63% earn
from 15000 25000 tk and 50% belong to 25-35 age groups. The characteristics of
JOL customers are more or less similar to JOCs characteristics. It has been found that
people working in different types of buying house, constructions supply business,
computer education centers, courier services, internet service providers (ISPs) and
RMG sectors, have higher tendency of leaving or switching to another job.

Traceless:
Monthly Income No of %
Customers
15000-25000 tk. 10 50.00
45000 (+) tk 6 30
26000-35000 tk. 3 15
36000-45000 tk. 1 5
Total 20 100.00

Age No of %
Customers
25-35 Years 12 60
45(+) Years 5 25
36-45 Years 3 15
Total 20 100.00

In this analysis it is evident that 50% of total TRA customers earn from 15000 to 25000
tk and 64% belong to 25-35 age groups. It is worth mentioning that most of TRA
customers are young and earning minimum salary to avail a loan. From interview with
the collection officers, it is found that some of TRA customers permanently left the
country. Some of them have left the job without notifying both employer and the bank.
Some of them have provided false phone number and references or addresses. So it is
too tough to contact them. Therefore, they are totally out of sight of the collection
department and considered as skip customers.

Salary Problem: (Fraud)


Service Tenure No of %
Customers
2-3 Years 4 57
3(+) Years 3 43
Total 7 100.00

Monthly Income No of %
Customers
25000-35000 tk. 5 71
35000(+) tk. 2 29
Total 7 100.00

Age No of %
Customers
25-35 Years 5 71
36-45 Years 2 29
Total 7 100.00
It is found that, 57% of total SAL customers have 2-3 years work experience, 71% earn
from 25000 to 35000/= and 71% belong to 25-35 age group. It seems that SAL
customers earn handsome amount of money though having service tenure not too long.
Actually, they have availed loans by providing false salary statement, which is much
higher than original. In other cases, some companies like garments manufacturing
organizations pay their employees irregularly, which make them incapable to pay loan
installments.

Fraud Activities:
Service Tenure No of Customers %
Less than 3 Years 3 75
3(+) Years 1 25
Total 4 100.00

Monthly Income No of Customers %


15000-25000 tk. 4 100.00
Total 4 100.00

Age No of Customers %
25-35 Years 2 67
36-45 Years 2 23
Total 3 100.00

It is found that, 75% of total fraud category customers have less than 3 years work
experience, all of them earn from 25000 to 35000 tk and 67% belong to 25-35 yrs age
group. It is significant that FRA customers do not have long work experience and
consists of young aged people. Some of them provided misinformation regarding their
employer or business concern. Post approval verification revealed that these customers
mentioned business concerned does not at all have any existence. In most cases, the
applicant mentioned their friends and colleagues as immediate relatives and cousins.
Besides, some of them have provided false tax paper, LOI etc. Actually, they have
taken loan from other banks also by using same techniques, for which they can be
considered as professionals. So it is quite evident that these types of customers had no
intention to repay the loan from the very beginning and intentionally skipped.

Others:
This group contains different types of customer like those who are temporarily job less,
having financial problem, sudden death, family crisis, illness etc. A customer may be
skipped for these various reasons. Since this group contains very few accounts, the
analysis in terms of age, income and service tenure is not done for this group. But
measures should be taken to keep this group under control.

12.3 Graphical Interpretation of Skip Customers Analysis:


12.4 Findings of Skip Customers Analysis

Based on the above analysis following facts have come out-

42% of total Skip customers are not paying loan installments due to having loan
overburden problems. Either they have loan with other banks or they have taken
loan from their friends and relatives. They are incapable of paying off these
loans since their income have been remaining same. So they have a good
reason to be skipped.

25% of total Skip customers are not paying for either they have changed their
previous jobs or currently they are job less. People, who have changed job, are
not paying loan installment since they are receiving lower salary than before.
Job less people is not paying because at present they have no source of income.

4% of total Skip customers are intentional defaulters. They are not paying
without any valid reason though they are capable enough. Form the interview of
the collection officers it has come out that most of them have strong political
backup and used the political influence to sanction the loan. This kind of cases
the bank has not much to do even though anticipating subsequent risk is
involved.

The rest of the customers (27%) are not paying for different reasons like
collection officers cannot contact them, customers have moved to another
country permanently, some of them found fraud and some of them are facing
salary problems or they are facing other problems.
Among five asset-products, Personal Instalment Loans (PIL) has been facing
about all of the Skip customers. This is because, no invoice, quotation, personal
guarantee or cash security are required for these loans. Even no down payment
is required to disburse this loan.

Only 15% of total Skip customers have taken loan as CEPS/AUTOPAY.


However, a certain group of these people, who had no intention to payback,
have availed the loan using this advantage.

In terms of delinquent accounts and skip cases, comparatively riskier companies


are BAT Bd Ltd, Conversyl Departmental Store, Opex Group, Pathfinder
Development Bd Ltd, Fabian Group, Newport Express Bd Ltd, Dhaka Sheraton
Hotel, KAFCO, Youngone (CEPZ), and Beximco Textile Ltd. These companies
have the highest number of Skip customers in terms of both CAR and PIL.

In terms of number of skip customers accounts, comparatively riskier sectors


are Garments Manufacturing Companies, Pharmaceuticals, Cigarette
manufacturing and marketing, Construction and supply, Dying, Knitting, and
packaging, Trading and marketing, Hotel Services, Ticketing and Cargo sectors.
These sectors contain the highest number of Skip customers.

Most of the LOB customers are taking loans by hiding their other loan details,
deliberately mentioning higher salary, providing false address and references,
contact numbers, showing very less expenditure and hiding the original purpose
of taking loans. In some cases skip customers take favor of some fraud officers
to conceal their actual designation, salary, date of joining in LOI (Letter of
introduction) to make the sanction of the loan reasonable.

Most of the IND customers have more than 3 years work experience, earn more
than 25000/= and belong to 36-45 age group- usually all these ratio are
considered as strength for a customer. However, IND customers have taken a
loan using these strengths both political and social. Though having these
strengths, they are totally unconscious about repayment and become traceless
after taking the loan.

A particular group, withdrawing salary 15000-25000/=, have work experience


less than 3 years and belong to 25-35 age group are more likely to switch the
job. It has been observed that people working in RMG, Buying House, Hotel
business, Trading and marketing business, insurance companies, advertising and
media companies and NGOs have higher tendency of job change.

It has been found that people working in different types of project (UN, CARE
etc), computer education centers, courier companies, internet service providers
(ISPs) and garments sectors, have higher tendency of leaving job.

A certain group of people have availed loans by providing false phone number
and references or addresses. Another group provided misinformation regarding
their employers or business concerns. Post approval verification revealed that
these customers mentioned business concerned does not have any existence at
all. In most cases, the applicant mentioned their friends and colleagues as
immediate relatives and cousins. Besides, some of them have provided false tax
paper, LOI etc.

It is also found that, most of the SAL customers have 2- 3 years work
experience, earn from 25,000 to 35,000 tk and belong to 25-35 yrs age group. It
seems that SAL customers earn handsome amount of money though having
service tenure not too long. Actually, they have availed loans by providing false
salary statement, which is much higher than original with the help of some
officers. In addition, some companies like garments manufacturing companies,
buying house, hotel services, construction and supply business pay their
employees irregularly which make them incapable to pay loan installments. In
the future these type of customer become skip customers.
Chapter 13: Recommendations
Based on the findings following recommendations are provided:

Customers expenditure-income details and loan details must be carefully


verified to minimize loan overburden problems. To minimize the risk of facing
JOL or JOC customers if any customer changes the job, the company should
inform HSBC and present location of the customer will be mentioned too. In
addition, the management must verify employments details. The collections
officers to collect the loan instalments should handle intentional defaulters
carefully. Since they are very sensitive customers, continuous follow up
activities should be organized to create awareness about paying loan
instalments.

To minimize the risk of having FRA and TRA customers, all the applicants
preferably should have land phone (PABX not applicable) and the concerned
people must verify all the contact phone numbers. References must be
immediate relatives and verified over phone before approvals. Customers
address and other information must be also be verified by the concerned people.

Personal instalment loan may be taken for any purpose but should be specific
and clearly stated in the application. The bank may ask for quotation in case of
CAR loan. In addition, the loan fund should be disbursed favoring the vendor
for specific purposes on a case-to-case basis. This will protect the misuse of
funds.

Company approval required before receiving any application from new


company i.e. financial strength, stability, and contribution to the economy. LOI
signatory must be verified by authorized signature provided by the company.
For Autopay /CEPS customer the financial burden, service length, previous job
experience of the customer and social reputation and nature of the company
should be taken into consideration with greater importance.

Management should carefully handle the loan application from some particular
companies and sectors that have been producing skip and delinquent customers.
Application received from the risky sectors should be verified carefully and
more authentications should be created to assess those particular applications.

Loan applications from customers from young age group, having shorter service
tenure and lower income level, should be carefully assess

Another important thing is that HSBC should make the CIB (Credit
information Bureau) report mandatory for every sort of applicants. This report
provided by Bangladesh Bank will create more transparency about the comers,
reveal the past repayment record of loan facility from other banks, applicants
credit worthiness, integrity level would be verified by this report. Making CIB
report mandatory for the applicant I think the tendency of skip customers will
be reduced to a subsequent level.

Collection efforts should be given more emphasized to ask the customers make
the repayment regularly. Customers with due of 1 and 2 payments should be
monitored carefully and prevent them to from reaching the in due 3 category.

Legal actions taken against the skip and delinquent customers should be
strengthen to discourage the applicants becoming delinquent or skip customers.

Sales team can play an important role in reducing skip customers. Avoiding
risky sectors as well as giving importance to banks interests and profits will
persuade them to bring good customers and help to reduce the skip tendency at
a tolerant level.
Finally, the management should strictly follow group policy before proceeding
for any loan application.

Chapter 13: Recommendations for Overall Credit Performance

Ensure Faster Credit Flow:


To ensure efficient and timely credit flow it is important to ensure effective work and
output from all the subsections of credit department. Right now, there are five approval
officers, five operation staffs where there is only two MIS officer. MIS officers have to
do a lot of tasks (profit model, prepare loan update, different queries, monthly,
quarterly returns, Bangladesh bank and group report) along with giving input to the
database. Hence, it becomes very hard to perform all the tasks within the deadline and
therefore bottleneck operation creates. Bottleneck operation delays the whole credit
process. So, it is recommended to recruit more people in MIS to remove bottleneck and
ensure smooth credit flow.

Ensure Feedback from MSO:


MSOs need to be trained up properly so that they posses a good knowledge about
credit. Whenever the approval officers will contact them they are expected to give
proper feedback. Though sales and credit are expected to be contradictory department,
the mobile sales officers (MSO) should emphasize more on helping the approval
officers with their highest effort rather interrupting their (approval officers) work for
achieving sales target.

Initiation of Scoring System:


If HSBC assign score on specific loan criteria it will become easier for the approval
officers to assess the loans. Scoring system will help to reduce bad applications
automatically and the burden on approval officer will be reduced. On the other hand
strength of a loan will be stemmed out from scoring system. However, the assessment
procedure should remain same.
Reconsider Interest Rates on Savings:
The savings rates of HSBC should be redesign as most of the customers were currently
dissatisfied with the savings rates. HSBC should restructure the interest schemes of its
savings product to attract more valuable customers.

Introduction of House Building Credit Facilities:


House building credits & loans should be introduced to satisfy customer needs.
Moreover to compete head to head with other banks HSBC should launch this product
without delay. At present HSBC is financing to purchase complete flats only.

Locker Services:
While interacting with the customers at customer service point a huge amount of
customers demanded lockers services. With such demand of this service, HSBC should
consider of proving locker services to its customers. This will also attract new
customers from other banks who are currently offering this service.

Use of Marketing Research:


The management of HSBC should regularly administer marketing research activities in
order to keep a regular track of satisfaction levels. Regular research should also be
conducted to find out customer expectations about various service aspects. As customer
expectations and satisfaction are not static figures regular research at sufficient
intervals should be conducted.

Focus on Relationship Strategies:


The bank should focus more on existing customers in order to build strong and loyal
relationship with them as satisfied customers more aptly or certainly recommends the
bank to friends and relatives. Thus the power of relationship will foster positive Word
of Mouth Communication and will attract new customers at a lower cost.

Employee Trainings:
Employee trainings and workshops should be administered in order to give them
knowledge and professionalism of customer interactions. With more professional base
employees can better satisfy the customers. They should be taught about how to deal
with problem customers and how to deal problematic situations. Employees-
specifically sales officers should be conscious and taught about the financial aspects of
the loans so that it becomes convenient for the approval officers to assess loans.

New Branches Should Be Introduced:


Customers showed a huge dissatisfaction with current locations as HSBC provides
services from only 5 branches throughout Bangladesh. New branches should be
constructed in Dhaka city satisfying more geographic segments. As convenience of
communication to the branch location is a very important factor for the customers
HSBC should consider building new branches and ATMs within Dhaka city as well as
other metropolitan cities of Bangladesh.

New Investment products:


New investment schemes should be introduced to meet customer demands. Other banks
have large number of investment schemes and services. New personal savings, future
investment products should be launched to stay ahead of competition and better satisfy
customer requirements.

Customer defined Service standards:


A formal service blueprint should be designed with appropriate service level standards
to reduce the variability of service. These standards should be customer defined and
customer expectation should be considered while deciding about the service standards.

Defensive Strategy of Service Quality:


HSBC should pursue a defensive service quality strategy that is a slow going strategy
rather than offensive service strategy. That is should focus on Costs of operation,
increasing Volume of businesses with existing loyal customers, Segmentation of the
premium customers, foster a positive word of mouth communication in its existing
customers, etc. Though these strategies will take time to develop a huge customer base,
they will in the long run bring more loyal customers to HSBC.

Faster Delivery of ATM cards:


HSBC should reduce the amount of time required to provide new ATM cards. Currently
it takes 2 weeks while some competitors can provide the card within 2 working days.
As the HSBC ATM card comes directly from Hong Kong delays are obvious. HSBC
should make necessary arrangements to produce the new cards locally in order to
reduce the customer difficulties faced in the absence of ATM card.

Advertising & Promotion:


HSBC should pursue an aggressive advertising campaign in order to build up a strong
image and reputation among potential customers. In this context, the valuable strengths
should be used for positioning the corporate image of the bank. TV ads should be aired
to reach a wider array of customers. The ads should capitalize on building strong
relationship, needs of customers and quality service of the bank rather than features of
products. Thus and offensive marketing strategy emphasizing customer satisfaction and
service quality can bring valuable business for the Bank.

Elimination of Contract Employees:


Contract employees should be eliminated from the customer service departments as
they lack the commitment and willingness to serve customers. One serious mistake can
take away valuable customers and years of relationship.

Control over the Mailing Network:


HSBC should strictly monitor the courier services that are engaged in delivering mails
and documents. Huge amounts delivery failures are being piled up at branches. So
HSBC should have some control over its couriers and ensure proper delivery of mails
and documents.
Chapter 14: Recommendations for Financial Performance
Efficient Use of Asset:

From the trend analysis of Asset Utilization Ratio, it has been found that the ratio has
got a decreasing trend in 2004. This means that asset is not being utilized properly.
HSBC should take appropriate actions in order to utilize it assets properly.

Consulting Financial Analyst or Specialist:


On a regular basis, HSBC should consult both the local and international financial
analysts. They might have in-house financial experts. But to be more accurate in
finding out the problems and determining the possible valid solutions they should also
hire outside financial analyst.

Maintaining a Well-balanced Portfolio:


In order to increase the profitability and reduce the credit risk, HSBC Bangladesh
should maintain a well-balanced portfolio. For example, instead of focusing on just
corporate banking and high profile business loan and leasing, it should also give equal
importance to retail banking. The more diversified the portfolio is the lesser the risk of
losses.

Reducing the Capacity Ratio to a Tolerable Level:


The Capacity Ratio has been increasing dramatically over the last four years. It means
that the amount of loans and leasing has been increasing much more compared to the
increase in assets. Therefore HSBC should limit the amount of loans to have better
control and avoid bankruptcy.

Cost Control:
In order to improve the Net Interest Margin and Net Operating margin, HSBC will have
to focus on every element of operating and non-operating expense. If the bank can
reduce the cost, it will result in the improved margins.

Chapter 16: Work Experience at HSBC

Case Study: 1

Missing File
Problem Statement: Some times due to misplacement or faulty maintenance of data in
the database, or not on time delivery update of the file is not delivered to the approval
officers or to operation on a timely manner. Or the file simply goes missing without any
trace.
Action:
Procedures to follow in this kind of situations:-
First task is to make sure that the file was actually received at our
end by tracing it in the Intransit Mail tracker.
If not received on any tracker then we must inform the introducer
about the fact that we have not received the file yet. Else if we have
received the file then we must follow the later procedures.
Then ask all the Approval officers one by one about the file (as
some times they have to receive the file directly for some high
graded customers due to top managements decision)
If the second phase is also a failure then we have to go for extensive
search in all the cabinets and storage facility where the files from the
said date on which the file was received, are stored.
If the file is still missing then we have to inform the introducer for
the last resort for this kind of problem, re-apply for the loan (this is
not encouraged).
Recommendation:
Arousal of this kind of situation is not unexpected as the volume of the files processed
each day is on the increasing trend. Due to shortage of the space and improper storage
facility this might happen. But the officer in charge has to be extra careful to reduce the
margin of error as low as possible. If the file is not found then there is a possibility that
the officer in charge might feel panic, but there is no need to panic but they must be
careful that the error rate in data maintenance goes down significantly.

Case Study: 2

Reject File Missing


Problem Statement: Some times due to misplacement or faulty maintenance of data
in the database, the file goes missing.
Action:
Procedures to follow in this kind of situations:
Track in the In-Transit mail tracker to make sure that the file was
actually received at our end for processing on the first hand.
Then search the database for the file status.
If it is still missing then we have to search at the approval officers
cabinets for the file to find out the actual status.
Ask the Approval Officer, who assessed the file about the file status.
If the approval officer assures of returning the file to the MIS then
we have to perform a thorough search in the rejected file bunch. This
is the last step that has to be performed, as the file must be found
during this process of missing file retrieval.
Recommendation:
If the approval officers are a little more concerned about the files they have assessed
then this kind of problems can be taken care of the very early stage of the problem. As
every day they are receiving two loan status updates, in which if the information is not
available or faulty, they can correct the information and prevent the future problems
that will arise from here.
Case Study: 3

Cheque Return or Change

Problem Statement: Some times due to misspelling or some other types of technical
faults the cheques are returned to the customer for new issuance of Cheque.
Action:
Procedures to follow in this kind of situations:
Perform maintenance (discrepancy) on the database that the Cheque
needs to be replaced.
The introducer gets the information by the next loan update.
Then the introducer arranges for new Cheque with all after
technicality measurements is met.
During this time the file stays with the Operations Department for
the replaced cheque, on receipt of which the fund will be disbursed.
After the cheque is received MIS is responsible for delivering the
cheque to the operations department.
Recommendation:
If the introducers become little more cautious then this kind of problems can be
avoided very easily. As more or less the majority potion of the Cheque replacement
problems are due to the amount or simple spelling mistakes. Being a little more
cautious they can avoid this kind of situations by carefully filling up the required fields.

Case Study: 4

Write off letter


Problem Statement: Not in time delivery or not the right recipient or the customers
social value and status is hurt, as the past record was not taken in to consideration.
Action:
Procedures to follow in this kind of situations:
Make sure that the history of the customer is taken into consideration
while performing the job.
If the customer is a high rated customer like the CRM or Power
Vantage, the process is to go through the assigned Relationship
Manager (RM).
If the customer is a hardcore defaulter then the Collection
department is going to be responsible for the job to handle the
customers and take necessary steps to recover the fund.
Recommendation:
Make sure that the write offs and set offs are not interchanged, as both of them are
closure from the book.

Case Study: 5

Facility Offer Letter


Problem Statement: This is the letter that is offered to the customer immediate after
disbursement of the fund in the customers account. They might have not been informed
in time so they can use the fund for their desired purposes.
Action:
Procedures to follow in this kind of situations:
In loan update the introducer can know about the status, or they can
check in the system of their respective branch, or can make a phone
call in case of urgency to know if there is any discrepancy.
Recommendation:
The letter has to be timely dispatched by the operation department. The introducer must
carefully study the loan update so that they can inform their customers timely.

Case Study: 6

Conflict Among Different Departments and Group


Problem Statement: Some times the inter-department misunderstanding becomes
really a great problem. As the communication is the key and the departments has to
work in a harmony to keep the whole system working. If the flow is interrupted by any
reason the entire process suffer, as it will not be able to bring out the desire output.
Action:
Procedures to follow in this kind of situations:
This is better to go and talk to the co-workers in other departments
and develop personal relationship so that they can deal with the same
kind of situation in future. Personal level communication is more
effective rather making it an official issue that requires the top
managements involvement to resolve it.
If the problem is still unsettled then the top management has to be
involved and they will be responsible for settle down the dispute.
The top management is always informed about the correspondences
under taken to resolve the matter.

Recommendation:
Development of personal level relationship is the key to deal with this kind of
situations. But the involvement and acknowledgement from the top management has to
be there. If the top management wants to deal with the matter in a formal way then they
should be involved. If they want the matter to be solved at the root level from where the
problem has arisen then in most of the cases the in charge officer is dealing with the
problem. Here the Service Level Agreement (SLA) comes in handy.

Case Study: 7

Collection Problem (Defaulter customer)


Problem Statement: Some times the customer fails to meet the deadline for their
installment payment. This can happen in many scenarios like the customer is willing to
pay but due to some unavoidable circumstances the customer could not pay the
installment on time. In other scenario the customer is not willing to pay any more
amounts. In other cases the worst one is the customer goes abroad without informing.
Going abroad cannot be considered as an assured defaulter of loan repayment. As the
respective customer might be in an urgent situation to move out side the country.
While dealing with customers, especially the 1 st bucket customers the collection
process has to be really cautious taking into consideration the past record of the
customers repayment history.
Action:
Procedures to follow in this kind of situations:
Carefully study the past loan repayment record of the customer.
If the customer is in the 1st bucket and the previous loan repayment
is satisfactory that means the front-end collection come into action.
If the defaulter is a hardcore defaulter with previous track record of
more than 4 EMI overdue then the hardcore collectors are in action
to recover the overdue amount.
Recommendation:
Studying the customers behavior carefully to make sure that he is a good customer and
their reputations in the society is not hurt due to some of the misdeeds by the collectors
as they might deal with something really sensitive, that can make a significant impact
in the peoples mind as well as in the society.
Case Study: 8

Intransit Mail Problem


Problem Statement: In the Intransit mail applications and the required supplement
documents are received by MIS for processing purposes. The timing for receiving the
mail has been a major problem for a long time. This has been almost a regular problem
that the mails are not arriving or receiving on time. As a result the volume of pending
applications and docs goes up by a significant margin (mail packets received after cut
off time according to the SLA are considered as pending for the following working
day). Also some times the introducers (MSOs) are coming carrying only their
customers applications. As a result this becomes tough for us to keep track for the
received applications. Missing applications and Cheques are worse case in terms of
intransit mail.
Action:
Procedures to follow in this kind of situations:
Follow the SLA to the point and deliver the mails on time. To do this
they might have to start few minutes earlier than they usually start
for the delivery towards destination from the branch.
The Introducers (MSOs) are requested specifically not to deliver
anything directly to the MIS; rather they should deliver the
applications to their respective branches. From where the initial
scanning and checking is done.
In case of some emergency they are most welcome to MIS but this
has to be pre informed via other media, like Lotus Notes or
Telephone. Here Lotus Notes is preferable, as this is considered as
safe and secure official electronic memo writing and delivery
system.
Recommendation:
Follow the SLA as specifically as possible and be respectful to the duties and activities
of the other department as the respect will earn respect.

Case Study: 9

Month End Pressure of Disbursement


Problem Statement: Disbursement pressure at the month end has been enormous for a
long time. As the introducers become more active and the customers are looking for
some quick funds for their urgent necessity. Also the factor of incentive comes in to
action here. As the MSOs are looking forward to make the customer avail the loan so
that he or she can earn points on the basis of the volume and amount disbursed during
the month as well as meets their sales target. As a result almost everybody is looking
forward for the disbursement of the loan within the same month.
Action:
Procedures to follow in this kind of situations:
From my point of view there is no solution for this problem. But to
make the situation bit easier by preparing support team for the
disbursement in case of this kind of situation at the month end.
MSOs can synchronize the whole work procedure by collecting the
required documents that are needed to avail the loan timely and thus
can reduce the pressure.
Recommendation:
MSOs should be conscious more about their sales target and keep the sales effort same
round the month rather than wait for the month end to come. And operation department
can employ extra workforce to handle the month end pressure with more ease.
Case Study: 10

Customer letter regarding the reschedule, reduce interest, or set off loan
Problem Statement: Some times customers come with many kind of request like
rescheduling of installment, reducing interest rate, or loan set off.
Action:
Procedures to follow in this kind of situations:
The Operations Department is informed about this kind of
applications arrives to the MIS.
Operations Department perform the required maintenance the
request if it feasible.
Recommendation:
The respective branch should handle this kind of requests or application so that the
customers can be sure about whether it is possible to perform the reschedule or change
of interest rate. Here both customers and operation time will be saved.

Case Study: 11

Operational mistakes disbursing the loan


Problem Statement: Some times the Operations Department makes mistakes while
disbursing the loan. Then in most of the cases the matter is solved at the officer in
charge. But some times the client might be a highly valuable customer for the bank; in
that kind of cases the top management has to be in the scene to settle the matter.
Action:
Procedures to follow in this kind of situations:
The officer in charge doing the actual disbursement or the introducer
finds out the error and informs the Operations Department. Naturally
this is rectified with in a very short time after the customer receives
the facility offer letter. If the introducer comes to know about the
matter then it is rectified at the root level before reaching the
customers.
If the mistake is proven then the Operations Department has to
perform reversal transaction and correct the error.
Recommendation:
During work there will be mistakes; this is what a multinational environment teaches. It
also teaches, never to make the same kind of mistakes, again and again. But In the
operations department while working with lots of data that has to be maintained
manually in to the system, there is always chance of error. This is why people involved
in the loan process have to be very careful about the process.

Case Study: 12

HUB Problem
Problem Statement: Some times the HUB system fails. Also this has been a major
problem that the network is not providing ample support, the computers are not
providing service of the expectation level and the printing (Hardware) systems are not
of the standard and quality.
Action:
Procedures to follow in this kind of situations:
Inform the IT Department with the detailed information about the
error to get the best support from them
Stop working on the problematic computer until the IT support is
available.
Recommendation:
Inform the IT for any kind of problem with the computer or the network. This has not
been a standard practice to troubleshoot the system by the user only. There is a great
advantage of this kind of standard practices. The IT is solely responsible for all sort of
maintenance, as a trouble shooter gives them the edge as they have the idea what can be
the problem with system, because all the systems are almost of the same category with
similar software installed on it. Employees should be given a short overview about the
problem that arises and possible solution. This might save valuable time and data.
Case Study: 13

Insufficient Fund Problem


Problem Statement: Some times the customers do not have sufficient amount
available at the account to pay for the loan-processing fee. As a result the disbursement
remains at hold position. As a result the loan gets the status of approved but the
customer cannot avail the fund, as the system requires some extra fund available from
which it deducts its charges.

Action:
Procedures to follow in this kind of situations:
Inform the introducer about the matter
The introducer then informs the customer to deposit some fund in
the account.
As soon as the funds are available the loan is disbursed.
Recommendation:
This kind of situation can be easily handled or reduced if the introducer of the loan
informs the customers about the fees or charges well before the disbursement. Or the
introducers can inform their respective customers as soon as they come to know that
the loan has been approved.

Case Study: 14
Disbursed in Different Account
Problem statement: One day a customer called the credit department and told that
the sales officer informed him that his loan application was approved on a certain date.
But even after the approval the loan was not disbursed to his account. And when the
sales officer checked the database, he did not find any discrepancies regarding the loan
application. What was the problem then?

Action:
After the objection, the operations department was looking for the cause of not
disbursement. After checking the system it was found that the loan amount had been
disbursed to another account. And it happened due to wrong debit authority number,
which was written by the sales officer in the application. Partially the operation
department was also liable for this mistake because before disbursement it was
operation departments duty to check all the necessary points of the applications for the
fund transfer. If the checking was done carefully, then it would have come out that the
applicants master account number does not match the debit authority number. Right
after the problem identification, it was checked in the system whether the account
holder had withdrawn the disbursed money or not. Luckily the account holder did not
withdraw the money and a hold instruction was given on the system to hold the account
for some period. After that the fund was transferred to the applicants account.

Recommendation:
The checking should be done very minutely and carefully. It should be done in such a
way that a single point of checking couldnt be missed in any cases. The respective
executives and officers should give more attention while doing the disbursement and
fund transfer respectively.

Case Study: 15

Waive the Penalized Amount:


Problem statement: A customer was enlisted as Grade-5 in the database of the bank.
Legal proceeding is going to be started by bank against the defaulter. One day, an
officer of the default customer called the credit department and requested for
reschedule of his boss loan according to their wish. While talking with the collection
officer, the applicants officer misbehaved with the collection officer saying that they
had harassed his boss a lot for the collection of the due EMIs. He also told that due to
business problem his boss couldnt repay the EMIs on time. His boss was then ready to
repay the loan in three installments and he would also settle the loan in the next three
months. But he wanted a favor. He requested to waive the penalized amount that was
incurred due to legal proceedings and accrued interest. The problem was that the
officials could not waive the penalized amount according to banks policy.
Action:
After the request pledged from the customer, the top executives of the credit
department called a meeting and came to a decision agreed by all that the applicants
request would be entertained as he could not repay the installment amount due to his
business problem. As he wanted to settle the disputes so why not give him the chance
of repayment by waiving him the penalty. After the decision, the customer was
informed that his application was granted. After that, the customer repaid the loan in
the next three months.

Recommendation:
While assessing a loan application applicants business condition, integrity, credit
worthiness etc should be checked very carefully.

Chapter 17: Conclusion

Consumer banking industry has been treated as a prospective financial sector in


Bangladesh. More and more banks and non-bank financial companies are entering the
industry. The industry became so attractive that multinational bank like HSBC has
entered the market and wants to lead the market. However, the entrance of banks like
HSBC has brought revolutionary changes in banking services. People get better service
than ever before. It becomes lot easier for people to get loans and investing money into
diversified portfolios. Sophisticated services like ATM, Phone banking etc. has been
brought by this new generation banking.

As the services improved workflow of the banks has been changed dynamically as
well. Banks use more sophisticated ways to assess loans. Quick assessment process
pressurizes the loan officers to use sophisticated ways of loan assessment. Though
HSBC use its own investigation along with third party investigation for loan
assessment the whole procedure may be developed furthermore. Central bank may
become more helpful by providing helps like hosting database (about customers) on the
net.
Internship Report

HSBC Consumer Product, Credit Operation& Collection Procedure in


Bangladesh

Prepare For

Dr. .M N Sirker
Register & Intern Supervisor of Asian University of Bangladesh

Date -02 May 2000

Prepared By

Md. Iqbal Hasan


MBA- (2D)
ID-980032
Asian University of Bangladesh