Controlling Mechanism of Assets in BRAC Bank Limited

Title: Controlling Mechanism of Assets in BRAC Bank Limited

Group Name: Audacious - 04

Dhaka School of Bank Management

1 Bangladesh Institute of Bank Management

 Controlling Mechanism of Assets in BRAC Bank Limited

Executive Summary

We the group “Audacious” of 5th batch of E-MBM program of Bangladesh Institute of Bank
Management, have prepared this report on “Controlling Mechanism of Assets in BRAC Bank
Limited”.

The objective of the study is to find out the controlling mechanism of assets in a centralized
bank.

The report has been prepared solely based on secondary data.

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 Controlling Mechanism of Assets in BRAC Bank Limited

Chapter 01
Introduction

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 Controlling Mechanism of Assets in BRAC Bank Limited

1.1 Background of the study:

As a part of our regular coursework in Fundamentals of Management, we have been assigned
to prepare this report. We have tried to find out impact of management studies in a
centralized bank.

1.2 Objective of the study:

The prime objective of this study is to identify the asset control mechanism in BRAC Bank
Limited.

1.3 Scope of the study:

The report has been prepared mostly based on secondary data and some with primary
informal data such as face to face conversation with the concerned bank officials of BRAC
Bank Limited.

1.4 Limitation of the study:

The report has been made on secondary data and very limited primary date that might not
show the more accurate scenario of the diversity.

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 Controlling Mechanism of Assets in BRAC Bank Limited

5 Chapter 02
Literature Review
 Controlling Mechanism of Assets in BRAC Bank Limited

2.1 Overview of BRAC Bank Limited:

BRAC Bank Limited is one of the largest operational ventures of BRAC which is established
by Sir Fazle Hasan Abed and the chairman of the bank is Mr. Muhammad A. (Rumee). After
facing so many obstacles and legal obligations BBL started its operation from July 04, 2001.
It has established with an aim to alleviate poverty and empowering poor and bringing
changes in their lives. The bank also continuously works to uphold the “Three P” agenda that
means Planet, People and Profit as a part of sustainable and glorious banking journey. With
the passage of time BRAC Bank Limited has become the fastest growing bank in
Bangladesh. And now it has become the market leader in the Small Medium Enterprises
(SME) business. Here BBL has targeted the missing middle the middle or small business
people. BBL by starting its journey in 2001 now it has152 branches, 12 Apon Shomoy, 313+
ATMs, 30 CDMs, 399 SME unit offices, 11 CRM center and almost 8000employees. Along
with SME banking it is continuously broadening its horizon into Retail banking, corporate
banking, Probashi banking and other arenas of banking. Its main focus is to set a standard as
the absolute market leader by bringing efficiency, friendliness and modernized automated
service on a profitable basis so that, BBL is providing 100% integrated on-line banking. BBL
6 is one of the members of the Global Alliance for Banking on Values (GABV)

2.2 Defining the term “Asset Control”:

Asset Management consists of an array of bank services, such as custody, investment

management, trust and estate administration, retirement plan administration and participant
record keeping, and corporate trust administration. The types of Asset Management
customers serviced by a bank are diverse (e.g., individuals, retirement plans, corporations,
mutual funds,
investment managers, insurance companies, endowments, and foundations), as are the
capacities in which a bank acts on behalf of these customers (e.g., trustee, agent, or
custodian). Many of these customer and account types have specialized legal, processing,
accounting, and reporting requirements. Asset Management operations serves as the “back
office” for a bank’s Asset Management activities and plays an important role in fulfilling a
bank’s strategic goals. Asset Management operations should implement efficient processes
and systems capable of supporting the types of Asset Management accounts, clients, and
assets that the bank services. These processes and systems should be capable of providing
 Controlling Mechanism of Assets in BRAC Bank Limited

timely and detailed account information to management, customers, regulatory agencies, and
other authorized parties, such as accountants or co-fiduciaries.

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 Controlling Mechanism of Assets in BRAC Bank Limited

2.3 Centralized Bank:

(Core Banking) Refers to the way in which the whole banking and financial transactions in
the banking network, a Central Intelligence Unit (Core) is maintained and documented. The
core banking system is based on strategic approaches to improve operations, reduce costs and
prepare for growth, banks are being exploited.

2.3 Classification of Asset:

Financial Non-Financial
- Cash - IT
- Cash with other Banks - HR
- Loans & Advances
- Investment
- Money at Call
- Fixed assets (Building, Vehicles and
others)
- Goodwill

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 Controlling Mechanism of Assets in BRAC Bank Limited

Chapter 03

Controlling Mechanism of Assets in BRAC Bank Limited

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 Controlling Mechanism of Assets in BRAC Bank Limited

3.1: Loans & Advance:

As a centralized bank, all the proposals regarding loans & advances are processed from head-
office. So, controlling mechanism & strategies are also set by the management which is one
of the core parts of head office.
To control this assets BBL has several departments to regulate the assets. Department wise
controlling function has been discussed below.
3.1.1: Business: In BBL, the business division sources the potential customers. The root level
officers known as relationship managers (RM) introduces the borrowers with asset products
and also maintains liaison with CRM, operations and branch.
3.1.2: CRM (Credit Risk Management): The CRM department under Risk Management
Division (RMD) basically assesses the borrowers’ eligibility for the loans. This is a core
mechanism to control the quality of the loans i.e. assets in a centralized bank. In BRAC Bank
Limited, the CRM department is head office based and few no. of officials sit in the in
different branches but sends the proposal to head office for final approval.
3.1.3: CAD (Credit Administration Department): The CAD basically responsible for
detailed documentation and creation of charge documents. For better controlling in future,
10 such documentation and charge creation are very much significant.
3.1.4: Asset Operation: The asset operation department makes limit load in the system
through Finacle which is one of the renowned softwares that is used in the banking system.
3.1.5: Branches: The branch basically gives the customers fund withdrawal & deposit
facility. Besides, other regular banking facilities are also provided simultaneously.
3.1.5: Special Asset Management (SAM): The SAM is also an integral part in a centralized
banking system. Though relationship officers are primarily responsible for ensuring the
recovery of the assets, in severely irregular payment where the loans become classified, the
SAM works deliberately for swift recovery.
 Controlling Mechanism of Assets in BRAC Bank Limited

3.2: Money/Cash Management:

The Treasury Division deals with the cash management in BBL. As long as cash is
considered as a very liquid asset, management of such asset is very sensitive.
Followings are the key roles which Treasury Division plays: -
3.2.1: Cash Forecasting -

This is the beginning of all other roles carried on the operation of a treasury department.
Dislike the accounting staffs who handle the cash receipt and disbursement activities on daily
basis, treasury staffs need to draw all those accounting staffs record (within the organization
including its subsidiaries if any), and compile it to generate a cash forecast (short and long-
range). The forecast and all its components are needed to:

- determine if more cash is needed. If that is the case, then they can go on to plan for
fund inquiry either through the use of debt or equity.
- plan for investment purposes, if the forecast results in surplus and cash excess shows
up.
- plan its hedging operations by using the information at the individual currency level.
11

3.2.2: Working Capital Management -

Major usage of company’s cash is in the working capital area. Working capital is a key
component of cash forecasting. It involves changes in the levels of current assets and current
liabilities in response to a company’s general level of sales. The treasurer should be aware of
working capital levels and trends, and advise management on the impact of proposed policy
changes on working capital levels.

3.3.3: Cash Management –

Combining information in the cash forecast and working capital management activities,
Treasury staff is able to ensure that sufficient cash is available for operational needs.

3.3.4: Investment Management -

When the forecast shows some excess funds at, the treasury staffs are responsible for the
proper investment of it. Three primary goals of the role are: (a) maximum return on
 Controlling Mechanism of Assets in BRAC Bank Limited

investment; (b) matching the maturity dates of investments with a company’s projected cash
needs; and most importantly is (c) not putting funds at risk.

3.3.5: Treasury Risk Management -

The treasury staffs are also responsible to create risk management strategies and implement
hedging tactics to mitigate the whole company’s risk—particularly in anticipating (a)
market’s interest rates may rise and leave the company pays on its debt obligations; and (b)
company’s foreign exchange positions that could also be at risk if exchange rates suddenly
worsen.

3.3.6: Credit Rating Agency Relations -

A company may issue marketable debt. In this case a credit rating agency will review the
company’s financial condition and assign a credit rating to the debt. The treasury staff would
need to show quick responds to information requests from the credit agency’s review team.

3.3.7: Bank Relation -

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A long-term relationship can lead to some degree of bank cooperation if a company is having
financial difficulties, and may sometimes lead to modest reductions in bank fees. The
treasurers should therefore, often meets with the representatives of any bank that the
company uses to: discuss the company’s financial condition, the bank ’ s fee structure, any
debt granted to the company by the bank, and foreign exchange transactions, hedges, wire
transfers, cash pooling, and so on.

3.3.8. Fund Raising -

Maintaining an excellent relation with the investment community for fund raising purposes,
is important—from the (a) brokers and investment bankers who sell the company’s debt and
equity offerings; to the (b) the investors, pension funds, and other sources of cash, who buy
the company’s debt and equity.
Other than those main roles, fundamentally the treasury staffs also monitor market conditions
constantly, and therefore is an excellent resource for the management team should they want
to know about interest rates that the company is likely to pay on new debt offerings, the
 Controlling Mechanism of Assets in BRAC Bank Limited

availability of debt, and probable terms that equity investors will want in exchange for their
investment in the company.
If a company engages in mergers and acquisitions on a regular basis, then the treasury staff
should have expertise in integrating the treasury systems of acquires into those of the
company. Another activity is the maintenance of all types of insurance on behalf of the
company.

3.3: Fixed Asset:

A tangible or intangible piece of property owned by a company or business organization for a

longer period of time which is used in the production of its income and valued over 20000
and lasts more than one year at the same time depreciated with passage of life time is called
fixed asset. Fixed asset provides benefits to business organization over than several years. As
example, a business organization may use machinery, tools etc for many years. Fixed assets
are differentiated in the company’s balance sheet as intangible, tangible, or investments
category.

13 Now we are going to give some examples of BRAC Banks fixed assets:
Office Equipment, Chair, Table, CPU, Monitor, ATM machine, Dehumidifier, UPS, IPS,
Online UPS, Air Conditioner, Fan, Money Counting machine, Router Cc camera, Vault,
Generator, Printer, Scanner, IT‟S Hardware & Software, Construction & Renovation Works,
Photocopy Machine, Vehicle etc.

The estimated useful lives for the current and comparative period are as follows:
Estimated useful life
Category of Assets
(Years)
Buildings 20
Furniture & fittings 5-10
Motor Vehicles 5
Leasehold Improvement 6-7
IT Equipments 4
Office Equipments 5-10
 Controlling Mechanism of Assets in BRAC Bank Limited

The rate of depreciation on various classes of property, plant and equipment are as follows:
Asset Category Rates (%)
Building & other constructions 2
Furniture & fixtures 12.5
Office decoration 15
Computers & accessories 25
Air coolers & ceiling fans 20
Telephones, fax & mobiles 20
Electrical & office equipment 20
Cookeries & cutleries 10
Vehicles 20
Software & system 33

3.3.1: Fixed asset management processes of BRAC Bank limited

Acquisition of fixed asset
 When someone create any MR (Material Requisition) and send it to the authorized person
or department head. The authorized person gives it to the IT team.
 The IT team first justify the MR after that they give it to procure department, who are
responsible for budgetary cost of that MR. After that, the payment processing and
compliance prepare a budget for that MR.
14  Then it will be send to division head for the approval of the MR. after that, he send it to
the store team for converting that MR into PR (Procurement Requirement)
 After that, it is seen that whether the MR is within the financial limit of approval or not.
If it is, then procurement department creates PO (Purchase Order) otherwise they take
necessary financial approval as per delegation.
 After creating PO, procurement purchases the asset according to the policy.
 When the procure department deliver the assets & submit of the final bill then Fixed
Asset Team creates object ID in IFS.
 Then the store team receives the asset and issue in the IFS and payment team pays the
final bill.
 Finally, Fixed Asset team activates all new objects that were purchased in last month &
charge depreciation in IFS.

3.3.2: Disposal off of the old or unused asset

 In case of old and unused asset GA&IS (General Administration & Infrastructure
Services) or IT takes necessary approval for the auction.
 Controlling Mechanism of Assets in BRAC Bank Limited

 GA&IS, Fixed Asset and auction participate on the auction and complete it.
 After the auction they calculate profit or loss on auction depending on the written down
value (WDV).
 Finally, it is the responsibility of fixed asset to dispose off each and every asset from
previous list using IFS sale option.

3.3.3: Charging depreciation

 At first, ERP team sets the depreciation rate according to the guideline of BBL.
 After that, assistant manager of fixed asset management team creates depreciation
proposal.
 Then, the officer of the fixed asset team charges depreciation manually and check it with
depreciation proposal.
 Finally, authorization and post depreciation proposal done by the Sr. manager of the fixed
management team.

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 Controlling Mechanism of Assets in BRAC Bank Limited

3.4: Information Technology (IT):

IT Assets include all elements of software and hardware that are found in the business
environment. IT Asset in BRAC Bank can be classified into two (2) groups.

1. Tangible IT Asset

Tangible IT asset includes All types of Hardware and Network equipments like PC, Server,
Switch, Hub, router etc.

2. Intangible IT Asset Intangible asset are mainly computer softwares. Different types of
software are used in BRAC bank like Core Banking Software (CBS), Human Resources
Management Software, Enterprise Resources Planning (ERP), Inventory Management
Software and others.

IT Asset Management (ITAM) in BRAC Bank is the set of business practices that join

financial, contractual and inventory functions to support life cycle management and strategic

decision making for the IT environment. There are several IT Division in BRAC Bank.

16 3.4.1. ICT Systems Division:

This division entails the management of the physical components of computers and computer

networks, from acquisition through disposal. Common business practices include request and

approval process, procurement management, life cycle management, redeployment and

disposal management. A key component is capturing the financial information about the

hardware life cycle which aids the organization in making business decisions based on

meaningful and measurable financial objectives.

 Controlling Mechanism of Assets in BRAC Bank Limited

3.4.2. ICT Operations Division:

ICT Operations Division mainly maintain Core Banking Software (CBS) FINNACLE,

BRAC Bank Data Centre IT asset management usually involves gathering detailed hardware

and software inventory information which is then used to make decisions about hardware and

software purchases and redistribution. IT inventory management helps organizations manage

their systems more effectively and saves time and money by avoiding unnecessary asset

purchases and promoting the harvesting of existing resources. Organizations that develop and

maintain an effective IT asset management program further minimize the incremental risks

and related costs of advancing IT portfolio infrastructure projects based on old, incomplete

and/or less accurate information. Hardware Asset Management Hardware asset management

Software Asset Management is a similar process, focusing on software assets, including

licenses, versions and installed endpoints. Role of IT asset management in an organization

17 The IT Asset Management function is the primary point of accountability for the life-cycle

management of information technology assets throughout the organization. Included in this

responsibility are development and maintenance of policies, standards, processes, systems

and measurements that enable the organization to manage the IT Asset Portfolio with respect

to risk, cost, control, IT Governance, compliance and business performance objectives as

established by the business. IT Asset Management uses integrated software solutions that

work with all departments that are involved in the procurement, deployment, management

and expense reporting of IT assets. IT Asset Disposition When assets need to be removed

from the enterprise, they move through various disposition processes. Commonly they are

handed over to an IT Asset Disposition vendor to be recycled or destroyed. Assets should be

managed properly after going offline to ensure they do not get lost prior to reaching the

vendor. The vendor of choice should then have secure procedures for tracking assets during

the entire time of their possession. After proper disposal, the vendor provides a certificate of
 Controlling Mechanism of Assets in BRAC Bank Limited

destruction with the serial numbers of assets they destroyed and recycled. The company

should then verify the serial numbers on their certificate of destruction with the assets they

know they handed over to the vendor. Tracking assets that are offline, prior to disposal,

should be approached with the same efficiency and security as when those same assets are

online.

3.4.3. ICT Audit Division:

IT Assets include all elements of software and hardware that are found in the business

environment. IT asset in BRAC Bank can be classified into two (2) groups. 1. Tangible IT

Asset Tangible IT asset includes All types of Hardware and Network equipment like PC,

Server, Switch, Hub, router etc.. 2. Intangible IT Asset Intangible asset are mainly computer

softwares. Different types of software are used in BRAC bank like Core Banking Software
18
(CBS), Human Resources Management Software, Enterprise Resources Planning (ERP),

Inventory Management Software and others. IT asset management (ITAM) in BRAC Bank is

the set of business practices that join financial, contractual and inventory functions to support

life cycle management and strategic decision making for the IT environment. There are

several IT Division in BRAC Bank.

 Controlling Mechanism of Assets in BRAC Bank Limited

3.5: Human Resource:

HRD manages the following tasks:

 Recruitment
 Employee Selection
 Career & Succession Planning
 Job analysis & Job Evaluation
 Performance Appraisal an Performance management System
 Compensation & employee benefits
 Handling employee grievance, disciplinary actions

These are controlled and monitored by HRD centrally. These are the parts of staffing in
management concepts.

3.5.1: Staffing:

The managerial function of staffing involves occupying the organization structure through
proper and effective selection, appraisal and development of the personnel to fill the roles
19 assigned to the employers/workforce.

3.5.2: Recruitment:

This part of staffing is done by HRD. It includes following procedures.

Recruitment
Internal External
 Transfers  Walk-in
 Promotions  Advertisement
 Re-employment of ex-employees  Employment Exchange
 Employment Agencies
 Educational Institutions
 Employee Referrals
 Labor Contractors
 Controlling Mechanism of Assets in BRAC Bank Limited

3.5.3: Employee Selection:

Employee Selection is the process of putting right people on right job. It is a procedure of
matching organizational requirements with the skills and qualifications of people. HRD
controls it centrally.

3.5.4 Different process of Employee selection:

 Interviews
 Tests
 Assessment Centers
 Application Blanks
 Others

3.5.6 Compensation:

The financial remuneration given by the organization to its employees in exchange for their
work is called compensation
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 Wages
 Salaries
 Incentives

3.5.7: Benefits:

Benefits refer to things of value other than compensation that an organization provides to its
workers. Sometimes it is called indirect compensation.

Benefits come in several forms:

• Pay for time not worked-sick leave, vacation, holidays, etc.

• Insurance benefits-life and health insurance for employees and their

dependents

• PF-employers and employee contribute

• Service benefits-recreational benefits

 Controlling Mechanism of Assets in BRAC Bank Limited

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Chapter 04
Findings
 Controlling Mechanism of Assets in BRAC Bank Limited

4.1 Major Findings:

 Due to centralized decision-making procedure, the process mechanism is time

consuming.
 Due to having specialized officials, the analysis & decision-making process is more
concrete.
 Due to centralization, ensuring the overall compliance with rules, regulations and
guidelines is more convenient and effective.
 Having been centralized, reporting and monitoring of assets is transparent and
unbiased.

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 Controlling Mechanism of Assets in BRAC Bank Limited

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Chapter 05
Conclusion
 Controlling Mechanism of Assets in BRAC Bank Limited

5.1 Conclusion:

BRAC Bank Limited (BBL) is one of the leading private commercial banks among different
commercial in Bangladesh. After passing so many obstacles and legal obligation it was
established in July 04, 2001. BBL is one of the strong IT supported bank as the bank updating
modern IT equipment keeping pace with the change of times and demand for providing better
banking service to the customers. BBL is providing countries largest SME banking services.
Along with SME banking they provide all kinds of banking services. The BRAC Bank
Limited
believes that this sector of the economy can contribute the most to the rapid generation of
employment in Bangladesh. BBL is the country’s largest fast growing bank. BBL is growing
faster because it is expanding its banking services and at the same time establishing more and
more SME unit office, Branch, CRM, ROC, Apon Shomoy etc. and along with the increasing
number of branches the volume of the fixed asset also increasing. That’s why the fixed asset
management department is also adapting different strategies; they are getting automated and
computerized day after day more and more. They are using different software for keeping the
proper record of assets, keeping the track of these assets, doing the proper valuation, and
24 finally
maintaining the balance of assets within the branches. These things help to create a proper
financial statement of BRAC Bank Limited.