CHAPTER – 1
INTRODUCTION OF THE REPORT
1.1 Introduction
Bangladesh is one of the developing countries in the world. The economy of the country has a lot left to be desired and there are lots of scopes for massive improvement. In an economy like this, banking sector can play a vital role to improve the overall social – economic condition of the country. The banks by playing the role of an intermediary can mobilize the excess fund of surplus sectors to provide necessary finance, to those sectors, which are needed to promote for the sound development of the country.
The motives of banks are profit-earning. The word ‘Bank’ refers to the financial institution that deals with money transaction. Banks collect deposits at the lowest possible cost and provide loans and advances at highest cost. The spread between the two is the profit for the bank. Commercial banks are primary contributors to the national development of the country
This report is an attempt to reflect the position of Prime bank Ltd in the banking industry of the country in respect of her activities in the area of General Banking.
1.2 Objective of the report
In this report, I tried to furnish all sorts of practical dealings that are conducted in case of handling various types of activities in general banking department, the theoretical aspects, that is what should be the procedures and requirements maintained from first to last, and actual practices as well as the ultimate gain for the bank in conducting financial activities are mainly discussed. So the purpose and objective of this report can be summarized as follows:
Ø Focus on the Brief description of general banking.
Ø To know deeply about general banking procedure.
Ø To examine bank’s performance in general banking activities.
Ø To know how they minimize general banking risks.
Ø To focus on some other activities of general banking.
Ø To specify some findings on given topic.
Ø To reveal some recommendation for better performance in general banking.
1.3 Methodology
The methodology of this report is very different from conventional reports. I have emphasized on the practical observation though this report has to need some primary and secondary data. Nevertheless, eventually almost the entire report consists of my practical observation. While preparing the report, I have taken information from the following sources. There are two types of data.
1.4 Sources of data collection
Primary Sources:
- Observation of banking activities.
- Overflowing Conversation with the in-charge of general banking department of Prime Bank Limited, Sylhet Branch, Sylhet.
- Working with my own experience while internship program.
Secondary Sources:
- Daily diary (containing my activities of practical orientation in Prime Bank Ltd) maintained by me,
- Various publications on Bank,
- Website of Bangladesh Bank,
- Website of Prime Bank Limited,
- Annual Report of the bank,
- Personal investigation with bankers,
- Different circulars issued by Head Office and Bangladesh Bank.
1.5 Potential problems of statement
Some of the limitations faced in preparing this report are:
Ø It was very difficult to collect the information from various personnel for their job constraint.
Ø There were some difficulties in understanding some activities due to not being relevant to the theoretical knowledge.
Ø Due to confidentiality the Bank’s policy restricts disclosing some data.
Ø The study of such a short course of time is not free from limitation. So time limitation is the main point of limitation.
Ø The data relevant for the analysis report writing sometimes could not be collected due to excessive year-ending workload at the branch.
Ø During the month of June-July in the branch, there was excessive year-ending workload, which sometimes acts as a barrier on the way of my effort.
Ø It is too much difficult to comment and suggest based on only the annual report and information collected from written documents.
CHAPTER-2
AN OVERVIEW OF
PRIME BANK LIMITED
2.1 Introduction of the Organization
Bank is a financial institution. The economy is mostly dependent on the bank since the bank facilitates the economic and financial transactions. Prime bank limited is a fast growing private sector bank and the bank is already at the top slot in terms of quality services to the customers and value addition for the shareholders. Prime Bank Limited has started its operation as a Conventional Bank in April 1995. The bank made satisfactory progress in all areas of business operation in 2007.
Prime Bank Ltd. is one of the few banks permitted by the Bangladesh in the early 90’s. These banks are known as the second-generation banks and fortunate to remain immune from the bad loan culture. Prime Bank Limited was designed to provide commercial and investment banking services to all types of customer ranging from small entrepreneur to big business firms. Besides investment in trade and commerce, the bank participates in the socioeconomic development through the participation in priority sectors like agriculture, industry, housing and self-employment. Prime Bank Limited wants to establish, maintain, and conduct all types of banking, investments and businesses in Bangladesh and abroad with superior service quality and performance.
The bank has consistently turned over good returns on Assets and Capital. The bank achieved an operating profit of Tk. 1931.60 million during the half-year ended on June 30, 2008.The achievement was 24.72% higher than that of the corresponding period of previous year.Net profit after tax increased by 30.63% compared to previous year and stood at Tk. 821.60 million as at June 30, 2008. The deposits and advances grew by 11.07% and 22.30% respectively during the first half year of 2008.The ratio of classified loans to total loans stood at 1.61% as at 30th June 2008.Adequate provision has been made against loans and advances as per Bangladesh Bank’s rules and regulation force. The capital adequacy ratio is 10.50% of the risk weighted Asset. The earning per share (EPS) based on half-yearly results stands at around Tk 57.78 (Consolidated Tk 58.10) annualized. In period under review, the bank handled import and export businesses to the tune of Tk 49,187 million and Tk 34,530 million respectively. The total numbers of branches are 72; five branches are designated as Islamic Branch complying with the rules of Islamic Shariah, the modus operandi of which is substantially different from other branches run on commercial conventional basis. .Eight more branches are most likely to be opened soon.
2.2 Mission, Vision & Core Values of Prime Bank Limited
2.2.1 Vision of PBL:
To be the best private commercial bank in Bangladesh in terms of efficiency, capital adequacy, asset quality, sound management and profitability having strong liquidity.
2.2.2 Mission of PBL:
To build prime bank limited into an efficient, market driven, customer focused institution with good corporate governance structure.
Continuous improvement in their business policies, procedures and efficiency through integration of technology at all levels.
2.2.3 Core values:
For customers
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To become most caring bank by providing the most courteous and efficient service in every area of our business.
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For employees
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Promoting being of the members of the staffs
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For shareholders
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To ensure fair return on their investment through generating stable profit
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For community
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Assume its roles as socially responsible corporate entity in a tangible manner through close adherence to national policies and objectives
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2.3 Organizational Hierarchy of Prime Bank Limited:
Chairman
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Managing Director (MD)
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Additional Managing Director (AMD)
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Deputy Managing Director (DMD)
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Senior Executive Vice President (SEVP)
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Executive Vice President (EVP)
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Senior Vice President (SVP)
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Vice President (VP)
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Senior Assistant Vice President (SAVP)
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Assistant Vice President (AVP)
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First Assistant Vice President (FAVP)
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Senior Executive Officer
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Executive Officer (EO)
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Principal Officer
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Senior Officer
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Management Trainee
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Officer
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Junior Officer
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Assistant Officer
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Trainee Assistant
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2.4 Business Activities of PBL
The Principal activities of the bank were banking and related businesses. The banking businesses included deposits taking, extending credit to corporate organization, retail and small & medium enterprises, trade financing, project financing, international credit card etc. Prime Bank Limited provides a full range of products and services to its customers, some of which are mentioned below with a brief overview of the major business activities.
2.4.1 Retail Banking:
As a part of risk diversification strategy PBL expended the lending activities in this sector during 2006. The growth rate of PBL’s consumer financing was 38% during this year. The loan schemes offered by the bank include Home Loan, Loan against Salary, Marriage Loan, Car Loan, Hospitalization Loan, Education Loan, Doctors Loan, Travel Loan etc.
2.4.2 SME Lending:
Job creation is essential and it must come from Small and Medium Enterprise that will ultimately dominate the private sector. During 2007 bank’s Strategy was focused on customer convenience. The Bank provided working capital loans to suppliers or dealers of large corporations or clusters of small exporters of non-traditional items.Despite growing focus about small and medium enterprises in Bangladesh and consequent policy efforts in this direction, limited access to financing still forms the crux of the problem of this sector. The overriding vision of PBL is to offer congenial lending products and services so that SMEs can aspire to opportunities of growth and wealth creation.
Keeping this in view, PBL has formulated a comprehensive policy on SME financing during 2007 and made significant progress in financing this sector During 2007, PBL's strategy was focused on marketing the products to wider range of customers and provided working capital and term loan to different manufacturers, traders and service providers including backward and forward linkage industry that fall into SME universe.
Bank's exposure is thus well diversified among 791 customers to different sectors viz. light engineering, cottage, handicraft, CNG station, power loom, CNG, garments accessories etc. Outstanding loan of SME is Tk 1021 million. Out of this 33% exposure accounts for manufacturing sector, 54% accounts for trading sector while balance 13% accounts for service sector.
Financing women entrepreneurs under SME:
Another notable idea in SME financing is the development of women entrepreneurs. Bangladesh bank has marked 10% of SME related fund women entrepreneurs. With the help of R&D, a consultative meeting was arranged with the leaders of women entrepreneurs. In the new framework of SME, PBL will give top priority in developing and harnessing women entrepreneurs.
2.4.3 Corporate Credit:
PBL’s strategy is to provide comprehensive service to the clients of this segment who are large and medium size corporate customers with expertise in trade finance and related services. Besides trade finance bank are providing working capital finance, project finance and arranging syndication for our corporate clients. Syndication and structured Finance Unit of the Bank strengthened its footstep in the consortium financial market and arranged a number of syndication deals for its corporate clients.
2.4.4 Islamic Banking:
For the development of Islamic Banking Business, 2006 was also a commendable year. It has been observed that compliance of Shariah has improved in 2006 as compared to the preceding years. According to their advice Islamic Banking operation of the bank has been separated from the operation of Conventional Banking and shown separately in the bank’s financial statement. It is found that the investment and deposits grew by 38% and 89% respectively in the year 2007. The operating profit of Islamic Banking Branches grew by 45% during the Year.
2.4.5 Credit Card:
In the year of 2005, Prime Bank Ltd has launched VISA. Before that PBL started its credit card operation in 1999 by introducing Master Card. Now PBL has become the first local Bank of the country to achieve principal membership of both the worldwide-accepted plastic money network i.e. Master Card and VISA. PBL has redesigned the credit card facility by providing the incentive of “Free Life Insurance Coverage” for their valued cardholders to mitigate the financial risk.
2.4.6 Custodial Service:
PBL equator fulfills its strategic commitment to provide custody and clearing services. Equator’s focuses are on the following:
§ Commitment to quality
§ Dedication to customer needs
§ Sustained investment in people and systems
2.4.7 International Trade Management:
This division is operational throughout the group and PBL’s core strength is trade finance and services. With an experience, Prime Bank has developed knowledge of trade finance, which is world class. Principle services to importers include imports letter of credit, import bills for collection and back-to-back letters of credit facilities. Services provide to exporters include export letters of credit, direct export bills, bonds, and guarantees.
2.4.8 Cash Management:
Prime Bank recognizes the importance of cash management to corporate and financial institutional customers, and offers a comprehensive range of services and liquidity management.
2.4.9 Institutional Banking:
Prime Bank Limited provides a wide range of services to institutional clients, commercial, merchant and central banks; brokers and dealers; insurance companies; funds and managers, and others. It provides relationship managers who are close to their customers and speak local language. This wide network of institutional banking facilities includes transaction, introduction, problem solving and renders advice and guidelines on local trading condition.
2.4.10 Treasury:
Treasury operations had been consideration as an important avenue for income generation purpose within Head Office. In fact, in the past, income from treasury operation was quite sizable and significant to the total income generated by the bank. The treasury division publishes daily and weekly currency newsletters, which provide analyses of currency trends and related issues. Seminars and workshops are conducted for customers from time to time on foreign exchange related topics. Prime Bank is one of the first local banks in Bangladesh to integrate treasury dealings of local money market and foreign currency under one Treasury umbrella. The bank has handled significant volumes of treasury over the last several years. Prime Bank's Dealing Room is connected with automated Reuters Terminal facility thus enabling the bank to provide forward/future facilities to its corporate clients at a very competitive rate.
2.4.11 Foreign Exchange Business:
Over the years, foreign trade operations of the bank played a pivotal role in the overall business development of the bank.
The bank has established relationship with as many as 110 new foreign correspondents abroad thereby raising the total number of correspondents to 542 by the year June-2008. The banks handle Tk 96,153.54 million as Foreign Exchange Business during June-2008 while Tk 61,676.20 million was in 2007. The growth rate was 55.90% over June-2007. The bank has also entered into remittance arrangements with several banks and exchange houses and expects to handle increased volume of remittance business over the near future.
2.4.12 Merchant Banking:
The Bank’s operation in this sector was limited to Underwriting, Portfolio Management and Banker to the Issue functions. The compulsory requirement for opening BO account for share trading has increased the demand for opening BO account.
2.4.13 Online Branch Banking:
The bank has set up a Wide Area Network (WAN) across the country to provide online branch banking facility to its valued clients. Under this scheme, clients of any branch shall be able to do banking transaction at other branches of the bank.
Under this system a client will be able to do following type of transactions:
· Cash withdrawal from his/her account at any branch of the bank.
· Cash deposit in his/her account at any branch of the bank irrespective of the location.
· Cash deposit in other’s account at any branch of the bank irrespective of the location.
· Transfer of money from his/her account with any branch of the bank.
2.5 SWIFT
Prime Bank Limited is one of the first few Bangladeshi banks, which have become member of SWIFT (Society for Worldwide Inter-bank Financial Telecommunication) in 1999 SWIFT is a member-owned co-operative, which provides a fast and accurate communication network for financial transactions such as Letters of Credit, Fund Transfer etc. By becoming a member of SWIFT, the bank has opened up possibilities for uninterrupted connectivity with over 5,700 user institutions in 150 countries around the world.
Information Technology in Banking Operation:
Prime Bank Limited adopted automation in banking operation from the first day of its operation. The main objective of this automation is to provide efficient and prompt services to the bank's clients. At present, all the branches of the bank are computerized. At branch level, the bank is using server-based multi-user software under UNIX operating system to provide best security of automation.
Profitability and Shareholder Satisfaction:
The bank had been one of the most profitable in the banking sector. The bank's return on assets (ROA) was 2.05% in the year 2006. Even though the capital market of the country has been suffering over the last few years, the good performance of Prime Bank made sure that the banks share price remained in a respectable position..
2.6 Products and Services of PBL
Prime Bank Limited offers various kinds of deposit products and loan schemes. The bank also has highly qualified professional staff members who have the capability to manage and meet all the requirements of the bank. Every account is assigned to an account manager who personally takes care of it and is available for discussion and inquiries, whether one writes, telephones or calls.
Loan Schemes:
· General Loan Scheme
· Consumer Credit Scheme
· Lease Finance
· House Building Loan & Apartment Loan Scheme
· Advance against Shares
· Custodial Services for investors (both individual & institutional) investing in through Stock exchange
· One stop services for payment of utility bills.
· Credit card
2.7 The financial position for the last five years of Prime Bank Limited at a Glance (Taka in million):
Particulars
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2003
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2004
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2005
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2006
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2007
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Total Deposits
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20483
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28069
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36022
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54724
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70544
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Loans and Advances
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16492
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23220
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31916
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45010
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57782
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Investment
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2750
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3084
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3940
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7844
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12698
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Foreign Exchange Business
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41931
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56249
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69185
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94440
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121933
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Operating Expenditure
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591
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824
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886
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1108
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1574
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Operating Profit
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1001
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1146
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1520
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3235
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4829
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Profit after tax
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375
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612
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568
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1048
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1399
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Total Assets
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24249
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32362
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41506
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60898
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79618
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Market value per share
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374.25
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879.5
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618.50
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528.75
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924
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No of Branches
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30
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36
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41
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50
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56
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No of Employees
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777
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894
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1024
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1172
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1400
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No of Shareholders
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1993
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2620
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4467
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5262
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7368
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No of Foreign Correspondences
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441
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501
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517
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528
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553
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2.8 Growth of PBL:
Outstanding(in million Tk)
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Growth of PBL
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Industry Average
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2007
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2006
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%
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%
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Assets
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79,588
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60,899
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30.69
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17.81
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Deposits
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70,512
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54,724
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28.85
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15.50
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Loans
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57,683
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45,010
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28.18
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18.34
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Figure- 01: Comparative Growth of PBL in 2007
2.9 Loans and Advances under Broad Categories:
Loans and advances
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2007 (in million)
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2006 (in million)
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Loans
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34,113
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27,472
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Cash credits
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9,192
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7,881
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Overdraft
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10,510
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5,954
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Total
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53,815
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41,307
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Figure- 02: Loans and Advances under Broad Categories
2.10 Loans and Advances/ investment to customer groups:
Customer Groups
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2007 (million)
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2006 (million)
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Commercial lending
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12,476
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12,102
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Export finance
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3,699
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3,061
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House building loan
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1,416
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978
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Consumers credit scheme
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2,747
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1,356
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Small & medium enterprises
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1,022
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437
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Special program loan
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135
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174
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Staff loan
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2.00
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253
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Other loans & advances
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7,357
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7451
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Total
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28, 853
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25,814
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Figure- 03: Loans and Advances/ investment to customer groups
2.11 Comparative position as on 30th June 2008
SL#
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Particulars
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June-08
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Dec-07
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Growth in% over Dec-07
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1
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Deposits
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78,320.59
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70,512.37
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11.07
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2
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Loans & Advances
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70,547.80
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57,683.02
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22.30
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3
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Classified loans & Advances
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1,132.41
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777.22
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45.70
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4
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Required provision for Classified Loans & Advances
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411.42
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342.96
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19.96
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5
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Provision maintained for Classified Loans & Advances
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536.93
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478.40
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12.23
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6
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Capital Fund:
Core Capital
Supplementary Capital
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7,137.40
5,854.65
1,282.75
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6,382.60
5,273.28
1,109.32
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11.83
11.02
15.63
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7
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Capital Adequacy Ratio
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10.50%
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11.49%
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(8.62)
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8
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Number of Branches
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62
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61
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1.64
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9
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No. of offshore Banking Units
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2
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1
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100
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10
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No. of employees
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1,508
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1400
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7.71
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11
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Ratio of Classified Loans to total Loans
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1.61%
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1.35%
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19.26
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12
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Return on Assets
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1.90%
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1.99%
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(4.52)
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13
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Statutory Reserve
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1,873.54
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1,873.54
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_
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14
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Shareholders’ equity
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5,861.49
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5,273.28
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11.15
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