1 Chapter-1&3 The Overview of Bank, it’s Structure and Services Md. Masukujjaman, Lecturer, NUB.

1

Chapter-1&3

The Overview of Bank, it’s Structure and Services

Md. Masukujjaman, Lecturer, NUB

2

• A bank is a Financial intermediary accepting deposits and granting loans; offers the widest menu of services to any financial institution. Bank actually links the people whose have

abundant of fund and who have not in a dedicated and systematic way and becomes the part of development of any economy and country.

Like other FI, Bank also sell their financial asset and thereby accommodate financing and investment

What is Bank?

3

• Management of a bank’s daily operations perfectly within some rules and regulations through some sophisticated as well as traditional ( long term practice) way can be regarded as the bank management. Controlling ranges from the deposit ,lending, fund ,defending external and internal threat especially the goodwill of the banks indeed.So, Management of banks functions efficiently is called bank management

What is Bank Management?

4

• Market where financial instruments

are traded on • Can be classified broadly as

– Capital market (share, bond)

Market place: DSE,CSE (controlled by SEC) Participants- investors and borrowers(company)

– Money market (debt, banker’s acceptance)Market place: Banking and non banking institutions

(controlled by central bank -Bangladesh Banks) Participants- Savers and borrowers

Financial Market & Banks

Bangladesh Bank

5

• Each of the country actually control their economy by– Fiscal policy

• Related with the control of money flow by the tax and government expenditure

– Monetary Policy• Involve with control of money flow of the

economy through Central Banks reserve and lending policy .

Economic policy and banks

6

• Brief Sketch of Banking System in Bangladesh• Finance Division

Bangladesh Bank (Central bank)

SOCBs PCBs FCBs SOSCB NBFIs

» •SOCB-State Owned Commercial Bank (4 nos.)» •FCPCB-Private Commercial Bank (30 nos.)» B-Foreign Commercial Bank (9 nos.)» •SCB-Specialized Commercial Bank (5 nos)» •NBFI-Non Banking financial Institution (29 nos)

Banking system of Bangladesh

7

State owned commercial Banks

– Sonali Bank – Janata Bank – Agrani Bank – Rupali Bank

8

• AB Bank Ltd • BRAC Bank Limited • Eastern Bank Limited • Dutch Bangla Bank Limited • Dhaka Bank Limited • Islami Bank Bangladesh Ltd • Pubali Bank Limited • Uttara Bank Limited • IFIC Bank Limited • National Bank Limited • The City Bank Limited • United Commercial Bank Limited • NCC Bank Limited • Prime Bank Limited • SouthEast Bank Limited • Al-Arafah Islami Bank Limited

• Social Islami Bank Limited • Standard Bank Limited • One Bank Limited • Exim Bank Limited • Mercantile Bank Limited • Bangladesh Commerce Bank Limited • Mutual Trust Bank Limited • First Security Islami Bank Limited • The Premier Bank Limited • Bank Asia Limited • Trust Bank Limited • Shahjalal Islami Bank Limited • Jamuna Bank Limited • ICB Islami Bank • Moon Bank Limited • United Bank Limited

Private commercial Banks

9

• Citibank na • HSBC • Standard Chartered Bank • Commercial Bank of Ceylon • State Bank of India • Habib Bank • National Bank of Pakistan • Wo Bank • Bank Alfalah

Foreign commercial Banks

10

• Grameen Bank • Bangladesh Krishi Bank (Govt.)• Bangladesh Development Bank Ltd (Govt.)• Rajshahi Krishi Unnayan Bank (Govt.)• Basic Bank Ltd (Bank of Small Industries and

Commerce) (Govt.)• Bangladesh Somobay Bank Limited(Cooperative

Bank) (Govt.)• Ansar VDP Unnyan Bank (Govt.)• Karmosangesthan Bank • Exim Bank

Specialized development commercial Banks

11

• Depository institutions offering commercial loans operated under the ‘Non Banking Financial Institutions Order, 1989’ of Bangladesh Bank.– NGOs , Leasing firms, insurance com’s,

etc.Non bank financial institution is now becoming the competitor of the bank with their similar packages of services.

Non-banking Financial Institutions

12

• Traditional bank services:– Offering savings deposits– Carrying out currency exchanges– Discounting commercial notes and making

business loan – Safekeeping of valuables and certification of

value– Supporting government activities with credit– Offering checking accounts (Demand

deposits)– Offering trust services

Services banks offer to public

13

• Recently added bank services:– Granting consumer loans– Financial advising– Cash management– Offering equipment leasing– Making venture capital loans– Selling insurance services– Selling retirement plan

Services banks offer to public

Large door to an old bank vault

14

• Dealing in securities:– Security brokerage services and

security loan– Offering mutual funds and annuities.– Offering merchant banking servicesd

Services banks offer to public

Because of having extensive competition with the non-bank institute, banks are increasingly becomes the “one stop”

service provider

15

• The many different roles banks play in the economy:– Intermediation role– Payment role– Guarantor role– Risk management role– Savings role/investment advisor loan– Safekeeping /certification of value

rol– Policy role

Role of banks for economy

16

A. Special Loan Scheme:• Consumer credit scheme• Personal loan• Small Business Loan• Building repair loan

B. Saving deposit scheme:• Savings Accounts• Short Term Deposit Accounts• Fixed deposit receipt Accounts• Double benefit deposit scheme• Monthly deposit scheme

C. International Banking:• 1. Foreign currency accounts• 2. Non-Resident Foreign Currency Deposit

Account• 3. Resident Foreign Currency Deposit Account

Illustration of banks services in BD (Uttara Bank)

Source: Uttara Bank ltd. retrieved on 2010, Website:www.uttarabank-bd.com

17

• Trends:– Service proliferation– Rising competition– Deregulation– Rising funding costs (existence of stock mkt.)

– Technological revolution.– Consolidation and Geographic

expansion– Globalization of banking– Increased risk of failure

Trends demanding efficient bank management

18

Loan officerCredit analystLoan workout specialistMergers of Bank operationBranch ManagersSystem analyst Auditing and control

personelBank examiner and

specialist

• Trust department specialist

• Teller• Security analyst and

trader• Marketing personnel• Human resource

managers• Investment banking

specialist• Bank training specialist

Career opportunities in Banking

Factors Affecting Organisational Structure of Banks

Banks can be classified into three groups in terms of size and asset concentration – small, medium and large.

The following are the factors affecting organisational structure:SizeServices offeredTechnology – new skills, management style etc.

19

Board of Directors

Chief Administrative Officer (Board Chairman/President/CEO/Managing Director

Accounting & Operations Division

Accounting & AuditDepartment

Operations(check clearing, posting,Account verification, &

Customer complaint)

Fund-Raising &Marketing Division

Tellers orCustomer Service officers

New Accounts

Advertising &Planning

Lending DivisionOr Loans Department

Commercial Loan Officers

Consumer LoanOfficers

TrustDivision

Personal Trusts

BusinessTrusts

Organizational Structure of Banks20

Illustration:1

ORGANIZATIONAL STRUCTURE

Board of Director

Managing Director

Secretariat

Public Relation Secretariat of M.D.

General Manager Adm.& A/C.

General Manager Operating

General Manager Audit& Recovery

General Service Dept. Resource & evelopment Dept

Loan Recovery Dept-1.

Central Account Dept-1

Budget& Cost Control Dept.

Loan Recovery Dep-2.

Central Account Dept-2

Branch control Dept.

Loan Recovery Dept-2

Personnel Management Dept.

Loan & Advance Dept-2

Regional Audit office- 18

Training institute Loan & Advance Dept-1

LPO Dhaka Branch

Zonal Office

Rajshahi

Regional Office

Naugoan

Regional Office

Nawabgong

Regional Office Natore

Zonal Office Pabna

Regional Office

Sirajganj

Regional Office Rangpur

Regional Office Thakurgoan

Regional Office Phanchogor

Regional Office

Dinajpur

Zonal Office

Dinajpur

Regional Office

Lalmonirhat

Regional Office

Nilfamary

Regional Office Kurigram

Regional Office

Gaibanda

Regional Office Natore

Zonal Office Pabna

Regional Office

Sirajganj Branch 15

Branch 17

Branch 16

Branch 17

Branch 18

Branch 17

Branch 18

Branch 22

Branch 13

Branch 17

Branch 19

Branch 19

Branch 21

Branch 13

Branch 16

Branch 14

Branch 15

Branch 12

21

Illustration:2

Board of Directors• Comprises of directors Appointment from the Promoters/share

holders heading a Chairman. Appointed/approved by the Government

• No rules regarding no. of members in a board of director .In America it is 5-25 (practiced).

• No specific qualification (academic) is not required. but must not be insolvent and be a sound person.

Responsibilities:• Formulating policies• Appointment of CEO• Appointment of chairman of Board of Directors• Taking Investment decision of the bank• Call for money issuing share

22

Managing Director

Responsibilities:

• Oversee the total administrative matter

• Regulate the daily operation

• Have the authority to take decision (not policy decision)

• Recruit employee through HRD

• Act as the secretary of the board of directors meeting

23

Standing committee• Executive committee

• Loan committee

• Investment committee

• Salary and employee relation committee

• Audit committee

• Trust committee etc.

• Risk management committee.

Beside these banks also form Special Committee for special occasions or situations.

24

Types of banks (Structural)

• Unit Banking

• Branch banking

• Bank Holding Company Organisation/Chain banking

25

Unit banking –

Banking system whereby all services of banks are offered from one office.

- Such office may have offer facilities such as, drive-in windows, automated teller machines, retail store point-of-sale terminals that are linked to the banks’ computers system, and internet website.

It facilitates in the following way:Greater controlPrompt decisionGreater verification of operation and functionOffering unique product and services.

26

Branch banking Branch banking is a system where full range banking services are

offered from several locations, including a head office, and other one or more full-service branch offices.

– Head office or registered office is guided and managed and controlled by a single board of directors, of which the MD is the CEO

– Actual operation is performed at the braches but controlled by the branches through manual, instructions, guidelines ,statements etc.

– Branches are managed by the managers having appropriate business, financial, administrative power delegated to head office.

– Each Brach is treated as separate unit for business and performance purpose. But for total performance the brach performance is aggregated.

27

Advantages- Branching allows for greater efficiency- It provides for easy, improved and convenience services to customers-Branching reduces transaction costs for customers-Branch provides security against the risk of failure –as it leads to increase in assets- It leads to growth in the banking industry

that is

• Scale of operation• Risk diversification• More coverage in utilization of Fund• Area development

28

Disadvantages

- Full branching may lead to increase in operation/service cost

- It may lead to edging out of competitors

- It may lead to variation in type and quality of services of a bank

29

Bank Holding Company Organisation/Chain banking –

This is a form of banking organisation whereby companies act as corporations chartered for the purpose of holding stock (equity shares) of one or more banks. This facilitates access to large pool of capital at the capital market

- One-bank Holding Companies

- Multi-bank Holding companies

30

31

Thank You Very Much