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Origin of the report
The internship program is an integral part of the MBA program that all the students have to
undergo of University of Chittagong. The students are sent to various organizations where they
are assigned to one or more projects. At the end of the program, the internships are required to
place the accomplishments and findings of the project through the writing of the internship
report covering the relevant topics. During this program, supervisor guides each student one
from the university and the other from the organization.
This report is the result of a 3 months (February 10 to May 10, 2004) internship program in
Social Islami Bank Limited (SIBL).
This report contains Introduction about the report-
In Chapter 1: Background of Islamic economy and Islamic banking.
In Chapter 2: To present an overview of SIBL.
In chapter 3: To appraise the principal activities of SIBL.
In chapter 4: To appraise performance evaluation of SIBL.
In chapter 5: Online Banking Operation of Social Investment Bank Limited.
In chapter 6: To Identify problems of SIBL.
In chapter 7: To suggest suggestion for the development of SIBL.
In chapter 8: The topic of the report has been consulted & directed by the internship supervisorfrom University of Chittagong.
Objectives of the Study
This study is aimed at providing me invaluable practical knowledge about banking operation
system especially Islamic banking in Bangladesh. It will also help me to develop my concept of
banking and it operations. The objectives are:
To relate theoretical knowledge with practical experience in several functions of the bank
To be acquainted with how bank perform its operation
To know about the modes of investment of Islamic Banks
To study strengths & weakness of SIBL compares to competitors
To present my observation and suggestions to the bank
To make myself more confident and active in future to handle my job
Purpose
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Knowledge and learning become perfect when it is associated with theory and practice.
Theoretical knowledge gets its perfection with practical application. As our educational system
predominantly text based, inclusion practical orientation program, as an academic component is
as exception to the norm. As the parties; educational institution and the organization
substantially benefit from such a program, it seems a win-win situation. It establishes contracts
and networking contracts. Contracts may help to get a job. That is, students can train andprepare themselves for the job market. A poor country like Bangladesh has an overwhelming
number of unemployed education graduates and Postgraduates. As they have no internship
experience they have not been able to gain normal professional experience or establish
networking system, which is important in getting a job. Thats why practical orientation is a
positive development in professional area. Recognizing the importance of practical experience,
School of Management and Business Administration has introduced a three months practical
exposure as a part of the curriculum of Bachelor of Business Administration program. In such
state of affairs the present aiming at analyzing the experience of practical orientation related to
an appraisal of SocialIslami Bank Limited, Alanker Moor Branch, Chittagong.
Scope
This report will be dealing with an appraisal of Islamic banking system, its history and
mechanism, policies, and appraisal of Social Investment Bank Limited.
Methodology
For collaborating the data and information collected through primary and secondary sources I
have used both qualitative and quantitative method which contains the past, present and future
situation of Islamic bank system in Bangladesh specially Social Islami Bank Ltd. During mystudy I followed some methodology to find out the fact and feature of the bank which are given
as follows:
a) Area of study:
My project was limited in overall banking function of SOCIAL ISLAMI BANK LTD. I studied all
the main three functional areas of the bank. They are:
i) General Banking.
ii) Investment Area.
iii) Foreign Exchange Area.
b) Sources of Data/Information:
I have collected my information/data from the following sources, which helped me to make this
report. The source has divided by two parts. Such as
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Primary source and
Secondary source
I used both the sources.
Primary Sources:
Primary sources include interviews and conversation with officers and executives of the bank of
different divisions and department.
Secondary Sources:
Secondary sources of information include annual report, general report, investment manual,
general banking manual, foreign exchange manual, selected books journals and other
publication etc.
Analysis of data
Two approaches have been mainly used in this report.
Conceptual Approach
Empirical Approach.
These two approaches are discussed below:
Conceptual Approach:
A theoretical section is given in this report (i.e. the organization part) to give an insight various
information concerning the financial function. It is given in relevance with the organization in
context i.e. Social Islami Bank Limited (SIBL). A background of SIBL is given to facilitate the
understanding of this report. Every single portion is discussed in order to understand the
empirical section.
Empirical Approach:
This refers to the information that has been directly collected and interpreted from the survey on
Social Islami Bank Limited (SIBL). The report is prepared by interviewing the officials of SIBL.
The reports of SIBL and documents are also been studied to do the report.
Time Allocation
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activities needed for economic prosperity. Performance-based arrangements, like profit sharing
or partnership, represent the most cooperative form of beneficial agreements, and thus are highly
encouraged in Islam. Responsibility means that each individual is entitled for reward or return
based on his effort and contribution. Thus gambling and lotteries are not permissible. Gambling
lows an individual to gain based on pure luck, not on merit or effort. It shifts wealth blindly among
participants leading to improper distribution of wealth. Gambling is a clear form of zero-sum game
where one party wins only if the other loses, and causes hatred and enmity among participants. A
society where lotteries or gambling-like activities prevail is a zero-sum society, where the winner
takes all, and the rest is doomed to fail.
Islamic Economics:
Islamic economics is a framework for studying economic activities that allow mutual benefit of
exchange to be realized. It provides proper tools and techniques for evaluating economic
decisions, showing when and how to achieve win/win outcomes and avoid win/lose or lose/lose
ones. Islamic economics is based on the principle that Allah, the Almighty created this world with
plenty of resources that satisfy the needs of everyone. Thus one persons success is not
necessarily achieved at the expense or excluding of the success of others. This win/win
framework leads to better economic behavior and performance, and thus promises better future
for mankind.
Islamic Banking:
Islamic banking is an inseparable part of Islamic economy. During the fiftys it was only a subject
matter of research and was limited to the writing of scholars and philosophers. During the sixtys
actual experiment were made and in the seventys Islamic Banking Institutions started gaining
strength. The eightys and ninetys are the period of consolidation and now Islamic Banking is
coming up as the only welfare banking system of the modern world.
There has always been a desire to establish financial institution to operate as per the tenets of
Islamic Shariah. A successful Islamic banking venture in My Gamer, Egypt was launched in 1963.
Subsequently, Islamic banking movement achieved steady progress and assumed significant
dimension and role with the establishment of the Nasser Social Bank (1972), Dubai Islamic Bank
(1975), Islamic Development Bank (IDB) (1975), Faisal IslamicBank in Egyptand Sudan (1977).Emergence of the Islamic Development Bank as and International Islamic Financial Institution
with a view to involving all the Islamic Countries in the establishment of Islamic Banks and
Financial Institutions was considered as a milestone in the history of Islamic Banking. In August
1974, Bangladesh signed the charter of Islamic Development Bank and committed itself to
reorganize its economic and financial system as per Islamic Shariah.
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Earlier in November 1980, Bangladesh Bank, the countrys central Bank sent a representative to
study the working of several Islamic Banks abroad. In January 1981, at the 3rd Islamic summit
conference held at Mecca and Taif, a great emphasize were given on that the Islamic countries
should develop a separate banking system of their own in order to facilitate their trade and
commerce.
In November 1982, a delegation of IDB visited Bangladesh and showed keen interest to
participate in establishing a joint venture Islamic Bank in the private sector. They found a lot of
work had already been done and Islamic banking was in ready for immediate introduction. Islamic
Economic Research Bureau (IERB) and Bangladesh Islamic Banker Association (BIBA) made
contributions towards introduction of Islamic Banking in the country.
Definition of Islamic Bank:
Islamic banking is a part and parcel of Islamic Economy. It is an interest free financial institute,
which is based on Islamic Shariah. OIC (Organization of Islamic Conference-1978) defined
Islamic Bank as a financial Institution whose statutes, rules and procedures expressly state its
commitment to the principles of Islamic Shariah and to the principles of Islamic Shariah and to the
banking of the receipt and payment of riba (interest) on any of its operations.
Islamic Banking in Bangladesh
Growth and Present Status:
Background of Islamic Banking in Bangladesh:
Bangladesh is the third largest Muslim country in the world with around 130 million population
and 90 percent of them are Muslim. The hope and aspiration of the people to run Banking system
on the basis of Islamic Principles came into reality after the OIC recommendation of its Foreign
Ministers meeting in 1978 at Senegal to develop separate Banking system of their own. After 4
years of that declaration in 1983, Bangladesh established 1st Islamic Bank. At present, in
Bangladesh, out of 51 banks, 6 full-fledged Islamic Banks and 2 Islamic Banking Branches of two
conventional Banks have been working in the private sector on the basis of Islamic Shariah.
Islamic Banking system has been designed and developed to prevent exploitation, ensure justice
and growth in the society. However, Islamic Banks in Bangladesh since their inception have been
facing multifarious problems in their operation, which needs to be carefully addressed.
Development of Islamic Banking in Bangladesh:
At present six full fledged Islamic Banks viz.
IslamiBank Bangladesh Limited (IBBL).
Al-Baraka Bank Bangladesh Limited (ABBL).
Al-ArafahIslami Bank Limited (AIBL).
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First Security Islami Bank Ltd.
ICBIslamic Bank Limited
SocialIslami Bank Limited (SIBL).
ShahjalalIslamic Bank Limited (SBL).
Shamil Bank of Bahrain EC (Islamic Bankers)
And two Islamic Banking Branches of prime Bank Limited and two Islamic banking branch of
EXIM Bank Ltd. are operating in Bangladesh as per Islamic Shariah.
The first Islamic Bank, Islami Bank Bangladesh Limited was established in March, 1983 to
conduct banking activities on the basis of the basic tenets of Islamic Shariah.
Later, Al Baraka Bank Bangladesh Limited was established as the second interest free Islamic
Bank in March 1987.
The third and fourth Islamic Banks of Bangladesh namely, Al-Arafah Islami Bank Limited & Social
Islami Bank Limited has started functioning in Bangladesh from September 27, 1995 & November
25, 1995 respectively.
At last, fifth private sector Islamic Bank Shahjalal Bank Limited has been started banking
operation very recently from Mid-May 2001.
The only Foreign Islamic Bank Shamil Bank of Bahrain e.g (Islamic Bankers) which is the
largest Islamic Bank of the world opened a Branch in Dhaka, Bangladesh, in August 1997.
Besides, two Islamic Banking branches of Prime Bank Limited also started operation on Islamic
Shariah basis from 18th December, 1995 & 17th December, 1997 respectively and two Islamic
banking branch EXIM Bank started operation from on mid-2002.
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An overview of Social Investment Bank Limited:
3.1 Corporate information:
Social Islami Bank Limited (SIBL) was established in the year 1995 as a public limited company
which is engaged in Shariah based commercial banking in the country and its modus-operandi
are substantially different from other conventional banks. This is the second generation pioneerIslamic Bank in this country to introduce online banking facilities to its customers.
Name of the Company Social Islami Bank LimitedLegal Form Public Limited CompanyCompany Registration No C-28763(44)/95
Authorized Capital Taka 10,000,000,000Paid up Capital Taka 703,14,15,640Registered Office City Center, Level 19, 20, 21 & 22, 90/1 Motijheel C/A, Dhaka-1000
Phone: PABX 88 02 09612001122FAX: 88 02 9568098Email:[email protected]:www.siblbd.comSWIFT: SOIVBDDH
Tax Payer IdentificationNo
035-200-4971
VAT Registration No 9011046380 Area Code: 90101Credit Rating Agency Emerging Credit Rating Ltd.
Auditors M/S Kazi Zahir Khan & Co.Chartered Accountants, 67/4, Pioneer Road, Kakrail, Dhaka-1000
Chairman Major (Retd) Dr. Md. Rezaul HoqueManaging Director Md. Shafiqur RahmanCompany Secretary Md. Humayun KabirChief Risk Officer Md. Yunus AliChief Financial Officer Walid Mahmud Sobhani, FCMANumber of Employees 1802Number of Branches 94 (Ninety Four)Number of Shareholders 82,614Investors Enquiry Share Division
City Center, Level-19, 90/1 Motijheel C/A, Dhaka-1000 Phone:PABX 88 02 09612001122
For SIBL SecuritiesLimited(a subsidiary of SIBL)
Managing Director3rd floor, 15 Dilkusha C/A, Dhaka-1000
For SIBL InvestmentLimited(a subsidiary of SIBL)
Managing Director3rd floor, 15 Dilkusha C/A, Dhaka-1000
For Offshore Banking Off Shore Banking Department
mailto:[email protected]:[email protected]:[email protected]://www.siblbd.com/http://www.siblbd.com/http://www.siblbd.com/http://www.siblbd.com/mailto:[email protected]8/11/2019 an Appraisal of Social Investment Bank Limited (VVI)
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48 Kamal Attaturk Avenues, Banani, Dhaka-1213Phone: PABX 88 02 09612001122
Listing Status (Shares) DSE (Dhaka Stock Exchange):Symbol: SIBL, Listing Date: 18.11.2000
CSE (Chittagong Stock Exchange):Symbol: SIBL, Listing Date: 04.10.2005
Market Price as on 31.12.2013DSE: Taka 13.30 Category: A, CSE: Taka 13.20, Category: A
Background of Social Islami Bank Ltd.
Introduction:
Social Islami Bank Ltd. (SIBL) became operational on 22nd November, 1995 with a clear
manifesto to demonstrate the operational meanings of participatory economy, banking and
financial activities as an integrated part of an Islamic code of life. It is an alternative concept of
Islamic Banking with a unique human face approach to credit and Banking based on interest
free economics and financial transactions and income generating program for the millions of the
urban and rural poor and a profitable investment option for the rich to invest, earn and live in a
better society with greater security and peace at the operational level, SIBL is operating three-
sector Banking, such as, Formal, Non-Formal and Voluntary sector, SIBL is beginning a new
era of Islamic Banking having social, ethical and moral dimension in each of its activities ranging
from credit to construction, trading to transport, farming to fishing, manufacturing to mining and
so on. Some renowned personalities and institutions are sponsors and directors of this bank,
specially, the Founder Chairman Prof. Dr. M. A. Mannan, who is an internationally reputed
Islamic thinker and Professional Economist. He served in different important capacities in
different International Organizations including Asian Development Bank and Islamic
Development Bank. With his heartiest efforts and inspiration Ex-Secretary General of O.I.C Dr.
Hamid AI-Gabid and Deputy Speaker of Saudi Arabia and former Secretary General of Rabeta,
Dr. Abdullah Omar Nasseef, and Ex-Commerce Minister of Saudi Arabia Salah Jamjoom took
part in the establishment of the Bank. Besides, International Solidarity Fund (IFS) and
International Islamic Relief Organization (IIRO) also took part as Sponsors.
Vision
Working together for a caring society
Mission
Establishing Three Sector Banking Model
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Transformation to a service oriented technology driven profit earning Bank
Fast, accurate and satisfactory customer service
Balanced & sustainable growth strategy
Optimum return on shareholders equity
Introducing innovative Islamic Banking Products
Attract and retain high quality human resources
Empowering real poor families and creating local income opportunities
Providing support for social benefit organizations by way of mobilizing funds and social services
Strategic Objectives
Transformation into a service-oriented technology-driven profit earning bank
Ensure fast, accurate and best-in class customer services with customers satisfaction
Balanced and sustainable growth strategy
Optimum return on shareholders equity
Introducing innovative Islamic Banking Products
Attract, motivate and retain high quality human resources
Empowering real poor families and creating local income opportunities
Providing support for social benefit organizations-by way of mobilizing Funds and social
services
To achieve global standards in Islamic Banking
To invest in the priority sector for the overall economic development
Ensure best CSR (Corporate Social Responsibilities) practices
Ensure Green Banking
Commitments
To the Shariah
To the Regulators
To the Shareholders
To the Nation
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To the Customers
To the Employees
To the other Stakeholders
To the Environment
Code of Conduct for the Employees
Adhere to the Shariah Principles
Adhere to the disciplinary measures of the bank
Adhere to applicable laws and regulations during performance of duties
To inform the customers about the benefits and risks of the products and services
offered to them
To offer unbiased and fair service to the customers receiving the same services
Not to disclose the secrets of their customers and the banks which they come to learn by
virtue of their positions and titles to anyone other than those persons and authorities whoare explicitly authorized under laws
Not to cause any loss of reputation of the bank during works and attitudes
Not to be engaged in any activity that can be classified as personal business
Not to behave in contradiction with the principles of justice, integrity, honesty, reliability
and social responsibility
To cooperate with other employees for common purposes through building a courteous
and diligent communication during their fulfillment of duties
Not to use the banks assets and resources unproductively and outside the designated
purpose
Not to derive any personal benefits both from their own job potentials and from potentialsof their customers by using their positions and titles
To refuse all such benefit offers immediately and to inform such offers to the competent
authorities and to their superiors
Not to be involved in relations with the customers such as borrowing-lending, being
guarantor and opening common accounts with the customers which do not correspond
with ethical principles
Not to accept presents from the current or potential customers, other than those
presents accepted by the bank personnel under the established practices in the bank
To be aware of his accountability regarding the duties assumed during the performance
of the services Not to assume any position in any private and public organization other than
associations, foundations, cooperatives, and similar organizations without the approval
of his bank
Ethical Principles of SIBL
Objectivity
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Just and equitable
Reliability
Transparency
Observing Social Benefit and Respect to Environment
Fighting with money laundering
Insider Trading Relations with public organizations, regulators and other institutions
Personnel behaviors
Competition
Honesty
Impartiality
Advertisements and Announcements
Customer complaints
Security
General employee qualities
Employment and career development Working environment
Job Descriptions
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ISLAMI SHARIAH BASHEL BANKING ACTIVITIES OF THIS BANK AREAS FOLLOWS
Formal Sector:
A. Deposit
AI-Wadiah Current Deposit Account
Mudaraba Savings Deposit Account
Mudaraba Term Deposit Account
Mudaraba Notice Deposit Account
Foreign Currency Account
Mudaraba Monthly Profit Deposit Account
Mudaraba Hajj/ Umrah Savings Account
Mudaraba education Savings Scheme Account
Mudaraba Special Savings (Pension) Scheme Account
Mudaraba Millionaire Scheme Account
Basasthan Savings Account
Social Fund Deposit Account
Shelter Finance Deposit Account
Cash-Waqf Deposit Account
Voluntary Sector Development Deposit Account
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B. Investment
Mudaraba-Trust Finance Partnership
Musharaka-Participation Financing /Equity Financing
Murabaha- Cost Plus Sale
Bai- MuajjalSale under deferred payment
Bai- SalamForward Purchase
Leasing -The Bank leases out Machineries, Transport, Houses, Ship etc. for an agreed period of
time, the company being the legal owner and the lessee having the right to use the property for
the duration of the contract.
Direct Investment- This Bank directly invests capital on medium and long term basis in
Industry, Agriculture, Trade, Transport, Immovable property and for construction of houses etc.
Hire Purchase- In this system of business the bank invests for purchasing durable assets like
machineries, equipment, transport, land and building etc. along with the client with the stipulation
that the client shall pay off the principal amount with rent (at the agreed rate) in installment.
C. Foreign Exchange
To purchase and sell foreign currencies and carry on business of import through opening of L.C.
D. Remittance
This bank remits clients money both at home and aboard, completes all formalities of
remittance in respect of Bangladeshi living abroad and other customers.
E. Special Banking Services:
In addition to sale and purchase of foreign currencies the Bank issue Guarantees, accept
certificate and shares, accept articles & valuable documents, for safe custody locker service,
discharge responsibility as investment trustee, act as clients agents for recovery of clients
demand and carry on transactions on their behalf within the stipulated period, work as
correspondent of local and Foreign Banks and other Financial institutions, act as; Banker to the
issue on behalf of the companies, provide consultancy service to the customers and all other
Banking Services.
F. Special services for Bangladesh living abroad :
Provide financial assistance to the Bangladeshis for the travel to the place of employmentoutside the country, prepare projects for investment of wage earners,accept housing projects and
provide other necessary services to them.
G. Social Fund
The Social investment Bank considers man not with money but with a human face approach.
So, this Bank is firmly committed to provide a human face approach in all its activities. This Bank
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builds a Social fund with the part of the profit earned by the bank and collects all kinds of gifts,
Zakat and Sadakah from clients. This fund is invested in projects for betterment of the less
fortunate and poor people of the society.
Non-Formal Sector :
The Banks special program is directed mainly to up-lift the socio-economic conditions of rural
and urban poor. In order to achieve this objective, Social Investment Bank Ltd. is involved in the
mobilization and utilization of local resources and the surplus labor mainly from within and
provide employment opportunities to the unemployed and the landless besides investing in
N.G.O. activities, educational, health expansion activities etc. Social Fellowship Program for
Students has already been introduced; Family health service cheque is being introduced.
Non-Formal Banking Sector:
i) Family Empowerment Micro Credit Program
ii) Family Empowerment Micro Enterprise Program
iii) Student Social Fellowship Program
iv) Social Fund Investment and its utilization
v) Rotating Family Savings and Credit Net (RFSCN)
vi) Non-formalRealLifeSchool of Management
vii) Displaced Garments Child Worker Student Stipend Disbursement Program
Islamic Voluntary Sector :
This Bank has a special program of development of various religious and social service orientedinstitutions. Within this program, Mosque, Maktab, Waqf, Charitable organizations etc. will be
modernized and activated. All properties under this program will be utilized in productive activities
on participation basis. Besides, Hajj (pilgrimage) and Kurbani (sacrifice of animals according to
dictates of Islam) schemes are included in the program of Social Investment Bank Ltd Cash Waqf
Certificate has already been introduced for the first time in history. Various methods of
compulsory and voluntary Islamic distribution of finance, such as, Zakat, Sadakah, Waqf etc. will
be institutionalized
Voluntary Banking Sector:
i) Social Capital Market Operation Program:
a) Cash Waqf Certificate
b) Mosque / waqf Property Development Bond
c) Mosque / waqf Property Development Quard-e-Hasanah Certificate
d) Non-Muslim Trust Property Development Bond
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ii) Mosque / waqf Property Development Scheme
iii) Sabuj Haat Project
iv) Non-Muslim Trust Property Development Scheme
Model of Social Investment Bank Limited
Natures and Scope:
Social Investment Bank Ltd. (SIBL) intends to demonstrate the operational meanings of
participatory economy, banking and financial activities as an integrated part of code of life. It is an
alternative concept of Islamic Banking with a unique human face approach to credit and banking
based on interest-free economic transaction, mutual participation and sharing of profit and loss
through various modes of finance and humanism as reflected in its general name.
In the context of labor-surplus economy of Bangladesh, it represents a comprehensive alternative
concept and an operational model meant to combine together: (a) real material benefits, (b)
visible social advantages and (c) clear spiritual vision-all three in one package to the benefit of
not merely its clients and shareholders but also to the advantages of vast poor masses at the
grass-root level. Because Islam knows no distinction between a spiritual and temporal realm nor
between religious or secular activities in a society. Thus, there will be clear manifestation of
human and moral dimension in each of its interest-free banking, financial and economic Activities
ranging from credit to construction, trading to transport, farming to fishing, manufacturing to
mining and so on. This Bank is expected to offer an alternative income-generating program for
the millions of urban and rural poor and a profitable investment option for the rich to invest, earnand live in a better society with greater security and peace.
At the operational level, this Bank will provide a clear linkage among three sector of the real
economy :(a) monetized formal sector, (b) non-monetized informal sector and (c) Islamic
voluntary third sector. It will offer the modern banking services and undertake projects in the
formal, non-formal. Voluntary third sector as well as provide special services for the Bangladeshi
living abroad. The concept of depositor in this model of social banking Is different. Here
depositors participate in a variety of participatory modes of financial, commercial and project
specific investment activities such as profit- loss-sharing, rent-sharing, cost-plus trading,dividend- sharing hire-purchase arrangements, installment sale, forward of Salam sale as well as
various financial instruments (i.e., Mudarabah Bond), Co-operative Insurance (Takaful) and so
on.
It offers a socio- economic action program that conveys life in its totality so that it will not only
generate economic and social opportunities for work but also to foster the spirit of voluntary
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sharing and participation, collective social responsibility, mutual concern and reliance rather than
self-reliance likely to promote acquisitive behavior and individualism. This involved participation is
expected to create an environment of economic security and viable social peace through a sense
of belongingness that, in turn, breeds loyalty and encourages people to do their best sense.
Each project is to be designed in a manner so that income earning, spending and non-spending
activities become economic, social and moral necessities all at one, Work is viewed as an
extension of prayer through the diverse programs of this Bank. This comprehensive economic
and social banking program goes much beyond the mere replacement of interest rate by profit-
sharing ratio. It is expected to introduce inter-dependency and mutual concern into the life-style,
effecting the behavior of savers, investors, consumers, producers, labors, farmers, poor and rich
members of the society. The bank is expected to provide and institutional frame work for
implementing these, ideas, Ideas die without institution.
Operational Strategies:
This Banks program will be directed mainly to uplift the socio- economic conditions of rural and
urban poor with a view to eventual elimination of poverty. In the process, this Band intends to
empower the family as a basic unit of the society. Thus investment program of this Band will be
geared to generate profits, a percentage of which will be set aside to support social projects on a
non-profit basis. Thus all activities of the Bank will be subject to social Assignments, thereby
making social and moral preferences transparent and revealed in all its financial and economic
operations. The concept of social welfare will then have a different meaning. Here right will be
linked to duties. The operational strategies of the Band would, therefore, involve mobilization and
utilization of:
1. Local resources at the grass-root level mainly from within;
2. Surplus labor wherever possible;
3. Human and money capital of beneficiaries of earlier programs;
4. Unemployed and underemployed in the informal sector;
5. Islamic voluntary sector and voluntary labor for social capital accumulation and welfare;
6. Adoption of class-harmony extended family approach to industrial relations through employment
buy participation; and
7. Participation of women, minorities, and people or other religions to operationally the concept of
brotherhood of man and humanism.
The management of such a Bank would mainly be participatory in nature so that employees feel
that the enterprise belongs to them.
The program of this Bank would include commercial, agricultural, small industrial, educational,
health and grass-root level social banking activities. The will be designed in a manner so as to
make finance, production, marketing, training and moral suasion in one package. While basic
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human endowments and God-loving or God-fearing criteria will be used as fundamental
collateral, in all operations of this Bank, it will give particular emphasis on programs dealing with
the problem of absolute rural and urban poor, the various mechanics of partnership, equity-based
and profit-sharing operations (i.e., Mudarabah, Musharaka, Murabaha) and other tools will be
operational zed in manner so that economic, human and moral dimensions are clearly manifested
in order to hive them a distinctive character of Islamic finance.
Seven Distinctive conceptual features:
At the conceptual level, seven distinctive features of this Bank are as follows:
1. To develop an alternative human face approach to credit and finance based on participation and
sharing of profit and loss.
2. To implement projects, targeting absolute poor on a priority basis;
3. To involve the poor and all beneficiaries of the program in the recycling process for mitigating the
poverty of relatively less fortunate people around him though contribution into a social Fund.
4. To foster the notion of sharing and participatory management designed to raise the level of self-respect and mutual reliance rather than self-reliance likely to promote individualism;
5. To raise the level of human qualities and potentialities of the participants of the program through
required de-education, re-education, neweducation and programs for non-formal training onthe
job;
6. To provide a clear sense of economic, social and moral purpose to each of the participants of the
Banks programs; and
7. To design and implement programs that conveys life in its totality with a view to developing a
sense of humanism and a caring society.
Ten unique operational features:
At the operational level, ten unique features of this Bank are as follows:
1. To develop a built-in provision for a contribution to a Social Fund in all financial contracts and
transactions with the Banks clients either on individual or group or family basis as well as to
operational zed the notion of integration between secular economic and non-secular activities.
2. To involve local public and workers in the decision-making process in the management of cottage,
small or medium scale industries. The poor will be placed at the focal point of an integrated
package.
3. To develop training program for generation and updating the required skill of the employs.
4. To enable selected target groups of people to have an access to non-formal banking facilities on a
continuous basis.
5. To identify and execute finance and business programs / deals involving absolute poor and
destitute people having no physical asset as collateral.
6. To organize door-todoor mobile banking.
7. To develop income-generating programs specially suited for women and disadvantages groups of
minority too.
8. To design programs for utilizing surplus labor as well as voluntary labor services in rural and urban
areas.
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9. To organize programs intended to institutionalize the various obligatory and voluntary tools of
Islamic distributive measures such as Zakat, Sadaqa, Waqf Fund, etc.
10. To establish links between the formal, informal and voluntary sectors of the real people in area
economy.
AT A GLANCE OF SOCIAL INVESTMENT BANK LIMITED
Followings are the important historical events of this unique model Bank:
February 02, 1989: The concept and three-sector model of Social Investment Bank Limited was
formally presented and discussed with his Excellency Late. Prof. Dr. Ahmed Al- Nagger of Egypt,
who is considered to be the father of modern Islamic Banking as well as Prof. Dr. A. Wadoed
Shalaby of AL- Azhar University, Cairo.
April 21, 1989: The concept of this Bank was presented and then a series of discussions took
place with His Excellency Dr. Abdullah Omar Nasseef of Saudi Arabia, Vice Chairman, Majlish e-
Shura, the Kingdom of Saudi Arabia, former President of the King Abdul Aziz University and
Secretary General of the World Muslim League.
July 04, 1989: This model of Banking was presented and then a serious of discussions took
place with His Excellency Dr. Hamid AL- Gabid, Secretary General of the Organization of Islamic
Conference (OIC) of 53 Muslim Countries.
July 27, 1989: Memorandum (85) on this Bank was formally submitted to the Prime Minister of
the Government of the Peoples Republic of Bangladesh.
August 01, 1989: Formal memorandum on this Bank was formally submitted to the Honble
President of the Peoples Republic of Bangladesh.
September 24, 1989: Formal presentation of this model was made before the full council of
ministers at President House fro about two hours with the President in the Chair.
September 30, 1989: The proposal of this Bank was submitted to Governor, Bangladesh Bank.
December 6, 1994: The Letter of intent for establishing this Bank was issued by Bangladesh
Bank.
July 05, 1995: The Memorandum and Articles of Association were duly incorporated under the
Companies Act of 1994 to implement this Model of this Bank as conceivedand developed by Prof.
Dr. M.A. Mannan.
August 21, 1995: Permission to open First Branch of the Social Investment Bank Limited at
Dhaka was given by Bangladesh Bank.
November 22, 1995: After a long journey, SIBL was formally opened at 15, Dilkusha C/A, Dhaka
by the Honble President of the Peoples Republic of Bangladesh in a grand ceremony.
Authorized capital of the company is taken 1,000 million.
General Banking of SIBL
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Opening of different types of Mudaraba Saving Deposit
Mudaraba Saving Deposit (MSD)
These are profit bearing deposit accounts. The drawings are restricted in respect of both the
amount of withdrawal and the frequency thereof so that the payment of interest does not become
any compensating for the banker. Some time the restrictions are ignored against the depositors
written confirmation to forgo his claim for interest on the total balance for the whole month of
withdrawal.
When a client wants to open a MSD accounts, s/he fill up a form. Any account holder introduces
him. He signed form & signature card where needed his signature and give his own 3 copy pp
photo & 1 copy pp nominees photo. Nominees also fill up nominee form & put his/her signature
nominee form. Then the officer gives him a accounts number against money.
** Enclosed original Mudaraba Saving Deposit (MSD) form.
Special Savings Scheme
1. Mudaraba Hajj Savings Scheme
Hajj is one of the basic pillars of Islamthe complete code of life. Social Investment Bank Limited
has introduced a scheme in the name & style Mudaraba Hajj Savings Scheme to facilitate the
intending Muslims to perform Hajj properly at appropriate age. This is purely a savings Scheme
for Hajj. Any Muslim intending in perform Hajj by building-up deposit required for meeting Hajj
expenses will select one of the 20 (Twenty) alternative choices based on duration of period from
1 year to 20 years for building-up savings by monthly installments under this Scheme.
** Enclosed original Mudaraba Hajj Savings Scheme form.
2001 & next 19 years savings and Hajj / Umrahs approximate expenditure (Tk.) chart:
2001 2002 2003 20
Period Monthly
Savings
Hajj/
Umrahs
estimated
cost
Monthly
Savings
Hajj/
Umrahs
estimated
cost
Monthly
Savings
Hajj/
Umrahs
estimated
cost
Mo
Sa
20 Yrs 350/- 2,22,700/- 370/- 2,33,800/- 385/- 2,45,500/- 405/
19 Yrs 370/- 2,12,100/- 390/- 2,22,700/- 410/- 2,33,800/- 430/
18 Yrs 395/- 2,02,000/- 415/- 2,12,100/- 435/- 2,22,700/- 455/
17 Yrs 420/- 1,92,400/- 440/- 2,02,000/- 460/- 2,12,100/- 485/
16 Yrs 445/- 1,83,200/- 470/- 1,92,400/- 495/- 2,02,000/- 515/
15 Yrs 480/- 1,74,500/- 500/- 1,83,200/- 525/- 1,92,400/- 555/
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14 Yrs 515/- 1,66,200/- 540/- 1,74,500/- 565/- 1,83,200/- 595/
13 Yrs 555/- 1,58,300/- 580/- 1,66,200/- 610/- 1,74,500/- 640/
12 Yrs 600/- 1,50,800/- 630/- 1,58,300/- 665/- 1,66,200/- 695/
11 Yrs 655/- 1,43,600/- 690/- 1,50,800/- 725/- 1,58,300/- 760/
10 Yrs 725/- 1,36,800/- 760/- 1,43,600/- 795/- 1,50,800/- 835/
9 Yrs 805/- 1,30,300/- 845/- 1,36,800/- 885/- 1,43,600/- 965/
8 Yrs 905/- 1,24,100/- 950/- 1,30,300/- 995/- 1,36,800/- 1,05
7 Yrs 1,030/- 1,18,200/- 1085/- 1,24,100/- 1,135/- 1,30,300/- 1,19
6 Yrs 1,200/- 1,12,600/- 1,260/- 1,18,200/- 1,325/- 1,24,100/- 1,39
5 Yrs 1,435/- 1,07,200/- 1,510/- 1,12,600/- 1,585/- 1,18,200/- 1,66
4 Yrs 1,790/- 1,02,100/- 1,880/- 1,07,200/- 1,975/- 1,12,600/- 2,07
3 Yrs 2,375/- 97,200/- 2,495/- 1,02,100/- 2,620/- 1,07,200/- 2,75
2 Yrs 3,550/- 92,600/- 3,725/- 97,200/- 3,915/- 1,02,100/- 4,11
1 Yrs 7,065/- 88,200/- 7,415/- 92,600/- 7,785/- 97,200/- 8,18
2. Mudaraba Education Savings Scheme
Social Investment Bank Limited, being encouraged by the success of the Mudaraba deposit
accounts, has introduced another savings scheme namely Mudaraba Education Savings
Scheme . Savings money Tk.25,000/= aged 7 year, 10 year, 15 year, 20 year. After Maturity
Bank will pay 55,000/=, 77,000/=, 1,36,000/=, 2,40,000/=. If any client deny to received the
amount at a time, bank will monthly pay Tk. 1,000/=, 1,500/=, 2,500/=, 4,500.
Mudaraba Education Savings Scheme :
Term Initial
Deposit
End of the
Terms
Monthly Educational
Allowance
7
Years
Tk. 25,000/- Tk. 55,000/- Tk. 1,000/-
10
Years
Tk. 25,000/- Tk. 77,000/- Tk. 1,500/-
15
Years
Tk. 25,000/- Tk. 1,36,000/- Tk. 2,500/-
20
Years
Tk. 25,000/- Tk. 2,40,000/- Tk. 4,500/-
** Enclosed original Mudaraba Education Savings Scheme form.
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3. Mudaraba Special Savings (Pension) Scheme
Considering increasing demands from the clients of the bank as from the people of the all walks
of the country for special and attractive savings scheme on the basic of the Islamic Shariah so as
to enable and encourage them to save as per their capacity in Islamic way for their old age when
they will normally retire from their active economic life, Social Investment Bank Limited has
introduced Mudaraba Special Savings (Person) Scheme in which a person gets the opportunity
to build-up savings by contribution small monthly installments for getting an attractive amount at
the end of a specified term or a monthly amount for a specific period after the expiry of the term.
Mudaraba Special Savings (Pension) Scheme:
Monthly
Savings
Term Lump sum
amount
payable at
Maturity
Monthly
Savings
Term Lump sum
amount
payable at
maturity
Tk. 100/- 5
Yrs
Tk. 8,000/- Tk.
100/-
10
Yrs
Tk. 22,500/-
Tk. 200/- 5
Yrs
Tk. 16,000/- Tk.
200/-
10
Yrs
Tk. 45,000/-
Tk. 300/- 5
Yrs
Tk. 24,000/- Tk.
300/-
10
Yrs
Tk. 67,000/-
Tk. 400/- 5
Yrs
Tk. 32,000/- Tk.
400/-
10
Yrs
Tk. 90,000/-
Tk. 500/- 5
Yrs
Tk.40,000/- Tk.500/- 10
Yrs
Tk.1,12,500/-
Tk.1,000/- 5
Yrs
Tk. 80,000/- Tk.
1,000/-
10
Yrs
Tk.2,25,000/-
Tk.1,500/- 5
Yrs
Tk.
1,20,000/-
Tk.
1,500/-
10
Yrs
Tk. 3,37,500/-
Tk.
2,500/-
5
Yrs
Tk.
2,00,000/-
Tk.
2,500/-
10
Yrs
Tk. 5,62,500/-
Tk. 5 Tk. Tk. 10 Tk.
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5,000/- Yrs 4,00,000/- 5,000/- Yrs 11,25,000/-
** Enclosed original Mudaraba Special Savings (Pension) Scheme form.
4. Mudaraba Monthly Profit Deposit Scheme
Social Investment Bank Limited 1.mined has launched a new, deposit product under the nameand style MudarabaMonthly Profit Deposit Scheme in accordance with the principle of Islamic
Shariah Any individual may open account under the- Scheme by depositing a minimum amount
of Taka 50,000/=, 1,00,000/=, 1,50,000/=, 2,00,000/=, 2,50,000/=, 3,00,000/= and multiple
thereof at a time for 3 years. Monthly provisional profit shall be given to the account just after
completion of 30 days from the dale of opening the account. The profit amount will be adjusted on
completion of each accounting year after declaration of final rate of profit.
** Enclosed original Mudaraba Monthly Profit Deposit Scheme form.
5. Mudaraba Millinery Deposit SchemeSocial Investment Bank Limited 1.mined has launched a new, deposit product under the name
and style Mudaraba Millinery Deposit Schemein accordance with the principle of Islamic
Shariah Any individual may open account under the- Scheme by monthly depositing amount of
Taka 550/= @ 25 years, 1,50/= @ 20 years, 2,050/= @ 15 years, the profit amount will be Tk.
10,00,000/= after maturity.
Mudaraba Millionaire Scheme :
Term Monthly Deposit Lump Sum Amount Payable at Maturity
15 Years Tk. 2,050/- Tk. 10,00,000/-
20 Years Tk. 1,050/- Tk. 10,00,000/-
25 Years Tk. 550/- Tk. 10,00,000/-
** Enclosed original Mudaraba Millinery Deposit Scheme form.
6. Mudaraba Home Savings Scheme
Considering increasing demands from the clients of the bank as from the people of the all walks
of the country for special and attractive savings scheme on the basic of the Islamic Shariah so as
to enable and encourage them to save as per their capacity in Islamic way for their old age when
they will normally retire from their active economic life, Social Investment Bank Limited has
introduced Mudaraba Home Savings Scheme in which this scheme gets the opportunity to
build-up shelter by contribution small monthly installments for getting an attractive amount at the
end of a specified term or a monthly amount for a specific period after the expiry of the term.
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Under this Scheme account may be open for monthly deposit of, Tk. 500/-, Tk. 1000/. Tk 1500/-.
Tk. 2000/-. After 15 years he will get total amount of Tk. 260000/-, 520000/-, 780000/-
&1040000/-.
** Enclosed original Mudaraba Home Savings Scheme form.
Mudaraba Term Deposit
Mudaraba Term Deposit are accepted by the bank with a sum of Tk. 5000 or above from
individual (single and joint), firms (proprietorship/partnership), limited companies, autonomous
bodies, charitable institution, association, educational institution, local bodies, trust etc. against
issuance of nontransferable receipts in acknowledgement of MTD received. MTD Account may
be opened in the name of minors jointly with their guardians.
The Mudaraba Term Deposits are accepted for period of 3, 6, 12, 24, & 36 months. Weightage on
the rate of return is given to deposits of longer maturity. Mudaraba Term Deposit Accounts
holders will share the profit of investment with Social Investment Bank Limited, at the rate
declared by the bank from time to time.
** Enclosed original Mudaraba Term Deposits form
Mudaraba Term Savings Scheme Based on Monthly Deposit:
Monthly Savings Tk. 200/-
Term Net
Savings
Lump Sum
Profit
Lump Sum Amount
Payable at Maturity
Net
Savings
Lum
5 Years Tk.12,000 Tk. 4,000 Tk. 16,000 Tk.18,000 Tk. 6
8 Years Tk.19,200 Tk.10,800 Tk. 30,000 Tk.28,800 Tk.1
10
Years
Tk.24,000 Tk.18,000 Tk.42,000 Tk.36,000 Tk.2
12
Years
Tk.28,800 Tk.25,200 Tk. 54,000 Tk.43,200 Tk.3
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Monthly
Savings
Tk. 500/- Tk. 2000/-
Term Net
Savings
Lump
Sum
Profit
Lump Sum
Amount Payable
at Maturity
Net
Savings
Lump Sum
Profit
5 Years Tk.30,000 Tk.10,000 Tk.40,000 Tk.1,20,000 Tk. 40,000
8 Years Tk.48,000 Tk.27,000 Tk.75,000 Tk.1,92,000 Tk.
1,08,000
10
Years
Tk.63,000 Tk.45,000 Tk.1,05,000 Tk.2,24,000 Tk.1,80,000
12
Years
Tk.72,000 Tk.63,000 Tk. 1,35,000 Tk.2,88,000 Tk.
2,52,000
Mode of Deposits and Profit Rate
1. Mudaraba Term Deposits: Profit
Rate (%) a. 36 Months@ 10.55% b. 24 Months@ 10.35% c. 12 Months@ 10.15% d. 6
Months@ 9.70% e. 3 Months@ 9.25% 2. Mudaraba Savings Deposits@ 7.45% 3.
Mudaraba Notice Deposits@ 6.15%4. Deposit under Special Schemes a. Hajj Deposit
Schemes@ 10.55% b. Monthly Profit Deposit
Scheme
(Minimum Tk.50,000/- &
Maximum Tk.10,00,000/-)@ 12.00% c. Cash Waqf@ 10.70%
Opening of different types of Al-Wadia Current Accounts
Drawings are allowed from such an account without any restriction within the funds available in its
credit. Ordinarily, no interest is paid on this deposit.If some one open AWCD, he fill up form and enclosed this type of paper shown as bellow:
1. For Sole Proprietorship
Trade License
Trade License
Partnership Deed
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A Certificate Copy Of The Memorandum And Articles Of Association Duly Attested By The
Signatory Of The Amount
Certificate Of Incorporation
Certificate Of Commencement Of Business
Copy Of The Last Balance Sheet
List With Name Designation And Specimen Signature Of Person Authorized To Operate The
Account Duly Certified By The Chairman
Minutes Of Board Of Directors Meeting Authorizing The Opening Of Accounts With Us Duly
Certified By The Chairman/ Managing Director
List Of Directors With Address
2. For Partnership
3. For joint Stock Company
** Enclosed original Al-Wadia Current Accounts form.
Cheque Book
Negotiable Instrument Act, 1881, says that Cheques, Bills of Exchange and Promissory notesare negotiable instruments (Section 13). The term cheque is defined under section 6 of
Negotiable Instrument Act 1881 which states that A cheque is a bill of exchange drawn on a
specified banker and not expressed to be payable otherwise than on demand. It we analyze this
section; a cheque has the following characteristics:
i) A cheque is a bill of exchange.
ii) A cheque is always drawn upon a banker.
iii) A cheque is always payable on demand.
As cheque is a bill of exchange, it is necessary to understand what is understood by bill of
exchange. As per section 5 of Negotiable Instrument Act, 1881, a bill of exchange in an
instrument in writing containing an unconditional order, signed by the maker, directing a certain
person to pay a certain sum of money to a certain person or to the order of that certain person or
to the hearer of the instrument. If we apply this definition of a bill of exchange to understand the
meaning of a cheque, a cheque is an instrument in writing containing an unconditional order
signed by the maker directing a certain banker to pay a sum certain money, on demand to or to
the order of a certain person or to the bearer of the instrument. From above, we can summarize
the characteristics of a cheque as under;
1)A cheque is a negotiable instrument
2)A cheque is a bill of exchange, hut every bill of exchange is not a cheque.
3)A cheque is always drawn upon a specified banker.
4)A cheque is always payable on demand.
5)There are three parties to a cheque:
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due course. In practice, the banker insists on identification of the payee while making payment of
such a cheque in cash. This is done to avoid any chance of being charged with payment out of
due course.
Stale or outdated cheque
As per banking custom a cheque becomes stale when it remains in circulation for more that six
months, though there is no legal sanction in this respect. Such an instrument is not honored by
the drawee banker unless invalidated by the drawer.
Post dated cheque
A post-dated cheque is one, which bears a future date as its date of issue. Such a cheque is valid
and its negotiability is not inspired simply because it is post dated. But the banker can not pay it
earlier than its date because the drawers mandate is not to pay it earlier. It the banker pays it
before its ostensible date, the payment is not a payment in due course and as such, he loses
legal protection and is liable to his customer for any loss that may arise out of his action. A post
dated cheque is not invalid by reason of only being post dated unless it involves any illegal or
fraudulent purpose or transaction.
Antedated cheque
Where a cheque bears a date before the date of its issue it is known as an antedated cheque and
is not invalid because of only antedating provided this does not involve any illegal or fraudulent
purpose or transaction. A cheque antedated for more than six months becomes stale or out of
date as per banking practice.
Stop payment
The drawer of a cheque has the right to countermand the payment thereof. To be effective Hire
notice of slop payment should be given in writing under his proper signature giving frill description
of the cheque to reach the banker before its actual payment. If the drawer sends notice which is
duly received, then the banker will have to bear any loss that may ensue should he pay the
cheque thereafter until the stop payment instruction is cancelled. A stop payment by telephone
requires written confirmation. Immediately on receipt of a telephone in this regard, the banker
should communicate with the customer asking for confirmation in writing and meanwhile, if the
cheque is presented, payment thereof should be tactfully avoided taking care that thisnonpayment may not be construed as causing damage to tile customers credit. The holder of a
cheque can not atop payment but on receipt of such a request, the holder should be advised to
obtain the drawers written instruction. If the cheque in question requires endorsement and the
holder reports to have lost it without any endorsement, the banker should take precaution so that
he is not charged for payment thereof out of due course and not In good faith.
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Date
The mandate of the drawer as conveyed through the cheque requires being dated. It appeals
probable that any holder of a cheque may insert the date where it was issued undated but in
practice, the banker dishonors an undated cheque. The date as appears on a cheque is
presumed to be the date on which it was made or drawn.
Crossing of cheque
A cheque can be crossed generally or specially to a banker by the drawer, or the holder thereof.
The crossing must be on the face of the cheque, there must be two lines drawn transverse and
parallel. There can not be any general crossing without His two transverse lines, with or without
the words and company or abbreviation thereof though the name of a banker without the lines is
sufficient to constitute a special crossing. The crossing of cheque is a material part of the cheque.
Cancellation of crossing
The drawer of a cheque (not any body else) sometimes cancels the crossing for making it
payable over the counter. This must be done by writing crossing cancelled under his signature
as recorded with the banker and by an indication of having cancelled it. The cancellation is done
in practice and not under sanction of law. This is being an immaterial alteration, the paying
banker must be very cautious lest he pays a crossed cheque over the counter.
Payment in due course
Payment in due course means payment in accordance with the apparent tenor of the instrument
in good faith and without negligence. Apparent tenor means what appears on the face of the
instrument and comprises date, payee, form of drawing (order or bearer), amount, signature of
drawer and crossing.
Payee of cheque
There must be a person entitled to receive the payment of the cheque either as a payee or his
endorsee or bearer. The drawer himself may also be the payee by writing his name self or pay
cash. In the absence of the payees name, the cheque can not be treated as a bearer one nor it
can be looked upon as a cheque at all and the better course would be to return it for completion
under authentication of the drawer.
Amount of chequeThe law does not specify whether the amount of a cheque is required to be expressed both in
words and figures. But as per banking practice the amount is stated both in words and figure.
Where the amount in words and figure differs, the amount stated in words shall prevail if the
banker pays the amount of cheque expressed in words even though it is higher than that
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expressed in figure, the banker may be protected under law but in practice, he does not pay a
cheque with discrepancy. To pay the smaller amount is also not the general custom.
Sufficient balance
The payment of a cheque is subjected to the drawers havingsufficient credit balance in his
account unless an arrangement has been made by the drawer for an overdraft. When the
balance is not sufficient to meet the whole amount of the cheque, the payee can not demand a
part payment nor His banker is bound to make such a payment the cheque can not be
considered as an assignment of funds in order to enable the payee have an equitable claim on
the drawers balance.
Drawers signature
The banker can not debit his customers account with the amount of cheque if the customers
signature thereon is forged, as this is not the order of the customer. It is the duty of the banker to
acquaint himself with the customers specimen signature and before payment of a cheque, he
must compare the signature with the specimen one on his record. Where a forgery is detected
subsequent to the debit of the account and the forgery is found to be directly due to or is
mundanely cumulated with negligence of the customer in the safe keeping of the cheque book,
the banker is entitled to debit his account.
Material alteration
A material alteration to negotiable instrument is one, which in any way alters the operation of the
instrument materially i.e., which causes it to speak differently than originally. The most common
material alterations include all those of the date, crossing, and place of payment, amount, and
name of payee. The Negotiable Instrument s Act in s.3 (f) provides material alteration in relation
to a promissory note, bill of exchange or cheque includes any alteration of date, the sum payable,
the time of payment, the place of payment, and where any such instrument has been accepted
generally, the addition of a place of payment without the acceptors assent. Any material
alteration renders the instrument void against all those who were already parties to it but not
against those who were parties subsequent to the alteration. Where a material alteration is not
apparent, the payment in due course and according to the apparent tenor of the instrument at the
time of payment, would discharge the payer from all liability on the instrument.Alteration by drawer
All material alterations in a cheque must he made with the drawers assent, evidenced by his
signature and not initials as an initial is easier lo forge than the full signature for which reason the
banker does not maintain record of the initials of the account holders. If there are two or more
signatories to the cheque all must join in authentication of the alteration. Amy material alteration
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made without drawers assent renders the cheque void. An order cheque may be turned into a
bearer one by the drawer substituting the word order with bearer under signature. No other
person has authority to make the alteration. But any holder may alter a bearer cheque to an order
cheque without drawers verification by simply scoring the word bearer. Similarly, crossing of
and uncrossed cheque by the holder does not require die drawers authentication.
Bankers Liability on altered cheque
If the banker pays a cheque with a material alteration without drawers consent, he does so at his
own risk, for he can not generally debit his customer with the amount of such a cheque.
Mutilation
Sometimes, a cheque may be torn accidentally or otherwise in such a way as its condition may
not afford sufficient evidence that the drawer or a holder did not intend to cancel it. As such, in
such a case the paying banker would be justified in dishonoring the cheque for the reason of
mutilation and should not pay such a cheque without drawers confirmationw collection bankers
guarantee. A slight slit on a cheque should not. However, be taken as a mutilation unless there is
reasonable doubt whether the drawer or a subsequent holder intended to cancel it.
Account payee cheque
A cheque marked account payee or payees account only between the two parallel lines of
general crossing is said to be crossed account payee and ceases to be negotiable. These words
by themselves without the general crossing do not form a crossing but the instrument which
contains such a marking, may better be treated as such as the intention or the mandate of the
drawer could not be other than that conveyed by these words. The significance of the marking is
not minimized even if the cheque is a bearer one. The duty of the paying banker is fulfilled by
payment of such an instrument in good faith and without negligence, as he can not be expected
to follow the money after it has reached the collecting banker to ensure credit to the proper
account. But the paying banker should refuse to make payment of such a cheque if there appears
an indication of the amount being credited to other than the named payees account.
Cheque can not he paid
A cheque does not become payable even if it is otherwise in order, where its payment has been
slopped by the drawer in writing, there is notice of customers death, bankruptcy, insanity, there isknowledge of defective title of the holder, court injunction or any other court order restraining the
customer form operation the account.
Customers death
Upon receipt of the news of a customers death all operations on the account should be
suspended by the banker as with the death of the customer the title of his property passes to his
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legal heirs unless otherwise provided for in a trust deed or a will left by the deceased or in letters
of administration. Cheque marked at the request of die deceased or paid before receipt of the
news of the death can however be debited to the account.
Inland Remittance
Bank is a service oriented industry and deals with public money. They provide services to their
clients through different ways. Transfer of money/fund of one person /customer to another
person/ firm/ organization through the bank is called remittance. Any Person can remit funds to
any one within the country through any of the branches of the some bank by the following means
with nominal charges:
i) Pay order
ii) Demand draft.
iii) Telegraphic Transfers
iv) Mail Transfers.
Payment order
This is an instrument issued by the branch of a bank for enabling the Customer/ purchaser to pay
certain amount of money to the order of a certain person/ firm/ organization/ deptt./ office within
the same clearing house area of the pay order issuing branch.
The payment order is used for making a remittance to the local creditor. As prevalent, the
payment orders are in the form of receipts, which are required to be discharged by the
beneficiaries, where applicable on revenue stamps of appropriate value, against payment in cash
or through an account. The payment order is not a negotiable instrument and can not be
endorsed or crossed like a bankers draft.
Characteristics
a) The issuing branch and the paying branch is same. (self drawing)
b) Applicable for payment with the clearing house area of the issuing branch.
c) This is may be open or can be crossed.
Procedure for issuing
a) Obtain P.O. application form (F-44) duly failed in and signed by the purchaser/applicant.
b) Receive the amount in cash/transfer with commission amount.c) Issue P.O.
d) Enter in P.O. Register
Procedure for Payment
a) Examine genuinely of the Pay Order
b) Enter in P.O. Register, give contra entry.
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Dr. General A/ C- Drawer Br.
Cr. Bills Payable A/c-D.D. Payable.
Particulars of DD is entered in D.D. Payable Register under initial of an officer.
Payment of D.D. Through Suspense A/C: Sometimes it happens that a D.D. is presented to a
branch for payment before the IBCA for the same is received. The draft is then paid with extreme
care by giving the following entries
Dr : Suspense A/C D.D. paid without advice (instead of D.D. Payable A/C.)
Cr : Partys A/C/ Clearing banks A/C/ Cash (Stamp is affixed on the draft and in the register)
Then after receipt of IBCA.
Dr. H.O Gen. A/C (Drawer Branch)
Cr. Bills payable A/C-DD. Payable.
Dr. Bills payable A/C-D.D. payable.
Cr. Suspense A/c-D.D. paid without advice
Date of entry reversed is noted by in the register and initialed by the incharge.
Cash payment:
Satisfy as to the identity and respectability of the presenter and particularly the genuineness of
signatures of the drawing officials. Signature of Letter of introduction issued by Drawer Branch
Identification by a constituent/ respectable gentleman known to the branch would normally be
acceptable.
Cancellation of a D.D:
Steps / Care to be taken:
(i) Written application from the purchaser
(ii) Signature verification of the purchaser. The D.D. which bears any endorsement should
not be accepted for cancellation until No objection from the payee / endorsee is given.
(iii) Commission not refunded.
(iv) Debit the Drawee branch and pay proceeds on identification of purchaser.
(v) Torn Signature but not to be destroyed.
(vi) Mark the D.D. across the face Cancelled by red ink.
Duplicate D.D: Steps:(1) Written application by the purchaser.
(2) Signature verification (of the purchaser as per form).
(3) Indemnity bond.
(4) If payee is a company/semi govt./Govt. authority letter should also be obtained from the
payee.
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(5) Confirmation from drawee branch that D.D. is still unpaid and have marked caution (message
by quickest means duly tested and charges from the party.) If by letter to be signed by two P.A.
holders from both ends. Head Office approval for issuance if duplicate D.D to be obtained.
(6) Duplicate D.D. remain identical to the original except printed number and affix stamp
Duplicate D.D. issued in lieu of original D.D. No. Dated - reported lost, and noted on
D.D. issue register, D.D. application, counter foil of both D.D. at issuing Br. and in D.D. payable
register of drawee Br.
(7) Intimate issuance of Duplicate D.D. to the drawee branch.
(8) In case original is presented, the same should not be paid under intimation to Head Office.
** Enclosed Demand Draft. Application form
Telegraphic Transfer (T.T.)
It is an instruction duly tested sent by telex/fax/telegram/ telephone/ express mail etc. to the
drawee branch for paying a certain sum of money to a specified person. This mode of transfer of
fund may be effected at the written request an account holder of the branch and against value
received from him. It is preferable to obtain a confirmatory cheque from the customer.
Characteristic :
a) Issued by one branch to another branch and massage is tele-communicated
b) Remittance / transfer of money is done through tested tele messages.
c) Remittance is effected on the basis of tested message.
d) Test key apparatus is required.
Issue of T. T:
Obtain T.T. application form (form No. F17) duty failed in and signed by the purchaser/applicant
with full account particulars of the beneficiary. Receive the amount in cash/transfer with
prescribed commission, postage, and telephone/telex charge. Prepare T.T. message inserting
test number (code number). Enter in T.T. issue register (B-30). Issue advice to the payee branch.
Dr. : Cash or Cheque
Cr. : Gen. A/C Paying Branch
Cr. : Income A/CCommission on T. T.
Cr.: Telegram charges. Cost Memo given to the purchaser.T. T. message prepared in duplicate, checked and signed by the in charge and Manager, tested
and transmitted. IBCA prepared in duplicate. The original sent to paying branch as confirmation
of message.
T.T. commission is .15%
Vat is 15% of T.T. Commission.
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Telex / Postage charge is 50 tk.
T. T. Receiving and payment:
Go through text of the T. T. carefully and Decode the text and tally the test. If the test agrees
Pass the FollowingVouchers:
(A) T.T. Advise and Credit
Dr. Gen. A/cIssuing Br. (Responding)
Cr. Bills PayableT.T. Payable
Dr. Bills PayableT.T. Payable
Cr. Party A/c.
(B) T.T. Advise & PAY :
Dr. Gen. A/c Issuing Branch (Respond)
Cr. Bills payable A/cT.T. payable (T.T. PO is issued and delivered to the Payee)
Dr. Bills Payable A/cT.T. Payable (T.T. PO)
Cr. B/P Cash /Clearing (Duly signed by the payee on revenue stamp and identification)
** Enclosed T.T. application form
M.T. :
In the prescribed format the purchaser / the drawer branch instruct the drawer branch to pay a
specified sum of money to the payee named in the IBCA preferably by crediting his account.
Issuance Procedure;
- Application in writing in prescribed form
- Deposit of money including commission
- Issue of cost memo
- Entry in M.T. issue register serially
- M.T. advice in IBCA (in block letters) with Test.
Vouchers:
Dr. Cash / Party A/c
Cr. General A/c (Drawee Br)
Cr. income A/c. CommissionCr. Postage Charge.
Receiving / paying Branch:
Test decode / Signature verified
Vouchers;
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Dr. Gen. A/cIssuing Branch
Cr. Bills Payable A/cM.T. Payable
Dr. Bills Payable A/cM.T. Payable
Cr. Partys A/c Advice and Credit.
Clearing Hose
Functions, procedures and accounting entries
Clearing stands for mutual settlement of claims made in among member banks at an agreed time
and place in respect of instruments drawn on each other.
Clearing house is an arrangement under which member banks agree to meet, through their
representative, at the appointed time and place to deliver instruments drawn on themselves.
The net amount payable or receivable as the case may be, is settled through an account kept
with the controlling bank (Bangladesh Bank/Sonali Bank)
Types of clearing :
Outward clearing
Inward clearing
Types of returns :
Outward return
Inward return
Clearing (outward) process: tier
First tire : Collecting Branch
Second tire : Principal Branch/local office
Third tire: clearing house (Bangladesh bank/Sonali bank)
Procedures of outward Clearing : Flow sequence
First tire:Collecting Branch
Instrument received
Instrument checked
Instrument deposited in second payees account : guarantee.
stamping
Special Crossing
Clearing Stamp
Endorsement
Return of counterfoil to the customer
Particulars entered in the out. Clearing register/computer
Register Balanced, Vouchers separated from the instruments
Prepare voucher :
Dr. Sundry Assets A/C : Clearing house
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Cr. All pay-in-slips / Vouchers
Sorting of instruments, prepares sub & main Schedules
Prepare House page according to main schedules
Tallied house page with outward clearing register
Instrument sent to Pr. Br/local office/main branch (2nd tire)
Voucher passed.
For return and unpaid instrument
Dr. Party A/C
Cr. Sundry assets A/C : Clearing house
Advice received from Principal/Local office
Dr. Head Office A/C
Cr. Sundry Assets A/C : Clearing house
Second tire :Pr. Branch/LO/main branch
Instrument received by this office :Lodgment by this branch :
Received house pages with instruments.
Recorded the amount in a register from house page.
Prepare bank-branch wise main schedule.
Prepare house page.
The instrument with house page & house book sent to the clearing house.
Third tire : Clearing house (B bank/ Sonali bank)
The instrument are delivered to the respective banks
* everyday 5 to 10 cror tk are in outward
Clearing (inward) process : tire
First tire : Clearing house (B bank/ Sonalibank)
Second tire : Principal branch/LO/Main branch
Third tire : Paying branch
Procedures of inward Clearing : Flow sequence
First tire : Clearing house (B bank/ Sonali bank)
Instrument received from other banks in the clearing house.
The amount and number of instruments received are entered in the house book from the main
schedule of respective banks. Instruments delivered, received and the difference are written on a figure slip provided in the
clearing house.
Second tire : Pr. Br/LO/Main br.
Instruments with schedules arranged branch wise.
The amount of each schedule received entered in the house pages of the respective branches.
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The respective house pages are totaled and check the amount with total amounts of instrument
received from all banks.
The instruments are sent to respective branches with the slip showing total amount and number of
instruments.
The instrument sent to the branches concerned for clearance and advice are collected from them
for honored cheques.
Third tire :Paying branch.
Particulars of the instruments are compared with the schedule.
Instruments sent to the respective dept for honoring them.
From honored cheques pass the following vouchers :
Dr. Party A/C (already debited by instruments)
Cr. Head Office A/C
Dishonored cheques (if any) with reason memo and credit advice sent to principal branch.
Every day 3 to 7 cror tk in inward.
** Enclosed objection memo for cheque return
Crossing on cheque:
It is a direction to the paying banker by the drawer that payment should not be made across the
counter. The payment on a crossed cheque can be collected only through a banker.
Significance of crossing :
Serves as a measure of safety against theft, loss of cheque in transit.
A person, who is not entitled to receive its payment, is prevented from getting the cheque
enchased at the counter of the paying banker.
Types of crossing:
1. General2. Special
General crossing:
Where a cheque bears across its face an addition of the words and company or any other
abbreviation thereof, between two parallel transverse lines, or two parallel transverse lines
simply, either with or without the words not negotiable, that addition shall be deemed a crossing
and the cheque shall be deemed to be crossed generally.
Specimens of General crossing :
Special crossing:Where a cheque bears across its face an addition of the name of a banker, either with or without
the words not negotiable, that addition shall be deemed a crossing, and the cheque shall be
deemed to be crossed specially, and to be crossed to that banker.
Specimens of Special crossing :
Drawing two parallel lines is not necessary in case of specially crossed cheque.
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Endorsement :
The chief characteristic of negotiable instrument is its negotiability i.e. it can be negotiated from
one person to another. The essence of negotiation this lies not in the transfer of the instrument
from one person to another, but in the fact that the transferee must get the right as the holder of
the instrument. An instrument may be negotiated in any of the following two ways.
a) By delivery : A promissory note, Bill of exchange or cheque payable to bearer is
negotiable by delivery thereof.Thus in case of bearer instrument merely delivery thereof
constitutes its negotiation.
b) By endorsement and delivery: A promissory note, Bill of exchange or cheque payable to
order, is negotiable by the holder by endorsement and delivery thereof. Thus negotiation of an
order instrument requires endorsement and delivery thereon by its holder.
Vault :
All cash, instruments (PO, DD, check) and other valuable documents are kept in the vault, which
is insured by a local insurance company. If there is shortage of cash during transaction period
money is transferred to drawn from the central bank. There are three keys of vault, which are
given to three most senior officers. Daily an estimated amount (25 lacs, which is insured by a
local insurance company) of cash is brought out from the vault for transaction purpose. No more
than Tk. 25 lacs brought at once from the vault on a single day.
Deposit mobilization
A strong deposit base is a critical for success of a bank. During the last years the bank has
mobilized a substantial amount in deposits in transactional and savings accounts. The highest
deposit is seen to be in the year 2002 & the lowest in 1998.
Deposit mobilization :
Year Deposit (figure in million) Growth %
1999 3899.72 88.49
2000 4863.21 24.70
2001 10569.67 117.33
2002 15141.34 43.25
2003 19709.31 30.16
Sources : Annual Reports of Social Investment Bank Limited.
Deposit for the year 1998 was Tk. 2068.85 million.
Investment
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Appraisal of Investment Proposal, Sanction and Disbursement of Investment
Loans and advances of a banking/financial institution. In other words, investment of Islamic
Banking Institution account for its vital portfolio activity. This is the activity, which the bank /
financial institution must carry with care and prudence so that it can earn on the investments and
get back the money as per planning. Without such earning, it is not possible for a bank to sustain
by meeting the profit payable on deposits and the overall cost of fund including administrative
cost. Since the bank has to plan to invest the owners capital and depositors time fund in short or
mid or long term financing and get back the same as per schedule, a banker has to be very much
careful in selecting the client and the line of trade and while industry while committing for the
investment.
A banker must have its strategy of investment operation and sectoral credit budget and the
features of selecting sponsors/prospective client and the system of appraisal of any investment
proposal. A branch manager wile choosing a credit commitment need to consider the following
major points:
1. Character, Capacity and credit worthiness of the applicant to be critically ascertained.
2. Past business records and trend to be examined with reference to the different books of
accounts/financial statements bank accounts turnover.
3. Applicants previous banking exposure and tax paying (TIN) capacity to be examined to assess the
financial solvency.
4. self declaration of applicants moveable and immovable assets and any liability has to be obtained
and checked up with reference to valid documents and ownership/ possession and liability if any
either in the name of the applicant or business.
5. Applicants business license whether obtained from recognized competent authority and whether
the same is valid to be seen.
6. proposed investment if has the compatibility to the credit norms and criteria.
7. collaterals, if any the applicant has offered to additionally secure the facility prayed for, the status
and value thereof to be assessed with reference to valid ownership and possession document and
the adequacy thereof to be determined.
8. Primary security under the facility if has the ready marketability to be examined. The go down or
storing house should have the location of easy access.
9. Whether the concerned business is being operated at applicants own shop or at rented business.
If rented rental agreement and the up to date rent paid receipt to be examined.
1. The business shop and the items of goods and merchandise of primary security can be easily
inspected by bank official.
2. In case of applicant, where partnership firm, is has to be seen whether the same is registered and
the partnership deed to be examined to ascertain whether any detrimental clause is contained
therein.
3. If proposed client is Private Limited Company, M/A, A/A and certificate of incorporation to be
studied including companys Board resolution to obtain credit facility.
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4. There must be not any classified loan either in the name of the applicant or in the name of his
business establishment or any concern of his interest.
5. Credit needs of the applicant/ business firm/company with reference to production/service strength
and sale to be assessed in the line of circulated credit norms.
6. In case of higher investment limit, lending risk analysis to be made to determine the extent of risk
in management or financial commitments/security aspect.
7. In case of long term investment proposal, detailed feasibility to be examined with reference to
technical, financial and commercial viability and economic justification before going for the
commitment.
8. where there is any credit norms fixed up by the central bank for assessing the working capital
needs of industrial enterprise those to be followed for the fixing up of investment limit favoring of
the applicant.
9. In cases where there is guarantors their worth and creditability and the relationship of the
guarantors with the client to be ascertained and kept on record.
10. In case of HPSM investment for House Building (Commercial or residential), in addition to legal
security of the land, the prospect of recovering the periodic installment of loan out of the monthlyrental income of the house or market to be specially verified from reliable source and physical
assessment.
11. After satisfying the requirements as highlighted above, investments to be sanctioned by competent
authority/authorized officer.
Investment of SIBL
Year Investment
(Figure in million Tk)