Executive Summary

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Executive Summary
The report represents the three-month working experience on Social Investment Bank
Limited (SIBL). I was assigned in the Principal Branch of SIBL. This report gives a clear
idea of the activities and the operation strategies of SIBL. SIBL incorporated in 5th July
1995 and being into its commercial operation on 22nd November with a view to provide
exclusive service facilities to its client and accordingly meet the demand of banking service
all over Bangladesh. During the short span of its operation the bank had been widely
acclaimed by the business community from small business persons to industrial
conglomerates for forward looking business outlook and innovative financial solution.
It is argued however, that any study of Islamic Banking in the 21st Century should make
dispassionate interpretation of history of achievement and failures of past generations and
take cognizance of rising expectations and signs of re-discovering Islam in the
contemporary period. This will set the stage for in-depth understanding of historical
context and socio-economic setting for the operations of Islamic Banking in the 21 st
century.
The whole report consists of two parts. The first segment is based on the operations of
SIBL and the services it provides. And the second segment is based on the performance of
SIBL.
My overall experience had been very fascinating and I believe internship period at Social
Investment Bank Ltd. will definitely help me a lot in building my future career.
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Acknowledgement
In completing my internship program in Social Investment Bank Limited. (Principal

Branch), I got help from different people who assisted me with various information, data
and advice. I am grateful to the following person for their sincere cooperation:
At first, my deepest gratitude goes to Mr.K.M. Ashaduzzaman, Managing Director, SIBL

who give me this nice opportunity to work in the Social Investment Bank Limited, a
leading joint venture Islamic Bank in Bangladesh, as a internee to enhance my practical
knowledge as the partial fulfillment of BBA program at the time when Bangladesh is going
to acquire an important role in the global market economy.
In addition, I want to give thanks to Fazle Elahi Mohammad Faisal, Lecturer, BBA Program
of Department of Business Administration, Shahjalal University of Science And
Technology, for giving me almost assistance and sincere cooperation with effective
guidelines in making report worthwhile.
Mr. MOHD Tahirul Islam (Executive Vice President & Branch Manager), the renowned
banker, was my supervisor. With many other Officers and Executives of the Branch, he has
also provided me with his suggestions, guideline and cooperation in doing my internee
program and also in completing this report. I am very grateful to them for giving me the all
sorts of cooperation.
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OBJECTIVE
The main objectives of this report are as follows:

1. To fulfill the requirement of ending activities BBA Program.
2. To have some practical exposure that will be helpful in the near future.
3. To learn disk-wise activities in bank branch.
4. To gather knowledge the functions and transactions of different departments of bank
branch and comparison of practice based on theory.
5. To demonstration the experience of the 12-week’s internship program at Social
Investment Bank Limited.
6. To illustrate the activity of the host organization (SIBL).
7. To demonstrate their Strength, Weakness, Opportunities and Threats.
ORIGIN OF REPORT
The BBA program conducted by Shahjalal University of Science and Technology, Sylhet,
was introduced in order to provide a number of fresh graduates in business sector; this
program has been designed to facilitate the students and the executive to provide basic
theoretical knowledge and practical in the job activities in the context of Bangladesh.
Since the BBA Program is an integrated, practical and theoretical method of learning, the
students of this program are required to have practical exposure in any kind of business
organization last term of this course.
This report on practical orientation has been originated above thinking.
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METHODOLOGY OF THE STUDY
In order to make the Report more meaningful and presentable, two sources of data and
information have been used widely.
1. Data collection method
The data collection method of this study is consisted of both primary and secondary
sources. Majority of the information was collected from secondary sources.
2. Data sources
Primary sources:
The primary sources include interviews with the bankers.
Secondary sources
The secondary sources of data are the annual reports, general reports, official
documents, credit manual and foreign exchange manual of the bank.
The “Primary Sources” are as follows-

Face-to-face conversations with the respective officers and staffs of the Branch.
Informal conversation with the clients.
Practical work exposures form the different desks of the four departments of
the Branch covered.
Relevant file study as provided by the officers concerned.
The “Secondary Sources” of data and information are-

Annual Report (2005) of SIBL.
Various book, articles, compilations etc. Regarding general banking
functions, foreign exchange operations and credit policies.
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SCOPE
I have been assigned in the Principal Branch in Social Investment Bank Limited. And this
opportunity paved me the way to get myself familiarized with the banking environment for
the first time indeed. I have had an opportunity to gather experience by working in the
different departments of the branch under the supervision of Executive Vice President, Mr.
MOHD Tahirul Islam. The area of concentration of this report is confined in investigating
different aspects of the banking transaction as well as problems and prospects and by this
way an endeavor is made to give recommendations for removing the problems.
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Limitations
The study has suffered following limitations:
a. Respondents were sometimes reluctant to fill the questionnaire, which has impeded
the preparation of the report.
b. Validity of the report is subject to the reply of the respondent.
c. Because of the resource constraint survey as per the sample size was not possible
which has restricted the accuracy of the result.
d. To analysis SWOT of an emerging market is a wide survey material. But time
constraint restricted the report to specific feature.
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Chapter 1. Introduction
Banking system occupies an important place in a nation’s economy because of its

intermediary role; it ensures allocation and reallocation of resources and keeps up the
momentum of economic activities. A banking institution is indispensable in a modern society.
It plays a pivotal role in the economic development of a country and forms the core at the
money market of any country. In a developing country like Bangladesh, the banking system
as a whole has a vital role to play in the progress of economic development. The overall
purpose of banking is to collect money from surplus unit and transfer it to the deficit unit.
1.1 Origin of Banking Industry
World Point of View
The history of banking is as old as the history of many. Generally, to the necessity for keeping
the money safe, the business of banking comes in to existence. The evolution if money solved
the problem of ‘Barter System’. Earlier there are two groups of people. One group felt the
need of honest and faithful person to keep their surplus money safe and the other group owing
to transaction felt the need of some person who could provide money. As a result based on
two groups a kind of businessman came in to picture. They used to keep the money as deposit
for security and give loans to the needy people. This is how the banking sector has developed.
The English word ‘Bank’ is derived from the Italian word ‘Banco’. The Latin word ‘Bancus’
and the French word ’Banque’ which means a bench. They are of the opinion that the
medieval.
European banker (i.e. moneychanger and moneylenders) transacted their banking activities on
the benches in the market place. This money changing and money lending business is known
as banking business.
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Bangladesh Point of View
Banking industry is very important financial institution in the country and the present
economic state of Bangladesh demands immediate development of the financial institution.
Bangladesh was born as an independent and sovereign country in the year 1971. That time
banking industry faced a tremendous crisis, as the Head office of the most of the banks was
located in West Pakistan. After that, ‘Bangladesh Bank’ was established according to the
order of Bangladesh Bank and this order effective from 16 th December 1971. Bangladesh
Bank was given the duty to act as the Central Bank of Bangladesh.
After that in 1972 nationalization order was declared and all commercial banks were
nationalized except foreign banks. Thus six nationalized banks were formed. They are Sonali
Bank, Agrani Bank, Rupali Bank, Pubali Bank, and Uttara Bank.
1.2Present Status of Banking Industry
Banking Business plays vital role in driving and manipulating the total financial management
and economy of any country. There are 52 different types of Banks operating in Bangladesh
including newly established privatized commercial Banks, up to December 2003. Amongst
these, there are 4 Nationalized commercial banks, 30 Private Banks, 12 Foreign Banks, 4
Government Specialized Banks, 1 Co-Operative Banks And 1 Grameen Bank.
In the recent years, Islamic Banking has been introduced which is a notable point in the
existing banking system. Out of the established private banks four of them are Islamic Banks.
Besides the banking sector, there are some non-banking financial institutes, which contribute
in financing the economy of the country. These institutions finance in different sector like
housing, industries etc. which contributes towards the development of the country.
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1.3 Formation of Social Investment Bank Ltd
The Bank was incorporated in Bangladesh in the year 1995 as a banking company under the
companies Act, 1994 all types of commercial banking services as provided by the Bank from
time to time besides as a matter of policy the Bank conducts its Business on the principles of
Musharaka, Mudaba, Bai-Muazzal and Hire Purchase transaction approved by Bangladesh
Bank.
The Bank is one of the interest-free Shariah Banks in the country and its modus operandi is
substantially different from those of other commercial Banks.
Register office:
15, Dilkusha C/A, Dhaka, Bangladesh.
Fax: 880-2-9559013
Telex: 632285 SIBL BJ
e-mail: sibl@bdonline.com
Telephone: 9557499, 9568098
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1.3. Islamic banking in the 21st century
The proper offers an alternative perspective, imperative and vision of challenges and
opportunities of Islamic banking in the 21st century with a view to responding adequately
to the problem of globalization of poverty and colonization of our future, this adequately to
the problem of globalization of poverty and colonization of out future, this paper provides
a forum for hard talk on harsh social realities. Therefore, an attempt is made to unfold,
some of the fundaments issues of Islamic banking in the 21st century, although special
referee is made to utterly neglected area of non-formal and voluntary sector banking., as a
case study, the operational thrust of the Social Investment Bank, a concept of 21 st Century
participatory three sector banking model , established in November 22, 1995 in Dhaka ,
Bangladesh , is review with a view to providing an empirical basis for and in-depth
understanding of an alternative paradigm of Islamic Banking.
It is argued that Islamic Banking in the 21st century needs ‘discontinuous leaps’ a change in
paradigm, to clear the backlog of history. It is however, felt the Islamic Banking in the 21 st
century will face the great challenge of our time but it would create great opportunities as
well. For both Muslim and Non-Muslim countries, if and only, it works for developing
participatory economy beyond market, arrest the present trend toward the globalization of
poverty and colonization, concentration of ownership and beneficiaries of Islamic Finance,
redefine the role of Islamic formal corporate finance, rediscover new package for
empowerment of families of both the rich and the poor at the grass-root level, help
developing of voluntary sector Social banking for mobilization and capitalization of social
savings and investment.
1.4 Company profile
Social Investment Bank Ltd was incorporated in Bangladesh in the year 1995 as a banking
company under the companies Act, 1994. All types of commercial banks diverse as
provided by the Bank from time to time. Besides as a matter of policy the Bank conducts
its business on the principle of Mushataka, Murabaha, Bai-Muazzal and Hire Purchase
transaction approved by Bangladesh Bank.
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The Bank is one of the interest-free Shariah Banks in the country and its modus operandi is
substantially different form those of other Commercial banks.
Although the operation of the Bank are in strict compliance with the rules of Islamic Law
(Shariah) relating to business activities, the financial statements have been prepared
basically in accordance with the formats prescribed under the Banking Companies Act,
1991.
The Bank started its operation with 1 branch in Dhaka. There were hardly any liquid assets
to run the operation of the Bank smoothly. Initially, the deposit of the Bank was
Tk.492363, investment Tk.215000, borrowing from other banking companies, agents etc.
Tk.91261.
The Bank had taken a steady expansion program all over the country by opening new
branches in the rural areas, in particulars with a view to extending Banking services to the
doorstep of the rural people. At the end of the year 1998, the bank had 10 branches. The
bank resumed its operational activities with an authorized capital of Tk.100000000, issued,
and paid up capital Tk.118360000. that presently stands at Tk.12600000.
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Chapter 2. GNERAL BANKING DEPARTMENT
Financial institution/ intermediary that mediates or stands between ultimate borrowers and
ultimate lenders is knows as banking financial institution. Banks perform this function in two
ways- taking deposits from various areas in different forms and lending that accumulated
amount of money to the potential investors in other different forms. General banking
department aids in taking deposits and simultaneously provides some ancillaries services.
General banking is the front-side banking service department. It provides those customers
who come frequently and those customers who come one time in banking for enjoying
ancillary services. In some general banking activities, there is no relation between banker and
customers who will take only one service form bank. On the other hand, there are some
customers with who bank are doing its business frequently. SIBL General banking is divided
into five sections.
Account opening section.

Bills and clearing section.
Remittance section.
FDR section.
Cash section.
Sanchaypatra section.
2.1.1. ACCOUNT OPENING SECTION:
Under this section, SIBL officer opens different types of accounts on the request of clients.
The procedure of opening account is given is given below.
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PROCEDURE FOR OPENING OF ACCOUNTS:
Before opening of a current or savings account, the following formalities must be completed
by the customer:
Application on the prescribed form

Furnishing photographs
Introduction by an account holder
Putting specimen signatures in the specimen card
Mandate if necessary
After fulfilling the above formalities, SIBL provides the customer a pay-in- slip book and a
checkbook.
2.1.2. APPLICATION FORM FOR CURRENT/ SAVINGS ACCOUNT:
Followings are the contents of the application form for opening Savings or Current account in
SIBL, -
Type of the Account: Individual/ Joint/ Proprietorship/ Partnership/ Limited Company/ Club/
Society/ Co-operatives
Name of the Applicant(s)
Father’s/ husband’s Name
Present Address
Permanent Address
Number, Date of issue, Date of Expiry & Place of Issue of Passport (if any)
Date of Birth
Nationality
Occupation
Nominee (s)
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Special Instruction of Operation of the Account (if any)

Initial Deposit
Specimen Signature (s) of the Applicant (s)
Introducer’s Information (Name, Account Number, Specimen Signature)
In case of Joint Account

Operation instruction of the account
Signature (s)
In case of Partnership Account

Partner’s Signature
Partner’s Name -------
The following formality along with the documents is to be completed before opening an
account:
Two copies of photograph of the Account Holder (s) duly attested by the Introducer.
Account to be introduced properly.
Introducer’s signature on Account Opening form is to be verified by an officer.
Letter of thanks to Account Holder(s) and Introducer is to be sent under registered post.
In case of joint account, operational instructions are to be signed by the Join Account Holders.
In case of Club/ Society,-

Up to date list of office bearers.
Certified copy of Resolution for opening and operation of account.
Certified copy of Bye-laws & Regulations/ Constitution.
Copy of Government approval (if registered.)
In case of Co-operative Society/ societies Limited,-

Copy of Byelaw duly has to be certified by the Co-operative officer.
Up to date list of office bearers.
Resolution of the Executive Committee, as regards of the account.
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Certified copy of Certificate of Registration issued by Registrar, Co-operative Societies.
In case of Non- Government College/School/ Madrasha/ Muktab,-

Up to date list of the Governing Body/ Managing committee.
Copy of resolution of the Governing Body/ Managing Committee.
In case of Trustee Board, -

Prior approval of Head Office of the Bank.
Certified copy of Deed of Trust, up to date list of members of the Trustee Board and Certified
copy of the Resolution of Trustee Board to open & operate the account.
In case of Minor’s Account, -

a) Putting the word “MINOR” after the title of the account.
b) Recording special instruction of operation of the account.
c) The account opening form is to be filled in and signed by either of the parents or the
legal guardian appointed by the Court of Law & not by the Minor.
In case of Limited Company,-

Certified true copy of the Memorandum & Articles of Association of the company.
Certificate of Incorporation of the company for inspection and return with a duly certified
photocopy for bank’s records.
Certificate from the Registrar of the Joint Stock Companies that the company is entitled to
commence business (in case of Public limited Co. for inspection and return) along with a duly
certified photocopy for Bank’s records.
Latest copy of Balance Sheet.
Extract of Resolution of the Board. General Meeting of the company for opening the account
and authorization for its operation duly certified by the Chairman/ Managing Director of the
company.
List of Directors with address (a latest photocopy of the form-xii).
Authorized signature.
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Name.
General conditions of governing Current / Savings Account,-

(a) Minimum Balance to be maintained in current account Tk. 10,000 /- and in Savings
account Tk. 5.000/-
(b) A suitable instruction by an introducer acceptable to the Bank is required prior to opening
an account.
(c) Recent photographs of the Account openers duly attested by the Introducer must be
produced.
(d) When cheques deposited are payable by other banks or outstation they are available after
clearing or collection only, Service charge will be charged @ Tk, 100 /- in Current account
and Tk 50 /- in Savings account yearly or as charged by the Bank from time to time as and
when required.
Provisional profit rate for Savings Account (SB) @ 6.85% (Half years compounding).
2.1.3. DEPOSITS ACCEPTED BY SIBL (LOCAL OFFICE)

Deposits that are taken by SIBL are:
Current Deposit
Saving Deposit.
Fixed deposit Receipts.
Short Term Deposit (STD)
Bearer Certificate Deposit (Bcd).
Gift cheque.
Marriage pension Scheme.
Deposit pension scheme.
Theoretically, total deposits are divided into categories on the basis of withdrawal procedure,
Time deposit & Demand deposit. In case of demand deposit money is withdrawn on demand.
It includes current deposit & saving deposit. On the other hand, A deposit whish is payable at
a fixed date or after a period of notice is a time deposit; SIBL accepts time deposit, For
example, FDR. Short Term Deposit (STD) is hybrid A/C in which the features of current and
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saving account exist. In short Term Deposit account the deposit should be kept for at least
seven days to get interest. The interest offered for STD is less than that of saving deposit. In
SIBL, various big companies, Organizations, government departments keep money in STD
accounts. Frequent withdrawal is discouraged and requires prior notice.
Provisional profit rate for STD Account – 5.60% (Half years compounding).In SIBL, usually
customers give an instruction the Bank that their current account will be debited whenever its
deposited amount crosses a certain limit and this amount will be transferred to the STD
account. So, bank follows this instruction by giving following entries.
Customer’s Current A/C Debit.

Customer’s STD A/C Credit.
2.1.4. Bearer Certificate of Deposit (BCD):
The objective of BCD is to convert black money into white and to reduce Hundi business.
Bearer Certificate of Deposit account is almost same as Fixed Deposit account. But in case of
BCD account no name and address are mentioned, the customers open this type of account as
a bearer, any person who bears the BCD receipt can make it cash. Another difference of BCD
with FDR is that the customer deposits the money deducting the interest. AT the maturity he
withdraws the total money for whish he opened the BCD account.
Interest rate on BCD account is same as Fixed deposit account,-
For 3 months @ 8.50%
For 1 Year or above @ 9.20%
Accounting treatment in case of issuing of BCD, -
Cash A/c Debit.
BCD A/c Credit.
Accounting treatment in case of encashment of BCD, -
BCD A/c ......................Dr.
Excise Duty on Deposit ........Cr.
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Tax on Interest ...................Cr.

Cash A/C .....................Cr.
2.2.0. BILLS AND CLEARING SECTION:
SIBL Local Office branch performs the bill clearing function through Local office. SIBL
Local office acts as the agent of all SIBL branches for the clearing house of the Bangladesh
Bank. There are two types of cheque, which are-
Inward clearing cheque
Outward clearing cheque.
2.2.1 Inward Cheques:

Inward cheques are those ones drawn the respective branch which have been presented on
other banks and will be cleared / honored through the clearing house of Bangladesh Bank. For
example the cheque drawn on SIBL Local Office Br. Then the cheque is called inward cheque
of SIBL Local Office Br,
Accounting treatment:
Customer’s A/C Debit.
SIBL General A/c credit.
2.2.2. Outward cheques :
Outward cheques are those ones drawn on other bank branch which are presented on the
concerned branch for collection through clearing house of Bangladesh Bank. These cheques
are called outward cheques.
For example, the cheque drawn on Mercantile Bank LTD, Kawran Bazar Br has been
presented on SIBL Local Office Br. This cheque is called the outward cheque of SIBL Local
Office. Hence it is said that the cheque which is the inward cheque of one bank is the outward
cheque of another bank.
Whenever a cheque is brought to the collection officer does two functions:-
i. Giving the special crossing with “Dhaka Bank. Local Office Branch, Dhaka”
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ii. Endorsed by the collecting bank.

The following table is showing endorsement of instrument in SIBL.
ENDORSEMENT
Payee’s A/C credited pay to Mr. X
Received payment
Payee’s A/C credited Pay to SIBL. Mr., X
Payee’s A/C credited pay Mr. SIBL
Payee’s A/C will be credited on realization Bills for Collection
2.2.3. Outward Bills for Collection (OBC).
By OBC, we mean that those cheques drawn on other banks which are not within the same
clearing house. Officer gives OBC seal on this type of cheques and later sends a letter to the
manager of the branch of the some bank located in the branch on which cheque has been
drawn. After collection of that bill branch advises the concerned branch in which cheques has
been presented to credit the customer account through Inter Branch Credit Advice (IBCA).
In absence of the branch of the same bank, officer sends letter to manager of the bank on
which the cheques is drawn. That bank will send pay order in the name of the branch. This is
the procedure of OBC mechanism.
2.2.4. CLEARING:
The scheduled banks clear the cheques drawn upon one another through the clearinghouse.
SIBL is a scheduled Bank. According to the Article 37 (2) of Bangladesh Bank Order, 1972,
the banks that are the member of the clearinghouse are called as Scheduled Banks. This is an
arrangement by the central bank where everyday the representative of the member banks
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gathers to clear the cheques. The place where the banks meet and settle their dues is called the
clearinghouse. The clearinghouse sits for two times a working day.
The SIBL Local Office Br sends the instruments through Inter Branch Debit Advice
(I.B.D.A). SIBL Local Office acts as an agent in this case. For this, Local Office branch gives
the following entries,
SIBL General A/C (Local Office Br) ---------------Dr.

Customer’s A/C---------------------------------Cr.
If the instrument is dishonored, the instrument is returned to the Local Office branch through
I.B.D.A. along with the following entries,
Customer’s A/C---------------Dr.
SIBL General A/C------------------Cr.
2.2.5. RECEIVING CHEQUES FOR COLLECTION:
In SIBL, cheques of its customers are received for collection from other banks. In case of
receiving cheques, following points should be checked very carefully-
The cheques should not carry a date older than the receiving date for more than 6 months. In
that case it will be a ‘stale cheque’ and it will not be allowed for collection. Again the date of
the cheque should not be more than 1 day’s forward than the receiving date.
The amount in figures and words in both sides of the pay-in-slip should be same and it should
also be same with the amount mentioned in figures and words in the cheque.
The name mentioned in the cheque should be some in both sides of the pay-in-slip and it
should be the same with the name mentioned in the cheque.
The cheque must be crossed.
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2.2.6. CHEQUE AND CROSSING:
A “Cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable
other wise than on demand. [According to section-6, negotiable Instrument Act, 1881.]
A cheque may be classified into:

An open cheque that can present for payment by the holder at the counter of the drawer’s
bank.
A crossed cheque that is to be paid only through a collecting banker.
Crossing cheque: A cheque is said crossed when two transverse parallel lines with or without
any words are drawn across the face.
Crossing may be general, special or restrictive.
2.2.7. Issuing cheque book:
Following procedures are maintained by SIBL, Local Office for issuing checkbook.
Firstly the customer will fill up the check requisition form.

The leaves of the checkbook under issue are counted to ensure that all the leaves and the
blank requisition slip are in tact.
The officer writes A/C number and branch name on all the leaves of the checkbook.
The name and the A/C number of the customer are than entered in the checkbook register
against the particular checkbook series.
Then the officer sightseer, checkbook, and requisition slip
Lastly the checkbook is handed over to the customer after taking acknowledgement on
requisition slip.
A cover file containing the requisition slip is effectively preserved as vouchers. If any defect
is noticed by the ledger keeper, he makes a remark to that effect on the requisition slip and
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forward it to the cancellation officer to decide whether a new checkbook to be issued to the
customer or not.
2.3.0. Remittance of Funds:
Remittance of funds is ancillary services of SIBL. It aids to remit fund from one place to
another place on behalf of its customers as well as non- customers of bank. SIBL has its
branches in the major cities of the country and therefore, it serves as one of the best mediums
for remittance of funds from one place to another.
The main instruments used by SIBL, Local Office Br for remittance of funds.
-Pay Order/ Banker’s check.
-Demand Draft.
-Telegraphic Transfer.
2.3.1. Bank’s cheque / Pay order.
The pay order is an instrument issued by bank, instructing itself a certain amount of money
mentioned in the instrument taking amount of money and commission when it is presented in
bank. Only the branch of the bank that has issued it will make the payment of pay order. The
banker’s cheque must come the branch for payment wherever it is presented.
Issuing of Pay Order:

The procedures for issuing a Pay Order are as follows:
Deposit money by the customer along with application form.
Give necessary entry in the bills payable (Pay Order) register where payee’s name, date, PO
no, etc is mentioned.
Prepared the instrument.
After scrutinizing and approval of the instrument by the authority, it is delivered to customer.
Signature of customer is taken on the counterpart.
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A customer can purchase PO in different modes:
By cash:
Cash A/C Debit
Bills payable (PO) A/C Credit.
Income on commission A/C Credit.
By account:
Customer’s A/C Debit
By transfer:
SIBL General/ other Dept Clients A/C Debit
PO A/C is the current liabilities of bank, which is acquired to be discharged by beneficiaries

against cash or through an account.
Settlement of a PO:
When PO submitted by collecting bank through clearing house, the issuing bank gives
payment.
Bills payable (PO) A/C Debit

SIBL General A/C Credit.
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But before giving payment it is duty for issuing to observe whether endorsement was given by
the collecting bank or not, then the instrument is dishonored and marking ‘Endorsement
required’.
Cancellation of a Pay Order:
If a buyer wants to cancel it, he should submit a letter of instrument in this regard and also
return the instrument.
Adjustment entry wills be-
Bills payable (PO) ---------------Dr.

Customer A/C------------------Cr.
When PO is lost:
If the instrument is lost, the holder will inform to the issuing bank immediately. Bank will
mark ‘stop payment’ on the Bills payable (PO) Register. Buyer will then ask for a new
instrument by submitting a GD copy, and indemnity bond. A new instrument will be
delivered.
2.3.2. Bank Draft:
The person intending to remit the money through a pay order has to deposit the money to be
remitted with the commission, which the banker charges for its services. The amount of
commission depends on the amount to be remitted. On issue of the pay order, the remitter
does not remain a party to the instrument i) Drawer branch ii) Drawee branch iii) Payee. This
is treated as the current liability of the bank as the banker on the presentation of the
instrument should pay the money. The banker event on receiving instructions from the
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remitter cannot stop the payment of the instrument. Stop payment can be done in the
following cases:
Loss of draft before endorsement: in this case, “Draft reported to be lost, payee’s endorsement
requires verification” is marked.
Loss of draft after endorsement: In this case, the branch first satisfies itself about the claimant
and the endorsement in his favor.
In case of issuing of the instrument:
Cash/ customer’s A/C---------------------Dr.

SIBL General A/C (Drawn on branch)--------------Cr.
Income A/C commission---------------------------Cr.
After giving these entries an Inter Bank Credit Advice is prepared which contains the
controlling number, depicting that the branch is credited to whom it is issued.
An I.B.C.A. implies the following entries,
SIBL General A/C Issuing Branch ---------------Dr.

Drawn on branch-------------------------Cr.
Role of the Drawn Branch:

After receiving the I.B.C.A. lodgment is done by the branch. The following entries are given
“DD In-Issuing branch” register
Issuing branch A/C-------------------------Dr.

Bills Payable -------------------------------------Cr.
(After receiving an I.B.C.A.)
Bills Payable (DD) A/C--------------------------Dr.
Client’s A/C------------------------Dr.
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Entries are given in “DD In-Issuing branch” register,-

Issuing branch A/C---------------Dr.
Bills Payable-------------------------------Cr.
(After receiving an I.B.C.A.)
Bills Payable (DD) A/C--------------------------Dr.
Client’s A/C------------------------Dr.
Charges:
A commission of 0.15% is taken on the draft value & Tk.50/= is taken as postal charge.
Cancellation:
To cancel an issued DD, the client has to submit an application. Issuing branch then sends an
Inter Branch Debit Advice (I.B.D.A) to the drawn branch against previously issued I.B.C.A.
After that the following entries are given,-
General A/C drawn on branch------------------------------Dr.

Client’s A/C --------------------------------------------------Cr.
Issuing of Duplicate DD:
If the customer wants to issue a duplicate DD, than customer is asked to do the following
formalities,-
Making a general diary (G.D.) in the nearest Police Station.

Furnishing an Indemnity Bond in Tk.50/= stamp
The banker immediately marks “stop payment” in the register after receiving the application
from the customer and a duplicate DD is issued.
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2.3.3. Mail or Telex Transfer (TT):
Telex transfer is another widely used mode for remittances of funds. In case of telex transfer
the message for transfer of funds is communicated through tested telex. SIBL generally
recovers from the telex charges in addition to the usual service charges.
Issuing of TT:
SIBL follows the following procedures:
The customer deposits money with SIBL to be sent.

The customer obtains a cash memo containing TT serial number.
TT serial number, notifying part name is mentioned in the telex message.
The Telex Department confirms transmission of the telex.
Accounting entries for TT:
Cash A/C/ Client’s A/C -----------------------Dr.

SIBL General A/C (Local Office branch)---------------Cr.
Procedures for the incoming TT:

After receiving the telex, it is authenticated by test. TT Serial number is verified by the “TT
in-Concern branch” register. The following entries are given in the vouchers,-
SIBL General A/C (Local Office branch)-----------------------Dr.

Client’s A/C------------------------------------------Cr.
Tk. 50/= is taken as postal charge. The minimum commission is Tk. 50/= or o.15% of the
amount whichever is higher.
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2.4.0. Fixed deposit:
Fixed deposit is one, which is repayable after the expiry of a predetermined period fixed by
him. The period varies form 3 months to 1 year. These deposits are not repayable on demand
but they are withdraw able subject to a period of notice. Hence, it is a popularly known as
‘Time Deposit’ or ‘Time Liabilities”. Normally the money on a fixed deposit is not repayable
before the expiry of a fixed period.
Before opening a Fixed Deposit Account a customer has to fill up an application form which
contains the followings:
Amount in figures
Beneficiary’s name and address
Period
Rate of interest
Date of issue
Date of maturity
Instructions:
- To be renewed automatically with interest for the next period.
- Not to be renewed for next period.
- Pay interest to account no. (-------) on maturity
Special instruction
How the account will be operated (singly or jointly)
Signature (s)
F.D.R. no.
Then a FDR account is opened and it is recorded in the FDR Register which contains the
following information,-
FDR A/C no.

FDR (Fixed Deposit Receipt) no.
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Name of the FDR Holder with address

Maturity period
Maturity date
Interest rate
In case of Fixed Deposit Account the Bank needs to maintain a cash reserve. So SIBL offers a
high interest rate in Fixed Deposit accounts. The Insterest rates followed by SIBL in Fixed
Deposit accounts are,-

For 1 year or above @ 11.75%
The FDR becomes renewed automatically in SIBL if the customer does not encash it within 7
days of maturity. In case of encashment of F.D.R in maturity, following accounting
treatments are given:
Excise Duty on FDR--------------------Dr.
Income Tax on interest ----------------Dr.
FDR A/C----------------------------------Dr.
Cash A/C---------------------------------Cr.
Interest on FDR A/C--------------------Cr.
If the customer wants to draw the interest only, then following entries are given-
Interest on FDR A/C-----------------Dr.
Cash A/C-----------------------------Cr.
In case of ‘before maturity enactment’ interest is calculated for the days from the date of
opening the FDR account.
2.5.0. Cash Section:

The cash section of any branch plays very significant role in general banking department.
Because, it deals with most liquid assets The SIBL Local Office Br has a equipped cash
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section. This section receives cash from depositors and pay cash against cheque, draft, PO,
and pay in slip over the counter.
2.5.1. Receiving Cash:

Any people who want to deposit money will fill up the deposit slip and give the form along
with the money to the cash officer over the counter. The cash officer counts the cash and
compares with the figure written in the deposit slip. Then he put his signature on the slip
along with the ‘cash received’ seal and records in the cash receive register book against A/C
number.
At the end of the procedure, the cash officer passes the deposit slip to the counter section for
posting purpose and delivers duplicate slip to the clients.
Account treatment:
Particulars Dr./Cr.
Cash A/C Dr.
Customer’s A/C Cr.
2.5.2. Disbursing Cash:
The drawn that wants to receive money against cheque comes to the payment counter and
presents his cheque to the officer. He verifies the following information-
Date of the cheque

Signature of the A/C hold
Material alteration
Whether the cheque is crossed or not
Whether the cheque is endorsed or not
Whether the amount in figure and in word correspondent or not
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Then he checks the cheque from computer for further verification. Here the following
information is checked:
Whether there is sufficient balance or not

Whether there is stop payment instruction or not
Whether there is any legal obstruction (Garnishee Order) or not
After checking everything, if all are in order the cash officer gives amount to the hold and
records in the paid register.
Account treatment:
Particulars Dr./Cr.
Customer’s A/C Dr.
Cash A/C Cr.
The cash section of SIBL deals with all types of negotiable instruments, cash and other
instruments and treated as a sensitive section of the bank. It includes the vault which is used
as the store of cash instruments. The vault is insured up to Tk. 60 lacs. If the cash stock goes
beyond this limit, the excess cash is then transferred to Head Office. When the excess cash is
transferred to SIBL Head Office. The cash officer issues IBDA.
Account treatment:
SIBL General A/C Dr.

Cash A/C Cr.
When cash is brought from SIBL Head Office.
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Account treatment:
Cash A/C Dr.

SIBL General A/C Cr.
2.6. Locker Service:

SIBL Local Office Br is providing facility of locker service for the purpose of safeguarding
the valuable property of customers. The person or organization that has any account in bank
branch can enjoy this service. They keep their valuable assets in banker’s custody. Customers
have right to look after with a key of their individual locker provided by bank. SIBL
maintains the following types of lockers:
------ Large locker.

------ Medium locker.
------ Small locker.
For enjoying this service, clients have to give charge yearly Tk. 1500, Tk. 1250 and Tk. 700
for large, medium and small locker respectively.
2.7.0. Closing of an Account:

For two reasons, one can be closed. One is by banker and other is by the customer.
By banker: If any customer doesn’t maintain any transaction within six years and the A/C
balance becomes lower than the minimum balance, banker has the right to close an A/C.
By customer: If the customer wants to close his A/C, he writes an application to the manager
urging him to close his A/C.
Different procedures are followed in cash of different types of A/C to close. Fixed deposit
A/C is closed after the termination of the period. BCD A/C is closed when the certificate is
surrendered.
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Closing process for current & savings A/C:
After receiving customer’s application the officer verifies the balance of the A/C.
He then calculates interest and other charges accumulated on the A/C.
If it bears a credit balance, the officer writes advice voucher. He gives necessary accounting
entries post to accounts section.
The balance is returned to the customer. And lastly the A/C is closed.
But in practice, normally the customers don’t close A/C willingly. At times, customers don’t
maintain any transaction for long time. Is this situation at first, the A/C becomes dormant and
ultimately it is closed by the bank.
2.8.0. Observations & Recommendations:

Theoretically any person can purchase pay order, demand draft and telex transfer by
depositing money and commission. But then person who wants to purchase these should have
account in the bank branch. These will discourage customers to transact with bank.
In opening A/C some additional documents are needed as compared with theoretical record.
Like trade license, member of Dhaka chamber of commerce and industry (DCCL) in Dhaka
city. Again some documents are not essential practically as referred in theory. For example,
the photo of the person who will open A/C, and sometime introducer.
There is a rule to deposit at least an amount of money in case of opening an account. But it is
not strictly followed. Sometimes more money is asked from a new customer who discourages
him to open an account in the bank. I think the amount should be fixed at a level that is not
altered from customer to customer.
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Theoretically any person can purchase pay order, demand draft and telex transfer by
depositing money and commission. But the person who wants to purchase these should have
account in the bank branch. These will discourage customers to transact with bank.
In opening A/C some additional documents are needed as compared with theoretical record.
Like trade license, member of Dhaka chamber of commerce and industry (DCCI) in Dhaka
city. Again some documents are not essential practically as referred in theory. for example,
the photo of the person who will open A/C, and sometime introducer.
There is a rule to deposit at least an amount of money in case of opening an account. But it is
not strictly followed. Sometimes more money is asked from a new customer who discourages
him to open an account in the bank. I think the amount should be fixed at a level that is not
altered from customer to customer.
In case of crossing cheque I did not observe any crossing with “Not negotiable” as much as I
stayed in bank orientation. Though theory have been given emphasis on the effect of “A/C
pay only” and “not negotiable”. The role of “Not negotiable” is not so much. There is no
provision in law regarding “A/C payee crossing”. But it has been developed in practice. If the
words, “A/C payee” are added to a crossing, it becomes an A/C pay crossing.
The degree of relationship between banker and customer determines how much theory is
deviated from practical work.
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Chapter 3. Accounts Department
Accounts department is a department with which each and every department is related. It
records the profit & loss A/C and statement of assets and liabilities by applying “Golden
Rules” of bookkeeping. The functions of it are theoretical based. SIBL Local Office Br
records its accounts daily, weekly, and monthly every record.
3.1. General Account:

The account is to be maintained with H/O of SIBL for the purpose of settlement of inter-
branch transactions. General A/C is an important one, which has to be maintained by each
branch of SIBL.
Indeed general A/C is a record of originating and responding transactions among inter-
branches of the same bank. All types of assets and liabilities of one branch with another one
are settled through this account. Branch can know how much liable with H/O the branch is.
The debit and credit balance shows assets and liabilities of the respective branch.
Followings are the journal entries under SIBL general account:
OBC paid by original branch (SIBL Local Office) to responding branch (say, SIBL
Dhanmondi) through Inter-Branch Credit Advice.
For original branch (Local Office branch)

Party’s A/C ----------------------Dr.
SIBL General A/C--------------Cr.
For responding branch (Dhanmondi)

SIBL General A/C--------------Dr.
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Party’s A/C--------------Cr.
O/W (outward) clearing cheques lodged through IBDA (Inter-branch debit advice).
a) For original branch (Local Office branch)

Party’s A/C ----------------------Cr.
b) For responding branch (Dhanmondi)

Other Bank A/C--------------Dr.
Inward clearing cheques paid by original branch (SIBL Local Office) to responding branch
(say, SIBL Dhanmondi) through IBCA (Inter-branch credit advice).
TT (Telegraphic Transfer)
Party’s A/C--------------Dr.
Party’s A/C ----------------------Cr.
TT (Telex transfer) originated by SIBL (Local Office br) to other branch of SIBL when party
is not A/C holder (through IBCA).
Party’s A/C--------------Dr.
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Party’s A/C ----------------------Cr.
Cash received from SIBL Local office. (Through IBCA).

Cash A/C--------------Dr.
b) For responding branch (Local office)

Party’s A/C (Local Office branch) -----Cr.
3.2. Extract:
Extract is a statement of all originating and responding transactions among inter–branches
through inter branches debit and credit advice. At the end of the day, all the debit and credit
advices of different department come to accounts department. It makes extract in light of all
advices.
Actually extract shows the balance of SIBL Local Office Br general A/C. The objective of
preparing it is to know how many transactions have been originated and responded by the
respective branch per day. Branch has to send it its Head Office keeping one photocopy.
3.3. Debit Voucher:

For making cash payment like entertainment, conveyance, account department writes a debit
voucher. Amount is withdrawn through cash section by presenting debit voucher.
3.4. Statement of affairs:

Accounts section prepares the statement of affairs for finding the profit /loss as well as
amount of assets and liabilities of concerned branch per day. Theoretically; it is called
financial statement and has two parts:
“Income and Expenditure A/C.
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“Statement of assets & liabilities.
3.5. AMORTIZATION AND DEPRECIATION:

Amortization is the allocation of the cost of an intangible asset to expense. For example;
prepaid expenditure, prepaid insurance and goodwill etc. Amortization schedule is determined
by the decision of management.
Depreciation is a process of cost allocation of assets not a process assets valuation.

Fixed Assets have been shown at cost less accumulated
depreciation.
Depreciation has been charged on straight- line method at the following rate on cost of assets
for the full year irrespective of their date of purchase.
Particulars of assets %
Furniture & fixture 10
Office Appliance 20
Office Decoration 10
Electric Equipment 20
Computer 20
Vehicle 20
3.6. FUNCTIONS PROVIDED BY ACCOUNTS DEPARTMENT:

Like all other Banks, in SIBL Accounts Department is regarded as the nerve Center of the
bank. In banking business, transactions are done every day and these transactions are to be
recorded properly and systematically as the banks deal with the depositors’ money. Any
deviation in proper recording may hamper public confidence and the bank has to suffer a lot
otherwise. Improper recording of transactions will lead to the mismatch in the debit side and
in the credit side. To avoid these mishaps, the bank provides a separate department whose
function is to check the mistakes in passing vouchers or wrong entries or fraud or forgery.
This department is called as Accounts Department.
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Besides the above, the Bank has to prepare some internal statements as well as some statutory
statements, which are to be submitted to the central bank. Accounts Department prepares
these statements also. The department has to submit some statements to the Head Office,
which is also consolidated by the Head Office late on.
The tasks of the Accounts Department of SIBL Local Office may be seen in two different
angles:
Daily Tasks.
Periodical Tasks.
DAILY TASKS:
The routine daily tasks of the Accounts Departments are as follows--------
Recording the daily transactions in the cashbook.
Recording the daily transactions in general and subsidiary ledgers.
Preparing the daily position of the branch comprising of deposit and cash.
Preparing the daily Statement of Affairs showing all the assets and liability of the branch as
per General Ledger and Subsidiary Ledger separately.
Making payment of all the expenses of the Branch.
Recording inter branch fund transfer and providing accounting treatment in this regard.
Checking whether all the vouchers are correctly passed to ensure the conformity with the
‘Activity Report’; if otherwise making it correct by calling the respective official to rectify the
voucher.
Recording of the vouchers in the Voucher Register.
Packing of the correct vouchers according to the debit voucher and the credit voucher.
PERIODICAL TASKS:
The routine periodical tasks performed by the department are as follows:
Preparing the monthly salary statements for the employees.
Publishing the basic data of the branch.
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Preparing the weekly position for the branch which is sent to the Head Office to maintain
Cash Reserve Requirement (C.R.R).
Preparing the monthly position for the branch, which is sent to the Head Office to maintain
Statutory Liquidity Requirement (S.L.R).
Preparing the weekly position for the branch comprising of the break up of sector-wise
deposit, credit etc.
Preparing the weekly position for the branch comprising of the denomination wise statement
of cash in tills.
Preparing the quarterly statements (SBS-2 and SBS-3) where SBS-2 shows “classification of
deposits excluding inter bank deposits, deposits under wage earner’s scheme and withdrawals
from deposits accounts” and SBS-3 shows “classification of advances (excluding inter bank)
and classification of bills purchased and discounted” during the quarter.
Preparing the budget for the branch by fixing the target regarding profit and deposit so as to
take necessary steps to generate and mobilize deposit.
Preparing an ‘Extract’ which is a summary of all the transactions of the Head Office account
with the branch to reconcile all the transaction held among the accounts of all the branches.
3.7. OBSERVATIONS:
Under this department, practice strictly supports theories. There is not too much discrepancy
between them. All the functions of Account Department provided by SIBL Local Office Br
are based on accounting theories and procedures.
In case of amortization there is no pre-determined rate on which it will be charged. It fully
depends on the decisions of the executives of Accounts Department or the instruction of H/O.
In case of depreciation only the straight-line is to be followed, but there are other methods of
charging depreciation, such as-double decline, sum year-digit methods etc are used as method
of depreciation. These are not followed by SIBL except the straight line method.
This department plays a vital role in the management information system. Management
collects different types of information from this department.
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Chapter 4. FOREIGN REMITTANCE DEPARTMENT
‘Foreign remittance’ means purchase and sale of freely convertible foreign currencies as
admissible under Exchange Control Regulations of the country. Purchase of foreign
currencies constitutes inward foreign remittance and sale of foreign currencies constitutes
outward foreign remittance.
So we see that there are two types of Foreign Remittance:
a. Foreign Inward Remittance

b. Foreign Outward Remittance
The Foreign Remittance department of SIBL Local Office branch is equipped with a number
of foreign remittance facilities. Following are the types of foreign remittance facilities offered
by SIBL Local Office branch.
Issuance of Foreign Demand Draft (F.D.D)

Issuance of travelers Cheques (T.C)
Endorsement Of US$ in Passport.
Issuance of foreign T.T (Telegraphic Transfer)
Disbursement of the cash of incoming F.T.T.
Collection of F.D.D.
4.1. FOREIGN DEMAND DRAFT (FDD)

SIBL issues the Foreign Demand Draft for the charges for TOEFL, SAT, GMAT, registration
fee, membership fee and also for the application or processing fee for the student who are
interested to study abroad. SIBL opens Student Files to issue Foreign Demand Draft
following the permission of Bangladesh Bank. SIBL Local Office branch has more than 200
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Student Files. Before issuance of FDD, SIBL asks the students to fill up the TM Form; which
contains the following particulars-----
Name of the student

Full address of the student
Amount of FDD in Foreign Currency
Purpose of Remittance
Address of the Institution to which the FDD will be favored
Country receiving payment
Passport no. of the student with date of issue
Signature of the student
The TM Form is sent to Bangladesh Bank with photocopies of the Passport of the student and
the FDD issued.
Commission for issuance of FDD, @ Tk.400.
Commission for Cancellation of FDD, @ Tk.400.
The foreign bank/exchange company on local bank usually issues foreign Demand Draft. It is
an order to pay a certain sum to a certain person or as his instruction, issued by the bank on its
overseas branch or on its correspondent bank. The demand draft is handed over to the
purchaser who sends it to the beneficiary. The beneficiary obtains payment on presentation to
the bank on which the draft is drawn.
Encashment of FDD may take place in two ways-
Purchase,
Sending for collection.
Purchase:
The following criteria must be fulfilled:
Firstly, the party applies for a Foreign Bill Purchase (FBP) to limit the facility, which is
approved by the Head Office authority for a certain period.
The local banks will entertain valued clients with this facility.
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The party will give an undertaking regarding adjustment of FBP liabilities which is offered to
him in case of non-realization of proceeds (FDD).
It is necessary that all relevant charge documents (D.P. Note, Personal Guarantee etc.) be
collected from the party.
The following vouchers are passed after it is posted in the FBP register;
Dr. - FBP (at the spot buying rate)
Cr.-Income A/C Commission others
Cr. - Income A/C Postage
The FDD is sent to the American Express Bank, Dhaka for collection along with a R.L. It is
drawn on a foreign bank in abroad otherwise it is sent to the respective bank on which the
FDD is drawn. After giving endorsement on the backside of the FDD.
After realizing proceed,the following vouchers are passed-
Dr. – SIBL G/A
Cr. – FBP (liability adjusted)
Cr. – Income A/C (Exchange Gain)
2. Sending for collection:
It is posted in the Foreign Bills for Collection. The following functional activites are
undertaken for a FBC:
It is posted in the FBC register. FBC No. Is assigned to the FDD.
Then it is sent for collection to the branch of the bank on which it is drawn. If it is drawn on a
foreign bank in abroad, it is sent to the AMEX. Dhaka along with a R.L. and liability voucher.
Dr.- FBR
Cr.- FBC
After receiving credit advice the following vouchers are passed.
Dr.- SIBL, General A/C, ID (at spot buying T.T. clean rate)
Cr.- Party A/C
Cr.- Income A/C postage
Cr.- Income A/C Commission
And liability voucher is reversed.
Dr.- FBC
Cr.- FBR
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4.2. TRAVELERS CHEQUE (purchase):

The payment to the customer is made instantly by debiting “foreign bill purchased” account.
As soon as collecting bank abroad informs us about the realization of the traveler’s cheques,
our branch debit that particular foreign bank account and adjust the foreign bill purchased
account.
The branch takes following steps chronologically as follows:
The signature of the party is taken on the T.C. and verified with that of his passport signature
to make sure that the particular T.C. belongs to the person.
The T.C. is allotted with a FBP No. and entry is passed into the FBP register. After that on the
back of the T.C. the endorsement “payee’s A/C credited” is written along with the FBP No.
And the following vouchers are passed:

Dr. FBP A/C.@ T.C. buying)
Cr. Income A/C commission (others) @ taka 0.25 per dollar)
Cr. Income A/C Postage @ Tk 50/-)
Cr. Party’s A/C
Then a schedule is prepared in four sets. First three copies are forwarded with the T.C. to the
foreign bank and the fourth copy is kept in the FBP lodgment file along with a copy of T.C.
When the branch gets the credit advice against the proceeds from our NOSTRO A/C with
which the transaction took place, we adjust the FBP liability by passing the following
vouchers:
Dr. SIBL Gen. A/C H.O (ready buying rate)

Cr. FBP (liability adjusted)
Cr. Income A/C Exchange gains.
Procedure for TC (outward):

For traveling purpose each person has a yearly foreign currency quota as follows:
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Particulars In cash In TC Total

For outside SAARC countries $300 $2700 $3000
For SAARC By road $300 $300 $500
Countries By air $700 $300 $1000
The yearly quotas are mutually exclusive to each other.

But for the F.C.A/C hold a special advantage is prevailing there and that is the person can get
TC for any amount as much as his FC A/C balance permits.
First, the party will fill up the form (purchase agreement) and sign it. Again he will sign the
T/M form. After that the banker will endorse the party’s passport and ticket declaring the
amount of foreign currency issued in cash and in the form of TC. Then the following
vouchers are passed:
Dr. Cash or party A/C

Cr. SIBL Gen. A/C.@ TC selling)
Cr. Income A/C Comm.
(Here 1% of total Taka amount is realized for issuance of TC)
Cr. Income A/C misc. (Tk 65/- per passport)
Then, entry is made in the TC issue register. Original copy of the purchase agreement,
photocopy of the ticket and passport are kept with the T/M form and the purchase agreement
copy along with the TC, passport and ticket are handed over to the party after getting after
getting his “received” signature in the TC issuing register.
For TC sale the operational procedure is as follows:
a.
Dr. CD A/C or cash
Cr. wes Fund Purchase A/C (at actual rate)
Cr. Income A/C Comm.
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b.
Dr. FC Fund A/C (Notional rate)
Cr. SIBL Gen. A/C H.O.
For TC settlement authorized AMEX, N.Y., U.S.A. debits the branch’s A/C along with
purchase agreement.
4.3. ENDORSEMENTS OF US$ IN PASSPORT:
SIBL endorses US$ in passports. To endorse US Dollar, the client has to apply in the
prescribed from (TM Form). The following entries are given in this regard,-
Cash or Customers’ A/C-----------------Dr.
Foreign Currency on Hand< Dollar Special> ---------Cr.
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CHAPTER 5. Credit Department
One of the core functions of commercial banks is to create the claim against individual
borrower or real the purpose of sanctioning credit. Bank grants loan in the form of different
securities. By the primary security, we mean the financial claim of holder against the real
sector of economy. In banking the sector, the financial claim of bank against issuer, (called
investors, borrowers and deficit units). This core function of a bank is to be performed by the
credit department of the bank. In this case, the relationship of bank and customer is that of the
creditor and debtor.
5.1. TYPES OF LOANS AND ADVANCES OFFERED BY SIBL:

SIBL offers following types of loans and advances,-
Secured Overdraft (SOD)
Loan (General)
House Building Loan (Staff)
Demand Loan
Transport Loan
Industrial Credit
House Building Loan (General)
transport Loan (Staff)
Cash credit (Hypothecation)
Past Due Bills
Loan against Trust Receipt (LTR)
5.2. Different types of Advances offered by SIBL
Types of advances Code Interest rate Features

Secured Overdraft 14 11.25%-16% Continuous advance facility given for one year
(SOD) but can be renewed after the expiry of the time.
Given against I.C.B. unit, FDB, Sanchaypatras
and Work Orders.
Loan (General) 13 12%-16% Given against Personal guarantee,
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Hypothecation of goods and land and building.

House Building 12 7% Given against Personal guarantee, land and
Loan (Staff) building.
House Building 24 12.75%-16% Given against Personal guarantee, land and
Loan (General) building.
Transport Loan 32 7% Given against Personal guarantee and
(Staff) Hypothecation of vehicles.
Transport Loan 17 15% Given against Personal guarantee and
(General) Hypothecation of vehicles.
Demand Loan 16 7%-14.5% Given against Personal guarantee, and cash
collateral securities.
Industrial Credit 22 12.5%-16% Given against land and building along with
machinery, Personal guarantee of Directors
and Hypothecation of raw materials.
Cash credit 18 11%-16% A short term arrangement by which a customer
(Hypothecation) is allowed to borrow money up to a certain
limit is sanctioned by the bank for a certain
time. Given against Registered mortagage of
land and building, hypothecation of goods and
personal guarantee of Directors.
Past Due Bills 31 15% Given against Bills Receivables.
Loan against Trust 15 11%-15% Advance allowed for retirement of shipping
Receipt (LTR) documents and release of goods imported
through L/C. The goods are handed over to the
importer under trust with the arrangement that
sale proceeds should be deposited to liquidate
the advances within a given period. Given
against Bills Receivables, hypothecation of
imported goods, Trust receipt, personal
guarantee, and registered mortgage of land and
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building.
5.3. PROCEDURE FOR GIVING ADVANCE:

The potential borrower will submit application to SIBL for loan by filling up of a specific
Application form.
The Application form (request for Credit Limit) contains following particulars:
Name of the Borrower-----

A/C No.-------------
Bunnies address (with telephone no.) [Residential address and Permanent address]--------
Introducer’s name, A/C no. & address-----
Date of establishment/ incorporation------
Trade license number, date and expiry date (Photocopy of trade license enclosed)--------
GIR/TR no. & amount of income tax paid last year------
Constitution/ Status (Mention whether sole proprietorship/ partnership/ Public Ltd. company/
Private Ltd. company)--------
Particulars of individual/ Proprietor/ Partners/ Directors (Name & Designation, father’s/
Husband’s name, present & permanent address with Telephone no., % of shares held)-------
Experience and background of Individual/Proprietors/ Partners/ Directors--------
Full particulars of assets in the personal name of Individual/ Proprietor/ Partners/ Directors
with valuation-----------
Names of Subsidiaries/ Affiliates, percentage of share holding and nature of business---------
Nature and details of business/ products (for which credit facility is applied for), Markets
(Present market price per unite, Factory price), Estimated sales for next one year............
Credit facilities required (type, amount, period, purpose, and mode of adjustment)..........
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Details of securities offered with estimated value (Primary security, Collateral security,
market value of the security)..........
Details of liabilities in the name of the client or in the name of any other partners/Directors or
Subsidiaries/Affiliates Nature of advance, amount, security and validity of limit).....
Balance Sheet/ Income Statement of Statement of Accounts of the following years attached
(Preferably last 3 years)........
Other relevant information.........
Proposed debt/equity ratio.........
Signature of the Applicant..............
After receiving the loan application form, SIBL sends a letter to Bangladesh Bank for
obtaining a report from there. This report is called CIB (Credit information Bureau) report.
This report is usually collects this report if the loan amount exceeds Tk. 50 Lac. But SIBL
usually collects this report if the loan amount exceeds Tk.10 Lac. The purpose of this report is
to being informed that whether the borrower has taken loan from any other bank; if ‘yes’ then
whether these loans are classified or not.
After receiving CIB report if the Bank thinks that the prospective borrower will be a good
borrower, then the bank will scrutinize the documents. In this stage, the Bank will look
whether the documents are properly filled up and signed.
Then comes processing stage. In this stage, the Bank will prepare a Proposal A proposal
contains following relevant information.......
Name of the Borrower---
Nature of Limit-----
Purpose of Limit------
Extent of Limit---
Security---
Margin---
Rate of Interest-------
Repayment-------
Validity-------
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Branch incumbent (Local Office Br.) has the discretionary power to sanction loan (SOD) up
to Tk. 25 Lac against financial obligations by informing Head Office. But in that case, the
Branch Manager has to give attention to the following matters:
The interest rate of the loan must not be less than 4.5% and
The borrower must maintain 10% margin.
Except this case, the branch has to send the proposal to the Head Office. Head Office will
prepare a minute and submit it before the Executive Committee (EC). The minute has to be
passed by EC. After passing the minute, it will be sent to Bangladesh Bank for approval in
case of following:
........If the proposed limit exceeds 15% of Bank’s equity;
.........If the proposed limit against cash collateral securities exceeds 25% of Bank’s equity.
After the sanction advice, Bank will collect necessary documents (charge documents). These
documents are--------
Joint Promissory Note

Single Promissory Note
Letter of Undertaking
Loan Disbursement Letter
Debit Figure Confirmation Sheet
Letter of Continuity
Letter of Authority
Letter of Revival
Right of Recall the Loan.
Letter of Guarantee
Letter of Indemnity
Trust Receipt
Hypothecation of Goods
Hypothecation of Vehicles
Counter Guarantee
Letter of Lien
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Letter of Lien in case of advance against FDR

Letter of Lien And Authority for advances to third parties against Fixed Deposit/Call
Deposit/Special Deposit or Margin or margin deposits.
Letter of Authority to encase FDR
Letter of Agreement for Packing Credit
Letter of Guarantee for opening L/C
Charges over Bonds or Certificates or shares etc. by third person, firm or company to secure
specific and general liability.
Memorandum of Deposit of Title Deeds
Hypothecation of goods to secure a Demand Cash Credit Or Overdraft/Loan amount
Guarantee by Third party.
For withdrawing the loan amount, the customer creates a CD account and the loan is
transferred to the CD A/C. Afterwards the customer can withdraw the money.
5.4. Feasibility Report:

This report is from borrower’s point of view. He prepares this report and submitted to the
bank.
5.5. Credit Line Proposal:

In this step of the term loan the branch sends a credit line proposal to the head office for
approval of the term loan. The credit line proposal contains the following particulars:
Fresh/Renewal/Revision of the term loan

Borrower name
Types of business
Capital structure
Particulars of previous transaction
Existing vis-a-vis proposed credit limits
Movement of the accounts
Liabilities of sister concerns
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5.6. Project Appraisal:

It is the reinvestment analysis done by the banker before a project he approved. Project
appraisal in the banking sector needed for the following reasons:
To justify the soundness of an investment
To ensure repayment of bank finance
To achieve organizational goals
To recommend if the project is not designed properly
5.7. Techniques of project appraisal:

An appraisal is a systematic exercise to establish that the proposed project is a viable
preposition. The appraising officer checks the various details submitted by the promoter in
first information sheet, credit application form, feasibility report. SIBL considers the
following aspects in apprising:
Entrepreneur
Viability of the project:
Technical viability (location and site of the project).

Commercial viability (This study indicates evaluation of a project’s feasibility in terms of
market).
Financial viability.
Economic Viability.
Management and organization viability:
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5.8 LENDING RISK ANALYSIS (LRA):

Lending Risk Analysis (LRA) is a technique by which the risk of the loan is calculated.
Banker must analyze LRA when loan application is above 1 crore. This analysis is done by
experienced people of Credit department in SIBL. It is a ranking whose total score is 140.
Among this score, 120 is for Total Business Risk and 20 for Total Security Risk.
In case of business risk, if the score falls---------
Between 13-19,then------- Poor risk
Between 20-26, then --------Acceptable risk
Between 27-34,then-----Marginal risk
Over 34, then ------ Good risk.
In case of security risk, if the score fall--------

Between – 20 to – 15 then --------------
Between – 14 to 0, then ------------ Acceptable risk
Between 0 to 10, then -------------Marginal risk
Over 10, then -----------------Good risk.
In LRA , following aspects are analyzed------------
Supplies risk
Sales risk
Performance risk
Resilience risk
Management ability.
Level of Managerial teamwork
Management competent risk
Management integrity risk
Security control risk
Security cover risk.
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5.9. SECURITIES:
SIBL charges the following two types of security,
Primary security
Collateral security.
5.10. MODES OF CHARGING SECURITY:

Common methods of charging security:
Lien
Assignment
Set off
Pledge
Hypothecation
Mortgage
Nature of security and Way of charging:

Nature of security Way of charging
Cash, Cash collateral and Documents of Lien, Assignment
title to goods
Moveable stock of raw materials, finished Pledge, Hypothecation
goods, merchandise.
Immovable property Simple/legal/registered and equitable
mortgage
Intangible assets (Goodwill) Execution of personal guarantee and Letter
of Trust Receipt.
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5.11. DOCUMENT AND DOCUMENTATION:

A document is a written statement of facts of proof or evidence arising out of particular
transaction which placement may bind the parties there to answerable and liable to the court
of law for satisfaction of the change in question. The execution of documents in proper form
and according to the law is known as documentation.
Steps in documentation:
Obtaining the documents.
Stamping (Stamp Act-1899)
Witnessing.
Execution of Documents.
Registration of Documents (assignment on the body of an insurance Policy, Mortgage deed,
Advance to a limited company etc.)
Common Compulsory Documents:

Letter of Acceptance about the terms and conditions laid down in Sanction Advice.
D.P. Note (Depending on the types of borrowers)
Letter of Arrangement.
Besides, there are other documents that are to be obtained depending on the types of Advance.
Such as-
In case of loan:
Letter of Disbursement.
Letter of Authority (if required)
Letter of Hypothecation (when goods are hypothecated as security)
Insurance Policy (if required).
Any other document as stated in Sanction Advice.
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In case of overdraft:
Letter of Continuity.
Letter of Hypothecation (when goods are hypothecated as security)
Insurance Policy (if required)
In case of cash credit:

Letter of Continuity.
Letter of Pledge/Hypothecation.
Insurance Policy under Bank’s Mortgage clause.
Letter of disbursement incase of renewed godown.
Advance against lien of FDR/ Insurance Policy etc:

Letter of Lien (1st party/ 3rd party)
Any other document as stated in Vehicles (in a separate form)
Transport Loan:
Letter of hypothecation of vehicles (in separate form)
Photocopy of blue book
Photocopy of rote permit
Insurance policy under Bank’s mortgage clause
Any other documents stated in Sanction Advice
Legal Mortgage:
Mortgage deed (certified copy)
Registration receipt in
Chain of documents for title (original if available)
C.S,S.A and R.S parcha
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Up to date Rent Receipt

Non-encumbrance certificate
Power of Attorney (if asked for)
Legal opinion
Valuation Certificate
Location plan etc./Site plan etc
Equitable mortgage:
Chain of documents for title
original title deed
C.S, S.A A and R.S parcha
Up to date Rent Receipt
Memorandum of deposit of title deed
Registered power of Attorney
Legal opinion
Valuation Certificate
Location plan etc
Non-encumbrance Certificate
5.12. CREDIT MONITORING, FOLLOW-UP AND SUPERVISION:

SIBL Officer checks on the following points:
The borrower’s behavior of turnover
The information regarding the profitability, liquidity, cash flow situation and trend in sales in
maintaining various ratios.
The review and classification of credit facilities starts at Credit Department of the Branch
with the Branch Manager and finally with Head office credit division.
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5.13. LOAN CLASSIFICATION:
Like other banks, all types of loans of SIBL fall into following four scales:
Unclassified: Repayment is regular.
Substandard: Repayment is stopped or irregular but has reasonable prospect of improvement.
Doubtful debt: Unlikely to be repaid but special collection efforts may result in partial
recovery.
Bad/Loss: very little chance of recovery.
5.14. PROVISION:
Type of classification rate of provision

Unclassified 1%
Substandard 20%
Doubtful 50%
Bad debt 100%
5.15. CLASSIFICATION CRITERIA:
Overdue (OD)
Required Payment (RP)
Limit Overdrawn (LD)
Legal Action (LA)
Qualitative Judgment (QJ)
5.16. GUARANTEE:
SIBL offers three types of Guarantee, which are as follows,
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Tender or Bid Bond Guarantee: The tender guarantee assures the tenders that tenders shall
uphold the conditions of his tender during the period of the officer as binding and that he /she
will also sign the contract in the event of the order being granted.
Performance Guarantee: A Performance guarantee expires on completion of the delivery or
performance. Beneficiary finds that as a guarantee, the contract will be fulfilled in every
respect and can retain the guarantee as per provision for long time. This can be counteracted
by including a clause stating that the supplier can claim under the guarantee, by presenting an
acceptance certificate signed by the buyer.
Advanced payment guarantee (APG): This type of guarantee is given against work order.
This idea can be made clear with the help of an example. Before the beginning of Jamuna
Bridge construction, the Government collected money from different sources to pay the
contractors in advance. But there was a risk for the Government that the contractors might not
do there
Construction work even they were paid in advance. So the Government asked Bank
Guarantee from them. Then the contractors submitted Bank Guarantee to the Government.
This type of Guarantee is called Advanced Payment Guarantee.
5.17. ISSUANCE PROCEDURE OF GUARANTEE:

Bank guarantee is a contractual relationship between the account (client) and the beneficiary.
For issuing Bank Guarantee, a customer has to apply to SIBL in their own pad. Normally the
bank prepares the format of the guarantee. The proposal for Bank Guarantee contains the
following particulars:
Name of the Borrower with address, Nature of Facility, Extent of Facility, Purpose, Security
Margin, Commission, Validity, Beneficiary, Liability position of the Borrower----, Nature of
Facility, Extent of Facility, Drawing Power , Margin Amount (Tk.), Outstanding/ Net
Exposure (Tk.), Validity.
The Bank issues Bank Guarantee on Judicial Stamp. The conditions for issuing Bank
Guarantee are:
The customer must maintain a Current Deposit (CD) account.
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The must keep certain percentage of guaranteed money (usually 2%) as margin.
Bank charges 0.50% commission on the guaranteed money per quarter (i.e., 3 months).
After realizing all the above charges, Bank then issues the Guarantee. For this issuance,
Banker’s Liability is created and the following entries are given:
Customer’s Liability-------------Dr.
Banker’s Liability---------------Cr.
When the guarantee is expired, the guarantee is marked is marked as “cancelled” and the
following entries are given---------
Banker’s Liability---------------Dr.
Customer’s Liability-------------Cr.
SIBL also issue Revolving Guarantee.
A Guarantee issues Register is maintained to record following information about Guarantee
Name of Customer
Account No.
Guarantee No.
Issuing Date
Date of Approval/Reference No.
Beneficiary of the Guarantee
Amount of Guarantee
Margin (percent and amount)
Commission
Date of Expiry
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5.18. SANCHAYPATRA:
SIBL sells five types of Sanchaypatra on behalf of the Government
Table: Showing types of Sanchaypatras bought and sold by SIBL
TYPE OF SANCHAYPATRA INTEREST RATES

3 Years Sanchaypatra (3 months term) 13.5%
5 Years Sanchaypatra (6 months term) 13.5%
Paribar Sanchaypatra 11%
5 Years Bangladesh Sanchaypatra (BSP) 10.5%-14.5%
5 Years Pratirakkha Sanchaypatra (PSP) 10.75%-17.75%
The sales statement of Sanchaypatra must be sent to Bangladesh Bank within 72 hours of sale,
otherwise the bank has to pay penalty to Bangladesh Bank. SIBL gets @ 1% as commission
of the total sales.
SIBL gives the following entries after receiving the application for Sanchaypatra from the
client,-
Cash A/C or Customer’s A/C---------------------Dr.
Sale of Sanchaypatra A/C ---------------------Dr.
5.19. ICB UNIT CERTIFICATE:
SIBL sells and purchases ICB Unite Certificate as a dealer of ICB. ICB Unite is an open-end
mutual fund. Units are sold as registered certificates. These are available in
1,5,10,50,100,150,250,1000,5000 denomination. In SIBL, there are separate forms for sale,
purchase and transfer of these certificates. the treatment for the sale of unite,-
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Cash or Customer’s A/C---------------------Dr.

ICB Unit Fund A/C ---------------------Cr.
For 100 Tk. ICB unit, buying and selling rates of SIBL are,-
For buying @Tk. 104.
For selling @ Tk. 109.
Table: Showing amount of collection charges in SIBL
Amount of the instrument to be % of collection Minimum Collection

collected charge charge
Up to Tk. 25,000
Above Tk. 25,000 but not
exceeding Tk. 1 Lac
Above Tk. 1 Lac but not
exceeding Tk. 5 Lac
Over Tk.5 Lac
STATEMENTS PREPARED BY THE CREDIT DEPARTMENT:

Monthly Statements prepared by Credit Department for Bangladesh Bank.
Quarterly Statements prepared by Credit Department for Bangladesh Bank.
Monthly Statements prepared by Credit Department for Head Office.

DEVIATIONS BETWEEN THEORIES AND PRACTICES:
Following dissimilarities have been observed in the credit department:
1. In case of method of granting security against loan, hypothecation is much
risky as compared with other charging security. But it is being used massively in SIBL Local
Office Br. It is risky because neither the ownership nor possession is passed on it, only a right
or interest in the goods is created in favor of the bank. Theoretically, bank provides two types
of credit facilities--- direct facilities (funded) and indirect facilities (non-funded). But bank is
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being covered indirect facilities fully but not direct facilities. For example, Demand Loan is
not available in bank practically.
2. In case of mortgage, only equitable and legal mortgage are commonly used as the charging
security in immovable property but theoretically there are another types of mortgage like
mortgage by the condition of sales, English mortgage, usufructuary and anomalous mortgage
are not applied in practice.
3. In case of cash credit (pledge), from the theoretical point of view, no collateral security is
normally asked for the grant of such credit, but practically security is taken against CC
(pledge).
4. Interest rates for different types of loan and advances vary to different customers. A
prospective customer is allowed to take credit facilities at a lower interest rate. Again, the
interest is charged at a higher rate to a customer who is not so prospective. But I think that
there should be a transparent interest policy that will be prospective for the bank, the borrower
and the country.
5. It is amusing matter that additional security has to be provided by borrower for loan against
trust receipt in order to protect the trust of the customers. Of course trust receipt is one of the
securities; it is valueless in the context of Bangladesh.
By and large, it can be said that amount of security and charging security are determined by
the degree of relationship between the banker and customer.
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Chapter-6: FOREIGN EXCHANGE DEPARTMENT
Foreign exchange department is an important one in SIBL Local Office Branch that deals
with import, export, and foreign remittance and post import financing. Through this is an
ancillary service provided by the Bank, The Bank is purchasing primary security by giving
loan in form of loan against imported merchandise (LIM), and loan against trust receipt
(LTR). Bank branch should be ‘Authorized Dealer’ with the approval of Bangladesh Bank to
run foreign exchange business. This department is playing an important role in enhancing
export earning, which aids economic growth and, in turn, will be helpful for economic
development. On the other hand, it also helps to meet those goods and services, which are
more demandable and not adequate in our country.
Foreign exchange department of SIBL Local Office Br has been divided into two sections:
$ Import section
$ Export section
6.1. SOME IMPORTANT TERMS ON FOREIGN EXCHANGE:

Letter of Credit:
Letter of credit is a credit contract where the Opening/ Issuing Bank is committed (On behalf
of the opener) to place an agreed amount of money at the beneficiary’s disposal under some
agreed conditions.
FORMS OF DOCUMENTARY CREDIT:

Revocable Credit:
A revocable credit is one where the issuing bank at liberty to revoke i.e. cancels the credit at
any time. According to UCPDC, a revocable credit may amend or cancelled by the issuing
bank at any moment and without prior notice to the beneficiary before shipment of
consignment against the L/C.
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Irrevocable Credit:
An irrevocable L/C is one, which can not be revoked, amended or modified by the bank with
the concurrence of the interested parties.
6.2. PARTIES TO LETTER OF CREDIT:

Importer (Buyer)/ Applicant
The Issuing Bank (Opening Bank)
The Advising Bank/Notifying Bank
Exporter/ Seller (Beneficiary)
Confirming Bank.
Negotiating Bank.
The Paying/Reimbursing/Accepting/Remitting Bank.
Applicant:
The person/ body (customer of the bank) who requests the bank (opening bank) to issue letter
of credit. As per instruction and on behalf of the applicant, bank open L/C in line with the
terms and conditions of the sales contract between the buyer and seller.
Opening bank/ Issuing bank: 3

The bank which open/issue L/C on behalf of the applicant/ importer. Issuing bank’s obligation
is to make payment against presentation of documents drawn strictly as per terms of the L/C.
c) Advising/Notifying bank:
The bank through which the L/C is advised/ forwarded to the beneficiary (exporter). The
responsibility of advising bank is to communicate the L/C to the beneficiary after checking
the authenticity of the credit. The advising bank acts only as agent of the issuing bank without
having any engagement on their part.
d) Beneficiary:
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Beneficiary of the L/C is the party in whose favor the letter of credit is issued. Usually they
are the seller or exporter.
Confirming bank:
The bank, which under instruction in the letter of credit adds confirmation of making payment
in addition to the issuing bank. It is done at the request of the issuing bank having
arrangement with them. This confirmation constitutes a definite undertaking on the part of
confirming bank in addition to that of issuing bank.
Negotiating Bank:
The bank, which negotiate documents and pays the amount to the beneficiary when presented
complying credit terms. If the negotiation of documents is not restricted to a particular bank in
the L/C, normally negotiation bank is the banker of the beneficiary.
Reimbursing/ Paying Bank:

The bank nominated in the credit by the issuing bank to make payment stipulated in the
document, complying with the reimbursing bank.
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6.3. IMPORT SECTION
Import section deals with L/C opening and post import financing i.e. LIM & LTR. Now the
procedure from opening L/C to disbursement against L/C is given below.
6.3.1. APPLICATION FOR OPENING L/C:

At first, an importer will request banker to open L/C along with the following documents.
An application
Indent or Performa Invoice
Import Registration Certificate (IRC)
Taxpayer Identification Number (TIN)
Insurance cover note with money receipt
A bank account in SIBL Local Office Br
Membership of chamber of commerce
IMPORTER/ L/C OPENING BANK/

BUYER COMMUNICATION ISSUING BANK
Indent or Performa invoice:

Indent or Performa invoice is the sale contract between seller and buyer in
import-export business. There is slight difference between indent and proforma invoice. The
sales contract, which is direct correspondence between importer and exporter, is called
Performa invoice. There is no intermediary between them. On the other hand, there may be an
agent of exporter in importer’s country. In this regard, if the sale contract is occurred between
the agent of exporter and importer then it is called indent.
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6.3.2. DELIVERED FORMS BY BANKER TO IMPORTER:
After scrutinizing above-mentioned documents carefully, officer delivers the following forms
to be filled up by importer and banker should check:
 Whether the goods to be imported is permissible or not.

 Whether the goods to be imported is demandable or not.
The forms are:

Import Permit Form (IPM).
L/C Application Form (L/CAF).
L/C Authorization Form (L/CAF).
6.3.3. PREPARATION OF L/C BY BANKER:
Bank’s officer prepares L/C when above mentioned forms are to be submitted by customer or
importer. Before preparing L/C SIBL officer scrutinizes the application in the following
manner.
The terms and conditions of the L/C must be complied with UCPDC 500 and Exchange
Control & Import Trade Regulation.
Eligibility of the goods to be imported.
The L/C must not be opened in favor of the importer.
Radioactivity report in case of food item.
Survey reports or certificate in case of old machinery is required. Bank of the importer is
called ‘L/C Issuing Bank’. Then issuing bank inform it’s corresponding bank, called
“Advising Bank’ or ‘Confirming Bank” located in exporter’s country to advice and the credit
forward to the exporter and simultaneously officer makes L/C opening vouchers.
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Desk work:
One debit voucher to be passed.

Corresponding credit voucher to be passed. (margin, commission, postage, stamp, F.F.C. and
others.)
Liability voucher to be passed.
Particulars Dr./ Cr.

L/C Applicants A/C or Customer’s A/C Dr.
Margin A/C Cr.
Commission A/C Cr.
Postage A/C Cr.
Stamp A/C Cr.
F.FC. (foreign corresponding charge) A/C Cr.
Telex charge A/C Cr.
Other A/C Cr.
Customer’s liability A/C Dr.

Banker’s liability A/C Cr.
L/C OPENING BANK/

ADVISING BANK/
ISSUING BANK GL/C CONFIRMING
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6.3.4. FORWARDING DOCUMENTARY CREDIT BY ADVISING OR CONFIRMING

BANK:
There are usually two banks involved in a documentary credit operation. The issuing bank
and the 2nd bank, the advising bank, is usually a bank in the seller’s country. The issuing bank
asks another bank to advise or confirm the credit. If the 2 nd bank is simply “advice or credit”,
it will mention that when it forwards the credit to seller, such a bank is under no commitment
or obligation to pay the seller.
If the advising bank is also “confirming the credit”, this mention that the confirming bank,
regardless of any other consideration, must pay accept or negotiate without recourse to seller.
Then the bank is confirming bank
ADVISING BANK/ SENDING EXPORTER/ SELLER

CONFIRMING BANK DOCUMENTARY
6.3.5. SUBMISSION OF NECESSARY DOCUMENTS BY EXPORTER TO THE

NEGOTIATIONG BANK:
As soon as the seller/ exporter receives the credit and is satisfied that he can meet its terms
and conditions, he is in position to load the goods and dispatch them. The seller then sends the
documents evidencing the shipment to the bank.
Exporter will submit those documents in accordance with the terms and conditions as
mentioned in L/C. Generally the documents observed by me in the foreign exchange
department are:
Bill of exchange,Commercial invoice, Bill of lading, Certificate of origin, Packing list,

Clean report of finding (CRF), Weight list, Insurance cover note, Pre-shipment certificate
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Some Definitions
Bill of Exchange:
According to the section 05, Negotiable Instruments (NI) Actunconditional order signed by
the maker, directing a certain person to pay [on or to the order of a certain person or to the
bearer of the instrument. It may be either at sight or certain day sight. At sight means making
payment whenever documents will reach in the issuing bank.
Commercial Invoice:
Commercial Invoice issued by exporter is the accounting document by which the seller
charges the goods to buyer.
Bill of lading:
A bill of lading is a document usually stipulated in a credit when exporter dispatches the
goods. It is an evidence of a contract of carriage, is a receipt for the goods and is a document
of title to goods. It also constitutes a document that is or may be, needed to support an
insurance claim.
6.3.6. THE DOCUMENTS SENT TO THE ISSUING BANK THROUGH THE

NEGOTIATING BANK:
The negotiating bank carefully checks the documents provided by the exporter against the
credit, and if the documents meet all the requirement of the credit, the bank will pay, accept,
or negotiate in accordance with the terms and conditions of the credit. Then the bank sends
the documents to the L/C opening bank.
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6.3.7. MAKING THE PAYMENT OF FOREIGN BILL THROUGH THE REIMBURSING

BANK:
The L/C issuing bank getting the documents checks immediately and if they are in order and
meet the credit requirements, it will arrange to make payment against L/C through
reimbursement bank and will send the importer the document arrival notice.
But if there is any discrepancy in the documents, the L/C isssuing bank send message to the
negotiating bank to rectify it under irs risks and responsibilities.
6.3.8. POST-IMPORT FINANCING:

If there is no available in cash in importer’s hand, he can rrequest the bank to grant loan
against the documents for the purpose of post import finance. There are two following forms
of post import finance available in SIBL Local Office Br.
0 LIM (Loan against imported merchandise).

0 LTR (Loan against trust receipt).
LIM:
On the arrival of goods and lodgment of import documents, importeer may request the bank
for clearance of goods from the port (custom) and keep the same to bank godown. Propeer
sanction from the cxompetent authority is to be obatained before clearance of consignment.
For giving these types of loan, officer makes loan proposal and sends it to H/Ofor approval.
After getting approval from H/O, bank grants loan in the form of either LTR or LIM.
Accounting treatnent:
LIM/LTR creation:
LTR/LIM (Importer) A/C Dr.

PAD A/C Cr.
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After payment of the loan or delivery of goods:
Party’s A/C Dr.

LTR/LIM A/C Cr.
Interest A/C Cr.
By and large, it is mentioned herewith that bank only deals with the documents, not with
goods & services in case of foreign exchange business.
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6.4. EXPORT SECTION

Payment for goods exported from Bangladesh should be received through an Authorized Dealer
in freely convertible foreign currency or in Bangladesh Taka from a Non-Resident Account.
6.4.1. PARTIES TO EXPORT TRANSACTIONS:

L/C Issuing Bank
importer
L/C Advising Bank
Exporter
Confirming Bank (If any)
Negotiating Bank
The paying/Reimbursing
Export L/C:
Export L/Cs are issued by a foreign bank favoring Bangladeshi exports through our banks having
correspondent relationship with them.
6.4.2. SERVICES PROVIDED BY SIBL LOCAL OFFICE BRANCH AGAINST EXPORT

L/C:
Advising of export L/C:
The advising bank getting the import L/C sent by the issuing bank located abroad will advise the
L/C to the beneficiary without any engagement or responsibly on their part. It will see the
following only:
Authenticity of L/C (Test agreed in case of Telex L/C and signature verified in case (air mail
L/C).
Merchandise specified in the L/C is permissible and clauses incorporated in the L/C are not
against country’s regulations.
B) Add Confirmation of Export L/C:
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Bank may add additional confirmation to export L/C where there is specific instruction from the
L/ C issuing bank to do so. Additional confirmation of L/C gives the seller a double assurance of
payment. Bank’s requirement of adding confirmation:
Issuing Bank should be a reputed bank.
Credit line/Arrangement with the L/C issuing bank.
L/C clause are to be acceptable to confirming bank
Approval from the competent authority for adding confirmation of export L/C.
Confirmation charges are to be recovered as per rules.
C) Negotiating of Export L/C:

Documents/papers to be submitted by exporter to bank for negotiation/collection against export
L/C. the exporter submit the documents to bank as per requirement of bank. List of export
documents is as follows:
Export L/C, EXP Form, Bill of Exchange, Invoice, Bill of Lading, Packing List, Certificate of
Origin, Inspection Certificate, Insurance Document, Weight List, Any other documents as per
L/C.
Bank must scrutinize all the documents stipulated in the credit with reasonable care to ascertain
whether they confirm with the terms and conditions or not. If the documents are drawn strictly in
terms of the credit, the bank may negotiate and pay the value of export bill to the exporter at:
OD buying rate (Sight Draft)

Usance rate (For DA Bill)
Appropriate rate for DP Bill
After adjustment of pre-shipment credit:
FBP (foreign bill purchased) A/C Dr.

Party’s A/C Cr.
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Realization of export proceeds:

On receipt of credit of the export bill from the foreign correspondent, banks realize the bill at
specified rate and following vouchers are passed.
H/O (ID) --------------Dr.

FBP A/C----------------Cr.
Income A/C on exchange earning ------Cr.
Collection Documents:
Export documents not covered by and L/C documents not drawn in terms of the credit are
accepted on collection basis with the shipper authority at their documents are forwarded through
foreign correspondents to the drawee for payment or acceptance. After realization of the bills on
collection, export is paid appropriate rate after adjustment of liabilities on his account (if any)
Voucher to be passed:
Lodgment (Accepted for sending on collection):
FBPL A/C Dr.
FBPC A/C Cr.
Realization: (Reverse of contra voucher)

FDPC A/C Dr.
FBPL A/C Cr.
H/O (ID) A/C Dr.
Party’s A/C Cr.
Income on com/charge Cr.
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6.5. EXPORT FINANCING:

Financing of export credits is made in two stages:
Pre-shipment stage.
Post-shipment stage
6.5.1. Packing Credit. (Pre-shipment financing)
Packing credit is short-term advance granted by a bank to an exporter against valid export L/C
contract for the purpose of purchase of materials or finished goods or manufacturing, processing,
packing, transporting up to ware house/ port of shipment etc, of exportable for export.
Voucher to be passed.
packing Credit-------Dr.
exporter’s A/C--------Cr.
Adjustment:
FBP/FDBC-----------------A/C
Packing credit----------Cr.
Income A/C interest on PC----------Cr.
6.5.2. BACK-TO-BACK L/C: (PRE-SHIPMENT FINANCING)

Back-to-back L/C means one credit backs another credit. It is new credit in favor of another
beneficiary. Sometimes beneficiary/seller of a credit himself is unable to supply goods specified
in the L/C and required to purchase from another supplier by opening second credit.
Besides, the normal formalities and requirements (for L/C opening) the following formalities
and documents are also required for opening back-to-back L/C;
Master L/C
Valid bonded were house license
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Quota allocation for quota items

ERC in addition to IRC
Indemnity/undertaking
No objection from previous banker (if any)
Factory inspection certificate
BGMEA Membership
Vouchers and accounting treatments are the same normal L/C opening except margin. In this
case, no margin is taken by the bank. After lodgment, maturity date of the import bill is
intimated to foreign bank as per L/C terms. The documents are delivered to the order of opener
duty indorsed for clearance of goods from custom authority. Goods are cleaned through
approved clearing and forwarding agent of the bank.
Voucher to be passed:
Banker’s liability for L/C------Dr. Reversal of contra Lodgment.
Customer’s liability for L/C------Cr.
Customer’s liability on IFBC L/C------Dr

Party’s A/C ---------Dr.
Income A/C Bank charges (if any)
6.6. PAYMENT OF IMPORT BILLS:

Payment of Import bills is at maturity from the relative export proceeds repatriated. The required
foreign exchange for payment of import bills is kept in a separate account, out of repatriate
proceeds of relative export. Party wise and export L/C- wise funds are kept in FBPAR (foreign
Bills Awaiting Remittance) account from export proceeds for payment of bills at maturity.
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6.7. OTHERS:
Loro account:
Loro account means “their account with you”. Account maintained by third party is known as
Loro Account. This account may be either in foreign currency or home currency.
Nostro Account:
Nostro Account means “Our account with you”. The account that a home bank maintains with a
foreign bank is known as Nostro account. For example, Dhaka Bank’s US Dollar account
maintained with City Bank NA New York, USA is NOSTRO Account of Dhaka Bank.
Vostro Account:
Vostro Account means “your account with us”. The account maintained by a foreign bank is
known as vostro account. We can term nostro account when referred to its account holder
(foreign bank) by home bank as vostro account. For example, State Bank of India’s taka account
maintained with Dhaka Bank is a vostro account of Dhaka Bank.
6.8. DISSIMILARITIES BETWEEN THEORIES AND PRACTICES:
Theoretically there are three types of L/Cs-revocable, irrevocable and confirming L/C. But in the
context of Bangladesh, banks are opening only irrevocable L/C in favor of exporter on the behalf
of importers/buyers.
Banks are advising/ forwarding only L/C provided by the bank of importer, but not giving
confirmation against the L/C. Hence it is true that there may be confirming bank involved in
export import business theoretically, it is not seen in my bank where I have done my practical
orientation.
There is no provision or laws against taking discrepancy charges in L/C. Practically this charge is
well-accepted in banking word.
In case of Loan against imported merchandise, on the arrival of goods and lodgment of import
documents, importer may request the bank for clearance of goods from the port and keep them to
bank warehouse. But in case of sanction of LIM no goods are kept in bank warehouse.
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CHAPTER- 7 Performance Of SIBL: A brief
I take this opportunity to place before you the present overall operational of the Bank as follows:
a) During 2005 Bank has made a pre-tax profit of Tk.54.20 million after providing
provision as per requirements of Bangladesh Bank. Business performance of 2006 shall
be much better.
b) The growth rate in formal sector-Deposit in 2005 was significant, based on actual
expected growth rate of deposited in.
c) Banking with the poor (that is mainly with street children and poor family) under micro
credit and micro enterprise under family empowerment credit program is increase very
rapidly.
7.1 Deposit
Deposit profit of the Bank was to Tk.16862.58 million during 2005 against total deposit of
Tk.19704.20 million in 2004, registering decreased by 14.42 % compared to growth rate of 10 %
in the Banking Sector of the country. It hereby may be mentioned the main target group of SIBL
is lower and middle class people, this model of Banking is capable of absorbing abnormal
fluctuation of stock market due to this target group of depositors.
Table-1
Year Deposit in million taka

2000 4863.21
2001 10569.67
2002 15141.34
2003 19709.31
2004 19704.20
2005 16862.58
Source: Annul report of SIBL (2000, 2001, 2002, 2003, 2004 &2005)
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7.2. Liquidity
Liquidity maintained in the from of cash in hand and balance with Bangladesh Bank including
foreign currency notes stood at Tk.1588.79 million as at 31 st December, 2005 against
TK.1303.33 million of last year to maintain cash & statutory liquidity requirement.
7.3. Foreign Exchange Business:
Foreign Exchange Business stood at Tk.11124.8 million in 2005 as against Tk.4723.4 million in
2004. The break up of foreign exchange business is as under:
Taka in million
Particulars 2004 2005 Growth Rate
Import 13363.07 11576.71 -13.37
Export 4500.23 5528.40 22.85%
Remittance 224.82 332.96 48.10%
7.4. Investment (Loans & Advances):
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The amount of advance of SIBL is increasing rapidly. In the year 2005 the amount of advance was Tk.
15096.83 million, which was Tk. 12887.27 million in 2004.
Table-2
Year Advance in million taka

2000 3522.25
2001 5499.25
2002 7504.03
2003 10059.11
2004 12887.27
2005 15096.83
Source: Annul report of SIBL (2000, 2001, 2002, 2003, 2004 &2005)
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7.5. Import Business:
The import business of SIBL Tk. 11576.71 million in the year 2005 that was Tk. 13363.07 million in the
year 2004.
Table-3
Year Amount in million Taka

2001 4723.40
2002 11124.85
2003 14908.90
2004 13363.07
2005 11576.71
Source: Annul report of SIBL (2001, 2002, 2003, 2004 & 2005)
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7.6. Export Business:

The export business of SIBL is in increasing trend. The growth rate in export business in the year 2005
was 6494.00.
Table-4
Year Amount in million taka

2001 265.00
2002 1067.90
2003 1934.00
2004 3299.07
2005 6494.00
Source: Annul report of SIBL (2001, 2002, 2003, 2004 & 2005)
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Chapter 8: Findings
8.0. SWOT Analysis
The acronym for SWOT stands for
 Strength
 Weakness
 Opportunity
 Threat
The SWOT analysis comprises of the organization’s internal strength and weaknesses and
external opportunities and threats. SWOT analysis gives an organization an insight of what they
can do in future and how they can compete with their existing competitors. This tool is very
important to identify the current position of the organization relative to others, which are playing
in the same field and also used in the strategic analysis of the organization.
8.1 Strength
As an Islami Bank, SIBL have the opportunity to take a firm position in the banking
sector. In fact, Islami Banks are doing well competing with the traditional banking system.
SIBL has been successfully operating Family Endowment Micro Credit & Micro-
Enterprise Program under non-formal banking sector since the inception of the bank in 1995.
And this is an effort to adjust the concept of NGOs with the banking system.
SIBL, as its part of social endowment, keep on patronizing the SMEs clients under the
coverage of family endowment Micro-credit and Micro-enterprise program. SIBL & JOBS
projects USAID with a collaborative effort is creating easy access to business capital for
small & medium enterprises.
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8.2 Weakness
SIBL has fewer breaches compared to both the traditional and Islami bank. So it is not
able to encompass the enlarging banking customers.
The manpower of SIBL is not so skilled as it requires. Again the manpower is not enough
for the continuation of its present activities.
SIBL is enlisted as a one of the list of problem bank, prepared by the central bank. And
so, the image crisis sometimes makes it difficult to reach the potential customers.
8.3 Opportunity
SME is an emerging sector in the context of economy of Bangladesh. At SIBL there is a

provision for up gradation of Micro-credit graduates into Micro-enterprise program and
successful Micro-enterprise graduates have opportunity to enroll them in the formal banking
activities.
In Bangladesh, the percentage is increasing of the consolidation with the banking sector.
So, a huge market is being opened up for the banking sector and SIBL should take the chance
to enlarge the share of the market.
8.4 Threats
At the present situation of the economy of Bangladesh, the local investors are not
interested to invest more for the emergency rule. So, the deposited money is remained idle
that may be a burden for the bank.
The traditional banks of Bangladesh, now a day, are inaugurating Islamic banking
department for the potential prospect. So SIBL must be compete with the competitors.
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Chapter 9: Policy Suggestions
Though Social Investment Bank ltd. is a new stated Bank but this is bank running successfully
and for its good deposit performance the bank occupies 2 nd position in the Islamic Banking
Sector. However, as it’s a listed problem bank, the management should take some steps to
establish itself as a successful one.
The Human Resource Management Department should emphasize to recruit skilled

personnel that are hardly present at this situation. But it’s also true, in the banking sector the
numbers of skilled professionals are not so much.
The salary structure of SIBL is low compared the others. And for this a skilled one
doesn’t want to get him/herself in this bank. So, management should improve the salary
structure to get skilled personnel.
The number of branches should do increase to reach more customers. At present, the
number of branches of SIBL is only twenty-four.
The process of L/C opening or any kind foreign transaction, SIBL should gather more
experience and also should to make the process easier for better service to customers.
In the principal branch, where I was assigned, the lay out of the office is not convenient,
for which the clients very often become dissatisfied. And management should take steps for
the better convenient of the valuable clients.
Family Empowerment micro credit and micro enterprises program must be designed in a
manner so as to make a) finance, b) production, c) marketing, d) trading, e) local specific
survey and research as well as moral suasion in one package.
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As SIBL is in a shortfall of capital adequacy amount of tk.35.01 crore that should be

maintained tk. 141.55 crore as per section 13(2) of the bank companies act-1991, it should
issue more shares in the market to make up its inadequacy, would also help to come out from
the list of problem bank.
SIBL needs further active support and continued cooperation of Bangladesh Bank,
ministry of finance and other government agencies, executives and employees of the bank,
valued partners, clients and the community at large in accomplishing difficult tasks ahead of
it.
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Conclusion
Modern banking system plays a vital role for a nation’s economic development. Over the last
few years the banking world has been undergoing a lot of changes due to deregulation,
technological innovation, globalization etc. These changes also made revolutionary changes of a
country’s economy. Present world is changing rapidly to face the challenge of competitive free
market economy. Banking sector in Bangladesh is facing challenges from different angles
though its prospects are bright in the future. Bank credit is very important for bringing economic
development in a country. Without adequate finance there can be no growth or maintenance of a
stable economy. Bank lending is important for the economy, for it makes possible the financing
of agriculture, commercial and industrial activities of a nation. At the same time, a bank will,
therefore, distribute its funds among various sectors in a manner as to derive sufficient incomes.
Credit is one of the important functions of commercial bank. The word “Credit” derives the Latin
word “Cruder”, to trust. The fundamental nature of credit is that an element of trust exists
between buyer and seller whether of goods or money. The main use of bank fund is to collect
money from surplus unit and lend it to deficit economic unit. In the ordinary course of business,
banks accept deposit from the public and; lend money to its customer. The credit program that
promotes small credit to the poor people for creating self-employment with a view to their
poverty and attaining sustainable development is referred here as micro credit program. Financial
Intermediary is an important activity in the economy because it allows fund to be channeled from
those who might otherwise not put them to productive use to those who will. In this way
financial intermediaries can help promote a more efficient and dynamic economy.
It appears that Islamic Corporate Banking is getting submerged in the wave of market and
running the risk of marginalizing social and ethical ingredients of Islamic Finance. While the
coverage between Islamic Banks and western Banks having Islamic window may bring
efficiency in operations of Islamic Banks.
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Appended Part
A/C : Account
BCD : Bearer Certificate of Deposit
BDT : Bangladeshi Taka
CD A/C : Current Deposit A/C
CIB : Credit Information Bureau
CRG : Credit Risk Grading
CRM : Credit Risk Management
DPS : Deposit Pension Scheme
FC : Foreign Currency
FDR : Fixed Deposit Reserve
FDD : Foreign Demand Draft
GB : General Banking
KYC : Know Your Customer
LIM : Loan against Imported Materials
LRA : Lending Risk Analysis
LSS : Laklhoti Savings Scheme
MBS : Monthly Benefit Schem
OBC : Outward Bills for Collection
PAD : Payment Against document
RFCD : Resident Foreign Currency Deposit
SB A/C : Savings Bank A/C
STD : Short Term Deposit
SLR : Statuary Liquidity Requirement
SOD : Secured Overdraft
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Bibliography
1. Annual Report of SIBL 2001
5. Statement of Affairs-2005 of SIBL
5. Manual guidebooks of SIBL

6. www.sibl.coms
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Page 1

In completing my internship program in Social Investment Bank Limited. (Principal

At first, my deepest gratitude goes to Mr.K.M. Ashaduzzaman, Managing Director, SIBL

The main objectives of this report are as follows:

This report on practical orientation has been originated above thinking.

METHODOLOGY OF THE STUDY

1. Data collection method

The “Primary Sources” are as follows-

The “Secondary Sources” of data and information are-

The study has suffered following limitations:

Banking system occupies an important place in a nation’s economy because of its

1.1 Origin of Banking Industry

World Point of View

Bangladesh Point of View

1.2Present Status of Banking Industry

1.3 Formation of Social Investment Bank Ltd

1.3. Islamic banking in the 21st century

1.4 Company profile

Chapter 2. GNERAL BANKING DEPARTMENT

Account opening section.

2.1.1. ACCOUNT OPENING SECTION:

PROCEDURE FOR OPENING OF ACCOUNTS:

Application on the prescribed form

2.1.2. APPLICATION FORM FOR CURRENT/ SAVINGS ACCOUNT:

Special Instruction of Operation of the Account (if any)

In case of Joint Account

In case of Partnership Account

In case of Club/ Society,-

In case of Co-operative Society/ societies Limited,-

Certified copy of Certificate of Registration issued by Registrar, Co-operative Societies.

In case of Non- Government College/School/ Madrasha/ Muktab,-

In case of Trustee Board, -

In case of Minor’s Account, -

In case of Limited Company,-

General conditions of governing Current / Savings Account,-

2.1.3. DEPOSITS ACCEPTED BY SIBL (LOCAL OFFICE)

Customer’s Current A/C Debit.

2.1.4. Bearer Certificate of Deposit (BCD):

Tax on Interest ...................Cr.

2.2.0. BILLS AND CLEARING SECTION:

2.2.1 Inward Cheques:

2.2.2. Outward cheques :

ii. Endorsed by the collecting bank.

2.2.3. Outward Bills for Collection (OBC).

SIBL General A/C (Local Office Br) ---------------Dr.

2.2.5. RECEIVING CHEQUES FOR COLLECTION:

2.2.6. CHEQUE AND CROSSING:

A cheque may be classified into:

2.2.7. Issuing cheque book:

Firstly the customer will fill up the check requisition form.

2.3.0. Remittance of Funds:

2.3.1. Bank’s cheque / Pay order.

Issuing of Pay Order:

A customer can purchase PO in different modes:

PO A/C is the current liabilities of bank, which is acquired to be discharged by beneficiaries

Bills payable (PO) A/C Debit

Cancellation of a Pay Order:

Bills payable (PO) ---------------Dr.

2.3.2. Bank Draft:

Cash/ customer’s A/C---------------------Dr.

SIBL General A/C Issuing Branch ---------------Dr.

Role of the Drawn Branch:

Issuing branch A/C-------------------------Dr.

Entries are given in “DD In-Issuing branch” register,-