Article of Bankers

CHAPTER 1. INTRODUCTION AND GENERAL INSTRUCTIONS 1.1 Introduction: NBFIs include all depository and non-depository financial institutions. The NBFIs which have the authority to receive deposits are treated as Non-bank Depository Corporations (NBDCs). As the NBDCs are the part of NBFIs, so in the first part of this guideline all definitions, explanations, interpretations and illustrations have [...]

Agent Banking:  In exercise of the powers conferred to Bangladesh Bank in Section 45 of the Bank-Company Act, 1991 (Act no. XIV of 1991), the following guidelines are hereby made:   PART I: PRELIMINARY Short Title These guidelines may be called as the “Prudential Guidelines for Agent Banking Operation in Bangladesh”. Interpretations As used in [...]

Swiss National Bank maintains expansionary monetary policy: The coronavirus pandemic and the measures implemented to contain it have led to a severe downturn in economic activity and a decline in inflation both in Switzerland and abroad. The SNB’s expansionary monetary policy remains necessary to ensure appropriate monetary conditions in Switzerland. The SNB is keeping the [...]

Introduction: 1.1 Technology risk refers to risks emanating from the use of information technology (IT) and the Internet. These risks arise from failures or breaches of IT systems, applications, platforms or infrastructure, which could result in financial loss, disruptions in financial services or operations, or reputational harm to a financial institution. 1.2 With the more [...]

Learning objectives: This chapter includes a brief history of the documentary credit, an insight into currently available statistics (2013 data) and the types of transaction for which a documentary credit is often chosen as the method of settlement. By the end of this chapter, you should be able to: ◆ describe the origins of a [...]

Understanding Nature of Assets: —Resources owned and controlled by a business —Assets are used  to run a business —Assets are the sources of revenue —Some assets are simply financial contracts —Some assets are subject to depreciation —Some assets are subject to appreciation   Understanding Asset of a Bank: —Cash —Balance with other Banks & FIs [...]

Management of NPL: Meaning, Causes, Objectives and Framework   Meaning of NPA: The bank being financial intermediaries are in the business of accepting deposits for the purpose of lending and to augment their resources at times they borrow money from other sources and meet the ever increasing borrowing requirements of their customers. However, most of [...]

Functions of TFPC: XYZ Bank Limited started its trade operations in 2001 and all the trade activities were carried out by XYZ’s  21 (Twenty One) Authorized Dealer (AD) Branches. In the year 2013, XYZ established the Trade Finance Processing Center (TFPC) at Dilkusha C/A, Dhaka and Chittagong. Since then the TFPC does the processing of [...]

Balance Of Trade (BOT) The balance of trade of a nation is a systematic financial record usually of a year, of its imports and exports of visible commodities from and to the rest of the World. For many years until now, the value of Bangladesh's imports of commodities from other countries exceeded the value of [...]

Grievances Management: - Factors responsible for Grievances - Its importance - Reason for Grievance in Bank - Resolving Process   (A) Factors: 1.Environment of Office 2.Sitting Arrangement 3.Time Schedule 4.Boss – Subordinate Relation 5.Financial Facilities 6.Posting 7.Promotion 8.Non Appreciation of Personal Problem 9.Career Opportunity 10.Work Load Nature of Work Communication Hazards specially Language ACR Special [...]

Customer Service Improvement: “There is only one boss, and whether a person shines shoes for a living or heads up the biggest corporation in the world, the boss remains the same. It is the customer! The customer is the person who pays everyone’s salary and who decides whether a business is going to succeed or [...]

Liquidity Definition +Availability of Cash in the amount and at the time needed and at a reasonable cost.   +A bank is considered to be liquid if it has ready access to immediately spendable funds at reasonable cost   Characteristics +Tightness is the bid-ask spread   +Depth is the volume of transactions necessary to move [...]

Procedure of Conducting: Enquiry Generally means the activities involved in investigation or examination in details for findings of facts on way occurrence or for any allegation against any employee. In otherworlds it is the management’s search for truth  or other wise of facto/circumstances/charges alleged byet, against its employees. It is an enquiry held by the [...]

How do lenders set interest rates on loans? For many borrowers, the factors that determine a bank's interest rate are a mystery. How does a bank decide what rate of interest to charge? Why does it charge different interest rates to different customers? And why does the bank charge higher rates for some types of [...]

Part - I An exporter submitted a bill under L/C to Agrani Bank for negotiation, who is also an advising bank of the Concerned L/C. The term deck shipment was specifically allowed in the credit. The bank negotiated the bill since all the terms and Condition of the L/C were Compiled with. But before negotiation [...]

ASSET QUALITY: CLASSIFICATION OF CREDITS Classification of credits is according to the probability of repayment which estimates the amount of loss that will probably be suffered on deteriorating credits.   Techniques of Credit Analysis ! ASSESSMENT OF CREDIT QUALITY The overall financial condition and resources of the borrower, including the current and stabilized cash flow. [...]

Who is Judgment Debtor? A. Person against whom there is a legal judgment or order for repayment.   What is Kite Flying? A. Raising funds by discounting accommodation bills.   What is Lame Duck? A. Company which is in financial difficulties.   What is Long Bill? A. The bill having maturity period of three months [...]

What is Bed-and- Breakfast deal? A. This term used in investment planning. Under this deal shares are sold on one business day and then bought back the following day in order to establish a capital gain or less for tax declaration.   What is Big Bang? A. The term applied to the liberalization in 1986 [...]

Q.What is absolute Advantage in respect of Economics? A. A country has an absolute advantage if its output per unit of input of all goods and services produced is higher than that of another county.   Q. What is acceptance credit? A. Clean credit facility for funding accommodation finance by drawing of a term bill [...]

What is Finance? Finance is the importance tools that assists in the formation of new businesses, and allows businesses to take advantage of opportunities to grow, employ local workers and in turn support other businesses and government through the remittance of income taxes. The strategic use of financial instruments, such as loans and investments, is [...]

Overview of Financial Statement underlying accounting principles and regulatory laws & regulation.   What is accounting principles? Three meanings come about principles of accounting:   1. Principles of Accounting was often the title of the introductory course in accounting.   2. Principles of accounting can also refer to the basic or fundamental accounting principles: cost [...]

Background: The Banking Companies Act, 1991 was enacted in February 1991 in order to make the role of Bangladesh Bank in dealing with licensing, monitoring, regulating and supervising the banking sectors. The Act was subsequently amended 3 (three) times in 1993, 1995 and 2013 which empowers Bangladesh Bank further.   Definition: Banking Company: "Banking Company" [...]

What is “Cash” for a Bank? —Cash is the most volatile and liquide Current Asset of Bank’s Balance Sheet and as such demands special attention of “Efficient Management". Cash Department plays a paramount role in creating good perception among customers about the service quality of a Bank.   Function of Cash Department: 7 (Seven) Functions [...]

Core Risk Management in Bank: Asset Liability Management Credit Risk Management Foreign Exchange Risk Management Internal Control and Compliance Anti-Money Laundering IT Security   Different Aspects of Balance Sheet (ALM) of a Bank: BALANCE SHEET NON-EARNING ASSET Different Aspects of Balance Sheet (ALM) in a Bank.   Asset-Liability Management: The Purpose of Asset-Liability Management is [...]

Cash Flow: The statement of cash flows reports the cash receipts, cash payments, and net change in cash resulting from the operating, investing, and financing activities of an enterprise during a particular period.  The main aim to prepare the statement is to identify and analyze the causes of differences between cash amount in the beginning [...]

Identification of Non-Performing:   Identification of Non-Performing/sick projects, symptoms of sick projects, early warning signals and early alert process, causes of non-performing/sick projects, rehabilitation measures.                            + A Non-performing/sick project is a unit, which is incurring losses or fails to generate internal surplus [...]

Corruption regarding Loan & Advances with Case Studies Talk Synopsis (Points to ponder on general norms and procedure of lending)   Purposes: Individual—Organizational—National interest (Economic purpose). Regulatory framework, policy guidelines and instructions for lending. Sound principles of lending i.e. Liquidity (i) in terms of SLR & CRR and in terms of nature of advances.   [...]

Bankers Of the Article What precautions to be taken prior allowing credit to a sole proprietorship?/In which circumstances, a married woman can bind her husband in respect of her availed loans & advances?/What precautions Bank should take prior allowing credit to joint account?/Distinguish between “Agent” & “Trustees” ?/What are the distinguish between “General & Special [...]

Deposits Remain the Cornerstone of Retail Banking:   Customers define their primary bank as the one where they have their Deposit Account Deposit customers are the best source of cross-selling Opportunity Deposits represent a very stable source of funds Virtually impossible to run an effective retail bank of any size without a culture of deposit [...]

Common Irregularities: Account Opening & Operation of Deposit A/c.   ► A/c Opened without Introduction or Improper Introduction. ► Not obtain necessary supporting papers. ► Not obtain Photographs. ► Signature of Introducer not properly Verified. ► Signature of A/c holder not properly Admitted. ► A/c Operated without Approval of the Manager. ► Particulars not been [...]

The Word “Communication” Originates from the latin word ‘COMMUNIS’ denoting ‘Common’, Communication, therefore, involves transmitting a Common idea or understanding and Covers any type of behaviour resulting in an exchange of meaning. Broadly communication is the process of meaningful interaction in between and among persons in an organization. It results in meanings being perceived and [...]

  Sensitivity analysis means varying the inputs to a model to see how the results change Sensitivity analysis is a very important component of exploratory use of models model is not regarded as “correct” sensitivity analysis helps user explore implications of alternate assumptions human computer interface for sensitivity analysis is difficult to design well In [...]

Introduction:  For gradual development of Trade & Commerce of a country, availability of financial requirement is very important to the Entrepreneur undertaking manufacturing unit or trading unit.  Financial requirements of a Business Unit can broadly be classified into Two categories , which are —– Long Term Requirement —— can be met availing Term Loan. Short […]

Term financing for new project and BMRE of existing projects (Large, Medium, SE) Working capital for industries, trading,  services and others (Large, Medium, SE) Import and Export Finance Lease Finance Consumer Finance Fee business      Islamic mode of finance     What is Loan, Advance & Credit ? Loans, Advances and Credit are interchangeably used without […]

Basel III introduces a simple, transparent, non-risk based regulatory Leverage Ratio to constrain leverage in the banking sector and supplement risk based capital ratio as a safeguard against model risk. The leverage ratio is calculated by dividing tier 1 capital with total exposure.   To increase the quality and quantity of the capital base of [...]

A. What is Leasing? Written or implied contract by which an owner (the lessor) of a specific asset (such as a parcel of land, building, equipment, or machinery) grants a second party (the lessee) the right to its exclusive possession and use for a specific period and under specified conditions, in return for specified periodic [...]

Statement of affair: The Statement of Affair is a summary of a Company's assets and liabilities.   Difference between Statement of Affairs and Balance Sheet Statement of Affairs and Balance Sheet are two varying terms, but they too nearly resemble which causes confusion in distinguishing them. For overcoming from these doubts regarding the two entities, you [...]

Bank's Accounting System-Double Entry system-Charts of Accounts Preliminary ideas of General Ledger, Trial Balance ? What is accounting? Accounting is a way of recording, analyzing and summarizing transactions of an entity.   Assets: Things that are resources owned by a company and which have future economic value that can be measured and can be expressed [...]

Bankers Of the Article   Abbreviation of different words in financial institute             Abbreviation of different words in financial institute?     Abbreviation :     CRISEL = Credit Rating Information’s and Services Limited     CRAB = Credit Rating Agency of Bangladesh     NCRL = National Credit Rating Limited […]

Bankers Of the Article   TYPES OF CREDIT ACTIVITIES           Depending on the various nature of financing, all the lending activities have been brought under the following major heads:     Loan (General) :     Short term, Medium term & Long term loans allowed to individual/firm/industries for a specific purpose […]

Bankers Of the Article   e-GP & Issuance of Bank Guarantee?         Background   Infrastructure development of country and Work Order/Contractor Financing run parallely. It is one of the most lucrative financing mode in the banking arena. Because it generates both funded and non-funded revenue. Majority of Infrastructure development work are done […]

Bankers Of the Article   Guidelines on  Internal Credit Risk Rating (ICRR) system for banks       Background of Internal Credit Risk Rating System   Lending Risk Analysis (LRA)- 1993 Credit Risk Grading (CRG) 2005 Internal Credit Risk Rating System  2018       Background of Internal Credit Risk Rating System   Prepared for […]

Bankers Of the Article   What is URC?-What is URR?-What is ACU?-Transportation-Import Finance by Islami Bank?         What is URC?   URC means Uniform Rules for Collection. Firstly the International Chamber of Commerce (ICC) published URC in 1956 and latestly revised URC, ICC publication No. 522 came into force from 01.1.1996.   […]

Bankers Of the Article   Major Discrepancies-IRC-ICC-Procedure Retirement etc.         Write the common major discrepancies those to be checked on receiving Export/Import documents   Common discrepancies: a) Claused (unclean) Bill of Lading b) Charter party B/L (unless stipulated in the L/C) c) Full set of B/L not presented d) Bill of Lading […]

Bankers Of the Article   Points to be checked while scrutinizing the shipping documents-Foreign Exchange         Points to be checked while scrutinizing the shipping documents:       1. Forwarding Schedule of the Negotiating Bank:        Whether there is any discrepancy mentioned in it.  Whether there is any […]

Bankers Of the Article   Foreign Exchange-International Trade Payment Methods – Domestic and International regulations         What do you mean by Foreign Exchange?   Foreign currency refers to the process or mechanism by which the currency of one country is converted into the currency of another country. Foreign exchange means converts currency […]

Bankers Of the Article   ATM-Mobile Banking-Garnishee Order-Bank Rate-Lien       ATM   ATMs  are electronic machines, which are operated by a customer himself to  deposit or to withdraw cash from bank. For using an ATM, a customer has  to obtain an ATM card from his bank. The ATM card is a plastic card,  […]

Bankers Of the Article   Nikash House-NPL-Bankers Book Evidence Act-Endorsement etc.         11.0 Nikash House   The clearing activities of the banks:     Currently Bangladesh Bank is receiving the information of   cheques/instruments on diskettes from all member banks of clearing house and processes the same using a software ‘NIKASH’ developed […]

Bankers Of the Article   CORE RISKS MANAGEMENT-MONEY LAUNDERINGS-FOREIGN EXCHANGE RISKS-SMEs         6.0 CORE RISKS MANAGEMENT   Introduction: Risk is a part of human life. Banking is also a risk bearing industry. There are numerous risks in banking activities. Bankers have to achieve their objectives by managing these risks.   Present banking […]

Bankers Of the Article   Credit Information Bureau (CIB)-Automated Clearing House-Asian Clearing Union.         3.0 Credit Information Bureau (CIB)   The Credit Information Bureau (CIB) of Bangladesh Bank is responsible among others for collection, processing and maintaining an updated database of credit related information supplied by participants, institutions which extend credit i.e. […]

Bankers Of the Article   Know Your Customer (KYC)-Claynton Rule?         1.0 Know Your Customer (KYC)   KYC is an acronym for “Know your Customer”, a term used for customer identification process. It involves making reasonable efforts to determine true identity and beneficial ownership of accounts, source of funds, the nature of […]

Bankers Of the Article   Overview of EDF ?       To boost up the export of non-traditional product by facilitating access to financing in foreign exchange for input procurements by manufacturer-exporters a refinancing fund of USD 30 million was created with the collaboration of IDA and Bangladesh Government in 1989 is known as […]

      What do you mean by Islamic banking? Define Islamic banking?   Ans. Islamic banking is a system of banking or banking activities that is consistent with Islamic law (Shariah) & guided by Islamic economics.   “An Islamic bank is a financial institution which identifies itself with the spirit of Shariah as laid [...]

    What are the various Input Devices?   The input devices consist of one or more physical devices through which data or program can be read in to the computer. The term input is used to describe the process of capturing or collecting raw data, at the beginning of computer based information system, in [...]

  13. Distinguish data and information and explain characteristics of information.   Data is collection of facts and figures. It consists of text, number, images or combination of any of these. Information is the processed data. It is the end result of the data collected. Information is the knowledge derived from data. Data Information   [...]

  5. What are the differences between ROM and RAM?   ROM (Read only memory)   1. You can only read the data. 2. Data can’t be written every time, to write the data we need PROM, EPROM, OR EEPROM. 3. ROM is non volatile in nature. The data stored in ROM is permanent in [...]

  1. How do you classify the various Computers?   Computers can be classified into two categories on the basis of the type of data they are designed to process. Data may be obtained either as a result of counting, in which case it is called as discrete data or by using some continuous signal [...]

  What is EDF (Export Development Fund)?   Export Development fund available at Bangladesh Bank for export at a lower rate of interest. This fund administrated by the Department of Banking Operation and Development of Bangladesh Bank. BTB LC will be opened on deferred basis. Interest/additional amount the usance period shall not exceed LIBOR or [...]

Can you Prohibit transshipment No   What is the Popular meaning of Stale B/L in Bangladesh Late Shipment   What are the visual contents of a commercial invoice A commercial invoice: must appear to have been issued by the beneficiary must be made out in the name of the applicant iii. must be made out [...]

What is the limit of Cizium-137 for different items? Acceptable limits of radioactivity for milk powder, milk food and milk products is 95 bq of CS-137 per kilogram and that for other food items is 50bq of CS-137 per kilogram. The level of CS-137 in an item shall be calculated in the state it reaches [...]

  What is retirement of LC Adjustment of PAD account and handover the transport documents to the applicant (importer)   Which rate we applying for LC Opening BC Selling   Which rate we apply for purchase of at sight documents OD SIGHT EXPORT   What is LIBOR London Inter Bank Offer Rate   What is [...]

  What is Foreign Exchange Foreign exchange is the trading of currencies.   What is exchange position Exchange Position is the status of total holding of foreign currency by the Authorized Dealer bank on a particular point of time. What is open position Balancing amount between the purchase and the sale of foreign currency What [...]

Describe different types of computer based on capacity and performance?   In terms of capacity, price, and performance, computers can be broadly classified as follows: 1. Main Frame Computers 2. Mini Computers 3. Micro Computers   Main Frame Computers:   They are most expensive of all the computers, are very big in size and offer [...]

  What is a computer? What are its major characteristics?   Definition:   The term computer has been borrowed from compute that means to calculate. A computer is an electro mechanical device which has capacity to accept, store, process and retrieve data, according to the user requirements. Technically, a computer is a programmable machine. This [...]

  There are a number of laws that contain provisions regarding conservation of environment,   improvement of standards and control of environmental pollution from various sources. Of these, the Bangladesh Environmental Conservation Act (ECA) 1995 is the umbrella Act. This Act established the Department of Environment (DOE), and empowers its Director General to take measures [...]

Bankers Of the Article Globalization-Snake in the Tunnel-Deficit Financing-Excess Liquidity-Primary Dealer-Capital Adequacy-Risk-Weighted Asset etc.     Globalization   Globalization is the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture. Put in simple terms, globalization refers to processes that promote worldwide exchanges of national and cultural […]

  Venture Capital   Venture capital is a type of equity financing that addresses the funding needs of entrepreneurial companies that cannot seek capital from more traditional sources. Venture capital (VC) is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies [...]

  Document of title to goods are defined by Section 2 of the Sale of Goods Act 1930 as   ―A bill of lading, dock warehouse keeper‘s certificate, railway receipt and any other document used in the ordinary course of business as proof of the possession or control of goods or authorizing to either by [...]

  LOANS AND ADVANCES: After accepting deposits from the customer, a bank goes for lending or forinvestment in different types of securities, such as government, company etc. For deposits received under savings account and fixed deposits, the bank has to pay an agreed interest rate. This, the bank has to pay only from its earnings. [...]

  COLLECTING BANKER: 1. Meaning of Collecting Banker A Collecting banker is one who undertakes to collect cheques, drafts, bill, pay order, traveler cheque, letter of credit, documents such as lottery chits, dividend warrants, debenture interest, etc., on behalf of the customer. For undertaking this collection, the collecting banker will be charging commission.   2. [...]

(i) Gibbons vs. Westminster Bank A Housewife issued a cheque to a departmental store for purchases made by her. When the cheque was presented by the departmental store, the banker negligently dishonored the cheque. When the account holder sued the bank, it was held that the bank must pay the cheque, dishonored negligently.     [...]

  EXERCISING LIEN :- If the following conditions are fulfilled, a banker can exercise his right of lien.   1) There must not be any agreement in consistent with the right of lien.   2) The property must come into the hands of a banker in his capacity as a banker.   3) The possession [...]

  APPLIED BANKING:   UNIT : I Banker and customer – meaning and definitions – Relationship between Banker and customer – General and special obligations ; (i) 70 honour customer is cheque ii) To right to set off – Garnishee order.     UNIT : II Operations of Bank accounts – Opening of different types [...]

 Q. What is Bill of Sight?        A. A temporary authority issued by the custom house at the port of destination authorizing landing of goods for examination when the importer is not certain as to the exact description of goods consigned to him/them.     Q. What is Bona Vacantia? A. Unclaimed goods [...]

Q. What is Aval? A. A sort of endorsement on the back of a bill guaranteeing the payment on presentation. The availsation of the bill is not recognized by law and banks do not endorse billing such manner unless they are requested to do so by the customers of the highest integrity and with a [...]

Q. What is Adjustable Peg? A. Flexible system of fixing exchange rates where rate is allowed to vary within certain defined limits.   Q. What is Affiliated company? A. Company or other organization related through common ownership, common control of management or owners or through some other control mechanism.   Q. What is Agency Bank? [...]

  Q.What is Accrual Bond? A. A bond on which interest accrues, but is not paid to the investor during the time of accrual. The amount of accrued interest is added to the remaining principal of the bond and is paid at maturity.     Q. What is Accumulated Depreciation? A. Total depreciation pertaining to [...]

  Q. What is absolute Advantage in respect of Economics? A: A country has an absolute advantage if its output per unit of input of all goods and services produced is higher than that of another county.     Q. What is acceptance credit? A: Clean credit facility for funding accommodation finance by drawing of [...]

  International Standard Banking Practice publication 745:     International Standard Banking Practice publication 745      The ISBP (full title: International Standard Banking Practice for the Examination of Documents under Documentary Credits) is an International Chamber of Commerce (ICC) publication which provides important guidance to documentary credit examiners and practitioners relating to the examination [...]

  Balance Of Trade and Balance Of Payment   Balance Of Trade (BOT):   The balance of trade of a nation is a systematic financial record usually of a year, of its imports and exports of visible commodities from and to the rest of the World. For many years until now, the value of Bangladesh's [...]

  ACU: Asian clearing union is a settlement mechanism evolved by the Central Bank of India, Iran, Nepal, Sri-Lanka, Burma and Bangladesh for payment of current international transactions on a multilateral basis amongst the member countries. The Head Quarter of the union is in Tehran, Iran.   The major objectives of formation of the ACU [...]

  C. PRINCIPLES   1. The Bank shall provide suitable credit services and products for the market in which it operates. Product innovation shall be a continuous process.   2. Loans and advances shall normally be financed from customers deposit and not out of temporary fund or borrowing from money market.   iii. Credit facilities [...]

What do you mean by “Actual” and “Constructive” delivery?   Ans. Actual Delivery: When the pledger hands over the physical possession of the goods to the pledgee as security that is called “Actual Delivery”   Constructive Delivery: When the pledger does something with the intention of placing the pledge in possession of the goods that [...]

What do you mean by Pledge? What are the essential characteristics/features of “bailment”? Who can create a pledge? Ans. Pledge means “bailment of goods as security for payment of a debt or performance of a promise”.  Bailment is the delivery of goods by one person to another for some purpose, under contract that the goods [...]

“Bankers lien implied pledge” discuss briefly. Ans. As a general rule, the of lien does not give the person exercising the right, any power of right to sell or dispose off the security retained. But in case of Bankers, it is otherwise. In case of Banker, lien is implied pledge as because through lien Bankers [...]

Write short notes on the following: Ans. a). Pari Passu Charge: The term usually use in consortium/syndicated finance. In case of such lending, number of Bank’s or financial institutions join together to finance a single borrower in an agreed ratio against a common security. The securities are charged to all the Bankers/financial institutions without any [...]

  What are the factors against which documentation is dependent? Ans. The types of documentation depend in the following factors: Legal status of the borrower (Proprietorship, Partnership or Limited company etc.) Type of securities. Type of loan. 14.07.09 reviewed.   What do you mean by ‘charge document’ & ‘legal document’ & ‘Other documents’ ? Ans. [...]

What do you mean by Security? Ans. Security means things deposited as a guarantee of an undertaking or loan, to be forfeited in case of default. Also means document as evidence of a loan, certificate of stock, bonds etc. It is also meant to be an insurance against an emergency.   What do you mean [...]

What is the distinguish between “Power of Attorney” & “Mandate” ? Ans. Power of attorney as act as general notice for all concerns regarding delegations of authority by the customer & on the other hand Mandate is only a notice for a particular Banker to allow his nominee to operate his account.   Who is [...]

  What precautions to be taken prior allowing credit to a sole proprietorship?   Ans. Banker should take a declaration from the owner that he is the sole proprietors and no other person has any interest in the business as partner or otherwise. He should also state that as the sole proprietor, he will be [...]

  What are the distinguish between OD & CC? Ans.  Basically nature of OD &  CC are almost same but in some cases they differ from each other. Overdraft is a kind of advance always allowed on a current account, with a certain limit upon which a borrower can overdraw his current account through cheque [...]

  Define “Eligible Security” as per Bangladesh Bank guideline? Ans. As per Bangladesh Bank’s BRPD Circular # 08 Dt. 27.04.2005 value of eligible securities are:   i). 100% value of deposit which are under lien against credit.   ii). 100% on the present market value of Gold & ornaments.   iii). 100% value of under [...]

  How we can assess risk of a particular credit? Ans. By analyzing following risk factors: Business/Industry Risk: SWOT analysis. Financial Risk: Profitability Liquidity Debt management Management Risk: Experience/Track Record Succession Reputation Structural Risk: Working capital need Loan structuring Security Risk: Perishability risk Enforceability Forced sale value Account performance risk   What do you mean [...]

   What are the sources of credit investigation?   Personal interview 2. Internal Bank Source (Loan application form, credit files, account performance etc.) 3. External Bank source (CIB report, confidential report of other Bank, Balance sheet, market report, stock exchange publications, income tax statement etc.)   Define borrower? Ans. Borrower means a person or group [...]

  What are the different types/forms of Credit ?/What do you mean by funded & non-funded Credit?/Discuss different types of funded credit?/What are the stages of credit processing? Ans. Commercial banks make advances in different forms. All types of credit facilities can be broadly classified in to two groups: Funded Credit b. Non- funded Credit. [...]

  What do you mean by CREDIT? and What are the principles of sound lending? Ans.  The word credit is derived from Latin word “Credo” meaning I believe. It is usually defined as ones ability to buy with a promise to pay. From the Bankers point of view, credit is the confidence of the lender on [...]

  MCQ QUESTIONS: LOANS AND ADVANCES   74. In case of Fixed Term Loans, repayable in more than five years, if the amount of defaulted installment is equal to or more than the amount of installment due for 24 months. Which category of classification shall it fall? A) DF B) BL C) SMA D) None [...]

  MCQ QUESTIONS: LOANS AND ADVANCES: 1. One of the differences between overdraft and cash credit is: (A) Overdraft is always subject to limit whereas cash credit has no limit (B) Overdraft is allowed on any kinds of account whereas cash credit is allowed on current account. (C) Overdraft is allowed on current account whereas [...]

MCQ QUESTIONS: GENERAL BANKING:     62. Crossing of Cheque is: (A) A material part of a cheque (B) A material alteration of a cheque   63. A collecting Banker gets protection for collection of cheques under Section 131 of the N.I. Act if the collecting Banker can satisfy the following conditions: A) The cheque [...]

MCQ QUESTIONS: GENERAL BANKING:   17. The title of the endorse will not be better than that of the endorser in case of a cheque is crossed containing the words - A) & Co.; B) Not negotiable; C) Account Payee; D) None of these     18. Cancellation of crossing can be done by - [...]

MCQ QUESTIONS: GENERAL BANKING:     1. The Banker has a statutory obligation to - (A) Exercise Lien, (B) Maintain Secrecy of his customer’s account (3) (C) Honour Customers Cheques (2) (D) Honour Customers bills     2. The document drawn by a debtor on the creditor agreeing to pay a certain sum is called- [...]

Credit Approval Process: Introduction: The individual steps in the process and their implementation have a considerable impact on the risks associated with credit approval. Therefore, this chapter presents these steps and shows examples of the shapes they can take. However, this cannot mean the presentation of a final model credit approval process, as the characteristics [...]

  Risks Financing:   Risks in Financing RMG Sector       Investment Risk: Over Investment- Over investment in office/ factory decoration. Under Investment: Crisis of Fund/ Debt- Interest burden Under investment results to : Selecting Overcrowded/ remote location for project. Yield of investment, opportunity cost.   Technical aspect: Machineries: Over invoicing (imported)- Money laundering, [...]

  CONVERTIBILITY OF CURRENCY:   What do you mean by convertibility? From which period Taka has made convertible?   Ans. Convertibility is the ability of the owner of the asset (foreign currency and foreign exchange) to exchange it from one currency into another. Convertibility also called as free tradability which ensures that every holder of [...]

EXPORT FINANCING: What are the purposes for which Export Credit allowed? Write down different types of pre shipment Export Credit facility allowed by banks? Ans.  Pre-shipment credit is given by the bank for following purposes: i). Cash for local procurement & meeting other expenses. ii). Procurement & processing of goods for export. iii). Packing & [...]

  IMPORT BILLS: LODGEMENT & RETIREMENT:   Write down the first steps on receipt of import documents? Ans. On receipt of import documents, bank have to ensure following measures:   i). Full set of original shipping documents has been received as stipulated in the credit. ii). Documents have been within the exporters country on or [...]

Write short notes on LIBOR rate?   Ans.  LIBOR refers London Inter Bank Offered Rate and represents the rate at which banks in London will lend a currency to other banks for a given period of time. Since London is a major Eurocurrency market, LIBOR is used as the basis for most Eurocurrency transactions. Because [...]

  What are the maximum period of export credit now?   Ans. The time limit to repay the export credit has been extended from 180 days to 270 days in case of export of frozen foods, tea and leather.   What is the present limit of export credit?  Ans. Now bank can extend export credit [...]

  How many categories of goods & commodities under import policy?   Ans. Goods & merchandise are divided into four categories. These are: List of banned items for import. List of restricted items which may be imported under fulfillment of certain terms & conditions. Foot Note: This list contains further conditions with regards to import [...]

  INTERNATIONAL MONETARY FUND (IMF):   Also known as World bank, the IBRD is an offshoot of the Bretton Woods conference of 1944. It’s main functions is to provide long terms capital assistance to its member countries for their reconstruction & development.   IBRD is an inter governmental organization. Only governments iof various countries can [...]

What do you mean by Eurocurrency Market? What are the special features of Eurocurrency market?   Ans. Eurocurrency market is an international capital market which specializes in borrowing and lending of currencies outside the country of issue. Thus, deposits in dollars with a bank in London are Eurodollars, Similarly, Japanese Yen held by banks in [...]

Who can open private foreign currency account?   Ans. Private foreign currency account may be opened in the name of :   i). Bangladeshi nationals residing abroad. ii). Foreign nationals residing abroad or in Bangladesh. iii). Foreign Firms registered abroad & operating in Bangladesh or abroad. iv). Foreign mission, International development organizations and their expatriate [...]

What are the sources of inward & outward foreign remittance?   Ans. The paying bank must observe following procedure while making payment:   i). Verified the signature to see that it is in order (Amount, name of beneficiary and remitters particulars). ii). Verifies the signature. iii). Verifies the test number (if any). iv). Convert the [...]

What do you mean by “bid and offered rate”? What do you mean by “Exchange profit”?   Ans. The buying and selling rates are also referred to as the bid and offered rates. The term “bid and offered rates” is prevalent in the money market. The bid rate is the rate the bank is willing [...]

What are the major risk in foreign exchange dealings?   Ans: Cash balance risk: Cash balances refers to the actual balances maintained in the “Nostro Account” at the end of each day. Balances in “Nostro Account” do not earn any interest on the other hand any overdraft involves payment of interest.     Reason of [...]

What do you mean by GSP? How many countries extended GSP facility? What are the benefits from GSP? preference   a). Product coverage: An exporter must find out whether his product is eligible for preferential treatment under the GSP scheme. For this he has to identify the classification of his product within the custom’s tariff [...]

  In which sectors private investment are restricted?   Ans. As per industrial policy, following sectors are restricted for private investment i.e. only public sector investment are included in this reserve sector: Arms, ammunition and other defense equipment and machinery. Production of Nuclear energy. Forest plantation & mechanized extraction within the bounds of reserved forest. [...]

Write down different categories of documents used in international Trade?   Commercial Invoice: Commercial Invoice is the sellers bill for merchandise. It is an evidence of sale drawn up by the seller on his letter head pad & contains all relevant information such as full name & address of the consignee, quantity, quality, unit price [...]

What is ICC? When is has been established? What was the objective of ICC? Ans. As per Article 2 of UCPDC 600, Advising Bank means the bank that advises the credit at the request of the issuing Bank.         What is ‘Banking Day’ as per UCPDC? Ans. As per Article 2 of [...]

Define “Letter of Credit” ? Ans: i). It assures the exporter not only against the failure of the importer but that of the issuing bank also. Though  a letter of credit bears the superior credit of a bank in importers country, the exporter may not know the financial standing of the issuing bank. When the [...]

What do you mean by Rate of Exchange? Which are the factors that influence fluctuation of exchange rate?   Ans. Rate of Exchange: Rate of exchange is that rate at which currency of one country converted with the currency of another country.     Factors that influence fluctuation of exchange rate:   a). Commercial factors: [...]

  What do you mean by “correspondents”?   Ans. If a bank has no overseas branches at centre, it keeps a balance with some other bank which is prepared to act as its agent in exchange dealings. Banks acting as agents of other bank are called ‘correspondents” What is agency arrangements? What is the objectives [...]

    What are the different terms of payment in foreign trade?   Ans. 1). Payments within a period of six months from the date of shipment are deemed as short term payment.   2). Payment within a period of more than six months but within five years are medium term payment.   3). If [...]

  What do you mean by foreign exchange? Write down the fundamentals of foreign exchange? Ans. Foreign exchange refers to the mechanism by which currency of one country converted into currency of another currency and thereby, involves the international transfer of money. It is the means & methods by which rights of wealth in a [...]

  Principles of Sound Lending: Lending is one the primary function of a bank. The banks accept deposits from people and then lend that money to the needy people in the form of loans, advances, cash credit and overdraft. Interest received from these lending is the main source of income for the bank. So a [...]

Charges on Securities: Charges on Securities: While extending credit, banker must secure his position. A wide range of securities e.g. Land, Building, Goods, Share Certificates, Life Policies, Fixed Deposit Receipts, Title Deeds etc. are accepted by banks as cover for a loan. Not only that the banker should insist on good securities proper charge should [...]

    CATEGORIES: As initiated by Bangladesh Bank vide BCD Circular No. 33 dated 16-11-89 different kinds of lending were subdivided into 11 categories w.e.f. 01-01-90 which was subsequently reduced to 9 vide BCD Circular No. 23 dated 09-10-93 and again to 7 sectors vide BCD Circular No.8 dated 25.04.94 for fixation of rates of [...]

GUIDELINE: Credit Quality: Credit facilities shall be allowed tracking industry best practices pursuant to this policy stipulations so that credit expansion does not deteriorate quality i.e there will be no compromise with the Bank’s standard of excellence. Credit shall be extended to the customers who will harmonize such standards.   Product & Services: The Bank [...]

'Investment Climate'   The economic and financial conditions in a country that affect whether individuals and businesses are willing to lend money and acquire a stake in the businesses operating there. Investment climate is affected by many factors, including: poverty, crime, infrastructure, workforce, national security, political instability, regime uncertainty, taxes, rule of law, property rights, [...]

Contents of Valuation Report: Particulars of Land : (i)   Mouza                                     : (ii)  J.L No.                                     : (iii) Plot/Holding No.                      : (iv) Sub-registered Office               : (v)  Police Station                           : (vi) District                                     :   Details of Title Deeds: (i)   Name of Owner   : (ii)  Name of Seller   : (iii) Khatian No.  : (iv) Plat No.        [...]

Introduction: Lending is the most important function of a commercial Bank. It is necessary to have an prudent Credit Policy in a Bank. Our Credit Policy generally aims at creating healthy loan assets to ensure good interest earnings for the Bank. ensuring safety of invested fund through judicious selection of borrowers and improving discipline and [...]

Treatment: Generally when a credit is classified as Substandard, Doubtful or Bad according to prevailing classification rules, the entire interest that has been accrued/charged in the account since last "Reference Date" (the date on which previous classification exercise was done) is suspended. Subsequently, all interest charged in the account is also suspended till the account [...]

LOAN CLASSIFICATION:   This part of the manual has the reference to BRPD circular no. 16 dated December 06, 1998. As per the circular the bank has to conduct the loan classification activities on quarterly basis. The detailed information concerning classification, provisioning and Interest Suspense Account will be required to be submitted to Bangladesh Bank [...]

HANDLING OF DELINQUENT LOAN: Despite the extreme care exercised in the sanctioning and control procedures, it is still possible that some advances may become doubtful because of adverse changes in economic conditions seriously affecting the borrower's business or his personal financial position.     All lending decisions involve an element of risk to the Bank, [...]

MARGIN: Meaning of Margin Margin is the difference between the actual amount that can be advanced to the customers (i.e. their drawing power) and the value of security offered by them to the Bank.     Margin dependent on security The fixation of margin depends on the nature and type of security, and the financial [...]

DISBURSEMENT: Loans Advance made in a lump sum repayable either on fixed installment basis or in lump sum having no subsequent debit except by way of interest, incidental charges, etc. is called a loan. After creation of loan, there will be only repayment by borrower. The whole amount of loan is debited to the customer's [...]

DOCUMENTATION: Securities Against Various Types Of Advances: Special Features Land and Buildings Land and Buildings have become increasingly more acceptable securities in the recent past in many countries, mainly due to steady inflation. These assets assume special importance as securities where the borrower has already tied up his other assets for other advances. Land and […]

POST SANCTION PROCESS : After the credit Line Proposal has been finally approved by the appropriate sanctioning authority in the Bank’s credit organization structure it enters the post sanction processing stage. At this stage the signed credit line proposals is returned to the branch / credit officers, following four further steps are to be taken [...]

General overview on approval process :   A Credit Line Proposal is prepared for every borrower. If the credit facility is a revolving short-term facility, then the facility will be renewed every year and a new credit line proposal will be prepared annually to provide the basis for the renewal. If the facility is medium-term [...]

PROJECT FINANCING:   Introduction: The Bank Primarily involves in commercial banking activities. But subject to availability of credit line and own resources, the Bank may provide term loan specially to industries within the framework of industrial policy of the Government and credit norms set by Bangladesh Bank and the Government from time to time. Systematic [...]

LOAN: House Building Loan:   Type of Loan : (i) Residential. (ii) Commercial. Purposes of the Loan : (i) Construction of residential house. (ii) Completion of under construction house. (iii) Purchase of Flat/Apartment. (iv) Construction of commercial complex for sale of space/shop/flat. (v) Construction of multistoried building/apartment for sale of flats. (vi) Construction of commercial complex [...]

  PROCESSING OF CREDIT: The client shall submit loan application form with necessary papers/ documents as per Bank’s checklist.   On receipt of the loan application form, with necessary papers/ documents as per Bank’s checklist.   On receipt of the loan application form, branch shall scrutinize the papers to ensure the following : All the [...]

Types: The credit facilities granted by the bank are classified under different account heads as under : Loan (Like short / mid / long term in nature) Overdrafts (allowing frequent debit / credit transactions within an agreed limit). Trade related credit facilities (like bills port folio) Short Term Advances (like continuing facilities) Contingent facilities (like [...]

  Individual: A single person or a sole proprietorship concern having valid trade Licence issued by concerned authority can open current accounts with any banks. An account holder can mandate to his / her representative to operate the respective account credit may be allowed to him/her or to the firm.   In case of an [...]

Bank Credit:  The money that Banks have lent or available to lend Credit Management is the process of controlling and collecting payments from the customers. This function within the Banks or company to improve credit policies and reduce the risk of credit.   Types of Credit There are two types Loan in terms security; Secured [...]

Stages of Credit Investigation: Credit investigation and selection may be completed in the following three stages: One, collecting information; Two, assessing collected information; and three, preparing credit report forming an opinion.    Collecting Information A lot of sources are there to collect information. Such as, Personal Interview Loan application Published Financial Statements, if any Physical [...]

Credit Investigation: Sanctioning credit is the main function of a bank and it is the prime source of earning of a bank. So, a banker must sanction credit. But only sanctioning a lot of credit will not serve the purpose of the bank. It is only good credit that will serve the purpose of the [...]

  Security: A secured advance is not really secured, unless the security deposited satisfies certain requirements. There must be critical appraisal of security. Let’s discuss about attributes of good security. There are two angles to appraisal of the security. One is the legal angle regarding the validity and enforces ability of the security. The second [...]

  credit coring work: To determine a credit score, lenders use credit-scoring software, which analyzes data from a large pool of borrowers. Most lenders rely on the credit-scoring software developed by Fair, Isaac and Company, with data gathered by the three major credit reporting agencies:     Experian; Equifax, Inc.; and Trans Union Corporation. When [...]

Credit-scoring systems:      Because a loan's risk varies according to its characteristics and its borrower, the assignment of a risk or default premium is one of the most problematic aspects of loan pricing.   A wide variety of risk-adjustment methods are currently in use. Credit-scoring systems, which were first developed more than 50 years [...]

  Cost-plus loan: A very simple loan-pricing model assumes that the rate of interest charged on any loan includes four components:   the funding cost incurred by the bank to raise funds to lend, whether such funds are obtained through customer deposits or through various money markets; the operating costs of servicing the loan, which [...]

  Cost Of Funds: Cost of funds is the interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one of the most important input costs for a financial institution, since a lower cost will generate better returns when the funds are deployed in the [...]

  Principles: Different kinds of borrowing facilities such as loans, cash credit, overdraft, temporary overdraft, clean advances, bridge loans, participation loans, purchase of bills, bill discounting, letters of credit, etc.Working capital finance and term loan finance– sources, appraisal of proposals for working capital finance and term loan finance consumer finance & calculation on interest on [...]