Main purpose of this report is to analysis Overall Banking Operations of Standard Bank Limited. Other objectives are to improve the quality of observation and to improve quality of evaluation. Report also focus on to create the ability to recommend to the branch and its bank based on the gathered knowledge. Finally draw SWOT analysis to improve the quality of communication. Here also suggest recommendation to improve Overall Banking Operations.
Standard Bank Ltd. is one of the Private Commercial Banks in Bangladesh that came in existence on May 11, 1999 with Tk. 750 million of authorized capital and 200 million of Paid-up capital. By now the bank has 19 branches. It is managed by a Broad of Directors consisting of one Chairman and one Vice-Chairman and 17 Directors. By June 30, 2003 its total shareholder equity stands at Tk. 1250 million authorized capital and Tk. 330 million paid-up capital. The Bank has taken the projection to crease its paid-up capital up to 1000 million within 31st Dec. 2005 consistent with the newly declared rule of Bangladesh Bank and implementation of Banking Company Act-2003.
Since inception the bank is growing rapidly obeying all the terms and conditions of central bank and doing excellent performance in the sector. The Bank is continuing its growth rate ratio in terms of Deposit collection, distribution of Loans and advances and also Foreign exchange business in terms of import of export financing and played a significant role for the economical development of the country. In terms of profit gaining the bank also maintains its growth ratio compared with the previous years. The percentage of non performing loans of the bank as of date is 0.59% which sets an example in the banking sector in Bangladesh.
The bank is running its operation with fully computerized state of art technology and installing SWIFT and e-commerce for mobilization of local and International Banking business. The bank is also committed to explore a new horizon of banking with a wide range of products and services. Advanced Banking Technology such as ATM, Credit Card, and Online Banking etc. for developed system to provide round-the-clock banking services to the valued clients. The Executive and Officers are also professional Bankers with decades of experience in leading commercial banks and they are capable of handing all banking needs up to the satisfaction of its clients.
The Bank is maintaining a standard quality of latest marketing tools for its Deposit mobilization and Lending process and also making a better contribution in foreign exchange business through maintaining relationship with the leading 14 International Banks located Worldwide. The bank is continuing its growth of business gradually and simultaneously making a significant contribution for the economic development and poverty alleviation of the country and also creating new employment opportunities for the unemployed sector through its participation in the trade and investment process of the country.
Standard Bank Limited is able to provide innovative service to the consumers of a developing country such as deposit products and services, commercial banking activities and Foreign Exchange & Foreign Trade. Based on the knowledge of practical field I prepared my internship report entitled of “A Case Study on General Banking, Foreign Exchange and Advance Section.”
Objective of the Study
The objective of this program and the report can be divided into two types, such as primary objectives and secondary objectives.
- To raise the ability to cope with new organization environment.
- To gather practical experience.
- To relate theoretical knowledge with practical field.
- To improve the quality of observation.
- To improve quality of evaluation.
- To create the ability to recommend to the branch and its bank based on the gathered knowledge.
- To improve writing ability.
- To improve the quality of communication.
To prepare this report the data has been collected from two sources, such as primary source and secondary source.
- Primary Sources
Primary sources are personal interview and conversation with employees of the organization.
- Secondary Sources
Secondary sources are annual reports, selected books, lecture papers of various institutions and websites related with this report.
Data Collection Technique
To prepare this report data are collected using interview of personnel of the branch, annual report of the bank, different published books, lecture papers of different institutions and related websites.
An Overview of Standard Bank Limited:
Bank is the most important financial institutions in a country. In Bangladesh this institutions is gradually increasing. These banks are helping in the progress of economy of Bangladesh. Standard Bank Limited (SBL) was incorporated as a Public Limited Company on May 11, 1999 under the Companies Act, 1994 and the Bank achieved satisfactory progress from its commercial operations on 03rd June, 1999. SBL has introduced several new products on credit and deposit schemes. It also goes for Corporate and Retail Banking etc. The Bank also participated in fund Syndication with other Banks. Through all these myriad activities SBL has created a positive impact in the Market.
The bank is marching forward with the vision of it would serve as partner and advisor of the clientele to trade, commerce and industry.
The mission of the bank is to be utmost trustworthy stakeholder, careful, committed for equitable and sustainable growth based on diversified deployment of fund/resources leading the bank to the peak of healthy and wholesome financial institution.
- To be a dynamic leader in the financial market in innovating new products as to the needs of the society.
- To earn positive economic value addition (EVA) each year to come.
- To top the list in respect of cost efficiency of all the commercial Banks.
- To become one of the best financial institutions in Bangladesh economy participating in the most significant segments of business market that we serve.
Treasury unit is a core-banking unit and Standard Bank Limited’s treasury unit is one of the best earning sources of the bank. The bank is well equipped with skilled human resources for efficient dealing. Its everyday business evolves around participation in Foreign exchange market and Money Market in a substantial volume.
- Foreign Exchange
Foreign Exchange dealing desk deals with different currencies in inter-bank market from liquidity perspective. Everyday it offer competitive exchange rates for these currencies against BDT.
- FX products
The bank’s daily foreign exchange products range as follows: –
- Spot dealing.
- Forward dealing.
- Forex- Commercial and non-commercial.
Money market comprises all sorts of deals with local currency in inter-bank /NBFI market in Bangladesh. Standard Bank Limited’s money market desk lends and borrows a remarkable amount for liquidity management and arbitrage in a lucrative manner. Recurrent deals in the market make Standard Bank Limited. as an agile and active participant in the money market of Bangladesh. Money market of the bank deals with:-
- Overnight (call) lending and borrowing with Banks-NBFIs.
- Term placement and with Banks-NBFIs
- REPO/Reverse REPO of govt. security scripts with central bank and other commercial banks.
- It takes a very dominant rule for coding rate and various market projections in our Money market through its everyday deals.
Foreign Remittance Services
Inward foreign remittance is one of major sources of the foreign currency reserve of the country and in order to encourage inflow of remittances through banking channel from the Non-resident Bangladeshis, Standard Bank Limited provides quality service for repatriation and collection of remittances with the help of its foreign correspondents and trained personnel. Remittance services provided by Standard Bank Limited are:-
Process / collection of cheque/ Draft, TT, EFT in USD, GBP, EURO, AUD and JPY
- Issuance of FDD, TT, EFT in USD, GBP,EURO, AUD and JPY
- Issuance of AMEX Travellers Cheques in USD
- Handling of Student file of the students going abroad for educational purpose in USD, GBP, EURO, AUD and JPY
Foreign Currency Accounts
Standard Bank Limited provides different account services as prescribed by the guidelines of central bank and offer competitive interest rate for those accounts.
- Foreign Currency Account. (FC)
- Non- Resident Foreign Currency Deposit Account (NFCD)
- Resident Foreign Currency Deposit Account (RFCD)
- Non Resident Non-convertible Taka Account.
Standard Bank Limited provides assistance for local and international trade using every mood of finance to the traders, exporters, manufactures, individual etc.
The international trade encompasses a substantial portion of business conducted by the Bank. During the year 2004, the bank has contributed in the national economy after successfully handling of foreign exchange transactions viz. Import, Export (Both local and foreign).
In the wake of recession of business, the government is currently pursuing an accommodative monetary policy through a number of measures such as reduction in Bank rate, reduction in interest rate in government bonds and reduction on SLR requirement, simultaneously adoption of floating exchange rate and open market operation fueling incentives towards private investment with the aim of creating more capital avenues thereby generating more income to add to the GDP of the economy. In the juncture, it is very tough for a Bank to remain on track of competition to achieve desired goal in international trade. In order to achieve the bank’s cherished goal of achieving consumer satisfaction it extend its hand in the following sector:
- Trade Finance
- Small & Medium Business
- House Building loan
- Consumer Credit
- Transport Loan
- International Trade
- Project Financing
- Lease Financing
- Financing for BMRE
- Agricultural loan
- Special finance for non-traditional item
- Syndication Finance
Mood of finance:
- Secured Overdraft: For Work Order, General purpose etc.
- Cash Credit (Hypothecation)
- Cash Credit (Pledge)
- Letter of Credit
- Back to Back L/C
- Loan against Trust Receipt
- Loan against Import Merchandise (LIM)
- Bank Guarantee
Online banking is the demand of 21st Century. Standard Bank Ltd. introduced this online banking facility in limited scale. The bank already establish online system in it 10 branches. They are-
- Principal Branch
- Agrabad Branch
- Khatungonj Branch
- Dhanmondi Branch
- Imamgonj Branch
- Gulshan Branch
- Foreign Exchange Branch
- Topkhana Road Branch
- Jubilee Road Branch
- Khulna Branch
|Account Summary||The customer will be able to view the list of Current, Saving, Term Deposit and Loan/Advance account with current balances.|
|Account Details||The customer will be able to view details of a particular account and see the account details including clearing amount, limit of loans, interest accrued etc.|
|Account Statement||The customer will be able to view details of transaction for a particular account for a period.|
|Standing Instruction||The customers can submit/view standing instruction to transfer funds to the specified accounts (his account or 3rd party).|
|Statement request||Customer can request the branch to send a statement for a required period. The bank will manually service this request.|
|Cheque book request||Customer can request for Cheque book. The bank will manually service this request.|
|Cheque status Inquiry||Customer can choose an account and enter the Cheque number for which the status will be displayed.|
|Stop payment Cheque||Customer can mark his Cheque leaf as stop payment.|
General Banking Section (Part-3)
In a commercial bank, General Banking Section is the most important part. This section is consists of activities of open of account, issue of cheque, payment, clearing of inter bank transaction; inter branch transaction, and closing of account. Open of account is one kind of technique of collection of deposits from customers.
“Deposits are Debts”- The money deposited with the banker is not held by him in trust but as his debts to the depositors and the relationship that exists between the banker and the depositor is strictly that of debtor and creditor. The deposits are accepted by the banker through current and saving accounts withdrawable by cheques. Deposits are also accepted against deposit a receipt, which is deposited against term deposit accounts. Those are primary source of fund of a bank.
Negotiable Instrument Act, 1881 provides-
The deposits accepted by the banker are repayable on demand or otherwise and withdrawable by cheque, draft, and order or otherwise. The total deposits held by the banker are broadly classified as demand deposits and time deposits, the former being payable on demand and the latter as per terms of the deposits.
“Customer”- The Negotiable Instrument Act has not defined a ‘customer’ but from section 131 of NIA and different court decisions as quoted in books of banking, it appears that only those constituents of the banker are customers who have some sort of an account with him duly introduced for the purpose, with the deposits put therein being withdraw able by cheques.
Privilege to Open Account
Who can open Account?
- Minor (Minor can open the account in the name of the minor’s guardian or jointly with the guardian)
- Discharged bankrupt
- Proprietorship firm
- Partnership firm
- Limited company
- Non-trading concerns
- Co-operative society
- Corporation and Public body
Who can’t open Account?
- Minor (Minor is not allowed individually open account)
- Undischarged bankrupt
Types of Account
There are three types of account are available for interested persons and organizations. Those accounts are current accounts, saving accounts, term deposits.
Drawings are allowed from such an account without any restriction within the funds available in its credit. Ordinarily no interest is paid on these deposits. In certain cases, however, interest is allowed at an agreed rate where withdrawals are subjected to a written notice for a specified period. These are called special notice current accounts and the deposits are treated by the banker as short term deposits in his books of accounts. There being no restriction on withdrawals current accounts are particularly suitable for business transactions though nobody is debarred from opening such an account for any purpose.
These are interest bearing deposit accounts. The drawings are restricted in respect of both the amount of withdrawal and the frequency thereof so that the payment of interest does not become non-compensating for the banker. Sometimes, the restrictions are ignored against the depositor’s written confirmation to forego his claim for interest on the total balance for the whole month of withdrawal. In Bangladesh, withdrawals are allowed twice in a week up to a maximum of Tk.5,000 unless a written notice for a specified period is given to the banker asking for the drawing of higher amount .In SBL it is Tk.7,000.
These are accounts intended for individual savings and are not suitable for business concerns which require frequent withdrawals. So are there the restrictions laid down on withdrawals and subject to the restrictions any one can maintain a saving account and in practice, firms and non-trading concerns also are found to open such accounts.
Deposits are also accepted by the banker against acknowledgement in the form of ‘receipt’ for specified amounts and fixed periods. They are known as term deposits or fixed deposits attracting higher rates of interest graded on the basis of the periods of deposits. The longer the periods, higher is the rate of interest on them. The receipts are not transferable and not negotiable. Sometimes encashment of a receipt before maturity is allowed upon surrender of the accrued interest. Unlike current and saving deposits no bank account is opened for these deposits in the names of the depositors.
Process of Account Opening
The Banker must keep on his record the particulars of each account holder and his introducer namely, full name, address, occupation, specimen signature, nominee etc. The particulars are essential for identification of the account holders individually so that the banker can discharge his obligation to everyone correctly and to the extent due.
Step: 01- Introduction
It appears established that the banker must not open an account for a stranger to him. Before opening an account he must first satisfy himself about the identity of the proposed account opener, his integrity and respectability. This is essential in order that a fictitious person or a person incapable of making a valid contract does not open an account. To meet the requirement of law the banker has been accustomed to obtaining an introduction for each account from a responsible person known to him or having already a duly introduced account with him, after recording his name, address, occupation and signature in the account opening form. In addition to this the bank Manager should talk to the proposed account opener in an informal way while opening the account and try to gather as much information as are possible about his affairs and thereby satisfy himself about his bona fides.
About whether the introduction is avoidable while opening an account, can be replied in the affirmative if the banker can ensure without fail that he will not undertake any collection or agency work on behalf of the account holder, and that the operations on the account will be strictly limited to deposits and withdrawals only. This is practically not possible because of varied nature of transactions that the modern banker undertakes on behalf of his customers.
Step: 02- Account Opening Form
Each banker has his own printed forms, more or less alike, for opening different types of accounts. The relative form is required to be filled up correctly and authenticated by the proposed account opener under his dated signature at the time of opening the account. This document is very important as it governs the relationship between the banker and the account holder, containing an undertaking by the latter that he agrees to comply with the banker’s existing rules for conduct of such an account.
Step: 03- Enclosing Documents
Each account opening form consists of Know Your Customer (KYC-from April, 2002 it is mandatory) form, Transaction profile, and Nomination form. In KYC form interested account opener described himself, about name, occupation, address, introducer and so on. In Transaction profile he or she filled estimated monthly transactions. And Nomination form is fills up to identify account holders nominee or nominees who will be paid up total or portion of the account’s balance if the account holder died. Except Nomination Form all those are needed for company and other organization. With those documents, some other identification documents like passport, Union Porishad Chairman Certificate, Ward Commissioner Certificate, Voter ID Card, Corporate ID card, Memorandum of Associations, Articles of Association, Trade License etc. must be enclosed with the opening form.
Step: 04- Specimen Signature
One or more specimens of the account opener’s usual signature are maintained by the banker on his record. These are the signatures the banker recognizes for the purpose of customer’s signing cheques on the account and issue of other instructions to him or her for execution. Any instruction of the customer under signature not in conformity with the specimens is not to be acted upon by the banker under any circumstances.
Step: 05- Recording of Specimen Signature
Each specimen signature should be individually attested by an authorized officer under his signature and any unattested signature recorded with the banker should be arise doubt as to its genuineness. Where fresh signatures are required to be recorded subsequently the same can be done either on the original signature card if there is space or on a separate signature card. In both the cases the signatures should be attested individually by an authorized officer and the date of recording the signatures should also be noted. But fresh signatures should not be recorded unless requested for by the account holder in writing showing reason and he is known to the banker or properly identified, as otherwise a cheat may put in a signature to defraud the banker.
Step: 06- Custody and Safe-keeping of Signature Cards
The signature cards should always be kept under such a proper custody as to prevent them from falling into unauthorized hands and also to exclude the possibility of fraudulent substitution thereof. There are instances of frauds and forgeries where additional signatures were subsequently inserted in the signature card without authorization or the signature card itself was replaced containing fresh signatures and cheques were paid without noticing the tampering. These frauds and forgeries would not have been possible had the absence of attestation of the signatures individually and the necessity of safe custody of the signature cards been not ignored by the bank officer.
Step: 07- Initial Deposits
The initial deposits for opening an account may be for any amount but the bankers sometimes prescribe a minimum. This initial deposit should be in cash or at the most if unavoidable, a cheque drawn by the account opener in favor of or a banker’s draft payable to the banker with whom the account is opened. A cheque collected for initial deposit in an account cannot be said to have been collected for a ‘customer’ in good faith and without negligence for the purpose of protection under section 131 of NIA if the account opener has no tile to the cheque.
Step: 08- Thanks Letter
After initial deposits the banker doesn’t issue cheque at the same time. Bank sends Thanks Letter to thanking the account openers to open accounts in its branch. This letter treats customers as honorable persons as well as it creates good faith and relationship with the bank. But most important thing of this letter that it is one kind of technique to verify the validity of the customers given information. Because, when the registered letter is returned because of wrong information about their name or addresses, it can not be explained that there is a possibility of fraudulent. And then banker must have to stop the accounts and issue of the cheques.
Step: 09- Issue of Cheque Book
If the account opener is known person, then cheque book can be issued before the Thanks Letter. For issue of a cheque book there should be a request from the account holder. The first one is issued on basis of the request printed on the account opening form but not before the account is opened. Subsequent issue should be done only on the strength of the duly signed requisition slip as attached to the cheque book unless the relative cheque book or the requisition slip is reported lost or destroyed by the account holder and the loss is properly noted on the banker’s records. No cheque book will be issued except by an authorized officer. While issuing a cheque book the account number should be noted on each leaf. This is essential for identification of the concerned account easily on receipt of a cheque on any other account. Immediately, after issue of a cheque book, its number should be noted on the ledger page of the account under dated authentication of an authorized officer. Any cheque book number noted on the ledger page without proper authentication should put the passing officer into query while passing a cheque from that series for payment. It should be noted that for term deposits there is need of issue of cheque, bank only give deposit receipts against that deposits.
A cheque is an unconditional order of the drawer in writing bearing a date, to the banker maintaining his account to pay on demand, to a named person, his order or bearer, a certain specified sum of money, expressed in both figures and words.
Parties to Cheque
There are three parties are available to a cheque. They are Drawer, Drawee, and Payee.
- Drawer: Drawer is the person who draws the cheque i.e. the depositor of money in the bank.
- Drawee: Drawee is the drawer’s banker on whom the cheque has been drawn.
- Payee: Payee is the person who is entitled to receive the payment of a cheque.
When a cheque is drawn ‘pay to self’ or ‘pay cash’ the payee is the drawer, his endorsee or bearer, as the case may be depending on the form in which it is drawn namely, order or bearer. A cheque is Payable forthwith on production and no presentment thereof is required as in the case of a bill of exchange or pro note. The payee or indorsee who is in possession of a cheque or the bearer thereof is the holder. A holder becomes a holder is due course when he possesses the instrument for consideration, before it became over-due and without notice that the title of his transferor was defective.
Endorsement and Negotiation
The endorsement is done by the payee or endorsee, as the case may be, by signing on the instrument customarily on its back and where the space is sufficient, on a slip of paper annexed thereto, called ‘allonge’. An order instrument is required to be endorsed by the payee or endorse for the purpose of negotiation. To make the negotiation complete, the endorsement must be followed by delivery of the instrument to the endorsee to make him holder (Ss. 48 &51 NIA). The endorsement should be for transferring the entire property in the instrument, if negotiation is desired and where it is done for transfer of the property partly, or to more than one severally it doesn’t operate as a negotiation. A bearer instrument is not required to be endorsed for the purpose of negotiation and can be negotiated by mere delivery (Ss 47, & 28A, NIA). In case of an order instrument, verbal assignments by mere delivery thereof without endorsement, is not valid and confer no title to the transferee except where equitable assignment is intended.
Types of Cheque
There are three types of cheque. They are bearer cheque, order cheque, and crossed cheque
A bearer cheque is payable to the bearer and the banker is discharged from liability by payment in due course to the bearer thereof. Unless the form of drawing ‘bearer’ is changed to ‘order’, a bearer cheque is always a bearer one and no endorsement can make it payable otherwise than to the bearer thereof. Though such a cheque is not required to be endorsed for negotiation the recipient of cash must endorse it in token of having received the payment, otherwise the banker is entitled to ask for a receipt, where required, on revenue stamp, for the amount paid by him against the cheque. Further, a transferor by delivery i.e. without endorsement is not liable on the instrument.
In case of an order cheque it should purport to be endorsed by or on behalf of the payee. Where an order cheque has been endorsed by payee in favor of another, the endorsee must also sign it to receive the payment in due course. In practice, the banker insists on identification of the payee while making payment of such a cheque in cash. This is done to avoid any chance of being charged with payment out of due course.
A cheque (also banker’s draft) can be crossed generally or specially to a banker by the drawer, or the holder thereof. The crossing must be on the face of the cheque, there must be two lines drawn transverse and parallel. There can not be any general crossing without the two transverse lines, with or without the words ‘and company’ or abbreviation thereof, though the name of a banker without the lines is sufficient to constitute a special crossing. A perforated crossing is not disputed. The crossing of a cheque is a material part of the cheque. General crossing is not done to bills of exchange or promissory notes.
Where a cheque is crossed generally, it can not be paid otherwise than to a banker (i.e. through a bank account) and where it is crossed specially, otherwise than to the banker to whom it is crossed or his agent for collection, being a banker. Mere crossing of a cheque with the two transverse lines does not affect its negotiability or transferability, what it affects is the mode of payment of the cheque.
The drawer of a cheque (not any body else) sometimes cancels the crossing for making it payable over the counter. This must be done by writing ‘crossing cancelled’ under his signature as recorded with the banker and by an indication of having cancelled it. The cancellation is done in practice and not under sanction of law. This is being a material alteration, the paying banker must be very cautious lest he pays a crossed cheque over the counter.
Payment of Cheque
A cheque is payble on due presentation for payment if it is drawn in proper form duly signed by the drawer or his authorized agent, subject to the crossing, if any, and the sufficient credit balance in the concerned account or the arrangement made for an advance and the drawee banker is discharged from liability by payment thereof in due course. In the event of dishonor of a cheque due to a reason other than a valid one, the drawee banker is liable to the drawer for any loss or damage caused thereby.
Payee of Cheque
There must be a person entitled to receive the payment of the cheque either as a payee or his endorsee or bearer. The drawer himself may also be the payee by writing his name, self or pay cash. In the absence of the payee’s name, the cheque can not be treated as a bearer one nor it can be looked upon as a cheque at all and the better course would be to return it for completion under authentication of the drawer.
The mandate of the drawer as conveyed through the cheque requires being dated. It appears probable that any holder of a cheque may insert the date where it was issued undated but in practice, the banker dishonors an undated cheque. The date as appears on a cheque is presumed to be the date on which it was made or drawn (s. 118 (b), NIA).
Post Dated Cheque
A post dated cheque is one which bears a future date as its date of issue. Such a cheque is valid and its negotiability is not impaired simply because it is post dated. But the banker can not pay it earlier than its date because the drawer’s mandate is not to pay it earlier.
Where a cheque bears a date before the date of its issue it is known as an antedated cheque and is not invalid because of only antedating provided this does not involve any illegal or fraudulent purpose or transaction. A cheque antedated for more than six months becomes stale or out of date as per banking practice.
Stale or Outdated Cheque
As per banking custom a cheque (also banker’s draft) becomes ‘stale’ when it remains circulation for more than six months, though there is no legal sanction in this respect. Such an instrument is not honored by the drawee banker unless revalidated by the drawer. But it does not appear established that the drawer or the endorser of such an instrument is discharged from liability unless barred by limitation of three years.
Amount of Cheque
The law does not specify whether the amount of a cheque is required to be expressed both in words and figure. But as per banking practice the amount is stated both in words and figure. Where the amount in words and figure differs, the amount stated in words will prevail. If the banker pays the amount of a cheque expressed in words even though it is higher than that expressed in figure, the banker may be protected under law but in practice, he does not pay a cheque with discrepancy. To pay the smaller amount is also not the general custom.
The payment of a cheque is subjected to the drawer’s having sufficient credit balance in his account (s. 31, NIA) unless an arrangement has been made by the drawer for an overdraft. When the balance is not sufficient to meet the whole amount of the cheque, the payee can not demand a part payment nor the banker is bound to make such a payment, as the cheque can not be considered as an assignment of funds in order to enable the payee have an equitable claim on the drawer’s balance.
The banker can not debit his customer’s account with the amount of cheque if the customer’s signature thereon is forged as this is not the order of the customer. It is the duty of the banker to acquaint himself with the customer’s specimen signature and before payment of a cheque, he must compare the signature with the specimen one on his record. Where a forgery is detected subsequent to the debit of the account and the forgery is found to be directly due to or is intimately connected with negligence of the customer in the safe keeping of the cheque book, the banker is entitled to debit his account. This means, the neglect on the part of the customer must be the proximate cause that led to the perpetration of the forgery, which otherwise would not have been possible.
No Payment for Valid Cheque
A cheque does not become payable even if it is valid for payment, where-
- Its payment has been stopped by the drawer in writing
- There is notice of customer’s death
- There is notice of customer’s bankruptcy
- There is notice of customer’s insanity
- There is knowledge of defective title of the holder
- Misappropriation of trust funds by the customer
- Garnishee order
- Court injunction or any other court order restraining the customers from operating the account
Each branch of the banker is a distinct unit. It maintains the accounts of the customers and the necessary office accounts independently. The branch complies periodical statements of its affairs on the basis of the balances of the office accounts in the General Ledger and sends the same (known as Trial Balance or General Ledger Abstract) to the Head Office where such statements of all the branches including Head Office are consolidated to ascertain the position of the bank as a whole. The total assets and liabilities position so ascertained, and has also to be submitted to the banking control in the prescribed form as per the Banking Companies Ordinance, 1962.
Reconciliation of Inter-branch Transaction
In the ordinary course of business the different branches of the banker receive deposits from the customers and make payments to them on behalf of each other. For example, a customer purchases a draft or a mail or telegraphic transfer payable at another branch or deposits a cheque or bills for collection of the proceeds from an outstation branch. In all these cases the issuing or the collecting branch receives the money and the drawee or the remitting branch makes the payments to the beneficiaries. There are many such transactions of various nature handled by the branches daily. For such transactions individually there is no physical transportation of cash to the concerned paying branches. The funds position of a branch is regulated separately through transportation of cash to and from the concerned link branch, whenever there is surplus or shortage of cash in the till.
These inter-branch transactions, debit or credit, are routed through a general account maintained in the General Ledger of cash branch including Head Office. While effecting such a transaction the originating branch sends an advice containing particulars thereof to the concerned responding branch, which effects as the contra entry on the basis of this advice. At the same time, both the originating and the responding branches apprise Head Office of the particulars of their respective entries through commonly called general account schedules.
On receipt of the schedules, the Head Office marks off the originating entries with the respective contra entries. This is known as Reconciliation of the inter-branch transactions. The entries which are not reconciled on any day are items in transit and the total (net debit or credit) of all the outstanding entries agrees with the total (net debit or credit) of the general account balances of all the branches on that day.
The clearing house is an assembly of the locally operating scheduled banks for exchange of cheques, drafts and other demand instruments drawn on each other and received from their respective customers for collection. The house meets at the appointed hour on all working days. Under the chairmanship of the central bank or its agent as the case may be, and works within the regulations framed there on the basis of the prevailing banking practices. The net dues receivable or payable arrived at after off-setting the total amount of the instruments received with that of the instruments delivered, are adjusted through the respective banker’s account maintained with the chairman-banker.
Types of Clearing
There are two types of clearing is perform by a bank. They are as follows-
Inward clearing refers to clearing of own branch cheques which are sends by other bank’s branch through the clearing house for collection. This is the medium of paying the payees on the behalf of its customers.
Outward clearing refers to send other banks cheque through clearing house for collection. This clearing is the medium of collecting cash nonphysical way on the behalf of its customers.
Clearing House System
When a branch receives a cheque from its customer (payee) for collection from other bank’s branch, they send it to the BB clearing house or its agent sonali Bank through the principal branch at the last hour (evening). BB clearing house or its agent sorts the cheque with other cheque at night and sends the cheque to the responding branch for payment through its principal branch at second day. The responding branch checks the cheque for honors or dishonors. If it honors the cheque, then it debit the customer (drawer) account and credit GL account of the principal branch and sends an advice to the principal branch about it. But if it dishonors the cheque, then it writes a slip to show the cause of dishonor and attached it with the cheque, and sends it to the principal branch at last hour. Principal sends the cheque to the BB clearing house, for honored cheque clearing house debit the responding bank account and credit collecting bank account, but for dishonored cheque it does not give such entries. After all these works again it sends the dishonored cheque to the principal branch of the collecting bank. Then principal branch sends the cheque to payee’s branch. Payee’s branch give entry for that dishonored cheque.
Notice of Dishonor
When an instrument is dishonored either by non-acceptance or by non-payment by the drawee, acceptor or drawee in case of need, where there is one, the collecting banker must give notice of dishonor to his customer, drawer and other endorsers within a reasonable time after dishonor except where the notice of dishonor is unnecessary or has been dispensed with by the party entitled to it.
Statement of Accounts
The statements are generally issued two times in a year, but sometimes it is issued several times by responding the customers’ application for necessity. The necessity of such statement of accounts was presumably felt in order to keep the account holders apprised of the position of their accounts so that their confidence in the banker remains unshaken. But with the gradual expansion of banking habits unauthorized withdrawals and misappropriations of customers’ deposits through unscrupulous means are on the increase. To check such fraudulent transactions it is all the more necessary now-a-days to send statements of accounts to the customers so that they can by themselves check up the balances of their accounts.
Closing of Accounts
At times, the banker may desire to close an undesirable or unsatisfactory conducted account. He or she should then send intimation to the account holder that he or she will not receive any further deposits in the account and requesting the customer to withdraw his or her balance. It is not desirable and in fact would be dangerous that the banker closes an account without giving such a reasonable notice as would obviate any damage to the customer’s credit.
Modes of Remittances
This function of the banker obviates the individual’s difficulty and the hazards in transportation of physical cash from one place to another. Against deposit of the requisite funds and the payment of the remittance charge the banker undertakes to make the equivalent amount available at a particular place to a named person or his/her order within or outside the country as per instruction of the remitter. The remittance are effected through Banker’s Demand Drafts (DD), Mail Transfer (MT) and Telegraphic Transfer (TT) as asked for by the remitter. This remittance of funds is also involved in sending the proceeds of cheques, bills and other instrument that the banker receives for collection as agent or as holder for value.
A banker’s demand draft (DD) is an unconditional order of the banker’s one office to another to pay to the named person or order the amount mentioned therein on demand. The remitter of funds can purchase a banker’s draft making the amount payable to anyone including himself. If the draft is not crossed, the payee can draw the amount in cash upon production of the same to the drawee office with satisfactory evidence of his/her identity or can draw the money by depositing it to his/her account there or any other banker. The draft being payable to certain particular person or order the banker must satisfy himself as to the title of the person presenting it for receiving the payment. The banker is discharged from liability only by payment in due course.
Mail Transfer Advice
Where the remitter desires the banker to remit the funds to the payee instead of purchasing a draft himself, the banker does it through a Mail Transfer Advice. The transfer is so called as the advice is dispatched to the paying office by ordinary mail. The payee must have an account with the paying office as the amount remitted in such a manner, is meant for credit to the payee’s account and not for cash payment.
Sometimes the remitter of the funds requires the money to be available to the payee immediately. In that case, the banker is requested by him to remit the funds telegraphically. Such a remittance is effected by the banker through a coded telegram attested by secret check signal, on receipt of which the paying office pay the amount to the payee in cash through a telegraphic payment order or credit his account, as the case may be.
It is also in practice with the banker to purchase telegraphic transfers from another banker of first class standing up to a certain specified limit under prior arrangement detailing the terms and conditions. This selling of telegraphic transfer is resorted to by the latter banker when he or she faces shortage of funds locally. The news of purchase and receipt of reimbursement by the respective office are required to be conveyed to the concerned receiving and purchasing office telegraphically in view of larger amounts being generally involved.
Unlike an M.T. or T.T. the banker’s payment order is meant for making payment of the banker’s own or of the customer’s dues locally and not for effecting any remittance to an outstation. In a sense, the payment order is used for making a remittance to the local creditor. As prevalent, the payment orders are in the form of receipts, which are required to be discharged by the beneficiaries, where applicable on revenue stamps of appropriate value, against payment in cash or through an account. The payment order is not a negotiable instrument and can not be endorsed or crossed like a banker’s draft.
Foreign Exchange Section (Part-4)
In the Panthapath Branch of SBL, Foreign Exchange Section does limited scale foreign exchange related activities. This section does the works related to inward and outward remittances and opening of LC (Letter of Credit) for importers via principal branch.
Foreign Exchange and Foreign Trade
Foreign exchange, like foreign trade, is a part of economic science. It deals with the means and methods by which rights to wealth in one country’s currency are converted into those of another country. By the same token, it covers the methods used for conversion, the forms in which such conversions take place and the causes which render these conversions necessary.
The causes which make dealing in foreign exchange necessary are too obvious. Since the early days of civilization, nations of the world are engaged in the business of trading with each other. At the same time each nation has developed a currency of its own, perhaps as measure of satisfying nationalistic ego or display of sovereign existence. These two divergent phenomena or what the French economist Perou described as ‘internationalism of trade and nationalism of currencies’, are precisely the reasons which give rise to dealing in foreign exchange. One can visualize that when there emerges one single world currency on some future date, dealings in foreign exchange will cease to exist, at least in the form as we know them today. Until then international trade and movement of money and capital will continue to remain the mainsprings of foreign exchange dealings.
Foreign Exchange Transaction
The transactions of the authorized dealer in foreign exchange involve either outward or inward remittances of foreign exchange from one country to another. In cover of the remittances the authorized dealer makes sales and purchases of equivalent foreign currencies on spot or forward basis. The sale involves exchange of foreign currency for home currency i.e. conversion of home currency into foreign currency and the purchase involves exchange of home currency for foreign currency i.e. conversion of foreign currency into home currency. The conversion of one currency into another takes place at an agreed rate of exchange at which the banker quotes, one for selling and another for buying, each one separately for spot transactions and forward transactions. In such transactions the foreign currencies are like any other commodities offered for sale and purchase, the cost (conversion value) being paid by the buyer in home currency, the legal tender.
The foreign exchange transactions of the authorized dealer are subjected to such restrictions and formalities as are prescribed by the Bangladesh Bank for the purpose of the day administration of the Exchange Control under the Foreign Exchange Regulation Act, 1947. The Bangladesh Bank has laid down the general regulations in their Exchange Control Manual and notifies instructions as are required from time to time for compliance by the authorized dealer and the general public.
Types of Exchange Rates
Exchange rate is the rate at which one currency is converted into another currency. There are two types of currency exchange rate. They are given below:
Spot Exchange Rates
When two parties agree to exchange currency and execute the deal immediately, the transaction is referred to as spot exchange rate. So, the spot exchange rate is the rate at which a foreign exchange dealer converts one currency into another currency on a particular day.
Forward Exchange Rates
The fact that spot exchange rates change continually as determined by the relative demand and supply for different currencies can be problematic for an international business. To avoid this risk, importers might want to engage in a forward exchange. A forward exchange occurs when two parties agrees to exchange currency and execute the deal at some specific date in the future. Exchange rates governing such future transaction are referred to as forward exchange rates.
Outward and Inward Remittances
There are two types of remittances are available in foreign exchange transactions. They are-
- Outward Remittances: Outward remittances comprise remittances on account of imports and private remittances on sundry items, sale of traveler’s cheques, currency notes and coins.
- Inward Remittances: Inward remittances comprise remittances on account of exports and private remittances on sundry items, purchase of traveler’s cheques, currency notes and coins.
The remittances are affected through the respective banker’s foreign branches or correspondent as the case may be, by means of mail and telegraphic transfer advices and banker’s crossed drafts.
The outward remittances for payment on account of imports are authorized by import licenses or authorization permits for import under free list and others by individual permits granted by the Exchange Control unless authorized dealers have discretion for some approved purposes. Inward remittances do not require any authorization by the Exchange Control other than the prescribed formalities to be compiled with by the exporters and other recipients.
Sales and Counter Purchases against Outward Remittances
The authorized dealer makes sales of foreign currencies to the remitter while effecting outward remittances in exchange of home currency equivalent. These sales may be on spot or forward basis as requested by the remitter. Generally, no forward booking of foreign currencies is made by the remitter for individual remittance on account of sundry items and travel quota. In case of remittances for payment of imports, the importer may go for spot rate or may contract for forward booking cove ring such period as are within the maximum laid down by the Exchange Control to avoid any loss arising out of exchange fluctuations or revision of exchange rates of the currencies concerned. The authorized dealer on the other hand, to cover his spot sales makes counter purchases of equivalent currencies on spot basis if the existing balances in his relative foreign currency accounts are not sufficient to make the payments. But against forward booking by the remitter, he or she always makes counter forward purchase of the concerned currency.
Purchase and Counter Sales against Inward Remittances
The authorized dealer makes purchase of foreign currencies at spot rates while paying in home currency against inward remittances on sundry items and travel quota and at spot or forward rates as agreed upon between the banker and the exporter on account of inward remittances for exports. Depending on his foreign currency funds position the banker also makes counter sales of the concerned currencies as purchased by him.
Reimbursement of Payments against Remittances
The remittances of the banker are paid by the drawee correspondent banker as per arrangement to the debit of his foreign currency (nostro) account maintained with that banker. Where no such account is maintained by the remitting banker with the drawee banker (as presently obtaining with the Bangladeshi banker’s foreign correspondents because of currency status) the remittances are drawn by deposit of covers to the drawee banker’s relative foreign currency account if any, maintained with him/her or the drawee banker is asked to pay and draw reimbursement from his relative foreign currency account maintained with any other banker. The funds in the foreign currency accounts are replenished by cross-drawing on each other, purchase of foreign currencies, deposit of export bills proceeds and where needed, by loans and drafts in foreign currencies.
Nostro, Vostro, and Loro Accounts
For the purpose of making the payments on account of the outward remittances and collection of the proceeds of inward remittances the banker maintains accounts in convertible foreign currencies with his foreign correspondent bankers or branches at the important centers of those countries. Such an account is called by the banker as ‘nostro’ account meaning ‘our account with you’. The correspondent banker or the branch with whom the account is maintained refers to it as ‘vostro’ account meaning ‘your account with us’. From the home currency point of view these accounts are non-resident accounts and are subjected to certain formalities and restrictions laid down by the Exchange Control. A ‘loro’ account means a third banker’s account with another banker and is referred to as such in a bilateral correspondence between the remitting and the drawee bankers.
For the purpose of accounting and reconciliation of various transactions routed through the different ‘nostro’ accounts the banker maintains ‘proforma’ or ‘shadow’ accounts in his or her books for the respective currencies showing the entries and the balances in both the foreign currency as well as the home currency equivalents. The entries which go to the credit and debit of the nostro accounts are reflected in the proforma accounts in the reverse way as in the case of the customer’s accounts in his or her books and in banker’s books under double entry accounting system. A debit balance in the nostro account appears as a credit balance in the relative proforma account and a credit balance in the nostro account as a debit balance in the proforma account.
Import and Export Trade
The import and export trade of Bangladesh is controlled under the Import and Export Control Act, 1950. As stated earlier, the imports involved outward remittances and the exports inward remittances. The terms and conditions of contracts between the importers and the exporters and the eventual remittances in foreign currencies are subjected to such restrictions and formalities as are laid down from time to time by the Import and Export Control and Exchange Control in their respective jurisdiction. More or less similar laws exist in each country to control the external trade and regulate the remittances in foreign exchange, which the importers and exporters must comply with.
Commercial Letter of Credit
The contract between the importer and the exporter is given a legal shape by the banker (authorized dealer) who undertakes to make the payment for the imports on behalf of the importer. The banker undertakes the responsibility through ‘Letter of Credit’ which, for this purpose, is a letter of commitment issued by the importer’s banker to his foreign correspondent banker or branch, if any, in the exporter’s country undertaking to honor bills of exchange drawn by the named exporter in accordance with and upon fulfillment of the terms stipulated in the letter. From the importer’s side it is an import letter of credit (outward) and from the exporter’s an export letter of credit (inward), its opening being always arranged by the importer. The banker opening the credit is known as opening banker and the banker’s foreign correspondent (or branch) advising the credit to the beneficiary i.e. the exporter is known as the advising banker.
Uniform Customs and Practice
In view of the different practice and usages that may be prevailing in different countries the International Chamber of Commerce (ICC) has evolved uniform sets of rules in connection with documentary credits known as Uniform Customs and Practice for Documentary Credits. This document has been commended by the United Nations Commission on International Trade Law (UNCITRAL) and serves as a guide to all concerned parties to a letter of credit.
Terms of Credit
The terms of the letter of credit are based on the contract between the importer and the exporter and the import license or the authorization permit for import under free list as the case may be, issued in the name of the concerned importer. The terms of the credit specify importantly, amount of the credit, name and address of the beneficiary and the opener, particulars of the goods, their make, quantity and price basis, tenor of bill of exchange, period and mode of shipment, whether part shipment allowed, port of shipment and of destination, nature of credit, expiry date, names and number of sets of shipping and other documents etc.
Letter of Credit Application
For the purpose of opening the credit the importer is required to fill up and signed a stamped letter of credit application which, in addition to recording the full details of the credit including instruction for booking exchange, serves as an agreement between the banker and the opener.
Opening of Letter of Credit
The opening banker established the credit if he or she is satisfied of the credit-worthiness of his customer-importer with or without cover (margin). In SBL it is 10%-20%. He or she issues the credit by air mail or cable followed by credit advice as asked for by the opener through his foreign correspondent or branch as the case may be, at the place of the beneficiary. The advising banker advises the credit to the beneficiary on his own form where it is addressed to him or merely hands on the original credit to the beneficiary if it is so addressed. The former form of advice is known as ‘transformed credit’ and the letter ‘hand-on-credit’. The advising banker however, does not incur any liability by just advising or transmitting the credit unless he or she adds his confirmation to the credit.
The opening banker’s credit advice contains all details of the credit and a reimbursement clause stating how the negotiating banker would get reimbursement of his or her payment made against the documents. The reimbursement arrangement may be to the debit of the opening banker’s account, if maintained with the advising banker in the currency of the credit. If no such account is maintained the advising banker may be asked to claim reimbursement from another banker either at the place of the beneficiary or else-where by drawing a reimbursement draft.
Liability Entries for Letter of Credit
While opening the credit the banker passes liability entries through proforma accounts meant for such transactions, which show the quantum of contingent liabilities he or she has undertaken on account of his or her customers under this head. The liabilities are reduced by proportionate reversal of the entries as and when the bills of exchange are received from the advising banker.
SWOT Analysis of Standard Bank Limited:
SWOT analysis means analyzing the strengths, weakness, opportunities and threats of the Organization to know the present condition. This is very common analysis to determine the company’s capabilities of doing effective business. This help to know the possible advantages and disadvantages of the firm that it has compare to compare to others. The SWOT analyses are briefly given in the below:
As a private commercial bank SBL enjoys the following strengths
- Better Commitment of Employees
- Better position of the branch
- Excellent working environment
- The bank launched several deposit schemes, which have been appreciated by the Consumers resulting growth of deposit of the bank.
- Huge business area
- No Variation in Products
- Absence of Online Banking System
- Absence of Strong Promotional Activities
- Profitable Branch
- Popular Branch
- Great Customer Base
- Leading Branch
- Increase of Competitors
- High Rate of Turnover of Customers
- High Rate of Turnover of Employees
SWOT analysis shows with what types of weaknesses the Standard Bank Ltd. and its Panthapath Branch are conducting its business. Based on the SWOT analysis some recommendations are given below:
- Decisions from Professionals: To achieve goal of an organization like bank, organization have to depend on the decision that are made by professional bankers, who have great knowledge and experience in their field. Organization should not take any adventurous decisions based on the unprofessional person’s opinion. It ensures the bank take decision on the point, not over the point.
- Co-operative Decision: To take a decision Standard Bank Ltd. and its branches have to introduce co-operative decision making system, where each staff will give their opinion regarding the problem to solve it. This system can help the bank to take best decision.
- Online Banking System: Today, in this 21st Century, online banking system is one of the most essential technologies in the banking business. Therefore, Panthapath Branch has to establish online system in their office as soon as possible.
- Advance Security System: To secure the branch from any types of threats like robbery, thief, and loss from fire etc., the branch has to install security camera, adequate fire defensive instrument and other security system. That will give confidence and trust in the mind of customers.
- Strong Promotional Activities: To create a brand image in the mind of the people, the bank has to take strong promotional activities as soon as possible.
- Aggressive Strategy: Remove the defensive strategy from the mind and take aggressive strategy is the best decision for SBL and its branches. Because, defensive strategy does not make the bank leader of this sector, only it can help the bank to survive.
- Introduce R&D Division: Introduction of Research and Development Division (R&D Division) will be a best decision for this organization. Because, this division can especially help the bank to create not only new deposit and loan products but also other new services by research in the field, which will give the organization competitive advantage over its competitors.
Although, three months experience is not enough to understand the all the activities of a branch and its future, after gathering all information about the branch and overall institutions, it can be said that without the weaknesses such as strong involvement of directors, no variation in products, unsecured branch, absence of online banking system, absence of strong promotional activities, long processing time, and poor quality of paper the Standard Bank Limited and its panthapath Branch has real potentiality to get the top position in the banking line as a market leader. With its three sections such as General Banking Section, Advance Section, and Foreign Exchange Section the branch can be performed well within this uncertain business environment when they perform as follows:
- General Banking Section
The officials have good relationship with their customers. The bank and its branch offer competitive deposit products to their customers and customers are satisfied more with their deposits products than their competitors
- Foreign Exchange Section
The branch becomes AD (Authorized Dealer) branch, and therefore the Foreign Exchange Section can offer its customers to open foreign account and sell and purchase foreign currency directly.
- Advance Section
The Advance Section offer competitive loan products to the borrowers and return the loan with interest successfully within the specified time.
To find the bank on this way, the bank its branch should have to do something. The recommendation part has suggested what the bank and its branch have to do to achieve its goals.
- Loan and Advances of HSBC Bank
- SME Loan Disbursement and Recovery of Jamuna Bank Limited
- SME Loan of BRAC Bank and Its Overall Performance
- Credit Risk Management System of Agrani Bank Limited
- The Position of Janata Bank Limited in the Banking Industry
- General Banking and Performance Evaluation of Trust Bank Limited