Operation of Commercial Banks in Bangladesh

Term Paper On Operation of Commercial believeing concerns in Bangladesh Term Paper On trading trading operations of Commercial verifys in Bangladesh fiscal Institutions & adenosine monophosphate grocery stores (FIN 335) Summer 2012 Submitted To Md Lutfur Rah art object Assistant Professor Department of line of yields Administration East West University Submitted by Srabonty MazumderMd. Saddam HossenMd. Mehedi HasanMd. Nazmul Hasan BhuyanSanjana Ahmed 2009-2-10-0212009-3-10-031 2009-3-10-0762009-3-10-0222008-3-10-101 Section02 period of Submission April 18, 2012 Letter of TransmittalApril18, 2012 Md Lutfur Rahman Assistant Professor Department of line of reasoning Administration East West University Subject Submission of Assignment. Dear Sir We atomic number 18 very pleased to submit this term paper on Operations of banking comp whatever management in Bangladesh. as you wee authorized us to in this semester. We ar honored to prep ar this term paper under(a) your guida nce since it gave us the opportunity to make aside the operations of variant commercial-grade-grade bank in Bangladesh and as well know the harvesting and process str etcetera outed by that bank.And we explore which bank wins unique return and serve for their customers and which way they provide. We try its maintained harvest-time comparative scenario in respective to the early(a) type of commercial bank. We tried our level best to accumulate the information for you as extensive as possible. We will be obliged to provide further light on this delineate whenever necessary. Sincerely Yours, Srabonty Mzumder 2009-2-10-021 ________________ Md. Saddam Hossen 2009-3-10-031________________ Md.Mehedi Hasan 2009-3-10-076________________ Md. Nazmul Hasan Bhuyan 2009-3-10-022________________ Sanjana Ahmed 2008-3-10-101________________ Ac noesisment We would uniform to sway our gratitude and indebtedness to our honorable faculty Md Lutfur Rahman, Assistant Professor, Depart ment of occupation Administration, East West University (EWU). With his inexhaustible guidance, valuable advice, continuous inspiration, constructive chiding and generosity she helped us to carry out this report successfully.We would likewise standardized to express our gratitude to the website that helped us to gather all the necessary information. Finally, we would c ar to give thanks to all group atoms that directly or indirectly helped us to provide and accumulate all the necessary information for the accomplishment of this assignment. Table of sum Executive Summary 1. Introduction There atomic number 18 antithetic frame commercial bank that argon operating their business in Bangladesh like state owned commercial bank, close owned commercial bank, twain(prenominal) multinational bank, Muslim bank etc. ach type of bank offer different kind of product and service for their guest. These commercial offer different types of furbish uporys service and besides offer d ifferent types of book of facts service. So we take apart the comparative situation in one and only(a) bank offered product and service with another bank. 2. 1. Origin of the reportThis report originates to fulfill the requirement of perusing Financial Institutions & group A Markets, which is the course of BBA architectural plan of East West University. The issuance of the report is Operation of Commercial deposits in Bangladesh 2. 2.ObjectiveThe purpose of the report is to know the comparative situation among the commercial bank and also to elabo bet our knowledge about pecuniary market by analyzing its comparative situation. 2. 3. Scope of the reportThere atomic number 18 huge scopes to prepare the term paper to collect information, analyze the information and also implement the information. 2. 4. LimitationsTo prepare this report we consume faced a lot of problems much(prenominal)(prenominal) as unavailability of lab, electricity problem, unavailability of related books unavailability of information in net etc. 2. 5.Methodology At first we collect the basic information from internet like related bank websites, and then analyzes the information on the basis of in stock(predicate) information. So for the purpose of the report completion collect information from secondary coil sources. human beings and secret commercial cash boxs in Bangladesh Public intrusts The banking system of Bangladesh is rule by the 4 Nationalized Commercial brinks In which 3 are tout ensemble controlled by judicature and 1 (Rupali depone) bank is controlled by both g everywherenment and private sector. Nationalized Commercial Bank of Bangladesh * Sonali Bank Agrani Bank * Rupali Bank * Janata Bank For Our coincidence we select Agrani Bank and Sonali Bank toffee-nosed Banks backstage Banks are the highest egression sector due to the dismal performances of political relation banks ( preceding(prenominal)). They tend to offer better service and products. N ow 39 private commercial banks are operating in Bangladesh. Among them we select Dutch Bangla Bank ltd and BRAC Bank ltd for our comparison. par betwixt Public and Private Banks 1. Personal Banking As public Bank Agrani Bank and Sonali Bank offer Personal banking products for their current and potential customers.On the other hand private bank also provide different types of in-person banking service for their current and potential customer. down payment and add function are- production type Public Bank Private Bank put forward services savings bank account, Fixed deposit receipt, Pension schemaSonali charge turning away (SDS)Education Deposit fascinate (EDS)Medicare Deposit Scheme (MDS)Monthly Earning Scheme (MES)Marriage Savings Scheme (MSS) farming(prenominal) Deposit Scheme (RDS) andDouble Benefit Scheme (DBS) assign Schemes Convertible Taka Account. flow rate Deposit Account sure Deposit Account BankExporters FC DepositForeign Current AccountNon- convertible Taka Acc ount Saving deposit AccountShort Term Deposit AccountShort Team Deposit Bank Account give Sevices Home loan, Consumer loan, Advance against salaryConsumer Credit Special Small Credit IT pay Loan for Diagnostic Center Loan scheme for Employment oversea Auto Line Care Line Dreams comes true LineEducation LineFestival LineFull Secured Line full general LineHome Line Marriage Line Professional LineTravel line 2. Business turn out And Industry Development Products With a view to building up a computer storage of Tk. 500 crore for financing industrial childbeds,Agrani BankintroducedAgrani Bank Shilpa Unnayan bond paperin 1999. There are two types of bonds 5 and 7 years. The last denomination is Tk. 50,000 and highest one is of Tk. 500,000. vex array is good enough to rive citizenry. Major credit Schemes for business flock are Industrial Credit, heap Finance, Import Finance and Export Finance. If you are a deserving nominee for both of them, or you need any documentary s upport fromAgrani Bank, you whitethorn visit to any offset printing ofAgrani Bank.For industrial development of the countrySonali Bankprovides long term loan against new industries and BMRE program of existing industries. below different schemes it addresses thrust sector, Garments, Tourism, Hospital, Pharmaceutical, Power Plant and many an(prenominal) more. Compare to Public banks with private bank in like manner offer different type of loan facilities thats participation rate is generally floated touch on rate. 3. Agri & Rural Banking product Now bottom line farmers may have a bank account depositing Tk. 10 only. Agrani Bankprovides this service to rural areas in Bangladesh.Young generation intending to go abroad for jobs may have loan for their impart tickets and other expenses against nominal securities. Other rural economical activities are also supported byAgrani Bankcredit programs. The areas addressed are tillage (flower and others), Fisheries, and Poultry, P urchasing Agriculture and irrigation machinery and ploughing animals. So it burn down be give tongue to thatAgrani Bank that public bankis working to promote economic gain of Bangladesh from the very grass settle level which is 80% of national economy. 5% of our population lives in rural areas of Bangladesh and 75% earn their life story from agriculture. So without boost up of agriculture our economy wont grow. Also Sonali Bank as a public bankvery properly addresses it through the Rural Credit Scheme. The scheme provides loan under the next criteria * Crop Loan * Special Investment Program * Farming & Off Farming program * Krishi Khamar Rin Karmasuchi * Pond Fisheries Credit Program * fertilizer Dealers Credit Program * Sugarcane Production Loan Program * kind Forestation Program wholely these credit programs are very much suitable for our rural people and society and in the mean duration these efforts have started to give result. The results are very encouraging. On the other hand private banks such(prenominal) as Bank Asia and Dutch Bangla bank as private bank, normally centralise on the urban people. They tire outt have any particular proposition products on the rural or Agricultural sector. Bank Asia has a product KIOSH for the farmer nevertheless it is not so popular or useable for the farmer. 4. Microcredit product For Bangladesh perspective microcredit is necessary.To think about the poor people of Bangladesh Sonali Bank offer Microcredit. Sonali Bankbeing committed for people and society has been participate in the field actively since 2003. About 20 projects under the scheme are in progress. On the other mess in Private Banks Such as Bank Asia and Dutch Bangla bank have no particularized microcredit product for the lower middle class people of Bangladesh. Their any product is basically for upper class and middle class people. 5. SME Banking product Small and medium enterprise of the country is one of the deserving sectors for fi nancial support.Agrani Bankjustifiably provides credit to them under different schemes. Agrani Banklaunched a joint venture program named Small Enterprise Development Program (SEDP) with NORAD, a Norwegian agency in 1995. This program was implemented in greater Mymensingh and Faridpur districts. The target fields were rice mill, oil mill, and nursery, repairing shops, fishery, weaving and many more. The bank is presenting micro credit and other supports to land less sidereal twenty-four hours labor for alleviation of poverty by generating employment. Agrani Bankhad designed most programs in collaboration with other agencies.One such program is Employment generation Project for Rural Poor (EGPRP). This program was launched in 1995. All these programs are very much favorable to the micro enterprises and the poor. Terms and conditions are also customer friendly and easy to follow. On the other Hand in Private Banks Private Bank such as Bank Asia and Dutch Bangla Bank has SME banking for the Small and middle enterprise. Bank Asia have 10 SME service branches all over the Bangladesh. They have different 9 SME products that cheer rate start from 10-17%. Dutch bangle bank have 3 SME branches.From the branches tenuous and meddle enterprise can borrow from 100000 to 5000000 tk. Floating touch rate is 17% and collateral 16%. As an entrepreneur moldiness have experience at least 2 (Two) years. 6. nonresident Bangladeshis customers products Nonresident Bangladeshis now get banking facility throughAgrani Bank. They may have an account in taka, they may invest in horse Bonds. They are also allowed to have an F/C account. To compare with Private Bank Such as Bank Asia and Dutch Bangla Bank gives the account facilities and F/C account for the NRBs . NRBs can also invest in Euro Dollar bonds. . Moslem Banking product Among the nationalized banks Agrani was the first to introduce Islamic Banking service. Agrani Bankprovides completely interest free shariah law based banking for their clients. Deposit services offerinterest free make in meekness with shariah. Agrani Bank, as per its slogan, is always beside the people in their struggle to come up with sustainable economic growth for themselves and for the nation. On the Other Hand Private bank Such as Bank Asia have Islamic banking services in 6 braches such as 3 in Dhaka, 1 in Chittagong and 1 in Sylhet.They provide completely interest free Shariah based banking to the clients. Deposit services offerinterest free advance in compliance with Shariah. Now a day most of the private banks start Islamic Banking Service to attract the all types of people. 8. net income Banking Agrani bank and Sonali bank dont have internet banking services. On the Other Hand Private bank All private banks branches under online banking system will be able to do banking practices using a ordinary server (which is centralized) from where only the branches will be able to enter using a common password.Dutch Bangla Bank and Bank Asia give the below internet banking services for their customers. Internet Banking Services * Check account balance * Take print out of account statement for a particular period * Transfer fund within your own account * Make payment of mobile knell bill * Recharge your mobile phone as well as others from your account * Enquire foreign exchange rate * Enquire silver exchange rates. * Acquire information on all our products. * Every movement report will be sent to clients through e-mail account. * dope change the password, pin code and respectivemobile number (For All Mobile Operators). 1. automated teller machine Booth product Now a day public bank doesnt offer any ATM facilities for their Clients. On the Other hand With more than 1000 of ATM booths all over the country,DBBLs has the largest ATM interlockings in Bangladesh. DBBL offering free access to its ATM network for its subscriber. This network helpedDBBLgaining more popularity and confidence among subscr iber and expanding banking opportunity to mass people. This entire network is being maintained by its own IT staff without any 3rd party dependency Brac Bank also has huge ATM booths facilities for their clients. 12.Credit / Debit post horses Product Public bank offer credit / account card facilities in a smaller range such as Sonali Bank Limited are one of the member banks of Q-Cash Consortium. throwaway holder of Sonali Bank Limited can use ATMs of consortium member banks, Dutch-Bangla bank and BRAC bank limited. Member Banks of Q-Cash Consortium. Agrani bank also give their clients debit card facilities but it not so popular. On the Other Hand Private bank such as Brac Bank offer Credit circular such as 1. Platinam card 2. Universal Card 3. scroll of charge 4. Payment of Credit Card Bill Debit Card Visa / Master CardPrepaid Card 1. Hajj Card 2. Travel Card 3. Schedule of Charge Dutch Bangla Bank also offer different types of Debit, Credit, Prepaid Card and different types o f offer & discounts. On the above comparison we see that public bank work with grass root level and more concentrate Last of all previous time Public commercial banks have fewer facilities than private commercial banks but now a day they try to increase their product and service. Private Banks gives a lot of services to their clients. For existence of the market private banks are increasing their products and services.Islamic Banking The key difference is that Islamic Banking is based on Shariah foundation. Thus, all come up toing, transaction, business approach, product feature, investment focus, responsibility are derived from the Shariah law, which lead to the significant difference in many part of the operations with as of the traditional. The foundation of Islamic bank is based on the Islamic faith and must stay within the limits of Islamic Law or the Shariah in all of its actions and deeds. Here, we take two banks for the comparison amidst Islamic Bank & Traditional ba nk * Social Islamic Bank Limited (SIBL) * Shahjalal Islami Bank (SJIBL)Amongst the governing principles of an Islamic bank are * The absence of interest-based (riba) transactions * The avoidance of economic activities involving oppression (zulm) * The avoidance of economic activities involving speculation (gharar) * The introduction of an Islamic tax, zakat * The discouragement of the production of goods and services which fight down the Islamic value (haram) Traditional Banking On the other hand, traditional banking is fundamentally based on the debtor-creditor relationship between the depositors and the bank on one hand, and between the borrowers and the bank on the other.Interest is considered to be the price of credit, reflecting the opportunity salute of property. Among of many traditional banks we take two, those are * National bank. * Brac Bank Comparison Between Islamic Banking And Traditional Banking 1. Functions And Operating Modes The functions and operating modes of S JIBL & SIBL banks are based on the principles of IslamicShariah. On the other hand BRAC Bank & National Bank are based on man maid principles 2. Interest Rate SJIBL & SIBL do not employ to fixed up the interest rate for their offering asset & liability products as like as traditional banks deal with. t promotes risk sharing between provider of capital (investor) and the user of currency (entrepreneur). Besides, The investor is assured of a predetermined rate of interest. They have fixed rate of interest. utilisation In BRAC bank, they have Prapti Current account & their interest rate is minded(p) below Amount of Balance Specific Interest Rate 0 at a lower place 5,000 0% 5,000 Below 100,000 1% 100,000 Below 250,000 2% 250,000 Below 500,000 3% 500,000 & Above 4% 3. proceeds Maximization Both of them SJIBL & SIBL aims at maximizing profit but subject toShariahrestrictions.Besides they just shares profit & loss both. Example They offer Al Wadiah Curren t Deposit Accounts. Where have No profit on Al Wadiah Current Deposit Account balances. Al-Wadiah current deposit account holder have no risk. In contrast, National bank ltd. & BRAC Bank has the aim of maximizing profit without any restriction. In contrast, SIBL & SJIBL share their profit & loss with their clients that indicates they dont fixed up interest rate as aforementioned in traditional banking system. 4. Provided Loan Modes Islamic law considers a loan to be given or taken, free of charge, to meet any contingency.So, The SJIBL & SIBL have no provision to charge any extra money from the defaulters. nevertheless small amount of compensation and these proceeds is given to charity. Rebates are given for early settlement at the Banks discretion. Example Al Wadiah Current Deposit Accounts Payment on Accounts demand Funds in the Al Wadiah Current Deposit shall be due on demand and the Bank guarantees quittance of such funds in full, less the Bank charges Besides. Len ding money and getting it back with compounding interest is the fundamental function for both of them.They can charge additional money (penalty and compounded interest) in gaucherie of defaulters. 5. Since SJIBL amp SIBL shares profit and loss, they pay greater attention to developing project appraisal and evaluations. Example Al Wadiah Current Deposit Accounts. No profit on Al Wadiah Current Deposit Account balances shall be allowed and the Bank at its own discretion uses the funds of Al-Wadiah current deposit accounts without any risk to the account holder. 6. Projects Development The SJIBL amp SIBL gives greater emphasis on the viability of the projects.In the comparison of BRAC bank amp NBL banks income from the advances is fixed, it gives little importance to developing expertise in project appraisal and evaluations. 7. Deposits Accounts Most importantly SJIBL amp SIBL can only guarantee deposits for deposit account, which is based on the principle ofal-wadiah, thence the de positors are guaranteed repayment of their funds, however if the account is based on the mudarabah concept, client have to share in a loss position. * Al Wadiah Current Deposit Accounts * Mudaraba Savings Deposit Accounts Mudaraba Term Deposit Accounts * Mudaraba Short denounce Deposit Accounts In contrast, BRAC Bank have these types of deposits * Probashi Current Account * Probashi Savings Account * Probashi Fixed Deposit * Probashi DPS * Probashi Abiram In these accounts client dont have to share in a loss position. 8. Zakat collection In the modern Islamic banking system, it has become one of the service-oriented functions of the SJIBL amp SIBL to be a Zakat Collection Centre and they also pay out their Zakat. They does not deal withZakat, as Islamic bank usually does. 9.Islamic Mode of Investment community in federation business is the fundamental function for both of them. * interest Of partnership business Example SIBL provide Musharaka service. It means means partnership business. Every partner has to provide more or less rectitude funds in this partnership business. Both the Bank and the investment client reserve the right to share in the management of the business. But the Bank may opt to permit the investment client to operate the whole business. In practice, the investment client normally conducts the business.The profit is divided between the bank and the investment client at a predetermined ratio. Loss, if any, is to be borne by the bank and the investment client according to capital ratio. * The location of SJIBL amp SIBL in relation to its clients is that of partners, investors and trader, buyer and seller. Example Bai-Muazzal. Bai-Muajjal is a dumbfound between Buyer and Seller under which the seller sells accredited specific goods ( permissible under Shariah and Law of the country ), to the Buyer at an agreed fixed price payable at a certain fixed future date in cluster sum or within a fixed period by fixed installments.The seller may also sell the goods purchased by him as per order and precondition of the Buyer. In Banks perspective, Bai-Muajjal is treated as a contract between the Bank and the Client under which the bank sells to the Client certain specified goods, purchased as per order and specification of the Client at an agreed price payable within a fixed future date in lump sum or by fixed installments. IN contrast, BRAC bank has * Probashi lucre Earnes bond * US $ premium & Investment Bond Probashi Biniyog Probashi remuneration Earners Bond Probashi Wage Earner Development Bond (WEDB) is a product designed by Bangladesh primeval bank for Bangladeshi national living abroad. The objective of this product is to back up the NRBs to invest their hard earned money to purchase WEDB on which the government guarantees a fixed interest rate. US Dollar Premium amp Investment Bond US Dollar Premium Bond is a product designed by Bangladesh Central bank for Bangladeshi national living abroad.The objecti ve of this product is to encourage the NRBs to invest their hard earned money to purchase WEDB on which the government guarantees a fixed interest rate. Probashi Biniyog BRAC Bank Limited offers Probashi Biniyog a product that exclusively provides Non-Resident Bangladeshis (NRBs) the opportunity to invest in the Bangladeshi Capital Market through a Beneficiary Owners (BO) account which will be funded by a Non Resident Investors Taka Account (NITA). Both BO account and NITA will be held with BRAC Bank Limited. 9. ConclusionsIn the conclusion we have differentiated different types of products of private and public banks, Islamic and traditional bank and local and multinational bank in Bangladesh. Basically we try representing a clear picture among two banks products base on their deposit products, loan products, ATM, cards, Interest rate , branch , SME product , rural amp agriculture products. To compare their products we have employ company website, visited the banks and talked w ith the employees of the banks. That has enriched the differentiation among different banks. 10. Reference