Chapter 1: Introduction

1.1 Origin of the Report:

As a prerequisite of obtaining Masters of Business Administration (MBA) degree from Faculty of Business Studies, University of Dhaka, and Every student has to go through an internship program. To fulfill the internship requirement I am being employed in IFIC Bank Limited, a well reputed specialized commercial bank. Under the supervision of Mr. Nazmul Karim Chowdhury, Professor, Dept. of Management Studies. I have been assigned to prepare an internship report on General Banking System of IFIC Bank Limited. This report is written to comply with that instruction.

1.2 Rationale of the study:

Banks have of course a vital role in promoting and accelerating the economic development process as per the demand of time through the implementation of finance for industrial & agricultural project, domestic and foreign trade and allocating the fund to various off-firm employment and self-employment generation projects. Focusing the light and considering the every pros and cons on available statistical data it has been apparently accepted that IFIC Bank Ltd. has continued to register its steady progress in the field of deposits, advances & foreign exchange business. In view of the sluggish nature of the economic activities over the years the deposit performance of IFIC Bank Ltd is more or less satisfactory. The low rate of economic growth, high rate of unemployment, illiteracy, growth rate of population, low rate of credit recovery etc. are the impediment factor of economic development of a country. Despite of this obstructed IFIC Bank Ltd. has shown a mediocre performance.

Internship report on IFIC BANK LIMITED

1

1.3 Objectives of the Report:

The main object of the study is to know & g the General Banking System of a bank, more over the study is conducted for the following objective

To know about the overall General Banking procedure of IFIC bank. To have knowledge about the activities of IFIC Bank Limited. To know the clearing procedure. To identify the customer relationship of IFIC Bank Limited. To know the banks cash section. To identify the problems face by the bank in opening a bank account. Suggest several guidelines to overcome these problems.

To fulfill the requirement of the internship program under BBA program. To formulate a viaduct between the theories and practical procedures of banking day to day operation. To gain practical experiences and view the application of theoretical knowledge in the real life.

2.4 SCOPE AND DELIMITATION OF THE STUDY

This study will deal with the General Banking department of IFIC Bank, where all the functions are vital issue. This study will be confined to the Mohakhali Branch of IFIC Bank. The overall function will perform in the bank and will be covered for the study. The corporate office of the bank will also be contacted to have meaningful information about the study.

Internship report on IFIC BANK LIMITED

2

1.5 Methodology:
Sources of Data: Both Primary and Secondary data are used in preparing this The details of the sources of data are as follows: Primary Source Practical work exposure with IFIC Bank Limited Face to face conversation / Interview with the Bank Officials Observations Secondary Sources: Annual Report of IFIC Bank Limited Training materials of the Bank Periodicals published by Bangladesh Bank Various books, journals, articles etc. Web sites. report.

1.7 Limitations of the Study:

Credit risk management is a vast area for studying. Different departments

participate in credit risk management. I had a limited exposure to all those departments during my internship period. Therefore not all information or observation presented throughout the report is from first hand experience. This report is considered only credit risk of IFIC Bank limited, there are also other risks of a bank namely: Asset and liability risk, Foreign exchange risk, internal control and compliance risk, Money laundering risk. Lack of experience has also acted a constraint for the exploration of the topic. Another limitation of the study is lack of sufficient work experience in the credit division during my internship

Internship report on IFIC BANK LIMITED

3

Chapter 2: Overview

2.1 Background of the IFIC Bank

International Finance Investment and Commerce Bank Limited (IFIC Bank) is banking company incorporated in the Peoples Republic of Bangladesh with limited liability. During 1972 it was taken under national ownership. At that time its paid up capital was 69.13 crore and profit figure was 42 lakhs. During September 1983 it was privatized under Privatization Act. At that time this deposit was 231.03 crore and profit figure was 5.06 crore. 95% of its shareholder is public and rest of share holds by Government. The bank earned ever-highest operating profit during the year 2002 among all private banks of Bangladesh (except Islami Bank BD Ltd.) The bank earned an operating profit of Tk. 131.18 crore during the year 2002. Overall management of the bank is vested in a 13member board of directors with the managing director as the chief executive. In December 2000, the bank had a total of 1,659 employees and 54 branches including two overseas. But in December 2010, the bank had a total of 2315 employees and 95 branches. In 1983 when the Government allowed banks in the private sector, IFIC was converted into a fully fledged commercial bank. The Government of the Peoples Republic of Bangladesh now holds 32.75% of the share capital of the field of trade and commerce own 8.62% of the share capital and the rest is held by the general public.

2.2

Vision of IFIC

Giving economic service in social and business sectors to be the leader of the banking sectors and develop it.

Internship report on IFIC BANK LIMITED

4

2.3 Mission of IFIC Bank Ltd

IFICs Mission is to provide service to their clients with the help of a skilled and dedicated workforce whose creative talents, innovative actions and competitive edge make their position unique in giving quality service to all institutions and individuals that they care for. IFIC committed to the welfare and economic prosperity of the people and the community, for they drive from them their inspiration and drive for onward progress to prosperity. IFIC want to be the leader among banks in Bangladesh and make their indelible mark as an active partner in regional banking operating beyond the national boundary. In an intensely competitive and complex financial and business environment, they particularly focus on growth and profitability of all concerned.

2.4 Core Value of IFIC Bank Ltd.

IFICs core values consist of 6 key elements. These values bind they are people together with an emphasis that they are people are essential to everything being done in the Bank.

Internship report on IFIC BANK LIMITED

5

Integrity
IFIC protects and safeguards all customer information IFIC treats everyone in an equitable and consistent manner IFIC creates an environment, which earns and maintains consumer trust

Open Communication
IFIC builds customer relationships based on integrity and respect. IFIC offers a full line of products and excellent service. IFIC is committed to the prosperity of the customers and shareholders.

Performance Driven
In IFIC customers and employees are judged in terms of their performance

Continuous Self Improvement

Continuous learning, self-challenge and strive make ways for self

improvement of workforce at IFIC.

Quality
IFIC offers hassle free better service timely IFIC builds-up quality assets in the portfolio.

Teamwork
Interaction, open communication, and maintaining a positive attitude reflect IFICs commitment to a supportive environment based on teamwork.

Internship report on IFIC BANK LIMITED

6

2.5 Functions of IFIC:

The main task of the IFIC Bank Ltd. is to accept deposited from various customers though various accounts. Provide loans on each term and condition. It creates loan deposit. The bank invest its funds into profitable sectors. It transfer money by Demand Draft (DD), pay order (PO), and (TT). etc. The bank is doing the transaction of bill of exchange on behalf of the client. Assists in the foreign exchange by issuing letter of credit. The bank insures the securities of valuable documents of the client. Above all IFIC Bank Ltd. helps the business man financially by giving discount facility for bill of exchange and by providing the facility of letter of guarantee.

2.6 Ownership Structure:

Previously IFIC Bank Ltd was Government owned bank. Now the government of the Peoples Republic of Bangladesh holds 49% of shares of the bank. Leading industrialists of the country own 34% of the shares and the rest is held by the general public. The founder of IFIC Bank Ltd was Jahurul Islam of Islam Group of Industries. He was the first Chairman and A.S. F. Rahman was first Vice Chairman. Board of Directors of the Bank is a unique combination of both private and Government sector experience. Currently it consists of 11 Director. Of them eight represent the sponsors and general public and four officials in the rank and status of Additional Secretary/Joint Secretary represent the Government.

2.7 Capital and Reserves:

Internship report on IFIC BANK LIMITED
7

IFIC bank has been consistently maintaining the Capital Adequacy Ratio, as prescribed by Bangladesh Bank. This has been made possible by a policy of building up both capital and reserves. It started with an Authorized and Paid up capital of Tk.100 million and Tk.63.20 million respectively in 1983. Authorized and paid up capital was Tk.5350 million and Tk.2180 million respectively at the end of 2010. As against tk 21.20 million only in 1983 reserves and

Senior Executive of 2010. reserves incased to tk 3585 million at the endVice-President

2.9 Hierarchy Executive Vice-President of the Management of IFIC Bank Ltd.

Senior Vice-President First Vice-President Vice-President Senior Assistant Vice-President First Assistant Vice-President Assistant Vice-President Senior Staff Officer (SSO) Staff Officer (SO) Officer Grade-I Probationary Officer Officer Grade-II Assistant Officer Officer Assistant Driver
Internship report on IFIC BANK LIMITED

Officer Attendant Security Staff

2.10 Functional Department:

The operations and activities at the Head Office are divided into following Divisions:

1
2

Credit Risk Management Division Remedial Asset Management Division Treasury, International Banking & Capital Market Division Secretarys Division Corporate Banking & Marketing Division Finance & Accounts Division Corporate Communication & Support Service Division Human Resource Division Training & Research Division Internal Control and Compliance Division Information Technology Division Card Division Law and Legal Affairs Division

3 4 5 6 7 8 9 10 11 12 13

Internship report on IFIC BANK LIMITED

9

2.11 Information Technology Structure:

*Present information technology structure of IFIC Bank:

Computer System Computerized Services

Computer System:

Computerized Branches: 44 out of 52 (i.e. 85%) Branches are

computerized throughout the country.

Local Area Network: Seven main Branches (i.e. Motijheel, Federation,

Dhanmondi, Gulshan, Moulvi Bazar, and Narayanganj & Agrabad) are operating in Local Area Network environment. Six more Branches (i.e. Khulna, Jessore, Rajshahi, Bogra, and Sylhet & Khatunganj) out side of Dhaka will be taken under LAN environment very soon.

Banking Software: It was past when 7 LAN Branches are using BexiBank
4000+ and rests of the 35 Branches are using BexiBank 3000+ for their daily Banking Transaction. Now They Are using MAYSIS a much Upgraded and Well Managed Software.

Internship report on IFIC BANK LIMITED

10

Operating System: Most of our

Branches, which are using BexiBank 4000+, are operating their Computer System in DOS (Disk Operating System). Branches, which are operating in LAN environment, are using Windows 2000, Winxp or Novell NetWare operating system.

Central Backup System: Presently Information Technology & Computer

Division of Head Office is maintaining an Office Central Backup System for all the Computerized Branches and Division of Head Office of our Bank.

Computerized Services:

Tele Banking (Computerized Phone Banking): Our Banking has implemented

Computerized Phone Banking technology in 4 Branches (i.e. Motijheel, Federation, and Dhanmondi & Gulshan).

SWIFT Network: Presently our International Division of Head Office is operating their
Foreign Trade related transaction through SWIFT Network.

Electronic Mail: Six main Branches has (i.e. Motijheel, Federation, Gulshan,
Dhanmondi, Narayanganj & Agrabad) are using Email facility for international and internal correspondence. In future all AD Branches will be brought under Email facility.

Home Banking: Our Bank is currently engaged in implementing this new service for
Banks high net-worth selected business clients.

Internship report on IFIC BANK LIMITED

11

Inter Branch Connectivity: Our major plan in the IT sector is to ensure Inter Branch
Connectivity of selected major Branches (i.e. Motijheel, Federation, Dhanmondi, Gulshan, Moulvi Bazar, and Narayanganj & Agrabad) under Wide Area Network (WAN) facility to offer our customers Any Branch Banking facility.

Visa Card: Visa Card already established in current year.

Metropolitan Area Network/Head Office Computerization: Network

implementation among Divisions (i.e. Special Project Division, Credit Division etc.) Of Head Office is in under

consideration.

Shared ATM Network: Setup of Shared ATM Network is in under

consideration.

Internship report on IFIC BANK LIMITED

12

Chapter 3: General Banking

3.1 General Banking Department:
General Banking department is considered as the direct customer service center. The clients and customers build their impression whether they are going for further dealings with the bank or not on the basis of their service. Moreover this is the first impression about the bank. So, general section must be taken carefully. Functions of General Banking of IFIC are discussed below: Establishing Banker Customer relationship Remitting customer's money from one place to another Collecting bills for customers Taking deposit and honoring Cheque drawn

The functions of the different sections of general banking department are discussed below:
General Banking

Account Opening Remittance Section Clearing Section Cash Transaction Section Accounts Section

Internship report on IFIC BANK LIMITED

13

3.2 ACCOUNT OPENING DEPARTMENT

A bank has to maintain different types of account for different purposes.

Short Term Deposit (STD) Current Account (CD) Fixed Deposit Receipt (FDR)

Saving Account (SB)

Accounts Opening Department

Pension Saving Scheme (PSS)

Security Overdraft (SO)

Cash Credit (CC)

The last two accounts are created in loan purpose. Other types of account are usual purpose. The different account opening producers will be discussed in detail in the forward topics.

Internship report on IFIC BANK LIMITED

14

Different account can be open by Individuals Sole Proprietorship firms Partnership firms Limited companies either public or private Clubs When an A/C is opened they give entries in the A/C opening register for A/C no.

3.2.1. Current Account (CD)

Most business current deposit accounts in order to make their daily business activities. This account funds change most frequently than any other accounts because customers use to withdraw and deposit funds in regular basis.

Opening Current Accounts:

Filling up the application form of CD account 2 (Two) copies of photographs. Introducers who has account on that particulars branch. For clubs requires regulations & by laws, registration of the club. For partnership account requires partnership deed. For private limited company requires articles of association

For public limited company requires articles of association, memorandum, certificate of commencement certificate of incorporation, resolution, list of directors etc.

Internship report on IFIC BANK LIMITED

15

Payment of Cheques:

No binding in case of payment of cheque of CD account Validity of a cheque is 6 (Six) month after issuing.

If proprietorship firm, then the seal mark of the concern is necessary. So do for the partnership, companies, clubs, and societies.

If the specimen signature matched with the specimen card, then will get payment.

No advance cheque will be allowed.

Issue of Cheque Book:

Requisition form filled up & signed up by client (if farm or co. then needs seal). Then a cheque book is issued for that client and gives entries His/Firm/Club/Company etc names, A/C No. and cheque numbers in the cheque book register. At this requisition is transferred to the deposit dept for computer posting.

3.2.2. Saving Bank Deposit (SB)

Saving bank deposit is another popular account maintains a bank. Saving deposit are suitable for savers who want to save for meeting future needs. These deposit accounts are

Internship report on IFIC BANK LIMITED

16

for people who do not want to keep money for fixed long period. It is a midway between current deposits and fixed deposits.

The different matters relating SB account are described in the following discussion:

Opening Saving Accounts:

Filling up the application form of SB account 2 (Two) copies of photographs. Introducers who has account on that particulars branch. An initial amount of money Tk. 1000. For clubs requires regulations & by laws, registration of the
club.

For partnership account requires partnership deed. For private limited company requires articles. For public limited company requires articles, memorandum,
certificate of commencement certificate of inco0rporation, resolution, list of directors etc.

Payment of Cheques: As it is for the Current account purpose.

Issue of Cheque Book: As it is for the Current account purpose. Internship report on IFIC BANK LIMITED
17

 Interest Provisions: The current rate of interest is 6% per month for SB account. Monthly
product is calculated for SB accounts.

Two time withdrawal within a week. For more withdrawal depositors are
not entitled for any interest.

No savings account will be allowed to be overdrawn.

3.2.3. Opening short Term Deposit (STD) Accounts:

The account may be opened in current individual/ proprietorship/ partnership/ limited co. account forms as the case may be, depending and the nature of the constituent. Specimen signature shall be obtained in CD specimen signature card.

Operating of the Accounts: Withdrawal form the account will be made by cheque/amount may be transferred as
per request letter of the customer.

The date of withdrawal given in the notice shall be recorded in the relative account. If an account is required to be operated like a CD, then the same is closed
immediately and the customer be requested to open a CD account instead.

Payment of Interest:
No interest shall be allowed if due notice are not received for withdrawal from the account. Any Exception will require prior approval of the head office. Interest will be allowed on the daily at all credit of the STD account. The amounts are being calculated and applied half-yearly, at the end of June and December on when an account is closed.

Internship report on IFIC BANK LIMITED

18

 No Interest will be given if:

Any withdrawal made over Tk. 50,000/- without notice. Two times withdrawal within a week. One over Tk. 25,000/- withdrawal. Any day balance below Tk. 1000/If withdrawal is 25% of total balance. More then two withdrawals in a week.

Withdrawal:
Withdrawal can be made only 2 times in a week.

Closing of STD: The client will make an application to the bank. The bank will take Tk. 50 closing to close the account.

3.2.4. Fixed Deposit Receipt (FDR):

Category of FDR Accounts:
IFIC offers the following category of FDR accounts: Maturity up to 1 month Interest rate 12.5% Maturity up to 3 month Interest rate 12.5% Maturity up to 6 month Interest rate 12.5% Maturity up to 12 month or 1 year Interest rate 12.5%

Different Provision
For FDR minimum period is one month and maximum period 1 year. But after 1 year if client not withdraw the amount then FDR automatically renew. FDR may be joint or individual.

Internship report on IFIC BANK LIMITED

19

 Payment on Maturity: After maturity period the customers gets the interest plus principal back. If customer wants to withdrawal money from FDR account before maturity then
interest will be changed as penalty.

If customer wants to withdrawal money from FDR account before maturity then
they will get only saving interest rate.

Either or Survivor:
In case of joint FDR, if one partner dies, then the survivor i.e. who is will get the money at maturity or the persons name in favoring.

Renewal of FDR:
If the customer not withdraws the FDR amount then it renewal for next period. The renewed period shall be count as FDR rate of those times.

Payment on Death:
It is critical process when FDR holder dies. The rest of the family members must have to submit the following documents: 1) Succession Certificate of Court mentioning, who get & what portion. 2) Death Certificate: The payee must make an application including the above documents. The branch forwards it to the head office. It is very important to note that in these cases, the bank have to be very careful. Some FDR mention either or survivor, in this case survivor will get the amount of FDR.

Duplication:

Internship report on IFIC BANK LIMITED

20

If the customers lost the FDR receipts, then he has to make application to the bank by filling up an indemnity bond. For duplicate FDR IFIC charges will be applicable.

FDR Block:
A receipt, given to the applicant after opening the FDR account, will show it after maturity to take his money back.

Specimen card:
The signature of the FDR account holder is maintained in the specimen.

Closure:
After payment at maturity period the FDR account is closed. The EDR account holder must surrender his FDR receipt during the payment. It is also notifying that in case FDR, the bank entries the full amount at maturity date in advance when a customer opens a FDR account. After the maturity FDR receipt and FDR from are attached together and on the front page of the FDR from bank authority writers close of FDR account and gives entry in the ledger.

3.2.5. Pension Saving Scheme (PSS):

This scheme is specially designed for the benefit of the limited income group members. This helps to accrue small monthly savings into a significant sum at the end of the term. So, after the expiry of the term period the depositor will have a sizeable amount to relish on.[

Internship report on IFIC BANK LIMITED

21

Monthly Installment (TK) 500/1000/2000/5000/-

Return of the 3 years (TK) 8% 20,322/40,645/81,290/2,03,225/-

Return after 5 years (TK) 7.5% 36,266/72,532/1,45,064/3,62,661/-

3.2.6 Consumer Credit Scheme:

IFIC Banks Consumer Credit Scheme gives you a great opportunity to buy household and office items on easy installments. This scheme gives you the advantage of part payment to cope with the high price tags of many necessary home and office appliances. Television, Refrigerator, VCR, Personal Computer, Photo-Copier, Washing Machine, Furniture, Microwave Oven, Car, and a number of other expensive items are now within your buying range. With this scheme IFIC makes better living possible for people living on fixed income. Customers can buy those home and office equipments without over taxing their budget. For most of the people on fixed income the opportunity to supplement their monthly earning is a golden one. And IFIC Special Deposit Scheme gives a customer just that.

3.3 Local Remittance Section:

Remittance is another best medium to serve fund from one place to another. Remittance facility is available to both customer as well as non customers of the bank and in fact this is the third major area of operation of a bank. Against deposit of the requisite funds and payment of the remittance charges, bank undertakes to make the equipment amount

Internship report on IFIC BANK LIMITED

22

available to a particular person or his order in a particular branch of the same bank or on other banks with agency arrangement. Money transmission / remittance are effected by way of issue Demand Draft (DD) Telegraphic Transfer (TT) Payment Order (PO)

3.3.1. DEMAND DRAFT (DD):

According to the section 85 (A) of the negotiable instruments Act, a bank draft / demand draft is an order to pay money drawn by one office of the bank upon other office of the same bank for the sum of money payable to order on demand.

PAYMENT OF DD: After issuing a bank draft to the purchaser, the issuing branch sends an Inter Branch Credit Advice (IBCA) to the Drawee branch, intimating about the issue of the Draft. On receipt of the Draft for payment, the Drawee branch verifies the signature of the authorized officials on the draft with the specimen signature maintained with them and if other wise in order pays the amount in cash or by transfer to account, as the case may be. The Draft may be paid in two ways, if the advice is received before presentation of DD it would be paid from Bills Payable A/C DD payable and if the DD is presented before receipt of the Advice it would be paid from suspense A/C DD PAID W/A. Feature of Draft: It is drawn by one office of a bank upon another office of the same bank.

Internship report on IFIC BANK LIMITED

23

It is payable on demand. Its payment is to be made to the person whose name is mentioned therein or according to his order. In other words it cannot be made payable to the bearer.

Issue of the Demand Draft: A standard DD application from duly completed and signed by the applicant with his full address is required. After receipt of cash, the application is treated as credit voucher for head office account. Concerned voucher is delivered to Remittance Department for issue of DD. The Draft is prepared by the concerned Department and entered in the Draft Issue Register. Branch wise serial number is given on the draft after the printed number putting an oblique in between. The Draft number is written on the voucher and Draft block, voucher an register are sent to the Officer-in-Charge/ Manager for signature. After signature the draft is handed over to the purchaser against acknowledgement on the voucher or on the back of the counter-foil. The Draft may be marked crossed it the purchaser desires and a cost memo is issued. After close of business branch wise ICBA are prepared for all the draft issued during the day and dispatched to the respective branches.

Issue of Duplicate demand draft:

Internship report on IFIC BANK LIMITED

24

The signature of the applicant is to be verified from the original filled in DD application form.

The drawee branch is to be informed about the loss of the draft so that caution is exercised by them.

On receipt of confirmation from the drawee branch that the draft is still outstanding in their book and that caution is being exercised by them, a duplicate draft is issued to the purchaser after obtaining an indemnity Bond.

The draft is issued with mark DUPLICATE in red ink without altering the printed no and repeating the original serial number. A note to this effect is made in the original DD application form and DD issued register and the Drawee branch is to be advised of issue of the duplicate draft.

Stop Payment of DD: The Issuing Branch instructs for stop payment of a DD when the purchaser approaches the issuing branch to do the same through an application.

Cancellation of Demand Draft: The purchaser can request the issuing branch to the DD. After getting instructions from the issuing branch to cancel the DD.

3.3.2. Telegraphic Transfer (TT):

It is an order of the Issuing Branch to the paying Branch to pay a certain sum of money to the beneficiary. TT transaction is done in between the two branches of the same Bank only. The beneficiary should maintain an account with the IFIC Bank to get facility. Before sending the massage, the issuing Branch must be sure that there is a test arrangement for authenticating the Telegraphic / Telex message with the branch designed to make payment.

Internship report on IFIC BANK LIMITED

25

Issuance of the Telegraphic Transfer (TT): The procedure of issuing TT massage are as follows: The customer asked to complete TT application form. Commission @ 1.5 per thousand with minimum charge Tk. 25 and telephone charge tk 50 along with the fund are realized from the customer. Entries are given to the register to maintain the controlling number and records. Out going Test number is prepared for any amount of money and TT no is allocated on the basis of controlling no. Out going Test No. TT no. amount in wards and figures, name of the beneficiary and name of the remittance in charge with P.A no are sent over the telephone. If the paying branch is not reached by the telephone, the coded TELEX / FAX MESSAGE IS SEND to the end. Two copies of ICBA are prepared in which one copy is sent to the Head Office for reconciliation through the account department and another copy is preserved as an office copy. Payment of TT: The procedure of the payment of TT is as follows: Remittance in charge receives incoming Test No. TT No amount in words and figure, name of beneficiary and name of the remittance in charge of the issuing Branch with P.A. no. An authorized officer verifies incoming Test & TT no with the controlling no and A/C no of the beneficiary whether he has an A/C with the paying Branch or not. If Test No. agrees and TT No supports the serial no, particulars are given posting to the TT payable register. Debiting IFIC General A/C and crediting Bills Payable A/C TT payable entries are passed.

Internship report on IFIC BANK LIMITED

26

Party A/C is credited by debiting Bills Payable A/C TT Payable. IBDA is prepared in duplicate the original is sent to the reconciliation department of Head Office through account department and true copy is kept as an office document.

3.3.3. Payment Order (P.O)

Pay order is an undertaking of a certain branch to pay a certain sum of money in favor of a customer. Issuing Branch order itself to pay the amount containing by the amount containing by the instrument. Banker can sell it in exchange of commission. It is issued as a means of local remittance. It may be called as the Chaque of the Bank because bank pays house rent, electricity bills, telephone bill, and borrowing from other banks, and shortage of clearing house and other necessary cots through P.O. It can be negotiated through endorsement and delivery. It has the following characteristics1. Serial no and date. 2. Name of the branch 3. Payees name 4. Amount in words and figure 5. Signature of two authorized officer. Issuance of pay order: For issuing a pay order, the following procedures are maintained Client is to submit an application to the remittance department in the prescribed from properly filled and duly signed. The client pays the equivalent amount of pay order plus interest on it in cash or by cheque. The issuing branch gives posting to pay-order register.

Internship report on IFIC BANK LIMITED

27

Debiting Cash and crediting Bills Payable A/C, Pay order issued & income A/C commission on pay order entries are passed.

Finally, it is prepared and delivered to the customer.

Payment of Pay order: As the pay order crossed A/C payee, the presents it with deposit slip to the issuing Branch for payment through the clearing house or for credit to clients account. On presentation the Pay-Order is verified and marked for transferred. The authorized officer cancels the P.O and separates it from the deposit slip. P.O is sent to the issuing Branch through clearing house and proceeds are credited to the concerned account. The party is allowed to withdraw the amount after getting clearance the originating branch.

3.4 Clearing Section

This section receives all kinds of check in favor of the valued client for clearing on the part of their banking services. After receiving Cheque it is necessary to endorse it and cross it specially. Clearing of Cheque is done through the clearing house in the Bangladesh Bank.

Nature of clearing house: 1st Clearing House Return Clearing House

3.4.1. Clearing House Process:

Every bank has an officer of clearinghouse who is work with Bangladesh Bank clearing house. Actually most of major client deposit their account in different kinds of bank

Internship report on IFIC BANK LIMITED

28

cheques. Clearing officer check all the cheques and deposit slip very carefully and then he received the cheque. After that the clearing officer posts all the cheques in computer software which is recognized through Bankgladesh bank computer department. Then clearing officer seal all the cheques in advance date after that the officer endorsement all the cheques and sign all the cheques. All the cheques are posted in the computer by branch wise, then officer print the entire document and staple all the cheques by branch wise this is called schedule of clearing house.

3.4.2. Types of Cheque for Clearing: There are four types of Cheques for clearing: Outward clearing Inward clearing Outward Bills for collection Inward bills for collection

3.4.2.1 Outward clearing:

The instruments drawn on the other Banks received from the clients are sent to the clearing house for collection called outward clearing. The particulars of the instrument and the voucher are entered into the outward clearing register The register is balanced The instrument is suitably discharged / endorsed. The instrument is arranged bank branch wise. Schedules are prepared for each branch of a bank and main schedule for a bank.

Internship report on IFIC BANK LIMITED

29

 The total of the schedules is taken and agreed with that of the register. The house page is prepared in duplicate. The instruments along with IDBA and house page are sent to the clearing house. Finally a single debit voucher debiting IFIC general A/Cs department along with third copy of IDBA and deposits slips.

3.4.2.2

Inwards Clearing :

The Chaque or other instruments drawn on branch received from

other banks through clearing house are checked whether they are crossed or endorsed properly. For payment of the instrument all formalities for Chaque payment

are maintained. Incase of other branch if any instrument returned unpaid for any

reason shall be given to the sending bank through General Branch with return memo. For the amount of return Chaque IFIC, General branch will give an

IDBA to the concerned branch.

3.4.2.3

Outward bills for collection (OBC):

When General branch receives Chaque from other banks or other branches of same Bank is called OBC. To send the bills to the paying bank the following procedure are maintained-

Internship report on IFIC BANK LIMITED

30

 Only account holders Cheques are received. It is received with the pay-in-slip. Counter foil is given back to the customer. Cheques are duly endorsed. Necessary entries are given to the concerned register. Forwarding schedule is prepared and attached with the Cheques and sent to the paying bank. Pay-in-slip is kept in OBC outstanding file. After getting advice from the paying bank the proceeds of the Cheques is deposited to the account of the customer. Balancing is done for the outstanding amount. Monthly statement is prepared if the outstanding is more than two months.

3.4.2.4 Inwards bills for collection (IBC):

For the inward bills for collection, the bank maintains the following procedures Cheques along with forwarding schedules are received by the manager. The manager sends the said instrument to the bills in charge. The bills in charge examine the endorsements, signature of the officers and their P.A no. and gives necessary entries to the register. The banker presents the Cheques to the customers. After realization the amount from the customer the officer sanctions IBC No. against the OBC No. and prepares a credit advice to the collecting bank.

Internship report on IFIC BANK LIMITED

31

3.5 Cash Transaction Section

Cash Transaction department starts the day with cash in vault. Each day some cash i.e. opening cash balance are transferred the cash officer from the cash vault. Net figure of this cash receipts and payments are added to the opening cash balance. The figure is called closing balance. This closing balance is then added to the vault. And this is the final cash balance figure at the end of any particular day.

3.5.1 Function of cash department:

Cash Payment Chaque collection process Cash receipt

3.5.2 Cash Payment:

Steps are as follows: 1. After receiving the instrument the cash officer should Cheque it for any apparent discrepancy, date of the check, amount in words & figure etc. 2. The cash officer will send the instrument to the collection officer. He will examine the apartment tenor of the Cheque very carefully and compare the signature of the Cheque with the SS Card. 3. It will be posted in the computer to debit the account.

Internship report on IFIC BANK LIMITED

32

4. if fund is available, the cancellation officer will cancel the Cheque and put a PAY CASH seal. 5. Double cancellations are necessary for the amount more than tk. 5000/-. 6. After getting the cancelled instrument the cash officer will pay the cash to the party. 7. He will make on entry into the ledger and write the denominations on the backside of the Cheque. 8. Then he will affix CASH PAID seal. 9. At the end of the day the total amount entered in the paying cash register will agree with the total paid amount. 10. The In charge will cheek the entries and instrument to find out the correctness of the payment and put an initial against each entry. 11. Finally the instruments will be sent to the accounts department. 12. If any Cheque is returned unpaid, it will be given back to the bearer marking the cause of the Return Memo.

3.5.3 The procedure of Paying Cash at the Counter:

Customer places the cheque to the officer. The officer receives it and issues the customer in a token

The officer now verifies the ledger of the customer. If the customers A/C position is O.k. he passes the cheque to the second officer.

Once the cheque is cancelled that is Okayed for payment

The officer compares the signature of the customer with that on the signature card in the software. Then he makes an entry Internship report on IFIC BANK LIMITED of the cheque and cancels it by singing across the 33 cheque

Cashier enters the amount of the cheque in the software & pays appropriate amount to the customer.

3.5.4 The Procedure of receiving Cash at the counter:

Customers place the deposit slip & amount to the cashier

Cashier counts the amount of money first and then cashier pass the deposit slip to the another officer with a seal of received.

After credited cashier return the deposit slip to the customer.

After verifying the receipt, the cashier credited the amount to the customer.

3.6 Accounts Department:

Accounts Department is play most vital role in Banking. Accounts Department is a department with which each and every department is related. It records the profit & loss

Internship report on IFIC BANK LIMITED

34

A/C and statement of assets and liabilities by applying Golden Rules of book-keeping. The functions of it are theoretical & computerized based. The following ledgers are maintained and statements are prepared in the Accounts Department1. Transfer Book 2. Supplementary 3. Clean Cash Book 4. General Ledger 5. Subsidiary Ledger a. Income Ledger b. Expenditure Ledger c. Sundry Deposit Ledger d. Sundry Asset Ledger e. Suspense A/C Ledger f. Salary Register g. Salary Disbursement Register 6. Voucher Register 7. Balance Book 8. Daily Statement of Affairs 9. Daily Position Statement 10. Weekly Position 11. Provisional Income and Expenditure 12. Accounts Monthly Statement 13. Salary Statement 14. Half-Yearly Statement 15. Annual Closing Balance

Chapter 6 Recommendations & Conclusion

Internship report on IFIC BANK LIMITED
35

Recommendations
After studying and Analyzing all the available data and documents of IFIC Bank Limited, Mohakhali Branch, related to credit risk management, I have found a strong effort made by the officials of Kawranbazar branch to comply with the guideline issued by Bangladesh Bank and Head office in order to mitigate the risk of lending. However there are scope of development, to make their lending risk more optimal and more smooth recovery path they can do the followings:

Improvement of Credit Risk Grading Systems:

An industry wise integrated Credit Risk Grading system should be developed. So that risk can measure for different industry of business.

Sufficient

Workforce

&

allocate

standard

Risk

Assessment time:
Sufficient risk managers should recruit in Credit Risk Management Division and a standard time should allocate for a credit proposal analysis. So that, risk managers could go through the credit proposal for risk managers and have sufficient time for better analysis and assessment

Credit Report:
Credit report should obtain for all sort of credit proposal. Single credit proposal should not approve without having Clean CIB Report from Bangladesh Bank.

Development of tools and techniques for Credit Risk Management:

Internship report on IFIC BANK LIMITED
36

Banks has a few numbers of tools and techniques for credit risk assessment i.e. CRG, CIB which are not sufficient for all kinds of risk management. So, new and effective credit risk management tools and techniques should be introduced by the help of IT Division.

Reduce

of Political

pressure

& influence

of the

Directors and Management:

It is unavoidable of Political pressure & influence of the Directors and Management. Consequently some techniques should introduce so that those pressure and influence will be reduced.

Adequate information & Documents:

Adequate information and documents should prove in the credit proposal so that Risk Managers can make their decision with a very minimum time.

Build up Co-ordination with others related Division:

Banks moves by a team effort. So, strong co-ordination with the related divisions and departments is very important.

Development & Training:

Training is the key factor for development of the risk managers skills. Banks should have a regular training and development program so that a risk manager does know every risk matter and assessment techniques.

Internship report on IFIC BANK LIMITED

37

Financial Analysis:
An analysis of a minimum of 3 years historical financial statements of the borrower should be presented. Where reliance is placed on a corporate guarantor, guarantors financial statement should also be analyzed. The analysis should address the duality and sustainability of earnings, cash flow and the strength of the borrowers balance sheet. Specifically, cash flow, leverage and profitability must be analyzed.

Strong Security Coverage:

Adequate collateral security should obtain by the borrower as security. So that in case of bank may save from financial losses.

Insurance Coverage:
Insurance coverage should obtain for every funded and non funded credit facility. So that in case of uncertainty and damage like fire, strike, riot etc. banks and borrower can save themselves from financial losses.

Adherence to Lending Guidelines:

The Credit Applications/ Appraisals must be prepared in line with Banks lending guidelines. It must be clearly stated whether or not the application/proposal is in compliance with Banks Credit Policy lending guidelines.

Supplier Buyer Analysis:

Any customer or supplier concentration shall be addressed, as these could have a significant impact on the future viability of the borrower.

Internship report on IFIC BANK LIMITED

38

Follow-up and monitoring:

Credit quality depends on close follow-up and monitoring of loans. The follow-up and monitoring of loans is not strong here. As a result Special Mention Accounts and deteriorating credit are increasing day by day.

Develop Customer Banker relationship:

Today is the time for relationship banking & for better performance, customer satisfaction is very much important. So, Bank should develop the relationship with the customer. The above recommendations will be advantageous for the IFIC Bank Ltd, Kawranbazar Branch if these are attained in case of credit risk management. As a result nonperforming loan will be reduced as well as the financing will steer the wheel strongly in the economy of Bangladesh.

Conclusion
Internship report on IFIC BANK LIMITED
39

Bank and financial institutions can be compared with the heart of an economy, if the circulation of money is not normal the economic growth will be hurdled. Bangladesh is a growing economy, it is growing in every aspect in every day, to help to continue this growth credit flow, credit circulation, and credit recovery should be smoothen. In order to increase more employment, set up new industrial unit, boost up export earning, increase the inflow of FDI, Diversify export, and increase the productivity credit facility must be extended. Proper credit management can give the strength a bank to increase the flow of credit facility, so in coming days I hope bank and financial institutions of Bangladesh will be more efficient in managing credit risk, and will be able to extend the credit facility to different sectors.

Internship report on IFIC BANK LIMITED

40

Bibliography
Roger LeRoy Miller, David Van House, Money, Banking and Financial Markets (2nd Edition), Thomson south-western Scott Besley, Eugene F. Brigham, Essential of Managerial Finance- (13th edition), the Dryden press, a division of Harcourt Collage Publishers Ministry of Finance (MOF), Government of Bangladesh (GOB). (1998-99, 1999-2000), Activities of Bank Financial Institutions. Annual repot of the Securities and Exchange Commission. Bangladesh Bank Order, 1972, (President Order No. 127 of 1972), Department of Public Relations and Publications, Bangladesh Bank. Bank Company law, 1991, Bangladesh Bank. Annual Report of IFIC 2005-2010 www.Bangladesh-Bank.org www.centralbank.com www.ificbankbd.com

Internship report on IFIC BANK LIMITED

41

Related Acronyms
Acronyms ADB ATM A/C BCC BE CAR CIB CLP CRG CRM D.C D.D DF EWS EPB FBP FDR GATT GOB HOCC IBCA IFIC KYC LIM L/C LTR MICR NPL NBFI PAD Asian Development Bank Automated Teller Machine Account Branch Credit Committee Bill of Exchange/Bill of Entry Capital Adequacy Ratio Credit Information Bureau Credit Line Proposal Credit Risk Grading Credit Risk Management Documentary Credit Demand Draft Doubtful Early Warning Signals Export Promotion Bureau Foreign Bill Purchase Fixed Deposit Receipt General Agreement for Tariffs and Trade Government of Bangladesh Head Office Credit Committee Inter Branch Credit Advice International Finance Investment & Commerce Bank Limited Know Your Customer Loan Against Imported Merchandise Latter of Credit Loan Against Trust Receipt Magnetic Ink Character Recognition Non-Performing Loan Non Bank Financial Institute Payment Against Document Elaboration

Internship report on IFIC BANK LIMITED

42

PSI PC SLR SWIFT SME SWOT SS SDR STR SOD T.T T.P

Pre-Shipment Inspection Packing Credit Statutory Liquidity Reserve Society for World-Wide Inter bank Financial Telecommunication Small & Medium Enterprise Strength, Weakness, Opportunities, Threats. Sub-Standard Special Drawing Rights Suspicious Transaction Report Secured Over Draft Telegraphic Transfer Transaction Profile

Internship report on IFIC BANK LIMITED

43