Intership Report on National Bank Limited Essay Example

knowledge about the managerial aspect of the branch. ? To identify the financial structure of the branch. ? To focus the various service performances of bank. ? To find out the problem lying in branch operation as whole. ? To foresee the prospect of the branch ? To identify its strengths and weaknesses as well as threats and opportunities from customers’ viewpoint ? To suggest steps for improving their effectiveness of the service standard of the bank 1. 3 Methodology of the study It is a descriptive research tat describes the state of affairs as it exists at present.

Company Profile 

Introduction Economic growth and development can be achieved only through investment and the financial system of a country plays the most crucial role in arranging funds for investment by way of transferring surplus fund from the savers to the investors. Apart from the primary function of transferring savings into investment, the financial system provides a variety of supporting services essential to modern living. This includes payment services, risk protection services, liquidity services and credit services. Bank is the pioneer institute for providing all of these crucial services.

Concept of Bank The English word bank originated from the German word banke and the Italian word banco (meaning long bench). Most of the scholars think that the Italian people accepted German word banke as banco and later the British introduced it as a bank. In today’s world the word bank is used to mean a financial institution. Bank can be defined as follows- A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities. Banks are a

fundamental component of the financial system, and are also active players in financial markets. The essential role of a bank is to connect those who have capital (such as investors or depositors), with those who seek capital (such as individuals wanting a loan, or businesses wanting to grow).

Structure of Financial System of Bangladesh Bangladesh bank as the central bank is at the apex of the financial system of the country. The other institutions consisting the major components of the financial system broadly be categorized as

• Banks
• Non-bank financial institution
• Other financial institution

Commercial Bank: the banking sector in Bangladesh comprises of four categories of scheduled banks. These are nationalized commercial banks (NCB), government owned specialized banks (SB), Private commercial bank (PCB) and foreign commercial bank (FCB). At present there are 48 operating in Bangladesh of which 9 are nationalized, 30 are local private bank and 9 are foreign banks.

Out of 30 PCBs 6 have been operating as Islamic Banks. Non-Bank Financial Institutions (NBFIs): the NBFI sector comprises one government owned investment company called Investment Corporation of Bangladesh (ICB) and 29 other institutions in the private sector licensed by Bangladesh bank. ICB provides financial assistance in the form of underwriting function and bridge financing to industrial projects/organizations. Apart from this the NFBIs in the private sector are primarily engaged in leasing business, investment financing, SME financing and housing finance. Other financial institutions

Insurance: at present there are 62 insurance companies in Bangladesh of which 60 are in the private sector and 2 are owned by the government. The insurance sector is still dominated by

two large state owned companies – Shadharan Bima Corporation and Jibon Bima Corporation. Cooperative bank: The traditional cooperative consists of three tier system with Bangladesh Samabey Bank Limited at the apex, the central cooperative banks at the intermediate level and primary cooperative at the village level. Micro finance institutions: Among the microfinance institutions, the most prominent one is the Grameen bank.

It provides finance to landless poor particularly the rural women without collateral. Other such organizations are BRAC, ASA, PROSHIKA, etc. Stock Exchange: The stock market of Bangladesh consists of two exchanges at Dhaka (DSE) and Chittagong (CSE).

Regulation of the financial system The bank and non-bank financial institutions are guided by the following regulations:

• Banking Companies Act, 1991.
• Bangladesh Bank Order, 1972.
• Financial institution Regulation, 1994
• Securities and Exchange Act, 1993.
• Micro credit Regulatory Authority, 2006
• The Insurance Act, 1938. 7. The Companies Act, 1994.

Bangladesh Bank acts as the regulatory and supervisory authority for banks and non-bank financial institution. The insurance companies are guided by the Controller of Insurance under Ministry of Commerce. The stock exchanges are regulated by the Securities and Exchange Commission (SEC). The activities of microfinance institutions are supervised by the micro credit regulatory authority while functions of co-operative societies are regulated by the registrar of co-operative societies.

Historical Background of NBL

National Bank Limited (NBL) is one of the pioneers of first generation private commercial bank incorporated in 1983 provide modern banking facilities to the mass people, NBL is opening branches in rural areas alongside urban areas giving due importance.

Presently, the bank created a strong market base through 121 branches and 10 SME centers throughout the country. NBL emphasizes on customer satisfaction and involvement in its daily activities. The emergence of National Bank Limited in the private sector was an important event in the Banking arena of Bangladesh. When the nation was in the grip of severe recession, the government took the farsighted decision to allow the private sector to revive the economy of the country.

National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the private sector. Form the very inception; it was the firm determination of National Bank Limited to play a vital role in the national economy. We are determined to bring back the long forgotten taste of banking services and flavors. We want to serve each one promptly and with a sense of dedication and dignity. The then President of the People’s Republic of Bangladesh , Justice Ahsanuddin Chowdhury, inaugurated the bank formally on march 28, 1983 but the first branch at 48, Dilkhusha Commercial Area, Dhaka started commercial operation on March 23, 1983.

The 2nd branch was opened on 11th May 1983 at Khatungonj, Chittagong. At present, NBL has been carrying on business through its 121 branches and 10 SME centers spread all over the country.

Vision and Mission

Vision Ensuring highest standard of clientele services through best application of latest information technology, making due contribution to the national economy and establishing themselves firmly at home and abroad as a front ranking bank of the country. Mission In NBL’s words; “Efforts for expansion of our activities at home and

abroad by adding new dimensions to our banking services are being continued unabated.

Alongside, we are also putting highest priority in ensuring transparency, accountability, and improved clientele service as well as to our commitment to serve the society, through which we want to get closer and closer to the people of all strata. Winning an everlasting seat in the hearts of the people as a caring companion in uplifting the national economic standard through continuous upgrading and diversification of our clientele services in line with national and international requirements is the desired goal we want to reach. Strategy and Strengths National Bank’s goal is to become a leading provider of integrated financial services for small and medium-sized enterprises (SMEs), institutional investors and high net-worth individuals in Bangladesh. The Bank intends to achieve this central goal by taking the following measures:

Strategic

Direction and the Challenges of the Bank Although the immediate outlook for the local operating environment is expected to be turbulent, the Bank intends to continue its growth momentum through the initiatives and strategic priorities set out in the Corporate Plan. The Bank is well positioned to mitigate the risks posed by the potential volatility of macroeconomic conditions in the country. The Corporate Plan and the Budget is a mid term plan, yet to be prepared annually covering a period of five years on a rolling basis.

This year the Bank prepared the plan for the period covering the years unto 2010. The strategic direction of the Bank is critically reviewed by the Management as well as by the Board at the time of preparing and approving the Corporate Plan

and the Budget. In keeping with the Vision and Mission statement of the Bank, the strategic direction has been clearly identified and laid down in the Corporate Plan. It detailed out SWOT analysis of the Corporate Banking, Personal Banking, Treasury, Information Technology, Human Resources Management and Bangladesh Operations of the Bank.

Besides, it spells out Goals and Objectives of these main segments along with detailed action plans with specific time frames to achieve them. The Corporate Plan and the Budget has immensely contributed in guiding the organization to its present level. Further, it has contributed in guiding the organization to its present level. Further it has contributed to building up the target driven culture across the organization and leading to record superlative performance and to maintain the pre-eminent position in the banking industry.

Functional Aspects of NBL

Banks are identified by the functions they perform in the economy. In modern times, the commercial banks undertake diverse functions and it is getting increasingly difficult to distinguish the commercial banks from other banks and financial institutions in terms of their nature of function. As a commercial bank, National Bank Bangladesh Limited performs the following functions:

1. Acceptance of deposit: one of the principal functions of commercial banks is the collection of deposits through various types of deposit accounts such as current account, savings bank account, short term deposit account; fixed deposit account etc. deposits collected through such accounts constitute the major source of finance for commercial banks.
2. Granting of loans and advances: The main business of commercial banks is to provide loan facilities both short term and long term to
   

trade, commerce and industrial enterprises.

Corporate Social Responsibility

Corporate social responsibility is fast gaining acceptance as the contribution that business can and should make voluntarily towards environmentally sustainable and socially equitable development. Beyond the financial targets and growth, they are also very conscious about their social responsibility. They always remain associated with the development of

education, healthcare, sports and culture and extended their hands to mitigate the suffering of humanity during any disaster. Employment

NBL has been continuously creating new fields of employment every year by way of expanding its business activities and branch network. In 2009, the bank created employment for 305 personnel. Education National Bank Foundation was established in 1989 for fulfilling responsibilities towards welfare of the society. National Bank Public School and College in Moghbazar, Dhaka has been established where about 1140 students are studying. The bank has been accommodating prospective graduates of recognized universities for completing their internship. National Bank Limited also awards stipends and scholarship to the brilliant children of the employees f the bank.

Sports and Cultural Activities National Bank has a tradition of patronizing and sponsoring sports and culture of the country. The “National Bank Volleyball League-2008” was arranged under the patronage of the bank. NBL has been arranging annual picnics for its executives, officers and staffs. Disaster Relief NBL always extends its helping hands and stands by the suffering and helpless people in times of natural calamities. NBL has contributed Tk 10 lac to Prime Ministers Relief Fund for Aila cyclone victims.

Contribution to National Exchequer National Bank has contributed significantly to the government effort in collection of revenue. In 2009 it has contributed to national exchequer an amount of taka 1,376. 06 million as tax and VAT on its earnings. Besides the bank deducted tax, vat, excise duties etc. from various payments and deposited the same to government exchequer. Contribution to martyred Army officers killed in BDR carnage National Bank has contributed significantly and continuously to the government

for the Martyred Army Officers killed in BDR carnage. In 2009 NBL has contributed over Tk 55. 25 lac for the officers killed in BDR carnage.

Products and Services of NBL Deposit Products Current deposit (CD): Current account means any account which pays no interest but from which the customer can withdraw money when he wants through cheques. Overdraft facility is a unique feature of this account. NBL offers this service to facilitate day-to-day business transaction. Typically, this service is widely enjoyed by business organizations. To enjoy this facility from NBL, client must maintain a minimum balance of Tk 2000 in his account and pay Tk. 800 as yearly service charge. Standing instructions arrangement is available for opening all types of accounts in National Bank Limited.

Short-term deposit (STD): Short-term deposit is a kind of current account in which clients often keep a large balance in their account for some days and the bank may offer a lower rate of interest on the balance for that period. In short, it is current in nature but savings in use. NBL offers this service with 2%-4% interest. To get benefit from this account, the customers must keep his withdrawals limited. Its required minimum balance is Tk 2000 and yearly charge is Tk 800. Savings deposit (SB): Savings deposit may be defined as the account that provides interest to the client on their average balance.

In this case, interest is charged only on outstanding balance not on full loan amount sanctioned. The client opens an account with the bank and the loan amount will be deposited in that account. Cash credit is generally given to

traders, industrialists for meeting their working capital requirements. The primary security of cash credit facility is stock of goods, which may be hypothecated or pledged to the bank. Overdraft: NBL offers overdraft facility for corporate customers for day to day business operations. An overdraft occurs when withdrawals from a bank account exceed the available balance. Overdraft is always allowed on a current account operated upon by cheques.

The customer may be sanctioned a ertain limit within which he can overdraw his current account within a stipulated period. In this case, interest is charged only on outstanding balance not on full loan amount sanctioned. Overdraft facility is generally granted to businessman for financing work capital requirement and high net worth individual to overcome temporary liquidity crunch. Secured overdraft (SOD): Secured overdrafts are overdrafts extended upon customers pledging their Time Deposits (FDR, NMS), Bonds, Unit Trusts or Properties as collateral to the bank. Working Capital Loan: Working capital loans provide businesses with short-run credit, lasting from a few days to about one year.

Working capital loans are most often used to fund the purchase of inventories or to purchase raw materials. Working capital loan is designed to cover seasonal peaks in the business customer’s production levels and credit needs. These loans are generally secured by accounts receivable or by pledges of inventory. Term loans: Term loans are the credit extended for longer than a year and often used to purchase capital assets. They are designed to fund long and medium – term business investments such as the purchase of equipment or the construction of physical facilities. Usually the borrowing firm applies for a lump-sum loan

based on the budgeted cost of its proposed project and then pledges to repay the loan in a series of installments.

Term loans normally are secured by fixed assets owned by the borrower and may carry either a fixed or floating interest rate. Under this system, loan amount is given in the client account maintained with the bank and issued through cheques or pay order or any other appropriate forms. Housing loan: NBL offers home facility for constructing house or purchasing apartment and extension, renovation, repairing of existing house. National bank has launched two types of specialized “housing loan” product, one for long term and the other for short term to meet the demand of the customers in general. The product has been made attractive by adopting hassle free and easy availability.

Since introducing the scheme in 2007, the bank sanctioned Tk. 939. 65 million under NBL housing loan scheme and Tk. 41. 00 million under small house loan. Consumer loan: NBL consumer durable loan is a personal loan scheme for purchasing various consumer durables such as television, refrigerator, air conditioner, Hi-Fi system, washing machine, computers and other household furniture etc for family use. The product is a term financing facility to individuals to aid them in their purchases of consumer durables or services. The facility becomes affordable to the clients as the repayment is done through fixed installments commonly known as equal monthly installment (EMI).

Education loan: NBL education loan is a partially secured and terminating loan facility for students/teachers to support their admission/tuition fees, semester fees, study at home/abroad. This scheme is for meeting the fund requirement for higher education

of children of salaried persons. Bank would finance against gross monthly income of the credit worthy individual. Professional loan: NBL loan for professionals is a partially secured and terminating loan facility (EMI based) for professionals only to support their small scale purchase of different equipment, tools and small machineries for installation at their offices. Bank would finance against gross monthly income of the credit worthy individual.

Target customer for this product is the established doctors, engineers and teachers or highly qualified other professional of the society. Any purpose loan: NBL any purpose loan is an unsecured and terminating loan facility (EMI based) for any legitimate purpose such as interior decoration. Marriages in the family, advance rental payments, emergency medical treatment, trips abroad etc. This loan is unsecured in the sense that only security in this type of loan product are

• letter of introduction from the employer or
• transfer of monthly salary and assessment of terminal benefits or
• personal guarantee taken from specific section of people.

Any purpose loan’ means the applicant does not have to declare the purpose for which he/she is taking the loan; hence there will be no hypothecation over the assets to be purchased. SME loan: Small and Medium Enterprise (SME) remains the engine of growth in the emerging economy. NBL underscores the importance of this financing in terms of national outlook and conquered a milestone in SME financing. In line with that, the bank expanded financing activities through its large network of 121 branches and 10 SME service centers attracting entrepreneurs in various fields of trade and industry. Recently NBL has launched another

two products namely NBL weaver’s loan and Nari jagoron for women entrepreneurs.

Agriculture loan: echoing with the national policy direction for growth of rural economy, the bank has been providing collateral free loans to landless and marginal farmers to acquire seeds, fertilizer, irrigation facility, agro equipment etc for better crop cultivation. The Bank has also been financing in fish, poultry and livestock farming sectors. The bank financed an amount of Tk338. 88 million in 2009 to 64127 borrowers while it was Tk325. 30 million to 61862 borrowers in 2008. Syndicated loan: National Bank gives priority in the loan syndication both as a lead and as a participating bank for large borrowers. The modality of syndicated finance enables the banks to diversify the credit portfolio.

The syndicated finance creates opportunity for risk sharing and standard of credit remains on the higher end because of co-appraisal by the multi-banks/ financial institutions. In 2009 Tk8565 million was approved under 16 deals in the different sectors of the economy like textiles and spinning, RMG, pharmaceuticals, power plant and food processing. Lease financing: As part of diversification of credit products, National bank has introduced lease financing scheme and can be availed from any branch of the bank. To assist a large group of people especially industrialists, business entities or individuals the scheme is designed in a trouble-free and easy mode.

The scheme facilitates to acquire capital machinery, equipment, medical instrument, automobile, CNG refueling machinery and customer durables etc. Besides the demand of consumer durables by the individuals, industrial entrepreneurs are showing much interest in lease financing to increase production, restructuring through BMRI etc. The bank has already

sanctioned Tk. 604. 20 million up to December 31, 2009 under lease finance scheme. Import finance: NBL provides comprehensive banking services to all types of commercial concerns for import purpose. National bank’s major forms of import finances are Import L/C, loan against imported merchandise (LIM), Loan against trust receipt (LTR) and Payment against document (PAD), etc.

Letter of credit: Letter of credit is a document by which a bank on behalf of its customer provides guarantee of payment for imported merchandise to the supplier when conditions specified in the document are met. It is non – funded loan where bank does not give any cash money to the client but gives a guarantee of payment in case of default of customers. The bank opened a total number of 24385 LCs amounting USD 1117. 61 million in import trade in 2009. Payment against document (PAD): PAD is created upon lodgment of import documents. This loan is created for a specified time. After this time, if the importer does not take the documents from bank, the bank may sell the imported goods to recover the given amount. Loan against imported merchandise (LIM): This loan is issued against imported goods.

In this case, the imported merchandise is kept under the control of bank and importer takes delivery of merchandise by making payment in cash. Typically, this loan is adjusted between 45 to 60 days. Loan against trust receipt (LTR): Loan against trust receipt is like LIM. This facility is kept limited for the valued customers and no margin is asked for. The loan holder takes delivery of goods from bank by submitting trust receipt and gives

assurance that payment will be made after selling the goods. In this case, the bank has no control over the imported goods.

Export finance: The bank has been nursing the export finance with special emphasis. In 2009, it handled 18761 export documents valuing USD 559. 8 million with a growth of 5. 41% over the last year. National bank’s major forms of export finances are export L/C, packing credit, export cash credit (ECC), foreign documentary bill purchased (FDBP), etc. Export L/C: The purpose of such a credit is to meet working capital needs starting from the point of purchasing raw materials to final shipment of goods for export to foreign country. Packing credit: This is available to the exporters, for financing purchase, processing, manufacturing or packing of goods. This would mean any loan or advance extended to you by the bank on the basis:  Letter of credit opened in favor of exporter by an oversea buyer. A confirmed and irrevocable order for the export of goods from buyer.

Any other evidence of an order placed on the exporter. Packing credit is granted for a period depending upon the circumstances of the individual case. Export cash credit (hypothecation): Under this arrangement the bank sanction the loan to the first class exporter, as there is no security against this loan. The letter of hypothecation creates a charge against the merchandise in favor of the bank but neither the ownership nor the possession is passed to it. Export cash credit (pledge): Under this arrangement the bank advance loan to the exporter against pledge of raw materials or exportable goods.

The exporter surrenders the physical possession

of goods under the bank’s control till the payment of dues is made. If the exporter does not pay the loan the bank can sell the exportable goods to recover the credit. Foreign documentary bills purchased (FDBP): Incase of deferred L/C the payment is usually received after a certain period, say 90 – 180 days. In that case the party (exporter) sometimes wants to negotiate bills with the bank, for incise or need of money. In FDBP bank negotiates the bills and documents to adjust the packing credit (PC) or back to back L/C payment and gives the rest of the amount to the client in cash or by crediting his account.

In this process the negotiating bank collects acceptance letter from the payment bank and purchase the export bills at the usual rate of currency. FDBP is created only for foreign documents. Local documentary bills purchased (LDBP): It is created only for the local export documents. Local exporters are usually small one and act as backward lineage industry to the large foreign exporters. So, incase of deferred L/C (usually done in textiles/garments) the exporters would want to negotiate the bills for quick receiving payments. The negotiating bank checks the documents thoroughly and transfers the discounted value of bills by converting it into Bangladeshi taka at the current rate. This temporary liability is adjustable from the proceeds of the bills.

Project finance: Project finance is the long term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of the project sponsors. Usually, a project financing structure involves a number of equity investors,

known as sponsors, as well as a syndicate of banks that provide loans to the operation. The loans are most commonly non-recourse loans, which are secured by the project assets and paid entirely from project cash flow, rather than from the general assets or credit worthiness of the project sponsors, a decision in part supported by financial modeling.