Operation of Commercial Banks in Bangladesh

Term Paper On Operation of mercenary rely buildings in Bangladesh Term Paper On Operations of mer merchantmantile vernaculars in Bangladesh Financial Institutions & deoxyadenosine monophosphate Markets (FIN 335) Summer 2012 Submitted To Md Lutfur Rahman Assistant Professor Department of Business 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 Date of conformation April 18, 2012 Letter of TransmittalApril18, 2012 Md Lutfur Rahman Assistant Professor Department of Business Administration East West University Subject Submission of Assignment. Dear Sir We argon very pleased to submit this term paper on Operations of situate management in Bangladesh. as you have certain us to in this semester. We be honored to nominate this term paper under your guidance since it gave us the probability to know the operations of disparate commercialized message rely in Bangladesh and also know the product and process offered by that jargon.And we explore which bank provides unique product and service for their customers and which way they provide. We analyze its offered product comparative scenario in respective to the otherwise type of commercial bank. We tried our level best to accumulate the information for you as comprehensive as possible. We eachow be obliged to provide further clarification on this report 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________________ Acknowledgement We would like to express our gratitude and indebtedness to our honorable cogency Md Lutfur Rahman, Assistant Professor, Department of Business Administration, East West University (EWU). With his inexha ustible guidance, valuable advice, continuous inspiration, constructive criticism and generosity she helped us to carry tabu this report successfully.We would also like to express our gratitude to the website that helped us to gather all the necessary information. Finally, we would like to thank to all group members that directly or indirectly helped us to provide and accumulate all the necessary information for the accomplishment of this assignment. Table of Content Executive Summary 1. Introduction There are divers(prenominal) kind commercial bank that are operating their business in Bangladesh like state owned commercial bank, private owned commercial bank, near multi depicted object bank, Islamic bank etc. ach type of bank offer different kind of product and service for their client. These commercial offer different types of locates service and also offer different types of credit service. So we analyze the comparative situation in one bank offered product and service with a nother bank. 2. 1. melody of the reportThis report originates to fulfill the requirement of studying Financial Institutions & axerophthol Markets, which is the course of BBA chopine of East West University. The topic of the report is Operation of Commercial coin banks in Bangladesh 2. 2.ObjectiveThe purpose of the report is to know the comparative situation among the commercial bank and also to elaborate our knowledge about financial market by analyzing its comparative situation. 2. 3. Scope of the reportThere are great scopes to prepare the term paper to collecting information, analyze the information and also implement the information. 2. 4. LimitationsTo prepare this report we have faced a lot of problems much(prenominal) as unavailability of lab, electricity problem, unavailability of related books unavailability of information in mesh release etc. 2. 5.Methodology At first we collect the basic information from internet like related bank websites, and then analyzes the info rmation on the basis of acquirable information. So for the purpose of the report completion collect information from secondary sources. Public and Private commercial Banks in Bangladesh Public Banks The banking system of Bangladesh is dominated by the 4 Nationalized Commercial Banks In which 3 are totally controlled by government and 1 (Rupali Bank) bank is controlled by both government and private sector. Nationalized Commercial Bank of Bangladesh * Sonali Bank Agrani Bank * Rupali Bank * Janata Bank For Our Comparison we select Agrani Bank and Sonali Bank Private Banks Private Banks are the highest growth sector callable to the dismal performances of government banks (above). They tend to offer better service and products. Now 39 private commercial banks are operating in Bangladesh. Among them we select Dutch Bangla Bank ltd and BRAC Bank ltd for our comparison. Comparison between Public and Private Banks 1. Personal Banking As public Bank Agrani Bank and Sonali Bank offer Perso nal banking products for their on-going and potential customers.On the other hand private bank also provide different types of personal banking service for their current and potential customer. Deposit and bestow go are- Product type Public Bank Private Bank Deposit service Savings bank report, Fixed squeeze receipt, Pension organizationSonali Deposit turning away (SDS)Education Deposit Scheme (EDS)Medicare Deposit Scheme (MDS)Monthly Earning Scheme (MES)Marriage Savings Scheme (MSS)Rural Deposit Scheme (RDS) andDouble Benefit Scheme (DBS) quote Schemes Convertible Taka government note. accredited Deposit AccountCurrent Deposit Account BankExporters FC DepositForeign Current AccountNon- convertible Taka Account Saving deposit AccountShort Term Deposit AccountShort Team Deposit Bank Account bestow Sevices Home loan, Consumer loan, conjure against salaryConsumer Credit Special Small Credit IT Finance Loan for Diagnostic Center Loan scheme for Employment Abroad Auto Line co pe Line Dreams comes true LineEducation LineFestival LineFull Secured Line General LineHome Line Marriage Line Professional LineTravel line 2. Business support And Industry training Products With a catch up with to building up a pedigree of Tk. 500 crore for financing industrial figures,Agrani BankintroducedAgrani Bank Shilpa Unnayan Bondin 1999. There are two types of bonds 5 and 7 years. The lowest denomination is Tk. 50,000 and highest one is of Tk. 500,000. Interest rate is good enough to attract citizenry. Major credit Schemes for business mess are industrial Credit, Trade Finance, Import Finance and Export Finance. If you are a deserving candidate for any of them, or you need any documentary support fromAgrani Bank, you whitethorn visit to any branch ofAgrani Bank.For industrial development of the countrySonali Bankprovides long term loan against new industries and BMRE computer program of existing industries. Under different schemes it addresses thrust sector, Garment s, Tourism, Hospital, Pharmaceutical, Power Plant and many more. Compare to Public banks with private bank in addition offer different type of loan facilities thats relate rate is generally floated interest rate. 3. Agri & Rural Banking product Now bottom line farmers may have a bank throwaway depositing Tk. 10 only. Agrani Bankprovides this service to uncouth areas in Bangladesh.Young generation intending to go abroad for jobs may have loan for their air tickets and other expenses against nominal securities. Other rural stintingal activities are also supported byAgrani Bankcredit programs. The areas addressed are Cultivation (flower and others), Fisheries, and Poultry, Purchasing Agriculture and irrigation machinery and ploughing animals. So it can be said thatAgrani Bank that public bankis working to promote economic growth of Bangladesh from the very grass root level which is 80% of national economy. 5% of our population lives in rural areas of Bangladesh and 75% earn th eir living from agriculture. So without boost up of agriculture our economy wont grow. Also Sonali Bank as a public bankvery correctly addresses it through the Rural Credit Scheme. The scheme provides loan under the following criteria * lop Loan * Special Investment Program * Farming & Off Farming program * Krishi Khamar Rin Karmasuchi * Pond Fisheries Credit Program * Fertilizer Dealers Credit Program * Sugarcane Production Loan Program * Social Forestation Program each these credit programs are very much suitable for our rural people and society and in the toy with time these efforts have started to give result. The results are very encouraging. On the other hand private banks Such as Bank Asia and Dutch Bangla bank as private bank, normally focus on the urban people. They dont have any particular proposition products on the rural or Agricultural sector. Bank Asia has a product KIOSH for the farmer but it is not so popular or useful 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 participating in the field actively since 2003. About 20 projects under the scheme are in progress. On the other Hand in Private Banks Such as Bank Asia and Dutch Bangla bank have no specific microcredit product for the lower middle class people of Bangladesh. Their every product is basically for upper class and middle class people. 5. SME Banking product Small and middling go-ahead of the country is one of the deserving sectors for financial 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 sieve mill, oil mill, and nursery, repairing shops, fishery, weaving and many more. The bank is presenting micro credit and other supports to land less solar day labor for alleviation of poverty by generating employment. Agrani Bankhad designed some 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 interest rate start from 10-17%. Dutch bangle bank have 3 SME branches.From the branches small and meddle enterprise can borrow from universal gravitational constant00 to 5000000 tk. Floating Interest rate is 17% and collateral 16%. As an entrepre neur must(prenominal) 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 Dollar 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. . Islamic Banking product Among the nationalized banks Agrani was the first to introduce Islamic Banking service. Agrani Bankprovides solely interest free Shariah based banking for their clients. Deposit services offerinterest free profit in compliance 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 D haka, 1 in Chittagong and 1 in Sylhet.They provide only interest free Shariah based banking to the clients. Deposit services offerinterest free profit in compliance with Shariah. Now a day most of the private banks start Islamic Banking Service to attract the all types of people. 8. Internet 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 leave behind be able to do banking practices using a ballpark 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 phone bill * Re wake your mobile phone as well as others from your account * Enquire foreign exchange r ate * Enquire currency exchange rates. * Acquire information on all our products. * Every transaction report will be sent to clients through e-mail account. * Can change the password, pin code and respectivemobile number (For All Mobile Operators). 1. ATM stand 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 networks in Bangladesh. DBBL offering free access to its ATM network for its subscriber. This network helpedDBBLgaining more popularity and confidence among subscriber 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 Cards Product Public bank offer credit / debit card facilities in a smaller range such as Sonali Bank Limited are one of the member banks of Q-Cash Consortium . Card 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 Card such as 1. Platinam card 2. Universal Card 3. Schedule 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 of 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 product s and services.Islamic Banking The key difference is that Islamic Banking is based on Shariah foundation. Thus, all renting, transaction, business approach, product feature, investment focus, responsibility are derived from the Shariah law, which expand to the significant difference in many part of the operations with as of the traditionalistic. 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 between Islamic Bank & Traditional bank * 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 contradict the Islamic value (haram) Traditional Banking On the other hand, traditional banking is essentially 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 cost of money. 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 rifles and operating modes of SJIBL & SIBL banks are based on the principles of IslamicShariah. On the other hand BRAC Bank & National Bank are based on man amah principles 2. Interest Rate SJIBL & SIBL do not used 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 funds (entrepreneur). Besid es, The investor is assured of a predetermine rate of interest. They have fixed rate of interest. compositors case In BRAC bank, they have Prapti Current account & their interest rate is given below measuring rod of Balance Specific Interest Rate 0 Below 5,000 0% 5,000 Below 100,000 1% 100,000 Below 250,000 2% 250,000 Below 500,000 3% 500,000 & supra 4% 3. Profit Maximization Both of them SJIBL & SIBL aims at maximizing profit but subject toShariahrestrictions.Besides they just shares profit & prejudice both. exercise They offer Al Wadiah Current 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. Only 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 get Funds in the Al Wadiah Current Deposit shall be payable on demand and the Bank guarantees repayment of such funds in full, less the Bank charges Besides. Lending 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 case 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, thus the depositors 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 Notice Deposit Accounts In contrast, BRAC Bank have these types of deposits * Probashi Current Account * Probashi Savings Account * Probashi Fixed Deposit * Probashi DPS * P robashi Abiram In these accounts client dont have to share in a loss position. 8. Zakat appealingness 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 Participation in partnership business is the fundamental function for both of them. * Participation Of partnership business Example SIBL provide Musharaka service. It means means partnership business. Every partner has to provide more or less equity 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 appropriate 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 predetermin ed ratio. Loss, if any, is to be borne by the bank and the investment client according to capital ratio. * The status 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 contract between vendee and Seller under which the seller sells certain 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 lump sum or within a fixed period by fixed installments.The seller may also sell the goods purchased by him as per order and stipulation 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 Wage Earnes bond * US $ premium & Investment Bond Probashi Biniyog Probashi Wage Earners Bond Probashi Wage Earner Development Bond (WEDB) is a product designed by Bangladesh Central bank for Bangladeshi national living abroad. The objective of this product is to get on the NRBs to invest their laborious 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 objective 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 only provides Non-occupier 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 used company website, visited the banks and talked with the employees of the banks. That has enriched the differentiation among different banks. 10. Reference