Chapter-01

INTRODUCTION

1.1 Introduction
Bangladesh is the natures darling child with a vast possibility of massive improvement of its economy. In an economy like this, banking sector can play a vital role to improve the overall socioeconomic condition of the country. The banks by playing the role of an intermediary can mobilize the excess fund of surplus sectors to provide necessary finance, to those sectors, which are needed to promote for the sound development of the country. The motives of banks are profit-earning. The word Bank refers to the financial institution that deals with money transaction. Banks collect deposits at the lowest possible cost and provide loans and advances at highest cost. The spread between the two is the profit for the bank. Commercial banks are primary contributors to the national development of the country. The revenue earning sources of banks are mainly loans and advances. The credit facility can be of two types: funded and non-funded. Funded credit can be expensive for the banks, as the bank has to pay interests. Non-funded credit includes Letter of Credit, Foreign Guarantee, Bank Guarantee, Remittance etc.; these are the main source of income for the foreign exchange business. If a bank can increase its import and export transactions, its profit will obviously reach a higher level, as the costs are negligible. Agrani Bank Limited deals with money transaction as well as it deals with the customers. This report represents how the employees of Agrani Bank Limited deal with the customers of their bank.

1.2 Objective of the Study

Project Objective Presenting and Emphasizing on credit operation, credit risk management and credit performance including the credit payment system. Secondary objective
To evaluate overall performance of The Agrani Bank Ltd.

To gain practical knowledge in the banking sector. To appraise the actual Recovery position of the Agrani Bank Ltd. To evaluate the success of credit operations compare with other Banks.

 To identify problems in credit operations of Agrani Bank Ltd. To analysis the Lending procedures maintained by the Agrani Bank Limited. To observe principal Lending activities of Agrani Bank Limited. To measure the actual position in classified Loan and provisions maintained by the Agrani Bank Ltd. To recommend suggestions for the successful Lending Operations of Agrani Bank Ltd.

1.3 Sources and Methods of collecting data

For preparing this paper, I used both Secondary and Primary data. Collection of Primary Data: Many of the data and information were collected from my practical experience. Experience queries from the executives while doing my internship at The Agrani Bank Ltd. Information and data regarding Overview of the Agrani Bank Ltd. Interviewing officers and staffs. Direct communication with the clients.

Collection of Secondary Data: Annual Reports. Brochures, Manuals and Publication of the Agrani Bank Ltd Internet and websites.

1.4 Methodology

The study is performed based on the information extracted from different sources collected by using a specific methodology. There are various methods of conducting such studies. This report is analytical in nature. The methodology is: Population: All the Branches of Agrani Bank Ltd. located in everywhere in Bangladesh has been taken into consideration as population. Sample: Agrani Bank, Sonargoan Road Branch Client is the vivacious sample. Employee of that branch is also sample of this report.

Two approaches have been mainly used in this report: A) Empirical Approach: This refers to the information that has been directly collected and interpreted from the survey on Agrani Bank Ltd. The report is prepared by interviewing the officials of The Agrani Bank Ltd. The reports of Agrani Bank Ltd and documents are also been studied to do the report. B) Conceptual Approach: A theoretical section is given in this report (i.e. the organization part) to give an insight to the various information concerning the operational function. It is given in relevance with the organization in context i.e. Agrani Bank Ltd, Sonargoan Road Branch,Dhaka. Every single portion is discussed in order to understand the empirical section.

1.5 limitations of the Study

Data are not available in a systematic way. The duration of the internship is only 3 months (12 weeks) is not enough for the study The authorities were unwilling to provide data because of confidentiality of the organization.

Chapter-02
ABOUT THE ORGANISATION

2.1 A Brief Overview of Agrani Bank Limited:

Agrani Bank Limited, a leading commercial bank with 879 outlets strategically located in almost all the commercial areas throughout Bangladesh, overseas Exchange Houses and hundreds of overseas Correspondents, came into being as a Public Limited Company on May 17, 2007 with a view to take over the business, assets, liabilities, rights and obligations of the Agrani Bank which emerged as a nationalized commercial bank in 1972 immediately after the emergence of Bangladesh as an independent state. Agrani Bank Limited started functioning as a going concern basis through a Vendors Agreement signed between the ministry of finance, Government of the People's Republic of Bangladesh on behalf of the former Agrani Bank and the Board of Directors of Agrani Bank Limited on November 15, 2007 with retrospective effect from 01 July, 2007. Agrani Bank Limited is governed by a Board of Directors consisting of 13 (thirteen) members headed by a Chairman. The Bank is headed by the Managing Director & Chief Executive Officer; Managing Director is assisted by Deputy Managing Directors and General Managers. The bank has 11 Circle offices, 25 Divisions in head office, 62 zonal offices and 879 branches including 27 corporate and 40 AD (authorized dealer) branches.

2.2 History of Agrani Bank Limited

The banking world has been undergoing rapid and fundamental changes. The speed of these changes has been maintained even after the global financial turmoil experienced during the past few years. It is well recognized that there is an urgent need for betterqualified management and better-trained staff in the dynamic global financial market. Bangladesh is no exception of these angles though its prospect is bright in the future. Agrani Bank is one of the most important nationalized commercial bank with 879 outlets strategically located in almost all the commercial areas throughout Bangladesh, overseas

Exchange Houses and hundreds of overseas Correspondents came into being on March 26, 1972 with the promulgation of Presidential Order no 26 of 1972. Under the Order Agrani Bank took over assets and liabilities of the rest while Habib Bank Ltd. and Commerce bank Ltd. functioning in the then East Pakistan. The bank enjoys the status of the company and functions in terms of the Banking Company Ordinance and Regulations of Bangladesh Bank (The Central Bank) and upon such directions as may be changed from time to time by the Government of the Peoples Republic of Bangladesh. The Bank, in 1972, started operation with only 249 branches with its Head Office in Dhaka. There was hardly any liquid asset to run the operation of the Bank smoothly. The bank resumed its operational activities with an authorized capital of Tk. 5.00 core and paid-up capital of Tk. 1.00 core. Initially the Bank had deposit of Tk. 96.17 core, advances of Tk. 76.56 core, borrowings of Tk. 29.48 core and investment of Tk. 11.00 crore. The bank had commercial relationship with only 41 overseas correspondents in 1972. In the initial phase, the bank undertook steady expansion programs all over the country by opening new branches, particularly in the rural areas, with a view to extending banking services to the doorsteps of rural people..

2.3 Key Features of Agrani Bank Limited

MISSON To become a leading bank of Bangladesh operating at international level of efficiency, quality and customer service. VISION We operate ethically and fairly within the stringent framework set by our regulators. We will go fusing ideas and lessons from best practice to explore new avenues to stay stronger and more efficient and competitive. We will apply information and communication technology for the benefit of our customers and employees. We will invest to strengthen the future of the Bank.

MOTTO To adopt and adapt modern approaches to stand supreme in the banking arena of Bangladesh VALUES We believe in integrity, transparency and accountability, and also value professionalism that will provide a high standard of service to all our customers and stakeholders.

2.4 Organizational Hierarchy of Agrani Bank Limited

2.5 Strategic Objective of Agrani Bank Limited

Winning at least 6 per cent share of deposits and 4.5 per cent share of loans and advancesof Bangladeshi market.

 Gaining competitive advantages by lowering overall cost compared to that of competitors. Overtaking competitors by providing quality customer service. Achieving technological leadership among the peer group. Strengthening the Banks brand name appeal. Contributing towards the economic well-being of the country by focusing particularly on SME and agricultural sectors. Strengthening research capability for innovative products.

2.6 Ethical Standards of Agrani Bank Limited

Be Trustful: We believe in mutual trust and trust our customers in a way they can

trust us.
Keep An Open Mind: For continuous improvement of our bank we keep our

minds open tonew ideas. We seek opinions and feedback from both customers and team members through which our bank will continue to grow.
Meet Obligations: Regardless of the circumstances, we do everything to gain the

trust and confidence of customers and clients by honoring our commitments and obligations.
Be Transparent: We are transparent in our dealings with customers and all

stakeholders. We reevaluate all print materials including advertising, brochures, and other business documents making sure that they are clear, precise and professional

Be involved with the Community: We remain involved in community-related

issues and activities, thereby demonstrating that our business is a responsible community contributor.
Be Respectful: We treat all stakeholders with utmost respect and courtesy

regardless of differences, positions, titles, ages, or other types of distinctions.

2.7 Role of Agrani Bank in General

After the emergence of Bangladesh, the banking system has expanded to a lot in the last three decades. Though many private commercial banks have been established, the major portion of banking business is covered by the four nationalized commercial banks such as: Sonali, Janata, Agrani and Rupali Bank Ltd. Agrani Bank plays an important role in our national Economy. It includes so many types of services and functions. The key roles of Agrani Bank Ltd are as follows: It helps to secure deposit. It inspires for savings. It provides loans and Advances for several purposes. It provides several services to the customers. It helps to the formation of capital. It helps for international trade. It helps to perform foreign exchange activities. It acts as an advisor. It helps to transfer money. It helps for collecting receipts, interests, dividends, rents, pensions etc. Apart from common lending activities, Agrani Bank is involved in various programs to disburse credit to the rural people. Actually Agrani Bank is a state owned bank; the people in general have every right to know how well their money is utilized. Financial activities and expenditures of Agrani Bank are increasing over the time. It is vital to know that how the expenditures relate to income of the bank. More specifically how far the increased expenditures over the years are justifiable in consideration of induced changes in income.

2.8 Services of Agrani Bank Limited

i. Cash service ATM Service Cheque Encashment Foreign Currency ii. Fund Transfer On line Banking(CBS) Inter Bank Money Transfer Swift Telegraphic Transfer Issuing & Enchasing Foreign Draft iii. Value Added Service Locker Services Agency Service Inland Remittance

2.9 Core Business of Agrani Bank Ltd.

1) Account & Deposit Current Account Call deposit Agrani Bank Shilpo Unnaya Bond Cash Credit (Hypo) Cash Credit (Pledge) Secure Overdraft(SOD) Temporary Overdraft (TOD) Industry Credit (IC Export Cash Credit 2) Trade Finance 3) Import Finance

 Loan Against Imported Merchandise (LIM) Loan Against Trust Receipt (LTR) Loan Against Export Development Fund (EDF) Payment Against Document (PAD) 4) Export Finance Export Cash Credit Pre-Shipment Credit Packing Credit 5) Islami Banking Mudaraba Savings Account Mudaraba Mohor deposit Scim Mudaraba Hajj Sanchay Prokolpo Islami Banking Window

2.10 Performance of Agrani Bank Ltd: 2.10.1 Deposits:

At the end of December, 2011the deposit of the Bank was Tk. 43714.18 million compared to Tk. 36982.05 million at the end of previous year.This growth rate is a remarkable achievement, considering the adverse economic scenario of the country during the year under review.This figure shows that Deposits of Agrani bank ltd has increased over the periods.

Table deposits of Agrani Bank ltd

Types Current deposits and other accounts: Bill payable Saving bank deposits Fixed deposits 2011(million) 43714.18 5093.32 85320.75 118080.1 2010( million) 36982.05 4000.21 80130.88 85212.85

Source: Annual report of Agrani Bank Ltd 2011, 2010, 2009.

2.10.2 Investment Agrani Bank Ltd invests its deposits in different sectors. It is the important way for the bank to earn income because from investment bank earn interest. This figure shows that investment of Agrani bank ltd has increased over the periods. For example, in 2010 current deposits was less than 2011.
Year 2011 2010 2009 Investment(in million) 43916.29 85331.25 43916.29

Source: Annual report of Agrani Bank Ltd 2011, 2010, 2009.

2.10.3 Operating income

Oerating income reresents the strength of bank. These table and grah shows the increasing amoun of oerating income . At the end of December 2011the operating income of the Bank was Tk. 2146.66 million compared to Tk. 16930 million at the end of previous year.
Types 2011 2010 2009 Operating income( in million) 21046.66 16930.21 16930.21

2.11 Brief

profile of Sonargoan Road Branch

The Agrani Bank Limited. plays a very important role in financial sector with 879 branches all over the country. In Sonargoan Road Branch commercial services are such as Loans and advances, Foreign Exchange General banking service are provided here. Branch is directing, controlling and doing its business by a SPO with so many energetic officials. It has 3 departments: 1. General Banking Section
2. Loan & Advances Section

3. Foreign Exchange Section My report highlighted Credit Management Operation is based on Loan & Advance Department of Sonargoan Road Branch

Chapter-03 CREDIT MANAGEMENT

3.1 Introduction to Credit

The word credit derives from Latin word crudere means to trust. The fundamental nature of credit is that, an element of trust exists between buyer and seller whether of goods or of money. Credit may also be defined narrowly or broadly. Narrowly credit is simply the opposite of debt. Debt is the obligation to make future payments. Credit is the claim to receive these payments. Credit is finance made available by one party (lender, seller or shareholder/owner) to another (borrower, buyer, corporate or non-corporate firm), i.e. from surplus unit to deficit unit. Credit is the outcome of financial intermediation the very major service offered by Bank financial institution. The economic basis of financial intermediation lies in the economies of scale in portfolio management and in the law of large numbers. Lenders have preference for financial intermediation because of: Greater liquidity Convenience and Low risk Other auxiliary services. Borrowers have preference for financial intermediation because of: The rate of interest charged is generally lower than that charged by other lenders. Regulated financial institutions do not fleece small borrowers in the manner moneylender do. Availability of big pool of funds that can satisfy big individual demands.

Greater certainty of the availability of funds at all times. Broadly, credit is finance
made available by one party (lender, seller) to another party (borrower, buyer).

3.2 Importance of Bank Credit (Micro and Macro Aspect)

One of the primary functions of commercial banks is sanctioning of credit to the potential borrowers. Bank credit is an important catalyst for bringing about economic development in a country. Without adequate finance there can be no growth or maintenance of a stable economy. Bank lending is important for the economy, for it makes possible the financing of agriculture, commercial and industrial activities of a nation. At the same time, a bank will, therefore, distribute its funds among various sectors in a manner as to derive sufficient incomes. At Micro Level: Credit influences the behavior of economic sector (Industry, Agriculture etc.) and the behavior of economic agents (Business Firm, Financial Institution, Household etc.). At Micro Level: There are two-way relationships between credit and deposit. Delivery of credit is the core function of banks and interest on credit constitutes the major part of bank income. Credit is important to business and industrial firm. Banks provide financing for import, working capital and investment etc. Credit is important to agriculture. Bank provides crops loan and financing for agro-based business and for investment. Credit is important to household. Since it enables them to incur expenditure in excess of income in a given time period. Thus credit supplements savings. At Macro Level: Credit influences and is influenced by quality of money supply, level of economic activity or GNP, imports, exports and net foreign assets. At Macro Level:

 Credit provides vital linkage among government sector, private sector, financial sector and foreign sector. Credit is an important determinant of money creation and enhances of production, consumption and national income. Credit influences imports and capital movement and enhance the outcome of balance of payment. Excessive credits can lead to inflation, over importation, capital flight and balance of payment deficit.

3.3 Target Customers of Agrani Bank limited,

The customers for loan service are categorized as follows: i. ii. iii. iv. v.
vi.

Individual person. Sole proprietorship firm. Partnership firm. Private Limited Company. Public Limited Company. Government and semi Government Organization. Bank employee.

3.4 Importance of Credit Policy

Bank can maintain regulatory standard in maintaining loan to the customers. Bank can make sure the profitability of the loan. Loan policy give loan officer and bank management specific guidelines in making individual loan decision and shaping the banks overall portfolio. Bank loan portfolio should reflect what the loan policy says.

3.5 Elements of a Good Credit Policy

1. Goal Statement: A goal statement must contain the size, types, maturity and quality of the loan.

2.

Specification of the Lending Authority i.e. Maximum loan limit, Loan giving capacity.

3.

Line of Responsibilities: Responsibility of the officers of department (Term of preference: TOR)

credit of credit

4.

Operating Procedure for; Soliciting Reviewing Evaluating and Making decision on customer loan application

5. 6.

Documentation: Which document should be taken for each loan? Line of Authority: It says who is responsible for maintaining and reviewing the credit file document.

7.
8.

Guidelines for taking, evaluating and perfecting loan collateral. Policy and procedure for setting interest rates and fees and the terms for repayment of loans.

9. 10. 11. 12.

A statement of quality standards applicable to all loans. A statement of loan limits policy. A description of the banks principal trade area. A statement of the preferred procedure for detecting, analyzing and working out problem loan situation.

13.

Policy guidelines for rehabilitation of seek project of non-performing loan or rescheduling of loan.

3.6 Lending Principles Followed by Agrani Bank

As liquidity and profitability are conflicting considerations, Agrani Bank, Branch, Dhaka as a bank, while employing the funds pays due regard to both profitability and liquidity.

In order to secure a balance between liquidity, profitability and security, Agrani Bank follows the following principles of sound lending

Liquidity: It means that while lending, adequate care has to be taken so that the liquidity is not compromised. Thats why, Agrani Bank chooses such securities which posses sufficient liquidity.

Safety: Agrani Bank exercises the lending function only when it is safe and that the risk factor is adequately mitigated and covered. Safety depends upon a) The security offered by the borrower; and b) The repaying capacity and willingness of the debtor to repay the loan with interest.

Diversity: In order to minimize risk, Agrani Bank invests its funds in different types of securities of different industries situated in different regions of the country.

Yield: From the commercial point of view, Agrani Bank considers sufficient yield or return while financing a project.

Productive Purpose: Agrani Bank exercises its lending function only on productive purpose.

3.7 Types of Loans and Advances Offered by Agrani Bank

Agrani Bank offers following types of loans and advancesa) b) c) d) e) f) g) h) Secured Overdraft (SOD) Cash Credit (CC) Staff Loan House Building Loan Transport Loan Mid-term Loan Bills Purchased and Discounted Industrial Credit.

3.7.1 Secured Overdraft (SOD) It is a continuous advance facility. By this agreement, the banker allows his customer to overdraft his current account up to his credit limits sanctioned by the bank. The interest is charged on the amount, which he withdraws, not on the sanctioned amount. Agrani Bank sanctions SOD against different security. Based on different types of security, we can divide SOD in the following categoriesFig.: Types of Secured Over Draft

SOD (General)

Secured Over Draft (SOD)

SOD (Others) SOD (Export)

Source: Official Records of Agrani Bank, Sonargoan Road Branch, Dhaka

1. SOD (General): Advances allowed to the individuals/firms against financial obligations i.e. lien of F.D.R. or Defense Savings Certificate (P.S.P), ICB Unit Certificate etc. 2. SOD (Others): Advances allowed against assignment of work order for execution of contractual works falls under this head. The advance is generally allowed for a specific purpose. It is not a continuous loan. 3. SOD (Export): Advance allowed to purchasing foreign currency for payment against L/Cs (Bank to Back) where the exporter cannot materialize before the date of import payment.

The processes of extending SOD are as follows a. b. The party must have a current account with the branch If the ownership of the firm is proprietorship, then a trade license must be

submitted and in case of a limited company, all the documents required to open a current account should be submitted. The financial statements of the concerned firm should also be submitted. c. The party must maintain a good transaction with the branch and have a

good turnover rate. d. The party will apply to the officer in charge of credit department of the

branch for SOD arrangement e. The concerned officer of the branch will give him a Credit Application

Form and the party will have to fill up this form. In this form he discloses all the information about his concern, purpose of the loan, description of security, etc. f. The concerned officer will prepare a Credit Line Proposal, where he

writes about the business concern, details of proprietors/directors of the concern, management structure, and the existing credit facilities, the particulars about the facilities that asked for such as margin limit, date of expiry, details of security, and any other relevant information. Then the proposal is sent to the Head Office, General Advances Division for approval. g. The responsible Department of the General Advances Division will

appraise the proposal and if it seems to a viable then the loan will be sanctioned. h. After the loan is sanctioned, the branch will issue two copies of a sanction

advice, where all the terms and conditions set by the bank is mentioned. The borrower is advised to write, accepted on the original copy if he is satisfied with the terms and conditions of the bank and retain the duplicate one as record. 3.7.2 Cash Credit (CC):

Cash Credit (CC) is an arrangement by which a banker allows his customer to borrow money up to a certain limit. CC is a favorite mode of borrowing by traders, industrialists etc. for meeting their working capital requirements. It is operated like overdraft account. Depending on the needs of the business, the borrower can draw on his cash credit account at different time and when he gets money can adjust the liability. Agrani Bank Limited charges interest on the daily balance in the account. Depending on charging security there are two (02) forms of cash credit 1) Cash Credit (Hypothecation): 2) Cash Credit (Pledge) Cash Credit (Hypothecation): The mortgage of movable property for securing loan is called hypothecation. Hypothecation is a legal transaction whereby goods are made available to the lending banker as security for a debt without transferring either the property in the goods or either possession. The banker has only equitable charge on stocks, which practically means nothing. Since the goods always remain in the physical possession of the borrower, there is much risk to the bank. So, it is granted to parties of undoubted means with the highest integrity. Cash Credit (Pledge): Pledge is the bailment of goods as security for payment of a debt or performance of a promise. Bailer in this case is called the Pawnor and the bailee is called the Pawnee. In a contract of pledge, Pawnor must deliver the goods to the Pawnee either actually or constructively. Transfer of possession is the judicial sense, is essential in the valid pledge. In case of pledge goods the bank acquire the possession of the goods or a right to hold goods until the repayment for credit with a special right to sell after due notice to the borrower in the event of non-repayment.

The processes of opening a CC account are shown in the following flow chartThe processes of opening a CC account
The interested party must have a current account and good transaction with the branch

Applies for CC pledge or hypothecation arrangement

Fills up the Credit Application Form as provided by the respective officer

The concerned officer prepares a Credit Line Proposal (CLP) detailing all relevant information

Sends the CLP to the Head Office, General Advances Division for necessary action

Head Office, General Advances Division examines the proposal and if finds it viable then sanctions it and sends it to the branch

The branch issues two copies of Sanction Advice, one for its own record and the other for the party to keep.

Source: Official Records of Agrani Bank, Sonargoan Road Branch, Dhaka 4.7.3 Staff Loan: Agrani Bank Limited provides advances to the staffs for buying motorcycles and bicycles, for wedding of their sons or daughters etc. It is called Staff Loan. Bank provides this advance facility under installment system. At the end of each month, when the staffs used to withdraw their salaries, bank takes a fixed amount from the salary of each of the concerned staff that takes this loan. 4.7.4 House Building Loan:

House Building Finance Corporation (HBFC) is the main institution to meet the requirement of loans in this field but Agrani Bank Limited also supplement to this sector. Advances for construction of residential houses against real estates as primary securities as allowed by banks. Agrani Bank Limited may grant advances for construction of commercial building also against real estates. 3.7.5 Purchase and Discount of Bills: Purchase and Discount of Bills is also a special form of advances Agrani Bank normally purchase demand bills of exchange that are called Drafts accompanied by documents of title to goods such as Bill of Lading, Railway of Truck receipt. The purchase of bills of exchange drawn at an issuance, i.e., for a certain period maturing on a future date and not payable on demand or sight is termed as discounting a bill and the charge recovered by Bank for this is called Discount. 3.7.6 Mid-Term Loans: Agrani Bank Limited or other commercial banks, because of their capital structure, constitution and liquidity consideration, are advancing for short term on principle. But modern banks have stated lending a safe proportion of their demand and time liabilities for fairly long periods to House Building, Industrial, Agricultural, Transport and many other sectors. Such loans are repayable by installments over a number of years ranging from 2 to 12 so far as, nature and conduct are concerned. 3.7.7 Transport Loan: Advances are allowed against hypothecation of Power-Driven Vehicles (PDV) including water crafts for genuine transport business to sufficient credit parties at 30% margin and suitable guarantee from persons of sufficient and standing where considered necessary mortgage of urban immovable property, registered or equitable, are also to be obtained by way of additional securities or in suitable case. In case of acceptance of mortgage, the minimum margin may be reduced up to 10 percent. These loans should be repayable within maximum period of two years, which is subject to renewal with approval from Head Office.

3.8 Procedures for Giving Advances

The General Advances Department of Agrani Bank Limited, Sonargoan Road Branch, Dhaka, usually follows the below-mentioned procedures and steps for sanctioning any kind of advances as available with the branchIn the first step, the prospective borrower has to apply to Agrani Bank Limited, Sonargoan Road Branch, Dhaka for loan by filling up of a specific Application form. The Application form (Request for Credit Limit) contains following particulars Name of the Borrower Account No. Business address (with telephone no.)/Residential address and Permanent address Introducers name, A/C no. and address Date of establishment/ Incorporation Trade license number, date and expiry date (Photocopy of trade license enclosed) GIR/TR no. and amount of income tax paid last year Constitution/Status (Mention whether sole proprietorship/ partnership/ Public Ltd. company/ Private Ltd. company). Particulars of Individual/ Proprietor/ Partners/ Directors (Name and Designation, Fathers/ Husbands name, present and permanent address with Telephone no., % of shares held) Experience and background of Individual/Proprietors/ Partners/Directors Full particulars of assets in the personal name of Individual/

Proprietor/Partners/ Directors with valuation

Names of Subsidiaries/Affiliates, percentage of share holding and nature

of business Nature and details of business/products (for which credit facility is applied

for), Markets (Present market price per unit, Factory price), Estimated sales for next one year. Credit facilities required (type, amount, period, purpose and mode of

adjustment) Details of securities offered with estimated value (Primary security,

Collateral security, market value of the security) Details of liabilities in the name of the client or in the name of any other

Partners/Directors or Subsidiaries/Affiliates with Agrani Bank Limited and other banks, if any (Name of the Bank, Account no., Nature of advance, amount, security and validity of limit) Balance Sheet/Income Statement or Statement of Accounts of the

following years attached (Preferably last 3 years) Other relevant information Proposed debt/equity ratio Signature of the Applicant

In the second step after receiving the loan application form Agrani Bank Limited, Sonargoan Road Branch, Dhaka, sends a letter to Bangladesh Bank for obtaining a report from there. The purpose of this report is to being informed that whether the borrower has taken loan from any other bank; if yes, then whether these loans are classified or not. In the third step, after receiving CIB report if the Bank thinks that the prospective borrower will be a good borrower, then the bank will scrutinize the documents. In this stage, the branch will look whether the documents are properly filled up and signed.

In the fourth step, i.e., the processing stage, the branch will prepare a Proposal. A proposal contains following relevant information Name of the Borrower Nature of Limit Purpose of Limit Extent of Limit Security Margin Rate of Interest Repayment Validity The branch incumbent has the discretionary power to sanction loan (SOD) up to Tk.25 lac against financial obligations by informing Head Office. But in that case, the DGM of the branch has to give attention to the following matters The interest rate of the loan must not be less than 14.5%; and The borrower must maintain 30% margin. Except this case, the branch has to send the proposal to the Head Office. Head Office will prepare a minute and submit it before the Executive Committee (EC). The minute has to be passed by the EC. After passing the minute, it will be sent to Bangladesh Bank for approval in case of the following If the proposed limit exceeds 20% of banks equity If the proposed limit against cash collateral securities exceeds 25% of banks equity.

After getting the approval from Bangladesh Bank, it will again come to the Head Office. The HO then prepares a Sanction Advice and sends it to the branch. A Sanction Advice usually contains the following particulars amongst other details Name of borrower Facility allowed Purpose Rate of interest Margin Period of the loan and mode of adjustment Security Security Other terms and conditions. The borrower receives the advice and returns a copy of this letter duly signed by him as a token of having understood and accepted of the specified terms and conditions. In the fifth step, after receiving the sanction advice, the branch will collect necessary documents. Documents mean any written record, which serves as evidence in respect of a transaction and may be described as anything that is obtained for recording a transaction. Documentation is a very important aspect of loans and advances. It may be described as the process or technique of obtaining the relevant documents/papers for securing advances. A banker must obtain proper documents to be executed by the borrower to protect the Banks interest. Moreover, when money is lent against security of some assets, the document must be got executed in order to give to the banker a legal and binding charge against those assets. The documents for loans and advances can be classified into the two categories namely charge documents and security documents. Charge Documents are a set of printed and prescribed forms, which are executed by the

borrowers to protect Banks interest while bank is providing loan/advances. Different types of advances are allowed to the customers against different types of securities. All securities are not suitable for all types of advances. There is common type of charge documents for types of advances. These are as follows Demand Promissory Note Letter of Arrangement Letter of Disbursement Balance Confirmation Certificate Specific types of charge documents are required for Commensuration types of securities/ facilities. The types of advances made by the Agrani Bank Limited, Sonargoan Road Branch, Dhaka, to its customers and probable securities offered by them are listed belowTypes of Advances LAOS LSM LIM TR Secured Overdraft Cash Credit LAFB FDBP LBP PAD Probable Securities

Lien of various kinds of Sanchaypatras, Government. Securities, Debentures etc Mortgage of Immoveable Properties Pledge of Imported Merchandise Trust Receipt obtained in lieu of Import Documents Sanchaypatra, Non-resident Foreign Currency Deposit (NFCD) etc. Pledge or Hypothecation of stock in trade, Goods produce and merchandise Shipping Document for Export Shipping Document for Export Banks Acceptance Shipping Documents for Import

Source: General Advance Dept. Agrani Bank Limited, Foreign Exchange Corporate Branch, Dhaka.

In the sixth step, after verifying all the documents the branch disburses the loan to the borrower. A Loan Repayment Schedule is also prepared by the branch and is given to borrower. In the seventh step, after the disbursement of the loan the bank follows the borrower in the following manner Constant supervision Working Capital assessment Stock report Break Even analysis Rescheduling of repayment In the eighth step, the loans are repaid in installment. This installment is according to bank directives. Some loans are repaid all at a time. If any loan is not repaid then notices served to the customer. Sometimes legal actions also taken for recover the loan.

3.9 Credit Risk Analysis

Credit Risk Analysis is a technique by which the risk of the loan is calculated. Experienced people of General Advance Department in Agrani Bank, Sonargoan Road Branch, Dhaka., do this analysis. It is a ranking which total score are 100. Credit Risk Grading Score sheet: Grading Superior Short SUP Score Fully cash secured, Secured by govt./Int. Bank Guarantee 85+ 75-84 65-74

Good Acceptable Marginal / Watch

GD ACCPT MG/WL

list Special Mention Substandard Doubtful Bad and Loss SM SS DF BL 55-64 45-54 35-44 < 35

Source: Advance Dept. Agrani Bank Sonargoan Road, Branch, Dhaka In Credit Risk Analysis, following aspects are analyzedA. Financial Risk Leverage Liquidity Profitability Coverage B. Business / Industry risk Size of business Age of business

Business outlook Industry growth Market competition Entry / Exit barriers C. Management risk Experience Second line / Succession Team work D. Security risk -

 Security coverage (Primary) Collateral coverage (Property Location) Support (Guarantee) E. Relationship Risk Account Conduct Utilization of limit (Actual/ Projection) Compliance of Covenants / Conditions Personal deposits.

3.10 Types of Security

Agrani Bank Limited, charges the following two types of security1. Primary security 2. Collateral security. The modes of charging securities usually followed by the branch are as follows Pledge Hypothecation Lien Mortgage

Lien: Lien is the right to retain possession and not right of ownership. Banks lien is general lien over its own financial obligation to clients. Property under lien cannot be realized/sold and proceeds thereof cannot be appropriated without notice to the owner and sometimes without courts order.

Hypothecation: This is mortgage of moveable by an agreement and here neither possession nor ownership is transferred. Hypothecated goods cannot be sold out/disposed off without notice and courts order. However, if a special power of attorney is taken in that case can be disposed off without going to the court. Pledge: Pledge is the bailment of goods as security for payment of a debt or performance or promise. Here, title and ownership are not transferred. Pledge goods may be sold out and proceeds thereof may be appropriated towards adjustment of Liability in case of failure of the borrower to repay or fulfill the terms and conditions. Mortgage: Mortgage is the transfer of interest in immoveable property to secure the repayment of money advanced. Ownership remains with the mortgagor. In case of equitable mortgage Court Order is necessary and in case of registered mortgage Courts order is not necessary for sale/disposal of the mortgaged property for adjustment of advance.

3.11 Common Methods of Charging Security and Their Nature of Security

Mode Nature of security and its characteristics a. Cash, cash collateral and documents of the title to the goods b. It is the right of banker to hold the debtors property until the debt is discharged generally retained by the bank in its own Lien custody or to the hands of third party with lien marked. c. The third party cannot discharge it without the permission of the bank. d. In case of need bank needs the permission from the court to sell the property a. Borrower transfers the right of property or debt to the bank Assignment Life insurance policies, supply bills, book debt of the borrower can be assigned a. Moveable stock of raw material, finished goods, merchandise b. Pledge is also lien but here bank enjoys more right. Pledge c. Physical transfer of goods to the bank is must. d. Bank can sell the property without the intervention of any court, in case of default on loan. a. Moveable stock of raw materials merchandise. b. Goods remain in the hands of debtor, but documents of title Hypothecation to goods are handed over to the banker. This method is also called equitable charge. c. Bank inspects the goods regularly to judge its the quality and quantity for the maximum safety of its loan. finished goods,

a. Mortgage is the transfer of specific immovable property like land, building, plant etc. b. Most common type of mortgage is legal mortgage in which ownership is transferred to the bank by registration of the Mortgage mortgage deed. c. Another method called equitable mortgage is also used in bank for creation of charge. Here mere deposit of title to goods is sufficient for creation of charge. Registration is not required. In both the cases, the mortgaged property is retained in the hand of borrower. a. Intangible asset (goodwill) Trust receipt b. It is used in foreign exchange business it will be discussed thereon

3.12 Loan Classification Procedure

3.12.1 Importance of Loan Classification: Loan classification attempts to categorize the debt information in a systematic manner. Loan classification is defined in terms of degree of risk associated with loans. Classification of loans mean and include only such assets of the balance sheet of a bank which do not yield interest income and which have remained past due for some quarters. The enormity of the loan classification status of Bangladesh can be gauged from the figures of total classified loan in the country. Loans are generally categorized in Bangladesh as either unclassified or classified. Loans are classified which are judged to have a reduce chance of repayment. Loans are classified as substandard, doubtful and bad/loss as per classification guidelines by the Bangladesh Bank. The status of loan classification in Bangladesh depicts a worsening situation of the Banking sector in Bangladesh in subsequent years after the implementation of Financial Sector Reform Program. Loan classification made two pronged attacks on the activities of banks.

 Fist, interests applied on loans are not taken into account because such interests are to be taken into account only on its realization. Second, banks have to make provisions on classified loans as per guidelines provided by the Bangladesh Bank from out of the income earned by them on performing loans. 3.12.2 Objectives of Loan Classification: Find out net worth / adjusted capital of bank Help for assessing financial soundness of a bank Calculate the required provision and the amount of interest suspense Put the bank on sound footing in order to develop sound banking practice in Bangladesh. 3.12.3 Importance of Loan Classification Strengthen credit discipline Improve loan recovery positions Make planning for future course of loan 3.12.4 Type of Loans to be Reported in CL: For application of classification criteria, loans are divided into the following: SL. Types of No. Loans Definition Reported to be in

a. Continuous

These are those advances, which do not have any set schedule for drawing or disbursement but usually have CL-2 a terminal date of full adjustment or repayment. e.g. OD, CC, etc. The loans which become payable after serving demand notice by the bank concerned are termed as CL-3 Demand loan. e.g. forced LIM, PAD, FBP, IBBP, etc.

b. Demand

CL-4 c. Term These are loans, which have a specific term for repayment as specified in the loan agreements. e.g. project finance, industrial finance, etc.

CL-4 c. Term These are loans, which have a specific term for repayment as specified in the loan agreements. e.g. project finance, industrial finance, etc.

The credits, which are categorized as short term in the Annual Credit Programs issued by the Agricultural Credit Department (ACD) of Bangladesh Bank from time to time, are termed as Short Term Agricultural Credit (STAC). The credits disbursed in agricultural d. Short Term sector having repayment due up to and including 12 agricultural / months from the date of first disbursement will also be included in this loan category. Micro Short-term micro-credit means loan up to Tk. 10,000.00 and having repayment due up to and including 12 months. These loans may he termed as non-agricultural credit,weavers credit or credit against banks own project.

3.12.5 Basis for Loan Classification: According to BRPD Circular No.16, 1998 all loans and advances and are classified on the basis of two criteria viz.: Objective Criteria and Qualitative Judgment (QJ) Criteria The above criteria along with definitions are described in the following table:

A. Objective Criteria
SL. No. 1. Unclassified (UC) Substandard (SS) Status Types of Loans All Current loans with required/ adequate eligible securities. Overdue is more than 3 months but less than 6 months Overdue is more than 3 moths but less than 6 months from the date of serving notice / creation of forced loans. Definition

2.

Continuous

Demand

If the defaulted amount of installment is equal to Term (Less than 5 installment/installments payable in more than 6 years) months but less than 12 months. If the defaulted amount of installment is equal to Term (Less than 5 installment/installments payable in more than 6 years) months but less than 12 months. If the defaulted amount of installment is equal to Term (More than installment/installments payable in more than 6 5 years) months but less than 12 months. Short Term Overdue is more than 12 months but less than 36 Agricultural/ months Micro Continuous Overdue is more than 6 months but less than 12 months. Overdue is more than 6 months but less than 12 months from the date of serving notice/creation of forced loans.

Demand

3.

Doubtful

If the defaulted amount of installment is equal to Term (Up to 5 installment/installments payable in more than 12 years) months but less than 18 months. If the defaulted amount of installment is equal to Term (More than installment/installments payable in more than 18 5 years) months but less than 24 months. Short Term Overdue is more than 36 months but less than 60 Agricultural / months. Micro

Continuous Demand

Overdue is more than 12 months Overdue is more than 12 months but less than 12 months from the date of serving notice / creation of forced loans.

4.

Bad/Loss

If the defaulted amount of installment is equal to Term (up to 5 installment/installments payable in more than 18 years) months. If the defaulted amount of installment is equal to Term (More than installment/installments payable in more than 24 5 years) months. Short Term Agricultural/ Overdue is more than 60 months Micro

B. Qualitative Judgment (QJ) Criteria SL. Status No. (SS) Doubtful Bad/Loss (BL) All Types of Loans Sub-standard All Definition A loan is considered sub-standard when the degree of risk of non-payable is so high and there is reasonable prospect that the loans condition can be improved. Chances of recovery is uncertain No security held. Borrower not traceable. Time barred loan cases. No hope for recovery.

3.12.6 Sources of Data for Preparation of CL: Loan ledger/ Records Instruction from Head Office/ Bangladesh Bank Calculated Derived Calculated / Derived

 Copies from previous classification forms Invention/Bin cards 3.12.7 Eligible Securities: Gold/Gold Ornaments 100% Govt. securities / FRS Shares / Debentures etc. 100% Un expired guarantees (Govt./Bangladesh Bank) 100% Readily salable goods under control of bank 50% and Market value of mortgaged property 50% The bank should assess valuation of securities 3.12.8 Calculation of Interest on Classified Advances: Interest on substandard and doubtful loan accounts should be credited to Interest Suspense Account instead of crediting the same to the interest income account. Calculation of interest on Bad/Loss loan accounts should be deferred instead of calculating the same on those accounts. If there is any recovery on the above accounts that recovery/ portion of recovery will be treated as interest recovery, not principal recovery. After adjustment of interest due, principal portion of respective loan account will be adjusted later on.

3.13 Existing Process of Handling Loans

1. Getting Loan Proposal from Party 2. Collection Information 3. Evaluating Project and Proposal 4. Evaluating Collateral 5. Decision 6. Sanctioning and Disbursing Loan

7. Supervision of Loan 8. Recovery of Loan

3.14 Guarantee
The branch offers three types of Guarantee that are as followsa) Tender or Bid Bond Guarantee: The tender guarantee assures the tendered that tenders shall uphold the conditions of his tender during the period of the offer as binding and that he/she will also sign the contract in the event of the order being granted. b) Performance Guarantee: A Performance guarantee expires on completion of the delivery or performance. Beneficiary finds that as a guarantee, the contract will be fulfilled in every respect and can retain the guarantee as per provision for long time. Including a clause stating that the supplier can claim under the guarantee, by presenting an acceptance certificate signed by the buyer, can counteract this. c) Advanced Payment Guarantee (APG): This type of guarantee is given against work order. This idea can be made clear with the help of an example. Before the beginning of Jamuna Bridge construction, the Government collected money from different sources to pay the contractors in advance. But there was a risk for the Government that the contractors might not do there construction work even they were paid in advance. So the Government asked Bank Guarantee from them. Then the contractors submitted Bank Guarantee to the Government. This type of Guarantee is called Advanced Payment Guarantee.

3.15 Issuance Procedure of Guarantee

Bank guarantee is a contractual relationship between the account (client) and the beneficiary. For issuing Bank Guarantee, a customer has to apply to the branch in his or her own pad. Normally the bank prepares the format of the guarantee. The proposal for Bank Guarantee contains the following particulars Name of the Borrower with address

 Nature of Facility Extent of Facility Purpose Security Margin Commission Validity Beneficiary Liability position of the Borrower a) Nature of Facility b) Extent of Facility c) Drawing Power d) Margin amount (Tk.) e) Outstanding/Net exposure (Tk.) f) Validity. Then Bank issues Bank Guarantee of Judicial Stamp. The conditions for issuing Bank Guarantee area. The customer must maintain a Current Deposit (CD) account b. The customer must keep certain percentage of guaranteed money (usually 2%) as margin. Bank charges 0.50% commission on the guaranteed money per quarter (i.e., 3 months) After realizing all the above charges, Bank then issues the Guarantee. For this issuance, Bankers Liability is created and the following entries are given-

Customers Liability --------------Dr.

Bankers Liability------------------Cr. When the guarantee is expired, the guarantee is marked as cancelled and the following entries are givenBankers Liability------------------Dr. Customers Liability --------------Cr. The branch also issues Revolving Guarantee. A Guarantee issue Register is maintained to record following information about Guarantee Name of the Customer Account no. Guarantee no. Issuing Date Date of Approval/ Reference no. Beneficiary of the Guarantee Amount of Guarantee Margin (percent and amount) Commission Date of Expiry.

3.16 Industrial Sectors Financed by Agrani Bank

Followings are the sectors that are financed by Agrani Bank under its Industrial Credit Scheme Composite Textile Textile Spinning Oven Fabrics

 Neat Fabrics Export-oriented Garments Sweater Factories Garment Accessories Printing and Packaging Paper and Board Mills Cold Storages Tannery, Footwear and Rubber Industries Engineering Industries Chemical Industries Glass and Ceramics Industries Partex Board Industries Cement Industries

3.17 Classification of Industrial Credit of Agrani Bank

Agrani Bank classifies its overall industrial credit into three (03) broad headings. These are as follows1) 2) 3) Small and Cottage Industries; Medium and Large Industries; and Working Capital.

3.18 Sources of Funds for Industrial Credit

The sources of funds for industrial credit operation in case of Agrani Bank are as follows1)

Foreign Aid; and Own Funds.

2)

3.19 Consortium for Industrial Credit

Agrani Bank has consortium agreement with the following banks and financial institutions for industrial credit purpose a) Janata Bank b) Sonali Bank c) Rupali Bank d) Bangladesh Development Bank Limited (BDBL) e) Investment Corporation of Bangladesh (ICB) f) Eastern Bank Limited

3.20 Application for Industrial Credit

Getting loans or advances is not that easy for an entrepreneur from any commercial bank. She/he has to follow some prescribed ways to acquire the loans or advance and it demands some preparation from the part of the borrower because the amounts that will be sanctioned by the bank are not of its own. The public deposits these amounts. So it is very risky for a bank to lend to the borrower. If the bank fails to recover that money then it should be paid from its own fund. As a result, banks fixed a systematic way to minimize this lending risk and try to use the money properly. A loan proposal for any kind of industrial credit offered by Agrani Bank generally requires the followings Application for the loan Required papers for ownership of the industry

 Schedule of mortgaged properties and relevant papers Market reputation of the applicant Other Banks opinions about the previous money lending Feasibility Study CRG Report Financial Spread-sheet Analysis (FSA) Credit Report Go-down Inspection Report Valuation Certificate (to be done by the engineer of the bank) Trade License and CIB Report Certificate from approved Advocate in respect of immoveable property Commercial Invoice Certificate of Origin Memorandum of Association and Articles of Association No Objection Certificate (NOC) form the Local Authority and form the Ministry of Environment CS, RS and SA of the land Mutation Certificate Affidavit and Personal Guarantee General irrevocable Power of Attorney

3.21 Project Appraisal

It is the reinvestment analysis done by the banker before a project he approved. Project appraisal in the banking sector needed for the following reasons:

 To justify the soundness of an investment To endure repayment of bank finance To achieve organizational goals To recommend it the project is not designed properly

3.21.1 Techniques of Project Appraisal An appraisal is a systematic exercise to establish that the proposed project is a viable preposition. The appraising officer checks the various details submitted by the promoter in first information sheet credit application form, feasibility report. Agrani Bank Limited, Bangladesh considers the following aspects in appraising: Entrepreneur Viability of the Project technical,

The project should be viable from organizational, commercial, financial and economic points of view. 3.21.2 Head Office Approval

Upon receipt of the credit line proposal from the branch the Head Office again appraises the project. If it seems to be a viable one, the HO sends it to the Head Office Credit Committee (HOCC) for the approval of the loan. The Head Office Credit Committee (HOCC) considers the proposal and takes decision whether to approve the loan or not. If the loan is approved by the HOCC the HO sends the approval to the concerned branch. 3.21.3 Sanction Letter After getting the approval of the HO the branch issues the sanction letter to the borrower. A sanction letter contains the following particulars amongst other details: Name of borrower. Facility allowed. Propose. Rate of interest. Margin Period of the loan and mode of adjustment. Security.

3.22 Disbursement Procedures of Industrial Credit

The disbursement procedures of industrial credit done by the Agrani Bank Sonargoan Road, Branch, Dhaka are showing in the following flow chart:

Submission of application with relevant papers attached

Project sight inspection by the concerned bank officials, engineers from the Head Office and experts Applicants profile, financial standing, sight inspection report are examined by the officials of the branch Submission of the branchs appraisal report to the Industrial Credit Division (ICD), Head Office

If ICD approves the project, then it sends Sanction Letter to the branch mentioning the Debt Equity Ratio

Documentation is done and the customer deposits the equity

Project implementation and follow-up by the officials of the branch

Source: Industrial Credit Department of Agrani Bank,

3.23 Presentation and Interpretation of Data

Table-3.1: Statement of various Loans and Advances of Agrani Bank, Sonargoan Road brance, Dhaka as on 30-09-2012. Serial no 01 02 03 04 05 06 Total Loans and Advances Continuous loan Demand loan Term loan up to 5 years Term loan over 5 years Short term Agri. credit & micro credit Staff loan Amount (in TK.) 1543028000 1472757000 1756450000 1334540000 130915000 6237690000

Source: Agrani Bank Limited, Sonargoan Road Branch, Dhaka (Credit Department)

Table-3.2: Statement of Total Classified Loans and Advances and Recovery of Agrani Bank, Sonargoan Road Branch, Dhaka. Year Amount of Classified Loans and Advances (in Tk.) 2008 2009 2010 2011 2012 530000000 680000000 600000000 780000000 750000000 Recovered Outstanding Amount During Amount at the end the Year (in Tk.) of the Year (in Tk.) 100000000 130000000 110000000 170000000 225000000 430000000 550000000 490000000 610000000 525000000

Source: Agrani Bank Limited Sonargoan Road, Branch, Dhaka (Credit Department)

Source: Agrani Bank Limited, Sonargoan Road Branch, Dhaka (Credit Department)

The Table-3.2 and the Graph show that the amount of Total Classified Loans and Advances has increased from the year 2008 to 2012. It is a negative symptom for the branch. But the percentage of recovery is favorable in the year 2012.

Table-3.3: Statement of Total Amount of Continuous Loans and Advances of Agrani Bank, Sonargoan Road Branch, Dhaka.

Year 2008 2009 2010 2011 2012

Amount of Continuous Loans and Advances (in Tk.) 1052000000 1205000000 1185000000 1300000000 1543028000

Source: Agrani Bank Limited, Sonargoan Road Branch, Dhaka (Credit Department)

Source: Agrani Bank Limited, Sonargoan Road Branch, Dhaka (Credit Department)

Table-3.4: Statement of Total Amount of Demand Loans and Advances of Agrani Bank, Sonargoan Road Branch, Dhaka. Year 2008 2009 2010 2011 2012 Amount of Demand Loans and Advances (in Tk.) 1332200000 1120000000 1251200000 1405500000 1472757000

Source: Agrani Bank Limited, Sonargoan Road Branch, Dhaka (Credit Department)

Source: Agrani Bank Limited, Sonargoan Road Branch, Dhaka (Credit Department)

Table-3.5: Statement of Total Amount of Term Loans and Advances (upto 5year) of Agrani Bank, Sonargoan Road, Dhaka.

Year

Amount of Term Loans and Advances (upto 5year) (in Tk.)

2008 2009 2010 2011 2012

1051700000 1804200000 1450000000 1505200000 1756450000

Source: Agrani Bank Limited, Sonargoan Road Branch, Dhaka (Credit Department)

Source: Agrani Bank Limited, Sonargoan Road Branch, Dhaka (Credit Department)

Table-3.6: Statement of Total Amount of Term Loans and Advances (over 5 years) of Agrani Bank, Sonargoan Road Branch, Dhaka.

Year 2008 2009 2010 2011 2012

Amount of Term Loans and Advances (over 5 years) (in Tk.) 1110000000 1204550000 1280000000 1374000000 1334540000

Source: Agrani Bank Limited, Sonargoan Road Branch, Dhaka (Credit Department)

Source: Agrani Bank Limited, Sonargoan Road Branch, Dhaka (Credit Department)

Table-3.7: Statement of various Interest Rate charged by Sonargoan Road Branch,Dhaka.

Types of Advances Agriculture Agriculture-based Industry Agri based working capital SME & Micro credit Large and Medium Term Working Capital Export

Interest Rate 8-10% 10-13% 14% 10-14% 14% 16% 7%+Service charge 2%. If expired then 16%

Import Commercial Lending Cottage Industry House Building Others

16% 16% 12-12.5% 15-16% 10-16%

Source: Central Accounting and Fund Management Department of Agrani Bank.

Chapter-04

RACTICAL Experiences

4.1 Working experience at Agrani Bank Limited

Agrani Bank Limited is a state owned bank of Bangladesh. Being able to work in this bank I find myself lucky. I worked at the Sonargoan Road Branch of Agrani Bank Limited. The working environment of Agrani Bank Limited was really nice. I have collected necessary information from this Branch of Agrani Bank Limited. I worked 2 weeks in General Banking Section, 1 week in Foreign exchange section & 3 weeks days

in Loan & Advances Section. The experience that I collect in six weeks that is very effective for me.

4.2 Specific Responsibilities

During my internship I worked in different department. That is a great opportunity for me. At first I was in Dispatch Desk for 2 weeks then General banking section for 4 weeks and finally in credit section for for weeks. So it was a great experience for me to work in different departments. Dispatch desk: Have marked and sealed, with the date, subject, and the sender's information Record reference number of each letter Give requisition for cheque books and account opening form. Organize the cards and send them to the proper address (via courier) Provide particular information to the customer. Remittance: Help customer to fill up accounting opening form Provide customer related information. Store all the form systematically and organized way. Scan the signatures of the new accountholders along with their pictures. Fill up Scheduled Bank Statistics (SBS) for each Deposit Pension Scheme,

Current and Savings account, and Fixed Deposit Account Fill up KYC (Know Your Customer). Write Pay Order

Prepare FDR and Pay Order block with seal

Account opening: Fill up current accounts from Make transaction portfolio Provide cheque books Provide internet banking form and help to fill it up Scan signature card and photograph Fill up SBS and KYC form for each customer Clearing department: Collect clearing cheques (cheques from another branch) Endorse the cheque and send it for verifying signature Sealed the received cheques with crossing seal. If there are any return cheque call customer Record return cheque in register book Credit: Had to rearrange all the customer files Printing, typing and photocopying documents Checking and filling up CIB forms Learning to put different types of seals

 prepare the inter-branch memo for pay order preparing head office forwarding letter Preparing purchase order for consumer Loan on the basis of clients quotation. Fill up all require information of a particular customer. Calculate processing fee and vat.

4.3 Critical Observation & Recommendation

A good chain of command is always followed Work load of remittance department is was more than compared to the number of working employees. There has not any chance of job rotation. To motivate employees it is much needed. To increase the rate of Work they need faster computer with user friendly operating system.

Chapter-05

Finding and analysis

5.1: Shortcomings of Agrani Bank Limited

Bureaucratic complexity in Management of ABL is very high in relation to general banking function. Management of GB practice excess formalities.

 In absence is service providing mentality. Interference of CBA and Officer Somiti in operation of GB Lobbing from upper level for doing unfair activities, Lacking of motivation in GB personnel due to irregular promotion.
Absence of using IT application in wide range. Manual based operations exist at all.

5.2: SWOT Analysis of Agrani Bank Limited

As a financial organization, Agrani Bank Ltd. has some strengths, weakness, opportunities and threats, to identify the strengths, weakness opportunities and treats a tool is used by me that is SWOT analysis. Here, S represents to strengths, W refers to weakness, 0 denotes to opportunities and T indicates to threats. Strengths State owned bank Wide image Unlimited trustiness about ABL to rural people High commitments for customers. Qualified and experiences personnel etc.

Weakness Absence of service providing mentality Absence of IT applications.

Somewhat manual based Lack of motivation of workers. Depends on Head office.

Opportunities High demand of credit. High demand of small enterprise financing. High demand of remittance facility. High demand of investment by depositing.

Threats: Interfere of CBA and Officers Somiti Some commercial and foreign banks. Some rules and regulations of Bangladesh Bank. Present of similar types of retail banking product etc.

Chapter-06
Conclusion and recommendation

6.1. Conclusion
Banks are currently undergoing sweeping changes in function and form. Key trends that reshaping banking today are service proliferation, risking competition, deregulation, rising funding costs, technological revolution, consolidation and geographic expansion, globalization of banking and last but not the least increased risk of failure.Traditional banking may be dying, but if banks are given greater freedom to respond to the publics changing demands for new services, they need not pass away. In addition to intermediation and ancillary services, only banks provide the payment services. During the six weeks internship program at Agrani Bank, Sonargoan Road,Branch, Dhaka almost all the desks have been observed more or less. This internship program has been arranged for gaining knowledge of practical banking and to compare this practical knowledge with theoretical knowledge. Comparing practical knowledge with theoretical involves identification of weakness in the branch activities and making recommendations for solving the weakness identified. Though all departments and sections are covered in the internship program, it is not possible to go to the depth of each activities of branch because of time limitation. So, objectives of this internship program have not been fulfilled with complete satisfaction. However, highest effort has been given to achieve the objectives of the internship program. During the internship, it is found that the branch provides all the conventional banking services as well as some specialized financing activities to the economy. Foreign exchange department provides all the services related to international and disburse credit if the proposal is sound. As specialized financing, it provides term finance to medium and small-scale industries. The branch also provides house-building loan. Thus by providing this various services, Agrani Bank, Sonargoan Road Branch, Dhaka is playing an important role in the banking system and in the payment system of Bangladesh.

6.2 Recommendation
There are some recommendations toward concern authority for overcoming the shortcomings of ABL in below: 1. All banking activities should be performed using IT 2. Bank should neglect the manual based operation 3. All branches should be well decorated 4. Staff and officers should speak polite and low voice 5. Bank should introduce new product 6. Bank should consider experience, written test and viva examination in cases of promotion 7. Bank should provide appropriate training 8. Bank should take motivational effort 9. To limit interferences of CBA and Officers Somiti.

Bibliography:
1. Text book of fundamental course training program for ABL officials 2. Annual report of ABL 2011 3. Handbook- Banking and Insurance Policy by Bangladesh Bank 4. http://www.agranibank.org/ 5. http://en.wikipedia.org/wiki/Agrani_Bank 6. http://www.facebook.com/pages/Agrani-Bank/103725012999627 7. http://www.banglapedia.org/httpdocs/HT/A_0063.HTM 8. http://en.wikipedia.org/wiki/BusinessWeek