Personal Question1. Self Introduction2. Do you deserve promotion? Why?3. Some questions form academic background.4. DAIBB-full form: Diplomaed Associates of Institute of

Bankers Bangladesh General Knowledge on BASIC Bank

1. Name of MD (Full) : Kazi Fakhrul Islam2. Name of DMD : Mr.Fazlus Sobhan, Mr.Kanak Kumer

Purakaosta, Mr. Kibrya ,Mr. A. Monaem Khan,. 3. Name of Chairman : Sk. Abdul Hye Bachuchu.4. Name of some important Directors :

i. Mr Fakhrul Islam, Director, BASIC Bank Limited, Chairman, Bangladesh Small and Cottage Industries Corporation (BSCIC)

ii. Mrs.Qumrun Nahar Ahmediii. A.K.M Rezaur Rahman ,Former Additional Secretaryiv. A.K.M Kamrul Islam,FCA, Director, BASIC Bank

Limited

5. Name of Company Secretary : Shah Alam Bhuiyan,General Manager

6. Name of GMs:Name Division

(1)Mr.ASM Rawshanul Huq

Administration (HRD ,Micro Credit)

(2)Mr.Hasan Tanvir

ICT. Division

(3)Mr.Mohammad Ali

Shantinagar Br

(4)Mr.Ahmed Hossain

Kawranbazar Br.

(5)Mr.Mozammel Hoque

Agrabad Br.

(6)Mr. Golam Faruk

Main Br.

(7)Mr. Major Ruhul Alam

Estt.

(8)Mr. Shamim CCD(9)Mr.Mahbubur Rahman

Law

(10)Mr.Moniruzzaman

TFD

(12)Mr. Md. Salim

Other

(13)Mr. Wahidul Alam

Audit,Copmpliance & Monitoring

7.Why BASIC Bank is unique (Mandate).

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BASIC Bank Ltd is unique in its objectives. It is a blend of development and commercial banking functions. The Memorandum and Articles of Association of the bank stipulate that 50 percent of loanable funds shall be invested in small and cottage industries sector. Thus the bank’s priority remains with promoting and financing development of small-scale industries in the country.

7. Authorized Capital : Tk 200.00 crore as on 31.12.068. Paid up Capital : Tk 94.50 crore as on 31.12.06 (Tk.124.74

crore as on 30.06.2007)9. Reserve and surplus : Tk 123.40 crore as on 31.12.06

(Tk.108.41 crore as on 30.06.2007 including statutory reserve Tk. 88.34 crore)

10. Capital Adequacy Ratio : 11.98 (Around 12) as on 31.12.06

11. Percentage of Tier 1 capital to risk weighted Assets : 11.83%

12. Percentage of Total capital to risk weighted Assets: 13.02%

13. Cost of Deposit: 7.06%14. Cost of Fund: 7.17%15. Interest Spread: 3.56%16. No. of Branches : 6117. No. of employee : 120018. External Ratings of Bank By CRISL (Short term &

Long term)Rating year-2006Date of rating-29.06.2007Long term-A+Short Term-ST-2 (High certainty of timely payments, liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small.)

19. CAMELS Rating by Bangladesh Bank : A-8 as on 30/06/2006

20. Target vis-à-vis Actual (Amount in crore Taka)

Target 2007

As on October 31, 2007

As on December 31, 2006

Deposit

2720.00 2992.49 2408.47

Advance

2212.00 2028.99 1900.00

Import 2050.00 1705.98 1780.43Export 1925.00 1332.79 1546.38Profit 133.50 100.50 Gross profit : Tk 101.16 crore (before

tax) as on 31.12.06, (Tk. 117.00 crore before provision and Tax as on

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31.12.2006 as per annual report)Net profit : Tk 55.41 crore (after tax) as on 31.12.06

Classified

74.87 (3.69%)

70.33 (3.7%)

General Knowledge on ICT Division1. Your Duty2. What is online Banking3. Why project is delayed4. Expected Date of Live5. Present position of project6. Date of Inauguration 7. Manpower in ICT Div

GENERAL BANKING

1. Difference between Pvt. Ltd. and Public Ltd.Private Ltd. Co. Public Ltd. Co.

01Incase of Private Limited Co. minimum shareholder will be 2(two) and maximum shareholder will be 50(fifty).

01

Incase of Public Limited Co. minimum shareholder will be 7(seven) and maximum will be unlimited or limited by share of the company.

02Certificate of the commencement of business is not required.

02Certificate of the commencement of business is must to starting business.

03Prospectus can not be published to the public for share sales and share cannot be transferred to the public.

03Prospectus must be published the Daily Newspaper to the public for share sales and share must be transferred.

04 Annual General Meeting is not required. 04

Annual General Meeting is a must on or before 15 months of the last AGM.

05Audit Report not to submit to the Register of the Company.

05 Audit Report must be submitted to the Register of the company.

2. Can minor open any account (rights and reservation)Yes minor can open account but as per contract act 1872, a minor enjoys some privileges such as he/she cannot be liable for any wrong doings. So, banker should take extra care in opening and operating of minor accounts,i. Natural guardian or Guardian appointed by the court should

operate the account. In this manner joint account can also be opened.

ii. The account can be opened and operated by them where the minor has attained the age of 12 years.

iii. Current account should not be opened in the name of minors.

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iv. Cheques/bills should not be collectedv. Bank should keep the recode of minor’s birth date and after

attaining majority guardian should not be allowed to operate the account and bank should request the minor to open a fresh account before a third party witness.

vi. If guardian dies before attaining majority then bank should give the money to court appointed guardian or to him after attaining majority.

vii. Minor can draw endorse or negotiate any chq but there will be no liability of minor.

viii. No OD facility is allowed to these accounts

3. Difference between DD & PODD and PO both is remittance instrument issued by bank. The main difference is, in case of PO, it is issued to remit money within the station and payment is made by the issuing branch. On the other hand DD issued by one branch of the bank with a advice issued on other branch to pay the money and it is issued when outstation remittance is required.

4. Difference between Banker’s Chq & Customer Chq.Banker’s cheques are those cheques issued by bank like DD, PO and customer chq are chqs issued against their account maintained with the Bank. If all other things are ok then main difference is that, a customer chq can be dishonored for insufficient of fund which is not possible for Banker’s chq.

5. Garnishee Order :

It’s an order by the court of law to suspend the transaction in any customer account or to disclose the information to the court or to any particular authority of any customer account. The Garnishee Order has two forms: 1. Order Nisi (Ask for freeze the account, ii. Ask explanation why funds not for payment of judgment creditor), 2. Order Absolute: Court directs to pay either whole or part of deposit against which Order Nisi issued.

6. Negotiable Instrument & It’s CharacteristicsNegotiable Instrument are those instrument which is declared negotiable as per Negotiable Instrument act-1881, as per the act Bill of Exchange, Promissory Note and Chqs are negotiable instrument.

Characteristics:i. Must be written and signedii. Easy to transferiii. Transfer free from defects: transferor with bad title can pass

good titleiv. Right to sue

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v. No notice to transfervi. Delivery Essentialvii. Credit of the Party

7. Difference between Bearer, Order & Not NegotiableBearer chq can be paid to any body. In case of order chq it should be paid to a certain person and it can be negotiated by endorsement. Not Negotiable chq is negotiable but it will not give better title to the ultimate holder and Banker should take extra care for these types of chqs.

8. Procedure of filing suit and punishment on dishonor of chq

9. Bill of ExchangeBill of Exchange is an instrument in writing containing an unconditional order, signed by the maker directing a certain person to pay a certain sum of money payable on demand, or fixed, or future determinable time, only to , or to the order of a certain person or to the bearer of the instrument.

10. Rates of interest of different accountsSB-7.00SND-6.50FDR-12.50

11. Different Status of Accounts: Dormant-6 Months, Inoperative-2 Years, Unclaimed-10 Years

12. Different Acts related to GBAns.

a. The Companies Act-1994b. The Bank Companies Act-1991c. The Contract Act-1872d. The Financial Institution Act-1993e. The Partnership Act-1932f. The Transfer of Property Act-1882g. The Money Loan Court Act-2003h. The Money Laundering Prevention act-2002i. The Negotiable Instrument Act-1881

13. What is Estoppel: An estoppel is a defense against a party reneging on a previous statement assumed to be a legal truth. Once a statement of fact is entered into a court case, the person who made that statement must stand by its truthfulness. He or she cannot claim a new position in a future business or private dealing. If the other party makes a decision based on the untruthful second statement and a lawsuit ensues, they can claim an estoppel in court against the plaintiff. In order for the estoppel to be considered valid, however, the

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defendant needs to demonstrate damages stemming from the untruthful statement.

Estoppel is a legal doctrine recognised both at common law and in equity in various forms. It is meant to complement the requirement of consideration in contract law. In general it protects a party who would suffer detriment if:

The defendant has done or said something to induce an expectation

The plaintiff relied (reasonably) on the expectation... ...and would suffer detriment if that expectation were false.

Unconscionability by the defendant has been accepted as another element by courts, in an attempt to unify the many individual rules of estoppel.

International Institutions

International Monetary Fund (IMF)Chief: Dominique Strauss-Kahn, Designation: Managing Director, Nationality: FrenchMember Countries: 185 countriesHQ: Washington DC,Date of Establishment: July 1944Functions:

i. The IMF works to promote global growth and economic stability—and thereby prevent economic crisis—by encouraging countries to adopt sound economic policies. Surveillance is the regular dialogue and policy advice that the IMF offers to each of its members.

ii. Financial assistance is available to give member countries the breathing room they need to correct balance of payments problems.

iii. The IMF is also actively working to reduce poverty in countries around the globe, independently and in collaboration with the World Bank and other organizations. The IMF provides financial support through its concessional lending facility—the Poverty Reduction and Growth Facility (PRGF) and the Exogenous Shocks Facility (ESF)—and through debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI). In most low-income countries, this support is underpinned by Poverty Reduction Strategy Papers (PRSP).

iv. Technical assistance and training are offered—mostly free of charge—to help member countries strengthen their capacity to design and implement effective policies.

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World Bank and World Bank GroupChief: Robert B. Zoellick, Designation: PresidentMember Countries: 185 countriesHQ: Washington, DC,Date of Establishment: July 1, 1944 Composition of World Bank: We are made up of two unique development institutions owned by 185 member countries—the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The term "World Bank" refers specifically to two of the five, IBRD and IDA.

Composition of World Bank Group: The term "World Bank Group" encompasses all five institutions as described below.

Functions:The International Bank for Reconstruction and Development

(IBRD)Established 1945184 MembersIBRD aims to reduce poverty in middle-income and creditworthy poorer countries by promoting sustainable development through loans, guarantees, and (nonlending) analytical and advisory services. The income that IBRD has generated over the years has allowed it to fund several developmental activities and to ensure its financial strength, which enables it to borrow in capital markets at low cost and offer clients good borrowing terms. IBRD’s 24-member Board is made up of 5 appointed and 19 elected Executive Directors, who represent its 184 member countries.

The International Development Association (IDA)Established 1960 165 MembersContributions to IDA enable the World Bank to provide approximately $6 billion to $9 billion a year in highly concessional financing to the world’s 81 poorest countries (home to 2.5 billion people). IDA’s interest-free credits and grants are vital because these countries have little or no capacity to borrow on market terms. In most of these countries, the great majority of people live on less than $2 a day. IDA’s resources help support country-led poverty reduction strategies in key policy areas, including raising productivity, providing accountable governance, improving the private investment climate, and improving access to education and health care for poor people.

The International Finance Corporation (IFC)Established 1956176 MembersIFC promotes economic development through the private sector. Working with business partners, it invests in sustainable private

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enterprises in developing countries without accepting government guarantees. It provides equity, long-term loans, structured finance and risk management products, and advisory services to its clients. IFC seeks to reach businesses in regions and countries that have limited access to capital. It provides finance in markets deemed too risky by commercial investors in the absence of IFC participation and adds value to the projects it finances through its corporate governance, environmental, and social expertise.

The Multilateral Investment Guarantee Agency (MIGA)Established 1988 165 MembersMIGA helps promote foreign direct investment in developing countries by providing guarantees to investors against noncommercial risks, such as expropriation, currency inconvertibility and transfer restrictions, war and civil disturbance, and breach of contract. MIGA’s capacity to serve as an objective intermediary and to influence the resolution of potential disputes enhances investors’ confidence that they will be protected against these risks. In addition, MIGA provides technical assistance and advisory services to help countries attract and retain foreign investment and to disseminate information on investment opportunities to the international business community.

The International Centre for Settlement of Investment Disputes (ICSID)

Established 1966 143 MembersTotal cases registered: 159Fiscal 2004 cases registered: 30 ICSID helps encourage foreign investment by providing international facilities for conciliation and arbitration of investment disputes, thereby helping foster an atmosphere of mutual confidence between states and foreign investors. Many international agreements concerning investment refer to ICSID’s arbitration facilities. ICSID also issues publications on dispute settlement and foreign investment law.

Difference between IBRD & IDA: The IBRD focuses on middle income and creditworthy poor countries, while IDA focuses on the poorest countries in the world

What is the difference between the World Bank and a Commercial Bank?

While it lends and even manages funds much like a regular bank, the World Bank is different in many important ways. It is owned by 184 countries. The financial support and advice the World Bank provides its member countries is designed to help them fight poverty. And unlike commercial banks, the World Bank often lends at little or no interest to countries that are

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unable to raise money for development anywhere else. Countries that borrow from the World Bank also have a much longer period to repay their loans than commercial banks allow.  In some cases, they don’t have to start repaying for ten years. Basically, the World Bank borrows the money it lends.  It has good credit because if has large, well-manages financial reserves.  This means it can borrow money at low interest rates from capital markets all over the world and channel it to developing countries, often at much lower rates of interest than what markets would charge these countries.

What if the difference between the World Bank and the IMF? People sometimes confuse the World Bank with the International Monetary Fund (IMF), which was also set up at the Bretton Woods conference in 1944. Although the IMF’s functions complement those of the World Bank, it is a totally separate organization. While the World Bank provides support to developing countries, the IMF aims to stabilize the international monetary system and monitors the world’s currencies.

About the Millennium Developments Goals (MDGs)The MDG goals and targets are based on the UN Millennium Declaration, and the UN General Assembly has approved them as part of the Secretary General's road map towards implementing the Declaration. For each MDG, one or more targets have been set, using 1990 as a benchmark and 2015 as the target date. Since the launch of the Millennium Development Goals (MDGs) at the Millennium Summit in New York in September 2000, the MDGs have become the most widely-accepted yardstick of development efforts by governments, donors and NGOs.

Goal 1: Eradicate extreme poverty and hunger Goal 2: Achieve universal primary education Goal 3: Promote gender equality and empower women Goal 4: Reduce child mortality Goal 5: Improve maternal health Goal 6: Combat HIV/AIDS, malaria and other diseases Goal 7: Ensure environmental sustainability Goal 8: Develop a Global Partnership for Development

ACUAsian Clearing Union (ACU) is the simplest form of payment arrangements whereby the members settle payments for intra-regional transactions among the participating central banks on a multilateral basis.Administration set up: 1) H.E. Bijaya Nath Bhattarai Chairman of the Board, Governor, Nepal Rastra Bank 2) Mrs. Bahereh Mirzaei-Tehrani (Secretary General)HQ ( Secretariat Office): Tehran, Islamic Republic of Iran

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Date of Establishment: December 1974

OBJECTIVESa) To provide a facility to settle on a multilateral basis, payments for current international transactions among the territories of participants;b) To promote the use of participants’ currencies in current transactions between their respective territories and thereby effect economies in the use of the participant's exchange reserves;c) To promote monetary co-operation among the participants and closer relations among the banking systems in their territories and thereby contribute to the expansion of trade and economic activity among the countries of the ESCAP region; and d) To provide for currency SWAP arrangement among the participants so as to make Asian Monetary Unit available to them temporarily.

Members: 1) Bangladesh Bank 2) Royal Monetary Authority of Bhutan 3) Reserve Bank of India 4) Central Bank of the Islamic Republic of Iran 5) Central Bank of Myanmar 6) Nepal Rastra Bank 7) State Bank of Pakistan 8) Central Bank of Sri Lanka

ACU SWAP FACILITY: The main objective of the SWAP arrangement is to extend short term foreign exchange support by providing participants access to the international reserves of other participants in times of temporary liquidity problems.The potential benefits of the SWAP facility are:a) Easy access by participants to international reserves of other participants at a time when foreign exchange support is needed ;b) Availability of the facility on a multilateral basis rather than on a bilateral basis; andc) The opportunity for further monetary cooperation among the participant's central banks.

World Trade Organization (WTO)

Chief: Pascal Lamy (Director-General)HQ: Geneva, SwitzerlandMembership: 151 countries on 27 July 2007Establishment:  1 January 1995 Created by: Uruguay Round negotiations (1986-94)  Functions:  

1) Administering WTO trade agreements2) Forum for trade negotiations3) Handling trade disputes4) Monitoring national trade policies5) Technical assistance and training for developing countries6) Cooperation with other international organizations 

Asian Development Bank (ADB)

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Chief: Haruhiko Kuroda, President and Chairperson, Board of Directors Asian Development Bank, Nationality: JapanHQ: Mandaluyong City, Metro Manila, PhilippinesMembership: 67 members, 48 from the region and 19 from other parts of the globe.Establishment: 1966Function: The Asian Development Bank

extends loans and equity investments to its developing member countries (DMCs) for their economic and social development

provides technical assistance for the planning and execution of development projects and programs and for advisory services

promotes and facilitates investment of public and private capital for development, and responds to requests for assistance in coordinating development policies and plans of its developing member countries

ASSOCIATION OF SOUTHEAST ASIAN NATIONS (ASEAN)Chief: H.E. ONG KENG YONG, ASEAN SECRETARY – GENERAL, Nationality: SingaporeHQ: Jakarta, IndonesiaEstablished: 8 August 1967Member Countries: 1) Brunei Darussalam 2) Cambodia 3) Indonesia 4) LAOS 5) Malaysia 6) Myanmar 7) Philippines 8) Singapore 9) Thailand 10) VietnamFunction: (1) to accelerate economic growth, social progress and cultural development in the region and (2) to promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries in the region and adherence to the principles of the United Nations Charter.In 2003, the ASEAN Leaders resolved that an ASEAN Community shall be established comprising three pillars, namely, ASEAN Security Community, ASEAN Economic Community and ASEAN Socio-Cultural Community

The European Union ( EU ) The European Union (EU) is a political and economic community of states with supranational and intergovernmental features. The twenty-seven member states are primarily located in Europe. It traces its origins to the European Economic Community (EEC) formed in 1957 by the Treaty of Rome between six European countries. Since then the EU has grown in size through the accession of new member states and has increased its powers by the addition of new policy areas to its remit. In 1993, the Maastricht Treaty established the current legal framework.The EU creates a single market by a system of laws which apply in all member states, guaranteeing the freedom of movement of people, goods, services and capital. It maintains a common trade policy, agricultural and fisheries policies, and a regional development policy.

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In 1999 the EU introduced a common currency, the euro, which has been adopted by thirteen member states. It has also developed a role in foreign policy, and in justice and home affairs. Passport control and customs checks between many member states were abolished under the Schengen Agreement.EU President: José Manuel Barroso, Nationality: PortugalHQ: Brussels, BelgiumMember Countries: The European Union currently has 27 member states: Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. Further Enlargement: There are currently three official candidate countries, Croatia, the Republic of Macedonia (FYROM) and Turkey. In addition the western Balkan countries of Albania, Bosnia and Herzegovina, Montenegro and Serbia are officially recognised as potential candidatesMission:Europe’s mission in the 21st century is to:

provide peace, prosperity and stability for its peoples; overcome the divisions on the continent; ensure that its people can live in safety; promote balanced economic and social development; meet the challenges of globalisation and preserve the diversity of

the peoples of Europe; uphold the values that Europeans share, such as sustainable

development and a sound environment, respect for human rights and the social market economy

G-8 CountriesBrief History: The concept of a forum for the world's major industrialised democracies emerged following the 1973 oil crisis and subsequent global recession. In 1974, the United States created the Library Group, an informal gathering of senior financial officials from the United States, the United Kingdom, West Germany, Japan and France, In 1975, French President Valéry Giscard d'Estaing invited the heads of government from West Germany, Italy, Japan, the United Kingdom and the United States to a summit in Rambouillet. The six leaders agreed to an annual meeting organised under a rotating presidency, forming the Group of Six (G6). The following year, Canada joined the group at the behest of U.S. President Gerald Ford, and the group became known as the Group of Seven (G7). The European Union is represented by the President of the European Commission and the leader of the country that holds the Presidency of the Council of the European Union and has attended all meetings since it was first invited by the United Kingdom in 1977.[3]

The Cold War ended with the dissolution of the Soviet Union in 1991, and Russia became the successor state. Beginning with the 1994

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Naples summit, Russian officials held a separate meeting with leaders of the G7 after the main summit. This group became known as the Political 8 (P8), or colloquially as the "G7 plus 1". At the initiative of United States President Bill Clinton, Russia formally joined the group in 1997, resulting in the Group of Eight (G8).Members: Canada, France, Germany, Italy, Japan, Russia, UK, USAFunction: The G7/8 Summit has consistently dealt with macroeconomic management, international trade, and relations with developing countries. Questions of East-West economic relations, energy, and terrorism have also been of recurrent concern. From this initial foundation the summit agenda has broadened considerably to include microeconomic issues such as employment and the information highway, transnational issues such as the environment, crime and drugs, and a host of political-security issues ranging from human rights through regional security to arms control.

G8+ 5 countriesG8+ 5 countries: G8 countries plus India, China, South Africa, Brazil, Mexico

Bay of Bengal Initiative for Multi Sectoral Technical and Economic Cooperation (BIMSTEC)

BIMSTEC provides a unique link between South Asia and Southeast Asia bringing together 1.3 billion people - 21 percent of the world population, a combined GDP of US$750 billion, and a considerable amount of complementarity given geographical contiguity, differing levels of development and resource endowments. A study (2004) shows the potential of US$ 43 to 59 billion trade creation under BIMSTEC FTA.Establishment : June 6, 1997Member Countries: Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal.Function: The seven nation countries have endorsed a plan for a free trade pact by 2017 -- while the three most advanced countries of the area (India, Sri Lanka, and Thailand) are committed to trade liberalization by 2012. [1]Trade in goods will be liberalized through progressive elimination of tariffs and non-tariff barriers. This will be done in two phases. Products will be identified for (a) Fast Track and (b) Normal Track.For the Fast Track products the non-LDC parties will eliminate tariffs for LDC parties by 30 June 2007; but among themselves by 30 June 2009. The LDC parties will do so far non-LDC by 30 June 2011; but among themselves by 30 June 2009.For the normal Track products the non-LDCs will eliminate tariffs for LDCs by 30 June 2010; but among themselves by 30 June 2012. The LDCs will eliminate tariffs for non-LDCs by 2017; but among themselves by 30 June 2015.

Islamic Development Bank (IDB )

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Chief: Dr. Ahmad Mohamed Ali Al-Madani, President, Nationality: KSADate of Establishment: 20 October 1975.HQ: Jeddah in the Kingdom of Saudi ArabiaMember: 56 CountriesFunction:

1) to participate in equity capital and grant loans for productive projects and enterprises besides providing financial assistance to member countries in other forms for economic and social development

2) assisting in the promotion of foreign trade especially in capital goods, among member countries; providing technical assistance to member countries; and extending training facilities for personnel engaged in development activities in Muslim countries to conform to the Shari'ah.

SAFTA: South Asian Free Trade Area. 7 countries of old SAARC [Effective from1st July 2006]SAPTA: SAARC Preferential Trading Arrangement. 7 countries of old SAARC [Effective from 8th December 1995]NAFTA: North American Free Trade Area. [Effective from 1st January 1994]Common Wealth General Secretary: Mr. Kamalesh Sharma [53-Nations]Banco Del Sur: 7 South American Countries, as alternative of World Bank and IMF [Hugo Shavez is the main thinker]SDR: Special Drawing Right. Arrangement for withdrawing from IMF. Valuation depends on [USD,GBP,FFr.,DM,JPY]

Different type of Banking & Banking Products1. Merchant banking

Merchant Banking encompasses two major businesses – Portfolio Management, and Issue Management and Underwriting – which serve both the demand and supply sides of the capital market.

2. SME BankingEnterprises shall be categorized using the following definition (fixed investment implies exclusion of land and building, and valuation on the basis of current replacement cost only):

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Small enterprise: an enterprise should be treated as small if, in today’s market prices, the replacement cost of plant, machinery and other parts/components, fixtures, support utility, and associated technical services by way of capitalized costs (of turn-key consultancy services, for example), etc, excluding land and building, were to be up to Tk. 15 million;

Medium enterprise: an enterprise would be treated as medium  if, in today’s market prices, the replacement cost of plant, machinery, and other parts/components, fixtures, support utility, and associated technical services (such as turn-key consultancy), etc,  excluding land and building, were to be up to Tk. 100 million;

For non-manufacturing activities (such as trading or other services), the Taskforce defines:

Small enterprise: an enterprise should be treated as small if it has less than 25 workers, in full-time equivalents;

Medium enterprise: an enterprise would be treated as medium if it has between 25 and 100 employees;

3. Off shore BankingPart of international banking business operates free of various constraints and taxes. Off-shore banking transactions are carried out in foreign currencies and transacted between foreigners.

4. Bridge FinancingPurely short-term credit/advance extended to a person or a concern pending the receipt of fund from another source. It is nothing but a stop-gap arrangement to avail a temporary credit line by a customer from his banker. Very frequently this sort of finance is required by projects when actual credit giving agency is unable to disburse the loan in time, the concern of the project then moves to a bank to avail credit line to establish/commission the project in time. It is also called “Swing Loan’, made in anticipation of long term financing.

5. SyndicationA Syndicated facility is a lending facility, defined by a single loan agreement, in which several or many banks participate.

6. SecuritizationSecuritisation is the process of pooling and repackaging of homogenous illiquid financial assets into marketable securities that can be sold to investors. The process leads to the creation of financial instruments that represent ownership interest in, or are secured by a segregated income producing asset or pool of assets. The pool of assets collateralizes securities. These assets are generally secured by personal or real property (e.g. automobiles, real estate, or equipment loans), but in some cases are unsecured (e.g. credit card debt, consumer loans).

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7. FactoringThe factor, the banker, undertaking to collect, to account for and manage client’s debts and also finances the clients either by lending against account receivables or purchasing/discounting them outright for a charge called discount.

8. Banker’s Account

9. Retail Banking & Wholesale bankingRetail banking is typical mass-market banking where individual customers use local branches of larger commercial banks. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so forth. Retail banking "is typical mass-market banking where individual customers use local branches of larger commercial banks. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so forth." Whereas wholesale banking is Banking services between merchant banks and other financial institutions.

10. Subordinate, subordinated, subordinationDebts or claims that have a lower status or priority than other debts or claims are subordinate. For example, creditor A may agree in a subordination agreement to have its claims on the cash flow or on the assets of a borrower lower in priority than (i.e., subordinate to) the claims to that cash flow or collateral by creditor B. In finance and accounting, the term also refers to debts that include provisions making them subordinate to other liabilities. For example, a bond issue may, by contractual agreement, be subordinate to all other bonds issued by a company.

11. Zero coupon bondA type of debt security that does not pay periodic interest. Zero coupon securities are bought and sold at prices that are less than the par value of the securities. The discount, or difference between the principal paid to purchase the security and the principal returned at maturity, constitutes the investor's return

Recent Measures to liberalize and strengthen Financial Sectors1) Interest rates were liberalized; 2) Open market operation was activated by introducing new bills. 3) Attempts were made to improve governance in the financial

sector.4) Reform initiatives attempted to improve legal aspects, corporate

governance, loan recovery, exchange and interest rates management, NCB's functions, risk management and efficiency of the Bangladesh Bank.

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5) Better disclosure and transparency standards have been introduced;

6) fit and proper tests prescribed for bank directors, chief executives and advisors;

7) Restriction imposed on the composition of the membership of the board of directors; the roles and functions of the board and management were clarified and redefined.

8) Audit Committees were mandated for all banks with clear guidelines and TORs and Early Warning System (EWS) was introduced.

9) To strengthen the banking operation, minimum capital requirement was raised from Tk. 400 million to Tk. 1000 million and the requirement on risk-weighted basis was also increased. Now it is raised to TK.2000 million.

10) Stringent loan rescheduling conditions were introduced to stop ever greening of loans.

11) An upper limit on a bank's exposure to a particular customer or group was introduced.

12) Strict measures have been laid and enforced on loan loss provisioning.

13) Loan write off guidelines were issued by the Bangladesh Bank, allowing the banks for the first time, to write off 'bad' debts against full provisioning.

14) Large loan limit has been linked to bank's NPL ratio. 15) BB is encouraging syndication of several banks for large

loans and has issued guidelines for restructuring such loans.16) The Core Risk Management Guidelines on five major risks

has been introduced by BB (credit, foreign exchange, and assets-liabilities risk management, internal control and compliance and anti-money laundering) laying down policies, processes, procedures and structures that will lead to better governance and improved services. Credit Risk Grading Manual is prepared so that bank can follow uniform procedure for taking decision to sanction loan and to judge the quality of loans. Prudential guidelines for SME and consumer finance loan are introduced.

17) In the monetary and foreign exchange front we have an exchange rate regime, which is now market determined. Floating of taka since June 2003 was achieved without encountering undue volatility.

18) Further reform in simplifying and streamlining forex operations and payment system is underway.

19) New financial instruments of varying tenure such as repo and reverse repo and government investment bonds of longer tenor have been introduced. Efforts are underway to develop the government and corporate bond market. BB and the Securities and Exchange Commission (SEC) agreed to allow the government bonds to be traded in the stock exchange.

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20) Securitization of receivables of private financial institutions has started.

21) Initiation of capacity building program in the Bangladesh Bank. Service standards have been introduced for work in different departments. Workflow analysis has been initiated to bring in greater speed and ensure quality. The Central Bank Strengthening Project (CBSP) includes (a) computerization of the operations of the Bangladesh Bank, (b) human resource development through reforms of recruitment, promotion and compensation policies, (c) restructuring of the different departments, (d) reengineering the business processes, (e) automation of the Clearing House, (f) capacity building in the core activities i.e. monetary policy, regulation of the financial sector, and research and policy analysis. The goal is to transform the decades-old traditional and manual system to a modern, automated system.

22) BB has got a Policy Analysis Unit (PAU) which produces various analytical policy briefs and publishes Monetary Policy Review, Financial Sector Review and Bangladesh Bank Quarterly.

Risk Weighted Capital Adequacy Ratio

Definition of CapitalFor the purpose of supervision, capital will be categorized into two tiers: Tier 1 i.e. Core Capital comprising the highest quality capital elements and Tier 2 i.e. Supplementary Capital represents other elements, which fall short of some of the characteristics of the core capital but contribute to the overall strength of a bank. The constituents of core capital and supplementary capital are enclosed at Annexure-I.

Minimum Capital StandardsEach bank will maintain a ratio of capital to risk weighted assets of not less than 9% (At present 10%) with at least 4.5% (at present 5%) in core capital and this requirement will have to be achieved by 30 June 2003 (within 2009). However, the minimum capital requirements of Tk. 40 crore for locally incorporated banks and an amount equivalent to USD 10 million for banks incorporated outside Bangladesh will remain unchanged until further instructions.

Risk-weighted AssetsBoth balance sheet assets and off-balance sheet exposures are to be weighted according to their relative risk. Presently, there are 4(four) categories of risk weights - 0, 20, 50 and 100 percent. For the purpose of assessing capital adequacy, weights for particular items are given in Annexure-II.Off-balance sheet transactions are to be converted into balance sheet equivalents for the purpose of assessing the capital

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adequacy before assigning a risk weight as shown in section 10(a) of Annexure-II. Four categories of credit equivalents of 0, 20, 50 & 100 percent will apply. Details are shown in Annexure-III.

CONSTITUENTS OF CAPITAL

CORE CAPITAL (TIER-1)A. Paid up CapitalB. Non-repayable Share premium accountC. Statutory ReserveD. General ReserveE. Retained EarningsF. Minority interest in SubsidiariesG. Non-Cumulative irredeemable Preference Shares.H. Dividend Equalization Account

SUPPLEMENTARY CAPITAL (TIER-2)A. General provision (1% of Unclassified loans)B. Assets Revaluation ReservesC. All other Preference SharesD. Perpetual Subordinated debtE. Exchange Equalization AccountNote 1: Core Capital must be equal to or more than 4.5% (at present 5%) of the risk-weighted assets.Note 2: Reserves created by periodic revaluation of banks' assets can be included as a Component of Tier-2 capital only if the revaluation is formally conducted by professionally qualified valuation firm. Such reserves will be eligible up to 50% for the treatment as Supplementary Capital provided that the rationale of the re-valued amount is duly certified by the external auditors of the bank. Such revaluation may be done once in a year.

Bangladesh Economy

1. GDP -- Bangladesh economy grew by 6.51 percent in FY07 compared to 6.63 percent in FY06

2. GNP --

3. Per Capita Income -- US$482

4. Foreign Exchange Reserve -- US$5.06 b

5. Inflation -- 10.03%

BOP and BOT StatusTrade balance recorded a larger deficit of US$717 million during July-August, 2007 compared to the deficit of US$156 million

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during July-August, 2006. Despite larger current transfers of US$1128 million, current account balance recorded a deficit of US$68 million during July-August, 2007 against the surplus of US$389 million during July-August, 2006 due to larger deficits in trade balance, services and income. However, the overall balance showed a surplus of US$130 million during July-August, 2007 against the surplus of US$107 million during July-August, 2006 due mainly to surplus in financial account of US$170 million.

EXPORTAccording to EPB data, merchandise export shipments in August, 2007 stood higher at US$1129.08 million compared to US$903.72 million in July, 2007. However, exports during July- August, 2007 decreased by US$269.01 million or 11.69 percent to US$2032.80 million against increase of US$537.16 million or 30.44 percent to US$2301.81 million during July-August, 2006.

Export Items: Raw Jute and jute Goods, Tea, Leather, Frozen Food, Woven Garments, Knitwear, Chemical Products, Agricultural products ( Includes Vegetable, Fruit, Tobacco), Engineering and Electronic goods

Category-wise share of total exports, (July, 2007)Others* (15.87%)Jute goods (2.48%)Frozen food (5.08%)Knitwear (38.37%)Woven (38.20%)* Others means residual items.

ImportImport payments in August, 2007 stood lower by US$56.00 million or 3.62 percent to US$1490.00 million, against US$1546.00 million in July, 2007. This was, however, US$146.70 million or 10.92 percent higher than US$1343.30 million in August, 2006. Import payments during July-August, 2007 increased by US$341.50 or 12.67 percent to US$3036.00 million compared to US$2694.50 million during July-August, 2006. Of the total import payments during July- August, 2007, imports under Cash and for EPZ stood at US$2775.70 million, under Loans/Grants US$4.20 million, import under direct investment US$16.30 million and short term loan by BPC US$239.80 million. Fresh opening of import LCs in September, 2007 decreased by US$39.76 million or 2.23 percent to US$1744.65 million compared to US$1784.41 million in August, 2007. However, this was US$287.50 million or 19.73 percent higher than US$1457.15 million in the same month of the previous year. Fresh opening of import LCs during July-September, 2007 increased by

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US$1099.74 million or 25.97 percent to US$5334.79 million against US$4235.05 million during July-September, 2006.

Sectoral Distribution in L/C Opening, ( July-September, 2007 )

Industrial RM 37.39%Capital Machinery 7.69%Intermediate Goods 8.14%Consumer Goods 15.18%Petroleum and petroleum Prod. 7.76%Machinery for misc. ind.7.39%Others 16.46%Total import (july-Aug’07) 5334.79

RemittanceRemittances in October, 2007 stood lower at US$562.87 million against US$590.67 million of September, 2007. However, this was higher than US$377.34 million of October, 2006. Total remittances receipts during July-October, 2007 increased by US$484.24 million or 28.36 percent to US$2191.60 million against US$1707.36 million during July-October, 2006.

Banking Techniques & General knowledge

1. Quick Ratio(Current asset- Inventories) or (Cash on hand + Cash in Bank + securities + net receivables)/Total current liabilitiesThe quick ratio is a measure of a company’s immediate short-term liquidity. An asset is liquid if it can be converted into cash immediately or reasonable soon.

2. IRR – what it is, implications – borrower’s perspective, lender’s perspective, limitationsThe IRR is the interest rate (also known as the discount rate) that will bring a series of cash flows (positive and negative) to a net present value (NPV) of zero (or to the current value of cash invested). Why is the IRR method still commonly used in capital budgeting? Its popularity is probably a direct result of its reporting simplicity. The NPV method is inherently complex and requires assumptions at each stage - discount rate, likelihood of receiving the cash payment, etc. The IRR method simplifies projects to a single number that management can use to determine whether or not a project is economically viable. The result is simple, but for any project that is long-term, that has multiple cash flows at different discount rates,

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or that has uncertain cash flows - in fact, for almost any project at all - simple IRR isn't good for much more than presentation value.

3. MIRRWhile the internal rate of return (IRR) assumes the cash flows from a project are reinvested at the IRR, the modified IRR assumes that all cash flows are reinvested at the firm's cost of capital. Therefore, MIRR more accurately reflects the profitability of a project.Thus, using the IRR could result in a positive NPV (good project), but it could turn out to be a bad project (NPV is negative) if the MIRR were used. As a result, using MIRR versus IRR better reflects the value of a project.

4. Problems with IRRThere are a few misconceptions about the IRR calculation. The major one is that IRR automatically assumes that all cash outflows from an investment are reinvested at the IRR rate. IRR is the "internal rate of return" with "internal" meaning each dollar in an investment. It makes no assumptions about what an investor does with money coming out of an investment. Whether the investor gives it away or puts it in a coffee can, the IRR stays the same.It does however have a few drawbacks. First, IRR is not made to calculate negative cash flows after the initial investment. If an investment has an outflow of $1,000 in year three and an IRR of 30%, the $1,000 is discounted at 30% per year back to a present value. You would have to put this PV amount in an investment earning 30% per year for the IRR to reflect the true yield.Also, IRR ignores the reinvestment potential of positive cash flows. Since most capital investments have intermediate (non-terminal) positive cash flows, the firm will reinvest these cash flows. Unless a better number is known, the firm's cost of capital is a reasonable proxy for the return to be expected. Investments with large or early positive cash flows will tend to look far better with IRR than with MIRR for this reason.To illustrate: a firm has investment options with returns that are generally moderate. An unusually attractive investment opportunity comes up with much higher return. The cash spun off from this latter investment will probably be reinvested at the moderate rate of return rather than in another unusually high-return investment. In this case, IRR will overstate the value of the investment, while MIRR will not.

5. Venture capitalCapital provided by a bank or any other financial institutions to a business enterprise to start a new business. This capital is often considered as risk capital since new business or the project may collapse at the beginning of its operation; but such venture may also bring high returns as well.

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6. ERRProfit generally is the making of gain in business activity for the benefit of the owners of the business. The word comes from Latin meaning "to make progress", is defined in two different ways, one for economics and one for accounting.Pure economic profit is the increase in wealth that an investor has from making an investment, taking into consideration all costs associated with that investment including the opportunity cost of capital. Accounting profit is the difference between retail sales price and the costs of acquisition (whether by harvest, extraction, manufacture, or purchase). A key difficulty in measuring either definition of profit is in defining costs. Accounting profit may be positive even in competitive equilibrium when pure economic profits are zero.

7. Shadow priceIn a business application, a shadow price is the maximum price that management is willing to pay for an extra unit of a given limited resource.[1] For example, what is the price of keeping a production line operational for an additional hour if the production line is already operated at its maximum 40 hour limit? That price is the shadow price. The true economic PRICE of an activity: the OPPORTUNITY COST. Shadow prices can be calculated for those goods and SERVICES that do not have a market price, perhaps because they are set by GOVERNMENT. Shadow pricing is often used in COST-BENEFIT ANALYSIS, where the whole purpose of the analysis is to capture all the variables involved in a decision, not merely those for which market prices exist.

8. CRR n SLRCRR-6%SLR-19%

9. CAMELSCapital adequacyAsset qualityManagement qualityEarning capacityLiquiditySensitivity to the risk

10. Core Risk Management5 (five) core risk areas of banking are; Credit RiskForeign Exchange RiskInternal Control and Compliance RiskMoney Laundering RiskAsset Liability Management Risk.

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The principal objective of risk management is to safeguard the bank’s capital, financial resources, profitability and market reputation. To this effect, the bank took the following steps under the guidelines of Bangladesh Bank.

11. REPO & Reverse REPORepo is a money market instrument, which enables collateralised short term borrowing and lending through sale/purchase operations in debt instruments. Under a repo transaction, a holder of securities sells them to an investor with an agreement to repurchase at a predetermined date and rate.

A reverse repo is the mirror image of a repo. For, in a reverse repo, securities are acquired with a simultaneous commitment to resell . Hence whether a transaction is a repo or a reverse repo is determined only in terms of who initiated the first leg of the transaction. When the reverse repurchase transaction matures, the counterparty returns the security to the entity concerned and receives its cash along with a profit spread. One factor which encourages an organisation to enter into reverse repo is that it earns some extra income on its otherwise idle cash.

12. BondA debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are commonly referred to as fixed-income securities.The indebted entity (issuer) issues a bond that states the interest rate (coupon) that will be paid and when the loaned funds (bond principal) are to be returned (maturity date). Interest on bonds is usually paid every six months (semi-annually). Ex. Zero coupon bond, Convertible bond, Redeemable bond, etc.

13. DSCR In corporate finance, it is the amount of cash flow available to meet annual interest and principal payments on debt, including sinking fund payments. In government finance, it is the amount of export earnings needed to meet annual interest and principal payments on a country's external debts. In personal finance, it is a ratio used by bank loan officers in determining income property loans. This ratio should ideally be over 1. That would mean the property is generating enough income to pay its debt obligations.

In general, it is calculated by:

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A DSCR of less than 1 would mean a negative cash flow. A DSCR of less than 1, say .95,  would mean that there is only enough net operating income to cover 95% of annual debt payments. For example, in the context of personal finance, this would mean that the borrower would have to delve into his or her personal funds every month to keep the project afloat. Generally, lenders frown on a negative cash flow, but some allow it if the borrower has strong outside income.

(After Tax Profit + Depreciation + Interest paid) / (Interest paid + 12 months principal i.e. Loan + LT Debt maturing under 1 year)

14. BASEL-1 & BASEL-IIWhy adequacy of Capital is important For Banks

1) Capital adequacy is to ensure rule is to ensure that institution has enough capital in relation to risk (credit risk, market risk, operational risk) involve with their activity

2) Enough capital means the amount of capital sufficient to meet any unforeseen loss.

Present Capital Adequacy Requirement for Banks as per BASEL-1Current Capital Regulation in BangladeshCapital /RWA >=10% or TK.200.00 crore which ever is higherAssets are all of on and off balance sheet assets Risk weghts are 0%, 20%, 50% and 100%

Composition of Capital Tier 1 or core Capital: 1) paid up capital 2) statutory reserve 3) general reserve 4) retained earnings 5) Dividend equalization account 6) non repayable share premiumTier2 or supplementary capital: 1) General provision on PA loans (1% of UC loans) 2) Asset Revaluation Reserve 3) Exchange Equalization account

About BASEL CommitteeBASEL Committee is established by central bank governors of G-10 countries at the end of 1974.G-10 Countries are Belgium, Canada, France, Germany, Italy, Japan, Luxemborg, The Netherlands, Spain, Sweden, Switzerland,UK, USA

Weak Points of BASEL-11) All risks are not included2) All private borrowers don’t carry 100% risk3) Not enough differentiation on counterparties

Capital Ratio according to BASEL-IICapital Base/RWA>=8%(Credit Risk +12.5X (Market Risk+ Operational Risk)

Three Pillars of BASEL-II1) Minimum Capital Requirement

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2) Credit Risk (Risk measurement approach: Standardized, Foundation IRB, Advanced IRB)a) Market Risk (Risk measurement approach: Standardized, Internal Model)b) Operational Risk (Risk measurement approach: Basic indicator, Standardized,

Advance Measurement)c) Supervisory Review

3) Market Discipline

15. Money LaunderingA definition of what constitutes the offence of money laundering under Bangladesh law is set out in Section 2 (Tha) of the Prevention of Money Laundering Act 2002 (Act No. 7 of 2002) which is reads as follows: “Money Laundering means -

(Au) Properties acquired or earned directly or indirectly through illegal means;(Aa) Illegal transfer, conversion, concealment of location or assistance in the above act of the properties acquired or earned directly of indirectly through legal or illegal means; “A concise working definition was adopted by Interpol General Secretariat Assembly in 1995, which defines money laundering as: "Any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources".

Why we resist money laundering1) It provides the fuel for drug dealers, smugglers, terrorists, illegal arms dealers,

corrupt public officials, and others to operate and expand their criminal enterprises. This drives up the cost of government due to the need for increased law enforcement and health care expenditures (for example, for treatment of drug addicts) to combat the serious consequences that result.

2) Money laundering diminishes government tax revenue and therefore indirectly harms honest taxpayers.

3) Money laundering distorts asset and commodity prices and leads to misallocation of resources.

4) Among its other negative socioeconomic effects, money laundering transfers economic power from the market, government, and citizens to criminals.

5) One of the most serious microeconomic effects of money laundering is felt in the private sector. Money launderers often use front companies, which co-mingle the proceeds of illicit activity with legitimate funds, to hide the ill-gotten gains. These front companies have access to substantial illicit funds, allowing them to subsidize front company products and services at levels well below market rates. This makes it difficult, if not impossible, for legitimate business to compete against front companies with subsidized funding, a situation that can result in the crowding out of private sector business by criminal organizations.

Stages of Money LaunderingIt is a process accomplished in 3 basic stages which may comprise numerous transactions by the launderers that could alert a financial institution to criminal activity -

Placement - the physical disposal of the initial proceeds derived from illegal activity.Layering - separating illicit proceeds from their source by creating complex layers of financial transactions designed to disguise the audit trail and provide anonymity.

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Integration - the provision of apparent legitimacy to wealth derived criminally. If the layering process has succeeded, integration schemes place the laundered proceeds back into the economy in such a way that they re-enter the financial system appearing as normal business funds.

16. Know Your Customer ProceduresKYC procedure starts from opening account in the name of different clients irrespective of borrowers and depositors. Each officer involved in account opening will be required to perform due diligence on all prospective clients prior to opening an account. This process will be completed by fulfilling the documentation requirements e.g., Account Application, Bank References, Source of funds and Identification for example and also a ‘Know Your Customer’ profile which will be used to record a client’s source of wealth, expected transaction activity at it’s most basic level. When opening accounts, the concerned officer will assess the risk that the accounts could be used for “money laundering”, and will classify the accounts as either High Risk or Low Risk. The risk assessment may be made using the KYC Profile Form given in Annexure D in which following seven risk categories are scored using a scale of 1 to 5 where scale 4-5 denotes High Risk, 3- Medium Risk and 1-2 Low Risk:

17. Reporting of Cash Transaction Report (CTR)The Anti-Money Laundering Compliance Officer (AMLCO) will monitor and analyze the daily cash transaction and prepare daily Cash Transaction Report (CTR) as per format given in appendix – Ka of AML circular – 10 in case of cash deposit, cash withdrawal and cash remittance/online deposit of Tk.7.00 lac or above in a single transaction or multiple transactions in any account in a single day. He or she will send CTRs to the CCU by the 1st week of subsequent month for onward submission of the same to Bangladesh Bank. Separate CTR report will be needed to prepare for cash deposit, withdrawal and remittance/online deposit.

18. Suspicious Activity Reporting ProcessAll employees of the bank are to remain conscious and alert to identify unusual/suspicious transactions and just after detection of unusual/suspicious transactions which may have connections with money laundering as per article 19(1) (Ga) of Money Laundering Prevention Act, 2002 will be reported in writing as per proforma at Appendix-Ga of AML Circular–02 and Appendix–Kha of AML Circular–10 to the nominated compliance officer of the of the branch.

Credit

1. Project appraisal – aspects, KYC, KYP, PP etc.Project appraisal means pre-investment analysis of an investment project to determine it’s commercial and socio-economic feasibilities while project evaluation shows the post investment achievement.Aspects : 1) Technical 2) Marketing 2) Financial 4) Economic 5) Social 6) Management competence

2. Principle of sound lending Safety, Liquidity, Purpose, Profitability, Security, Spread, National interest and sustainability.

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3. Loan policyA policy gives loan officers and bank’s management specific guidelines in making individual loan decisions and in shaping the bank’s loan portfolio. (contains Lending authority, lines of responsibility, operating procedure, required documentation, loan pricing, credit limit, etc.)

4. Equitable & Registered MortgageIn registered mortgage, the mortgagor transfers to the mortgagee the legal title to the property. On repayment of the loan the mortgagee transfers the title to the mortgagor. In case of an equitable mortgage, the mortgagor deposits the title deeds with the mortgagee with the intention of giving the mortgagee an equitable interest in the property. It does not require registration.

5. SMEEnterprises shall be categorized using the following definition (fixed investment implies exclusion of land and building, and valuation on the basis of current replacement cost only): Small enterprise: an enterprise should be treated as small if, in today’s market prices, the replacement cost of plant, machinery and other parts/components, fixtures, support utility, and associated technical services by way of capitalized costs (of turn-key consultancy services, for example), etc, excluding land and building, were to be up to Tk. 15 million;Medium enterprise: an enterprise would be treated as medium  if, in today’s market prices, the replacement cost of plant, machinery, and other parts/components, fixtures, support utility, and associated technical services (such as turn-key consultancy), etc,  excluding land and building, were to be up to Tk. 100 million;For non-manufacturing activities (such as trading or other services), the Taskforce defines:Small enterprise: an enterprise should be treated as small if it has less than 25 workers, in full-time equivalents;Medium enterprise: an enterprise would be treated as medium if it has between 25 and 100 employees;

6. LSI (Manufacturing and Service)“Large Industry” means an industry in which the value/replacement cost of durable resources other than land and factory buildings is above 100 million taka. “Large Industry” means an industry in which more than 100 workers work.

7. MSI (Manufacturing and Service)“Medium Industry” means an industry in which the value/replacement cost of durable resources other than land and factory buildings is between 15 million and 100 million taka. “Medium Industry” means an industry in which 25 to 100 workers work.

8. SSI (Manufacturing and Service)“Small Industry” means an industry in which the value/replacement cost of durable resources other than land and factory buildings is under 15 million taka. “Small Industry” means an industry in which fewer than 25 workers work (unlike family members in a cottage industry).

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9. Cottage industry“Cottage industry” means an industry in which members of a family are engaged part-time or full-time in production and service-oriented activities.

10. SWOT AnalysisStrength, Weakness, Opportunity, Threats (Challenges)

StrengthsGood asset quality, Satisfactory business growth, Good profitability, Experienced top management, Good operating efficiency, Equity base enhancement decision, No short fall in Capital Adequacy, Satisfactory NPL coverage, Professional management team, Satisfactory risk management structure, Multi product financial institution, Strong distribution channel, Satisfactory IT soft and hard infrastructure, Adequate capital base, Satisfactory liquidity position, Market leader in Small & Medium scale industry banking among the local banks, Government ownership

WeaknessesDependent on fixed deposits, Moderate risk management system, Limited delegation of power, Limited branch network, Poor Corporate Governance, Insignificant market share, Limited disclosure, Concentrated ownership, Low non-funded business

OpportunitiesBasel-II compliance for capital adequacy, Creation of brand image, Dual currency credit card, SME and Agro based business, Real time online banking, Scope of whole sale banking with NBFIs, Housing finance

ThreatsIncreased competition in the market, Market pressure for increasing the SLR, Supply gap of foreign currency

11. CRGM (With Risks) The Credit Risk Grading (CRG) is a collective definition based on the pre-

specified scale and reflects the underlying credit-risk for a given exposure. A Credit Risk Grading deploys a number/ alphabet/ symbol as a primary summary

indicator of risks associated with a credit exposure. Credit Risk Grading is the basic module for developing a Credit Risk Management

system.

Number

Risk Grading Short Name

Score

1 Superior SUP 100% cash covered Government guarantee International Bank guarantees

2 Good GD 85+3 Acceptable ACCPT 75-84

4 Marginal/Watchlist

MG/WL

65-74

5 Special Mention SM 55-646 Sub-standard SS 45-54

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7 Doubtful DF 35-448 Bad & Loss BL <35

Principal Risk Components: Weight:

Financial Risk 50% Business/Industry Risk 18% Management Risk 12% Security Risk 10% Relationship Risk 10%

Establish the Key Parameters

Principal Risk Components: Key Parameters: Financial Risk Leverage, Liquidity, Profitability & Coverage ratio. Business/Industry Risk Size of Business, Age of Business, Business

Outlook, Industry Growth, Competition & Barriers to Business

Management Risk Experience, Succession & Team Work. Security Risk Security Coverage, Collateral Coverage and

Support. Relationship Risk Account Conduct ,Utilization of Limit,

Compliance of covenants/conditions & Personal Deposit.

12. Difference between CC(H) & CC(P)CC (hypo) CC (Pledge)

01 The stocks of goods are under the control of borrower. 01 The stocks of goods are under the control of

lending Bank.

02 For this ‘letter of hypothecation’ is obtained from the borrower. 02 For this ‘letter of pledge’ is obtained form the

borrower.

03 Borrowers have to submit stock report on monthly basis to the lending Bank. 03 Bank maintains pledge register; stock reports

not require to submit.

04Incase of CC (hypo) Bank obtained sufficient collateral security for covering loan risk.

04Incase of CC(Pledge) Bank takes other collateral security if available in the hand of borrower.

13. DP and CalculationMargin is the borrowers contribution beside the borrowing contribution beside the borrowing for procurement of any asset with business interest. Margin of security is the difference between the written down value of the asset financed and the outstandings in loan given for it. The DP of the client/ customer to be calculated after deducting the prescribed margin from the value of the securities offered (pledged or hypothecated). Under no circumstances, advance shall be allowed in excess of the DP of the customer. In case where the DP of the client exceeds the limit sanctioned in its favor advances shall be allowed upto the extent of sanctioned limit only.

14. SMAA Continuous credit, Demand loan or a Term Loan which will remain overdue for a period of 90 days or more, will be put into the "Special Mention Account(SMA)"

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and interest accrued on such loan will be credited to Interest Suspense Account, instead of crediting the same to Income Account. This will help banks to look at accounts with potential problems in a focused manner and it will capture early warning signals for accounts showing first sign of weakness.Loans in the "Special Mention Account (SMA)" will have to be reported to the Credit Information Bureau (CIB) of Bangladesh Bank. However, it is reiterated that loans in the "Special Mention Account" will not be treated as defaulted loan for the purpose of section 27KaKa(3) of the Bank Company Act, 1991. Interest accrued on "Special Mention Account (SMA)'' will be credited to Interest Suspense Account, instead of crediting the same to Income Account.

15. NPAAgainst which income not generating basically those account which account has been classified.

16. Effect of NPA on Bank B/SAsset quality gets reduced, decreases profit, high provision has to be made

17. What is Loanable fund and how it is quantified Paid up capital+General reserve+Other reserve+Deposits+Borrowings+Undistributed profit+Refinance loan (Bangladesh bank, ADB, Kfw, etc.)+Call loan-SLR-%Demand deposit

18. Large loanLoan sanctioned to any individual or enterprise or any organization of a group amounting to 10% or more of a bank's total capital shall be considered as large loan.Outstanding financing facilities by a bank to any single person or enterprise or organization of a group shall not at any point of time exceed 35% (funded and non-funded credit facilities) of the bank's total capital -- funded facilities do not exceed 15%-- all non-funded credit facilities included in the loan shall be considered as 50% credit equivalent. However, in case of export sector single borrower exposure limit shall remain unchanged at 50% of the bank's total capital. But funded facilities in case of export credit shall also not exceed 15% of the total capital.

The banks will be able to sanction large loans as per the following limits set against their respective classified loans :Rate of net classified loans The highest rate fixed for large loan

against bank's total loans & advancesUpto 5% 56%More than 5% but upto 10% 52%More than 10% but upto 15% 48%More than 15% but upto 20% 44%More than 20% 40%

19. Rescheduling

Term Loan overdue installments

the total outstanding amount of loan

first rescheduling at least 15% 10% whichever, is less

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second time minimum 30% 20% whichever, is lessmore than two times

minimum 50% 30% whichever, is less

Demand and Continuous LoanAmount of Overdue Loan Rates of Down payment 

Up to Tk.1.00 (one) crore 15%Tk. 1.00(one) crore to Tk. 5.00 (five) crore 10% (but not less than Tk.15.00 lac)Tk. 5.00(five) crore and above 5% (but not less than Tk.50.00 lac)

If any Continuous or Demand Loan is rescheduled by restructuring/converting partly or wholly into Term Loan and repayment installments have been fixed, application for rescheduling such loans shall be considered on cash payment of minimum 30% of the overdue installments or 20% of the total outstanding amount of loan, whichever is less. For subsequent rescheduling minimum 50% of the overdue installments or 30% of the total outstanding amount of loan amount shall have to be deposited in cash.

20. Write offBanks may, at any time, write off loans classified as bad/loss. Those loans which have been classified as bad/loss for the last five years and for which 100% provisions have been kept should be written off without delay. After issuance of this circular the process of writing off all other loans classified as bad/loss should be started immediately. Under the process the oldest bad/loss classified loans should be considered first for written off.Banks may write off loans by debit to their current year's income account where 100% provision kept is not found adequate for writing off such loans.

21. Money loan court Act, 2003 (12, 33, 46, 47, Mutual Settlement)Artha Rin Adalat Ain 2003 (8 chapters & 60 sections) promulgated in the year 2003 in place of the Artha Rin Adalat Act, 1990 which has came into effect on 01.05.2003. ***** from the previous such laws. This law, for the first time empowered financial institutions with the right to sell the mortgaged properties without / before going to the court, if Power of Attorney to sell the mortgaged property obtained from the borrower at the time of execution of mortgage and made it mandatory to sell out the securities over which the bank created charges before filing of suits. Artha Rin Adalat Ain –2003 has fixed time limit for filing of suit for recovery of debt. Time limit for serving of summons, submission of written statements, judgment, etc. and time limit for filing of execution suit has been reduced substantially in this law which shall expedite disposal of suits. Artha Rin Adalat Ain-2003 provided for Settlement of disputes through Settlement Conference at the initiative of the court and in case of non–settlement through Settlement Conference, through Arbitration, keeping pending the normal proceedings of the suit. Artha Rin Adalat Ain –2003 imposed some obligations to the bankers in respect of disposal /sale out of securities, filing of suits, follow- up of suits etc., failure to perform some of which is punishable offence and may harm the interest of the bank to a great extent. So relative officers and executives of the bank should read this law meticulously and must act accordingly in timely manner to avoid legal complications.

22. Difference between credit and investment

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23. Difference between guarantee and indemnityGuarantee is a promise by a third person to the lender for the present or future debt of the borrower. Bank guarantee is an irrevocable obligation in the form of written undertaking of a Bank to pay an agreed sum, in case of default by a third party in fulfilling their obligations under the terms of the Bank Guarantee. e.g. Bid bond, Performance bond, Shipping guarantee, etc.Contract of Indemnity is a contract by which one party promises to save the other from loss caused to him by the conduct of the promissory himself, or conduct of any other person.Difference : Guarantee is an undertaking to pay the debts of the creditor whereas Indemnity is an assurance to compensate for any loss.

24. ChargesFixed charge: A charge is said to be fixed is made specially definite and assets of a permanent nature or assets capable of being ascertained and defined, e.g. charge or land and building or heavy machinery. It prevents the loanee from with the property charged without consent of the charge holders.Floating charge: It is a charge on property, which is constantly charging e.g. stock. A company can Deal with such properly in normal course of its business until it become fixed on the hampering of an event. Thus, it is a charge on the assets of a company in general.Pari-passu charge: Pari-passu charge is crated in cases of consortium lending where several banks on financial institution lend to a single borrowers ageist some common securities in an agreed ratio. In such charges all the creditors have equal priority, i.e. are entitled to have equal rights over the assets as per the agreed share.Second charge: A creditor holding a second charge by way of mortgage is entitled to the proceeds after the first charge is met. The second charge holder must inform the first mortgage about the second charge, so that he cannot part of title of the property.

25. Time limit for filing suit in Artha Rin Adalat Ain-2003.Artha Rin Adalat Ain-2003 fixes time limit for filing of suit for recovery of debt and stated that anything otherwise contained in the Limitation Act,1980, a financial institution shall file suit as per provision of the Artha Rin Adalat Ain-2003 .The provisions and time limit for filing suits for recovery of debt in Artha Rin Adalat Ain-2003 are as under :-

1) Where repayment period is less than three years :a) If the amount of recovery in the total loan period is less than 20%, the

financial institution shall file suit within the period of one year from the date of expiry of the repayment schedule.

b) In cases of reschedule of loan by the financial institution within the validity period of repayment, if repayment amount of loan is less then 20% in the period of reschedule, the financial institution shall file suit within the period of one year from the date of expiry of reschedule period.

2) Where repayment period is 3 years and above :If a borrower fails to pay back the loan as under after starting of re-payment schedule according to the terms of the loan agreement ,the financial institution shall file suit within the period of next one year :-

a) At least 10% of first one year’s repayable loan amount or b) At least 15% of first two year’s repayable loan amount or c) At least 25% of first three year’s repayable loan amount.

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In cases of reschedule of loan by the financial institution within the aforesaid time limit, the period of 1year or 2 years or 3 years shall be reckoned from the date of the reschedule of the loan and one year’s time limit for filing suit shall be effective anew as per above rules.

26. Limitation in imposing claim :Artha Rin Adalat Ain –2003 provides that whatever may contain in the agreement between the parties, the financial institution while instituting suit shall not claim more than 200% of the capital ( original loan Tk. 100+ interest Tk. 200 = Tk.300 ). The court shall not entertain any such claim which shall be more than 200% of the capital.

27. Function of Relationship ManagerReports to: Head of Corporate BankingPurpose of Job:The jobholder serves as the primary relationship contact with the Bank’s corporate and commercial customers. To maximize relationship profitability through cross selling. To minimize credit losses through thorough risk assessment and timely identification of deteriorating credit risk of customers.

Responsibilities: Provide good customer service while ensuring the Bank’s interest is

protected. Grow the customer base through marketing and business development

efforts, including cross selling to existing customer base. Ensure that credit quality is maintained and customer reviews are

completed in timely manner. Maintain an in-depth knowledge of the customer’s business through

regular customer visits and industry research. Ensure facility risk grades are accurate, and are changed in a timely

manner as soon as adverse information is known. Seek assistance from CRM at the earliest if adverse trends in a customer’s

financial position are noted. Follow up with customers to ensure the timely receipt of financial

statements, loan payments and all documentary requirements of the Bank. Ensure compliance with internal policies and procedures and external

regulatory requirements, and that all internal and external audit recommendations are implemented.

28. Functions of Credit Administration Departmenti. Disbursement

ii. Custodianiii. Complianceiv. Monitoring

29. Loan classification

Sub-standard Doubtful Bad/Losscontinuous loan past due/over due for 6

months or beyond but past due/over due for 9 months or beyond but

past due/over due for 12 months or beyond.

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less than 9 months. less than 12 monthsDemand Loan past due/overdue for 6

months or beyond but not over 9 months from the date of claim by the bank or from the date of creation of forced loan.

past due/overdue for 9 months or beyond but not over 12 months from the date of claim by the bank or from the date of creation of forced loan

past due/overdue for 12 months or beyond from the date of claim by the bank or from the date of creation of forced loan.

Fixed Term Loans, which are repayable within maximum five years of time

If the amount of 'defaulted installment' is equal to or more than the amount of installment(s) due within 6 (six) months, the entire loan will be classified

If the amount of 'defaulted installment' is equal to or more than the amount of installment(s) due within 12 (twelve) months, the entire loan will be classified

If the amount of 'defaulted installment' is equal to or more than the amount of installment(s) due within 18 (eighteen) months, the entire loan will be classified

Fixed Term Loans, which are repayable in more than five years of time

If the amount of 'defaulted installment' is equal to or more than the amount of installment(s) due within 12 (twelve) months, the entire loan will be classified

If the amount of 'defaulted installment' is equal to or more than the amount of installment(s) due within 18 (eighteen) months, the entire loan will be classified

If the amount of 'defaulted installment' is equal to or more than the amount of installment(s) due within 24 (twenty four) months, the entire loan will be classified

Short-term Agricultural and Micro-Credit

after a period of 12 months

after a period of 36 months

after a period of 60 months

CL : Loan Classification : (1) Classified (2) Unclassified

(1) Classified : (a) DF- 6 from SS (b) BL- 09 month from SMA(2) Unclassified : (a) SMA – 02 month overdue (b) SS – 03 month overdue

(c) Standard- regular

Base for Provision : (BFP)

(1) Outstanding (-) Valuation of eligible security (-) Interest suspense OR(2) Outstanding x 15% (which is higher)

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SMA = 05% of BFPSS = 20% of BFPDF = 50% of BFPBL = 100% of BFP

Written Off : condition 03, a. 05 years,b.100% provision C. Suit File

Waive : cost of Fund can not waive

Re- scheduling:

Continuous Loan:

Up to 01 crore 15% of outstanding

Up to 05 crore 10% of outstanding

Above 05 crore 005% of outstanding

Time limit maximum 24 months

Reschedule maximum 03 times

Trade Finance

1. NFCD : (TERM)Who can open: A) All non-resident Bangladesh nationals and persons of Bangladesh origin including those having dual nationality and ordinarily residing abroad. B) Bangladesh nationals serving with Embassies/High Commissions of Bangladesh in foreign countries as also the officers/staff of the Government/semi-Government departments/nationalized banks and employees of body corporate posted abroad or deputed with International and Regional agencies like IMF, World Bank, IDB, ADB etc. during their assignments abroad may open such accounts. C) Foreign nationals and companies/firms registered and/or incorporated abroad, banks, other financial institutions including institutional investors and 100% foreign owned (A-Type) industrial units in the Export Processing Zones in Bangladesh, are also allowed to open and maintain NFCD accounts with the ADs. The minimum amount of time deposits in such cases should be US$ 25,000 or its equivalent in pound sterling, Euro or Japanese yen. Other terms and conditions in respect of these account-holders will be the same as those mentioned above for NFCD accounts of non-resident Bangladesh nationals.

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Who Can not open: Crew members of the Bangladeshi shipping companies are not entitled to open such accounts.

Currencies: The accounts may be maintained in US dollar, pound sterling, Euro or Japanese yen; initially with minimum amount of US$ 1000 or pound sterling 500 or equivalent. Accounts may be opened against remittances in other convertible currencies after conversion of those into US Dollar, pound sterling, Euro or Japanese yen

Period : The accounts are in the nature of term deposits maturing after one month, three months, six months and one year.

Interest Rates: The ADs will pay interest on deposits into the accounts at the eurocurrency deposit rates. In case of premature repayments, the interest amount will be forfeited to the depositing AD.

Tax: The interest on deposits into this account is exempt from the tax payable under Income Tax Act.

Withdrawl of Principal and Interest: The account holder can freely repatriate the balance and the interest accrue & thereon in foreign exchange to the country of his residence or anywhere he chooses and may at his option, convert the balance into local Taka at the prevailing exchange rate.

2. RFCD :Who can Open: Persons ordinarily resident in Bangladesh may open and maintain Resident Foreign Currency Deposit (RFCD) accounts with foreign exchange brought in at the time of their return from travel abroad. Any amount brought in with declaration to Customs Authorities in form FMJ and upto US $ 3000 brought in without any declaration, can be credited to such accounts.

Who can not: Any non residents and International firms operating in Bangladesh will not be allowed to open such accounts. Proceeds of export of goods or services from Bangladesh or commission arising from business deals in Bangladesh shall not be credited to such accounts.

Currencies: The accounts may be maintained in US dollar, pound sterling, Euro or Japanese yen.

Period : The accounts will be treated as term only when kept for a period of minimum 1 month.

Interest Rates: Interest in foreign exchange shall be payable on balances in such accounts if the deposits are for a term of not less

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than one month and the balance is not le ss than US $1000 or £500 or its equivalent. The rate of interest shall be one quarter percent (0.25 percent) less than the rate at which interest is paid on balances of bank in their foreign currency clearing accounts maintained with the Bangladesh Bank.

Tax: Nothing has been said about Tax. It is deemed that AIT will be applicable for such accounts.

Withdrawl of Principal and Interest: Balances in these accounts shall be freely transferable abroad. Fund from these accounts may also be issued to account-holders for the purpose of their foreign travels in the usual manner (i.e. with endorsement in passport and ticket, upto US $ 1500 in the from of cash currency notes and the remainder in the form of TC).

3. Retention Quota Account:Who can Open: A) Merchandise exporters are entitled to a foreign exchange retention quota of 50% of repatriated f.o.b value of their exports. However, for exports of goods having high import content (low domestic value-added) like POL products including naphtha, furnace oil and bitumen. readymade garments made of imported fabrics, electronic goods, etc. the retention quota is 10% of the repatriated f.o.b value. B) Service exporters may retain 5% and Software and Data entry/processing exporters may retain 40% of their repatriated income as Retention Quota.

Currencies: The accounts may be maintained in US dollar, pound sterling, Euro or Japanese yen

4. FC Account

5. BOP: What it is: BOP is a summary of statement of all its economic transactions with the rest of the world at a given year. Two components i) Current account, ii) capital account. Current account includes trade in goods and services and unilateral transfers. Capital account shows the change in the nations assets abroad and the foreign asset in the nation.

Components of Current account and Capital Account:Current account:Exports of goods and services:

Export of goodsExport of services

(-) Import of goods and services:Import of goodsImport of services

Balance of Trade

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The net of Unilateral transfers:Receipts

GrantsGiftsPrivate Inward remittances

PaymentsGrantsGiftsPrivate Outward remittancesBalance of Current accountCapital Account:Outflow: (Assets in abroad):Govt. assets other than official reservePrivate assets: Direct investment in abroadForeign SecuritiesNonbank ClaimsBank liabilitiesInflow: (Foreign Assets in the nation)Foreign Direct investmentU.S. Treasury and other U.S. SecuritiesNonbank liabilitiesBank liabilities

Balance of Capital account

6. SWAP:In general SWAP is simultaneous sale and purchase of identical amounts of one currency against another, for different maturities. A SWAP could be spot against forward or forward against forward.

7. NITA:Non-resident persons/institutions including non-resident Bangladesh nationals may buy Bangladeshi shares and securities in Bangladesh against freely convertible foreign currency remitted from abroad through the banking channel. Transactions relating to such investments including repatriation of dividend/ interest earnings and sale proceeds shall be made through a Non-resident Investor's Taka Account (NITA)

8. EDF : This fund was created in 1988 with the fund provided by IDA to GOB vide BCD circular 29 dated 07/12/1988 to assure continued availability of Foreign Exchange to meet the import requirement for export of non traditional items including RMG. This fund is basically used to provide funds to the exporters for import of raw materials on sight basis to bring confidence of the foreign suppliers. The total fund amount as of now is $150.00 million and the maximum amount of credit can be given to a particular exporter is $1.50 million. The

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interest will be deducted @ LIBOR + 1 from the date of utilization of the fund.

9. Bill of Exchange: Bill of Exchange act 1882 “Bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it requiring the person to whom it is addressed to pay on demand or at fixed or determinable future time at a certain sum of money to or to the order of a specified person or to the bearer”. The main features are: a) It must be written unconditional order by a definite drawer to pay a definite sum of money, b) The sum, as specified in it must be payable by a definite drawee on demand or on a fixed date or on an ascertainable date, c) It must be payable to a set person or to his order or to the bearer, d) It must be duly referred, dated, stamped, endorsed (if required) and signed by the drawer and also indicating the place of the drawing.

10. Nostro Account: A bank’s account with a correspondent bank/branch abroad in the

currency of that country.

11. Vostro Account: A local currency account of a foreign bank/branch. Thus the nostro account of the account holder is a vostro account for the bank where it is maintained.

12. Loro Account: The foreign banks maintaining accounts with each other in the separate territory other than host nation is known as Loro account. Simply their account with them.

13. Different types of Int’l Trade Payment: Cash in advance: Buyer places the funds at the disposal of the seller prior shipment of the goods or services.Open account: An arrangement between the buyer and the seller whereby the goods or services delivered to the buyer before any payment received by the seller.Collection: An arrangement between the buyer and the seller where the seller ship the goods and relevant bi log exchange is drawn by the seller on the buyer and document(s) sent to the bank with clear instruction for collection through one of its correspondent bank located in the domicile of the buyer.

Type of collection: URC 522, 1996 Documentary collection: After shipment, the seller submits drafts and other documents to the remitting bank which sends the documents to the collecting bank for payment. Article 2C, URC 522, 1996.Clean Collection: An arrangement whereby the seller draws only a draft on the buyer for the value of the goods and submits

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the same to the remitting bank for payment. Article 2C, URC 522, 1996.Direct collection: A direct collection is an arrangement whereby the seller obtains his bank’s pre-numbered direct collection letter, thus enabling him to send his documents directly to his bank’s correspondent bank for collection. This accelerates the paper work process.

Documentary Credit: The documentary credit is a definite undertaking issued by a bank on behalf of the applicant or for it’s own use, to pay the beneficiary the value of the draft or documents provided that the terms and conditions of the credit complied with.

14. Parties involve in L/C: a) Applicant, b) Issuing bank, c) Advising bank, d) Confirming bank, e) Transferring bank, f) Beneficiary, g) Paying/Negotiating/Accepting bank, h) Reimbursing bank.

15. Types of L/C: Revocable Credit: A revocable credit is a credit which can be amended or cancelled by the issuing bank at any time without prior approval/ notice to the beneficiary.Irrevocable Credit: Since an irrevocable credit is that which can not be amended/cancelled without any prior approval/notice to the beneficiary.Revolving Credit: The revolving credit is one which restoring the credit to the original amount after it has been utilized. The revolving credit can be Cumulative or Non-cumulative. A cumulative revolving credit is that which can not exceed the total L/C value after revolving. A non-cumulative revolving L/C is that which is established for a certain amount and can revolved with that amount for a certain period of time.Transferable Credit: The transferable credit is the one that can be transferred by the original beneficiary in full or in part to one or more subsequent beneficiaries. Such credit can be transferred one only. Article 38 UCP 600.Red Clause Credit: A red clause credit is a credit with a special condition incorporate into it that authorizes the confirming bank or any other nominated bank to make advances to the beneficiary before presentation of the documents. Under this type of credit the opening bank is liable for such pre-shipment credit made by the negotiating /nominated bank.Stand by Credits: The stand by credit is a documentary credit or similar arrangement however named or described which represents an obligation to the beneficiary on the part of the issuing bank to:a) Repay money borrowed by the applicant or advanced to or for

the account of the applicant.b) Make payment on account of any indebtness undertaken by the

applicant or

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c) Make payment on account of any default by the applicant in the performance of an obligation.

16. L/C settlement methods:a) Settlement by Payment, b) Settlement by Acceptance, c)

Settlement by Negotiation.

17. INCOTERMS 2000 (EXW, CFR, CIF, CPT, CIP, DAF, FAS, FOB) : EXW: EX Works means the seller delivers the goods at the disposal of the buyer at his premises or at any named places not cleared for export and not loaded on any vehicles.CFR: Cost and Freight means the seller must pay the costs and freight necessary to bring the goods to the named port or destination but the risk of damage or loss after delivery are transferred from the seller to buyer. Used for marine and inland waterway transport.CIF: Cost Insurance and Freight means the seller must pay the costs and freight necessary to bring the goods to the named port or destination but the risk of damage or loss after delivery are transferred from the seller to buyer. Moreover the seller has to procure marine insurance against the buyer’s risk of loss or damage to the goods during the carriage. Used for marine and inland waterway transport.CPT: Carriage Paid To means the seller delivers the goods to the carrier nominated by him and should pay the cost of the carriage to bring the goods to the named destination but the risk of damage or loss after delivery are transferred from the seller to buyer. Used for any mode of transportation including multimodal. CIP: Carriage and Insurance Paid to means the seller delivers the goods to the carrier nominated by him and should pay the cost of the carriage to bring the goods to the named destination but the risk of damage or loss after delivery are transferred from the seller to buyer. Moreover the seller has to procure marine insurance against the buyer’s risk of loss or damage to the goods during the carriage. Used for any mode of transportation including multimodal.DAF: Delivered At Frontier means that the seller delivers the goods at the disposal of the buyer on the arriving means of transport not unloaded for export but not cleared for import at the named point or place. Used mainly for land / frontier trade.FOB: free on Board means that the seller delivers when the goods pass the ships rail at the named port of shipment. This means that the buyer has to bear all the costs and risks of loss or damage to the goods from the point of delivery. Used for marine and inland waterway transport.

18. Transshipment:

Transshipment generally means transfer and reloading from one mode of transport to another mode of transport ( Incase of

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multimodal transport document) or from one vessel to another vessel within the same mode of transport ( incase of marine and air transport document). But in case of road, rail or inland waterway transport document, transshipment means conveyance to another means of conveyance, such as road to rail to waterway etc.

19. Types of B/L: Article – 20 UCP 600

Through B/L: When a B/L covers goods being transshipped en-route. It covers the whole voyage from one point of shipment to final destination. Simply one transport document is used.Short From/Blank B/L: B/L in which the detailed conditions of transportation are not listed in full on the back of the B/L.Straight B/L: The B/L which is issued to the name of a certain party or directly in the name of the consignee and which can not be transferred by endorsement.Port or Custody B/L: B/L issued by the port officer or ware house supervisor stating that the goods have been received for shipment.Mate’s receipt: When the goods are handed over to the agent of the shipping company for shipment and the agents contracts to do so and issues a receipt which is known as Mates Receipt. When the goods are actually shipped the Mate’s receipt is exchanged with the regular B/L.On Board B/L: It is issued after the goods have been received on board of the ship.Charter Party B/L: A charter party is a contract under which a ship owner agrees to place his ship, at the disposal of a merchant or other person (Charterer) for the carriage of goods from one port to another (voyage charter) or to let his ship for a specified period (time charter). Two types : Demise ( when the ship owner only provides vessel and Non demise (when the ship owner provides both vessel and crew). Article 22,, UCP 600. Forwarder’s Certificate of Receipt: It is issued by a freight forwarder as a carrier or multimodal transport operator or as an agent of a carrier or multimodal transport operator for the goods received from shippers.Clean B/L: A B/L or transport document is one which bears no clause or notation which expressly declares a defective condition of the goods and/or packaging. Article – 27, UCP 600.

20. Documents of L/C (Types & Name):

a) Bill of exchange, b) Invoices and other documents, c) Transport documents, d) Insurance documents. Totally these all are called shipping documents.

21. Convertibility of currency: A currency is said to be convertible when it may be fully exchanged for another currency. Convertibility of currency is not meant for

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domestic transaction purposes. It is only required for international transactions. In Bangladesh Current account has made convertible on October 20, 1993. The capital account has been made partially convertible with the Foreign Direct Investment and for Securities investment through NITA.

22. Over invoicing & Under invoicing and it’s effect: Over Invoicing – excess value than the actual value – effect - Foreign Currency Drain, Under Invoicing – less value than the actual value – effect - Duty Loss.

23. Effect on import & export when taka gets stronger than F.C.:

When BDT gets stronger than the vale of the FC gets down, means the more FC is available with the same amount of BDT. Usually it is done when the country’s FX reserve remains more than required level and when the export + remittance earnings are much higher than the import + FC payments. At this situation import is encouraged since more FC can be obtained against BDT and the export is discouraged since the exporters will receive less BDT against FC earnings.

24. Accommodation bill: An accommodation bill is prepared by the drawer/seller on the drawee/buyer without any supply of any goods and services. This is done to provide some financial help to the drawer/seller. In our country this is possible for inland transactions and for international transactions this type of accommodation is not possible.

25. Export financing – Pre-shipment, Post-shipment: Pre-shipment export financings are – BBLC, Packing Credit, ECC (Hypo), ECC (Pledge), Post Shipment export financings are – Negotiation of export bill, Bill purchase, Advance against Export bill, Short Tem advances against export etc.

26. UCP 600: Effective from July 01, 2007. 39 articles

27. URC 522: Effective from January 01, 1996. 25 articles.

28. Difference between LBP/LADB: LBP is Local Bill Purchased which means the bank shall purchase the clean inland export documents on presentation and shall give the value to the exporters without charging any interest on the face value of the bill. On the other hand the LADB is Loan against Documentary Bill means providing an exporter a post shipment loan against an export document, whether clean or not, without purchase of the same and shall charge interest on the face value of the bill.

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29. Foreign exchange position: Foreign exchange positions are represented by the balance of foreign exchange operations (purchase and sale of foreign currency, securities and documents that represent them, and gold – exchange instrument) recorded in a bank at a certain day.

Open position: Each open position has four major characteristics: You're trading a particular currency pair, you're either long or short the market (you've bought or sold, respectively), the size of the position in increments of 100,000 of the base currency, and an exchange rate at which the position was opened. For example a "EUR/USD, 500, S, 0.9220", means the trader Sold 500,000 Euros for U.S. Dollars at an exchange rate of 0.9220.Short Position: Short positions are taken when a trader sells currency in anticipation of a downturn in price. Making this move allows the investor to benefit from a decline.Long Position: Long positions are taken when a trader buys a currency at a low price in anticipation of selling it later for more.Interday and Overnight Position: Intraday positions are all positions opened anytime during the 24 hour period AFTER the close of Forex Capital’s normal trading hours. Overnight positions are positions that are still on at the end of normal trading hours which are automatically rolled by Forex Capital Management.

30. Dealing room:

31. Difference between entre-pot and re-export: Entrepot Export: Entrepot trade may be carried out in compliance with the Export Policy and Import Policy Order in force subject to the following conditions:a) The value of export is at least 5% more than the import valueb) No change can be made in respect of quantity, quality, shape or any other attribute of the goods intended to be imported for entrepot;c) Goods imported to Bangladesh may be taken outside the port area only with the special approval of the concerned authority;d) AD will not provide any foreign currency from local source; import cost (on back to back basis) may be met from realized proceeds through entrepot trade; that is, AD will not bear any liability on behalf of its customers for import payment in entrepot trade;

Re-Export: Re-export (import for export) may be carried out in compliance with the Export Policy & Import Policy Order in force subject to the following conditions wherein import, processing and subsequent re-export shall be conducted under the authorization and supervision of Customs Authorities:a) Goods (including goods under control list) may be imported

for re-export under bonded warehouse/ 100% bank guarantee/ provision of duty draw back for 100% export within stipulated time;

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b) Minimum value addition shall be 10%; wherein re-export consignment is brought in Bangladesh for subsequent re-shipment in favor of foreign buyer, import cost alongwith freight will not exceed 90% of the FOB value of re-export.

c) Quality, quantity and shape of the goods are required to be changed;

32. Procedure for issuance of Industrial IRC:At first an industrial IRC is issued on adhoc basis for an year with the amount to be imported for the 1st year. After completion of the first year the concerned authority of CCI&E shall check the % of the amount authorized at the time of 1st renewal. If the industrial concern was able to utilize at least 80% of their limit then CCI&E issues the regular IRC. If the amount is less than 80% then the concern will be given as 2nd adhoc.

33. BBLC % as per Import Policy Order:a. For Knit garments minimum value addition should be 20%b. For all non-quota category oven items minimum value

addition should be 20%c. If the price of the quota category oven item is FOB USD40.00

the3n minimum value addition should be 20%d. For all type of quota category if FOB value more than

USD40.00 minimum value addition should be 20% but minimum price per dzn should be not less than USD12.00

e. For high value added quota and non quota RMG, minimum value addition should be 20% and 15% respectively.

f. For all type of sweater export minimum value addition should be at least 20%

g. For kids wear the minimum value addition should be 15%

34. Cash FC and TC sell limitation: For any Resident Bangladeshi the maximum amount of FC can be taken under travel quota is USD3000.00 of Which maximum USD1500.00 can be taken as cah and other in the form of TC. But if the Resident Bangladeshi maintains RFCD account, he will be allowed take FC upto the account balance with the endorsement in the passport and with the cash limitation of USD1500.00.

35. Rules related to EPZ concerns: FC Accounts of EPZ concerns: The following procedure shall apply to release of foreign exchange to the enterprises against exports made from EPZs:100% of repatriated export proceeds of a Type A industrial

unit inEPZ may be retained in FC account in the name of the unit with an AD in Bangladesh. Balances in the FC account may freely be used to meet all foreign payment obligations including import payment obligations of the unit and payment obligations in

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foreign exchange to BEPZA. Balances from the FC account will also be freely encashable for local disbursements or for crediting Taka account maintained with an AD for meeting Taka payment obligations like wages, rents, rates, taxes etc. Taka account maintained with ADs by Type A units in EPZ may be credited only with encashments of funds from FC accounts or of other inward remittances from abroad. However, receipts from Taka sales of factory refuses and of unusable portion of raw materials of Type A industries may be credited to the Taka accounts provided the permission letter of BEPZA for the sale and evidence of payment of duties/ taxes on sale proceeds are produced to the AD. Balances in the Taka accounts cannot be converted to foreign exchange and may only be used for meeting local expenses

Upto 80% of the repatriated export proceeds of Type B and Type C units other than those in the garments sector may be retained in FC Accounts maintained in the names of the units with their ADs; for a Type B or Type C unit in the garments sector, upto 75% of the repatriated export proceeds may be credited to FC account maintained in the name of the unit with an AD. The remainder of the export proceeds should be encashed to taka at the prevailing exchange rate. All foreign payments obligations of Type B and Type C units including import payments and repayments of foreign loans may be met out of the balances in their FC accounts; payment obligations in foreign exchange of a type B unit to the BEPZA may also be settled from balances in its FC account. Balances in the FC accounts of the Type B and Type C units are freely encashable to Taka for local disbursements

Credit facilities to EPZ concerns: (A) 100% foreign owned enterprises in the EPZs known as type A industries may obtain short term foreign currency loans from overseas banks and financial institutions subject to the following conditions:(i) The loan shall be received through an AD in Bangladesh; and the

loan proceeds will be credited to the FC account maintained by the AD in the name of the Type A unit, to be used for financing import of capital machinery and raw materials, payment of interest /service charges, repayment of loans and for crediting Taka account for meeting local expenses;

(ii)Only assets fully owned by the Type-A industry may be lodged as collaterals for such loans;

(iii) Repayment of principal and interest on the loan shall be remitted out of the balances available in the FC account without prior Bangladesh Bank approval. No fund may be provided from the AD’s own resources for such repayment except with prior approval of Bangladesh Bank;

(iv) In case the loan is called up by the creditor, the asssets charged to foreign lender will be allowed to be sold only in foreign exchange and proceeds, after paying off all local

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liabilities in Bangladesh, may be remitted abroad with Bangladesh Bank’s approval;

(vi) No Taka loan against repatriable short term foreign currency loan will be allowed to a Type A industry.

(B) Type B industries (joint venture projects) may also obtain such loans subject to conditions applicable to Type A industries as indicated above, except that Type B industries will not be permitted to mortgage/ hypothecate their fixed assets, raw materials in favour of any non-resident. The ADs may, however, issue guarantee to overseas banks/ financial institutions for short term foreign currency loans brought into Bangladesh by Type B industries, subject to prior approval of the Bangladesh Bank.

Taka loan maybe granted to a joint venture (Type B) industrial unit in EPZ upto 100% of short term foreign currency loan brought in and encashed to Taka. Loan in Taka for procurement of capital machineries for setting up a Type B industry, not exceeding the local partners’ share of ownership of the unit, may be extended on normal Taka loans to Type B units banker-customer relationship. Prior Bangladesh Bank approval should be obtained by the AD while providing foreign exchange for import of the machineries out of the Taka loan. Repayments of the Taka loans alongwith interests should be received out of the foreign exchange earnings of the unit.

ADs may extend credit facilities to Type C industries (100% locally owned) as admissible to

such industries outside EP Z.

In establishing import LCs on account of Type A, B and C units in the EPZs ADs shall bear in mind the position that the import payments may be made only out of the foreign exchange earnings of the concerned units or out of their borrowings abroad credited in their FC accounts, and that no funds from the AD’s own foreign exchange resources can be used for this purpose. Before opening inputs import LC against an export LC or export order received by an EPZ unit the AD should satisfy itself completely about the clarity of the conditions in the export order/ LC, the standing and credit of the foreign buyer and the ability of the exporting unit for timely execution of the export order. In opening inputs import LCs on account of Type B and Type units, domestic value addition requirements prescribed for the respective items by the Ministry of Commerce should also be abided by. Import payments against the LCs should be scheduled in a manner that payment obligations do not fall due before receipt of export proceeds. In all cases of opening input import LCs on accounts of units in the EPZ, ADs should satisfy themselves that necessary arrangements have been made by the opener that in case of shortfall or delay in export receipts, foreign exchange would be made available from external sources.

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36. Quota : Application of a reduced or zero duty rate for a specified quantity of imported goods, or for goods imported during a given period.

37. GSP: GSP (General System of Preferences) Under which goods from certain countries are given preferential rates of import duty.

38. Changes in UCP 600: a. The term ‘parties’ has been replaced by ‘banks’. b. Important definitions of the UCP have been

accumulated into a single article c. All interpretive issues of UCP have been placed into a

single articled. Revocable letter of credit has been kept out of the scope

of the UCP 600.e. In general, articles stated in future form in UCP 500 are

restructured into present form.f. The phrase ‘unless otherwise stipulated in the credit’

has been removed from UCP 600. g. The phrase ‘on its face’ has been mostly taken out from the

articles while composing the texts of the UCP 600h. The common starting of transport document ‘if a credit calls

for’ has been dropped, and ‘in all other respects meets the stipulations of the credit’ of UCP 500 has been removed form UCP600.

i. Article 5 and 12 of UCP 500 regarding incomplete and unclear instructions, Article 8 in regard to ‘Revocation of a Credit’, and article 30 connected with ‘Transport documents issued by freight forwarders’ of UCP 500 have found no place in the UCP 600.

j. In the article 1 of UCP 500, the phrase ‘shall apply to all documentary credit’ is replaced by ‘are rules that apply to any documentary credit’.

k. Some of the definitions of article 2 [line 9] appears to have new meaning. ‘Applicant’ has been termed as party. Credit has been defined only as ‘irrevocable undertaking’.

l. Introducing the term ‘Honour’ offers a new dimension. The definition of ‘Negotiation’ appears differently. And the UCP 600 has defined ‘presentation’ explicitly.

m.Interpretation of the term ‘Bank’ rightly accommodates other entities to demonstrate wider scope.

n. Addition of a sentence has made it is more distinct that credit is a separate contract

o. ‘All parties concerned’ has been replaced by ‘banks’ of UCP 600.

p. UCP 600 has identified four terms of payment , no different from UCP 500.

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q. The liabilities and responsibilities of issuing and confirming bank have been split out in two articles.

r. UCP 600 brings in the concept of ‘second advising bank’.

s. ‘Amendment issues along with advising bank’s responsibilities related to amendment of UCP 500 have been placed in a new article.

t. Slightly modified text of the article 10 [c] of UCP 500 has been placed under a new title ‘Nomination’.

u. Removal of ‘as reflected in these articles’ at the end of ‘international standard banking practice’;

v. Maximum period allowed to examine documents reduced to five banking days from seven;

w. The term ‘reasonable time’ has been removed in connection with time required for examination of documents

x. The UCP 500 provision on ‘submission of documents within 21 days after the date of shipment’ has been accommodated under a new article;

y. The UCP 500 article 22 on ‘Issuance Date of Documents V. Credit Date’ retained in the UCP 600 with new wordings.

z. The presentation of documents by or on behalf of the second beneficiary has been made to the transferring bank.

General Knowledge

Nobel

ECONOMICS Awarding institution: The Royal Swedish Academy of Sciences And the prize goes to... Leonid Hurwicz , Eric S. Maskin , and Roger B. Myerson "for having laid the foundations of mechanism design theory". [Mechanism Design Theory] [It describes how motivation and flow of information make market more active.When market system does not work properly due to clash between Business Corporate houses and Political Government, by using this theory highest level of social benefit can be achieved]

PEACE Awarding institution: The Norwegian Nobel Institute And the prizes go to... Intergovernmental Panel on Climate Change (IPCC) and Albert Arnold (Al) Gore Jr. "for their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change".

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LITERATURE Awarding institution: The Swedish Academy And the prize goes to... Doris Lessing "that epicist of the female experience, who with scepticism, fire and visionary power has subjected a divided civilisation to scrutiny".

CHEMISTRY Awarding institution: The Royal Swedish Academy of Sciences And the prize goes to... Gerhard Ertl "for his studies of chemical processes on solid surfaces".

PHYSICS Awarding institution: The Royal Swedish Academy of Sciences And the prizes go to... Albert Fert and Peter Grünberg "for the discovery of Giant Magnetoresistance".

PHYSIOLOGY or MEDICINE Awarding institution: The Nobel Assembly at the Karolinska Institute And the prizes go to... Mario R. Capecchi , Sir Martin J. Evans , and Oliver Smithies "for their discoveries of principles for introducing specific gene modifications in mice by the use of embryonic stem cells"

New 7 wonders1. Taj Mahal, India2. Chichen Itza, Mexico3. Machu Picchu, Peru4. Colosseum, Italy5. Petra, Jordan6. Great Wall, China7. Christ Redeemer, Brazil

SPORTS

Cricket1. 20-20-2007

a. Champion--Indiab. Venue—South Africac. Bangladesh’s performance—2nd round (won against West

Indies in 1st round)d. Player of the tournament—Shahid Afridi (Pakistan)e. Next – year – venue—2009--England

2. World cup--2007a. Champion--Australiab. Venue—West Indies

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c. Bangladesh’s performance—Super eight (Won against India & Barmuda in 1st round and against South Africa in Super 8)

d. Player of the tournament—Mathew Hayden (Aus)e. Next – year – venue—2011 India, Pakistan, Srilanka,

Bangladesh3. Test

a. Most Runs—B.C. Lara—11953 runsb. Most Centuries—S.R. Tendulkar—37c. Most wickets—Shane Warne—708 wickets

4. One daya. Most Runs— S.R. Tendulkar —15962 runsb. Most Centuries—S.R. Tendulkar—41c. Most wickets—Wasim Akram—502 wickets

Football1. World cup--2006

a. Champion--Italyb. Venue--Germanyc. Golden ball—Zinedine Zidane (France)d. Golden boot—Miroslav Klose (Germany)—5 goalse. Next – year – venue—2010-South Africa

Others1. India

a. P.M.-Dr. Monmohan Singhb. President-Smt. Prativa Devi Sing Patilc. Finance Minister-Mr. P. Chidambaramd. Foreign Minister-Mr. Pranab Mukhrjee

2. Pakistana. Advisor of Care taker Prime Minister-Mr. Mohammedmian

Soomro (Former Banker)b. President-Mr. Pervez Musharrof

3. Bangladesha. Finance Advisor-Mr. A B Mirza Azizul Islamb. Education Advisor-Mr. Ayub Quadri (Former Director of

BASIC)c. Governor-Dr. Saleh Uddin Ahmedd. Deputy Governor

a. Mr. Md. Nazrul Hudab. Mr. Ziaul Hasan Siddiquic. Mr. Murshid Kuli Khan (New)

e. Finance Secretary—Dr. Mohammed Tarique

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Economy Glossary

Most Common:

Gross domestic product (GDP): The value of the total final output produced inside a country during a given year. It equals GNP (gross national product) less overseas remittances.

Real GDP: GDP(gross domestic product) adjusted for inflation. Real GDP provides the value of GDP in constant dollars, which is used as an indicator of the volume of the nation's output.

Gross national product (GNP): The value of all final goods and services produced during a year by the factors of production in a country. It is the sum of expenditures by consumers and governments, gross investment spending, and total merchandise exports less imports. It is a measure of the gross value added by all of the economic agents in the economy. A related concept is net national product, which subtracts out depreciation of investment and thus is equal to net value added of all consumption, government spending, net investment, and exports minus imports.

Gross national income (GNI): GNI is equal to gross national product, but measures the income produced by the gross national product rather than the value of the product itself. Thus GNI is equal to wages and salaries, rents, and profits from all economic entities in an economy.

Dumping: When exports are sold at prices below marginal cost – often as a result of government subsidy.

Balance of Payment: A record of the country’s transactions with the rest of the world over a given period.

Balance of Trade: A record of a country's exports and imports of goods and services

Broad Money: Items in narrow definitions plus other items that can be readily converted into cash.

Narrow Money: Items of money that can be spent directly (cash and money in cheque-book/debit-card accounts).

Exchange rate: The rate at which one national currency exchanges for another. The rate is expressed as the amount of one currency that is necessary to purchase one unit of another currency (e.g. $1.60 = £1).

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Floating exchange rate system: The flexible exchange rate system in which the exchange rate is determined by the market forces of supply and demand without intervention.

Depreciation: A drop in the free-market exchange rate of the domestic currency with foreign currencies.

Appreciation: A rise in the free-market exchange rate of the domestic currency with foreign currencies.

Inflation: A general rise in the average level of all prices.

Demand-pull inflation: Inflation caused by persistent rises in aggregate demand.

Internal rate of return (IRR): The rate of return of an investment: the discount rate that makes the net present value of an investment equal to zero.

Equi-marginal principle: Consumers will maximise total utility from their incomes by consuming that combination of goods where MUa/Pa = MUb/Pb = MUc/Pc …= MUn/Pn.

Special Drawing Rights (SDRs): Additional liquidity created by the IMF. SDRs give countries the right to borrow a certain amount of additional funds from the IMF, with no requirement for extra deposits (quotas).

Value added tax (VAT) A tax on goods and services, charged at each stage of production as a percentage of the value added at that stage.

Economic growth: An increase in the nation's capacity to produce goods and services.

Economic Development:

Economies of scale: If all the inputs in a production process are increased and the output increases by proportionately more than the inputs were increased, economies of scale are being realized. There may also be diseconomies of scale which occur when an increase in all inputs brings about a less than proportionate increase in output.

High-powered money: The monetary base, or the total of currency in circulation and commercial bank deposits with the central bank.

Consumer price index (CPI): A price index that measures the cost of a fixed basket of consumer goods with weights based on consumption shares of urban consumers.

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Budget:

Sustainable Development:

Developing Country:

Less Development Countries (LDCs)

Net Present Value:

Backward Linkage:

Forward Linkage:

Less Common:

Absolute advantage: A country has an absolute advantage over another in the production of a good if it can produce it with less resource than the other country can.

Aggregate demand: Total spending on goods and services made in the economy. It consists of four elements, consumer spending (C), investment (I), government spending (G) and the expenditure on exports (X), less any expenditure on imports of goods and services (M): AD = C + I + G + X – M.

Aggregate supply: The total amount of output in the economy.

Assets: Possessions or claims held on others

Barter economy: An economy where people exchange goods and services directly with one another without any payment of money. Workers would be paid with bundles of goods.

Budgeta statement outlining the spending plans of a government or an individual usually for the coming year.

Budget deficit: The excess of central government’s spending over its tax receipts.

Budget line: A graph showing all the possible combinations of two goods that can be purchased at given prices and for a given budget.

Budget surplus: The excess of central government’s tax receipts over its spending.

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Business cycle or Trade cycle: The periodic fluctuations of national output round its long-term trend.

Capital: All inputs into production that have themselves been produced: e.g. factories, machines and tools

Consumer surplus: The excess of what a person would have been prepared to pay for a good (i.e. the utility) over what that person actually pays.

Producer surplus: The difference between revenue received and the variable costs of production for each unit of a commodity sold. Represents a contribution to fixed costs and producer profits.

Crawling peg: A system whereby the government allows a gradual adjustment of the exchange rate.

Crowding out: Where increased public expenditure diverts money or resources away from the private sector.

Deadweight loss of an indirect tax: The loss of consumer plus producer surplus from the imposition of an indirect tax.

Dualism: The division of an economy into a modern (usually urban) sector and a poor traditional (usually rural) sector.

ECU (European Currency Unit): The predecessor to the euro: a weighted average of EU currencies. It was used as a reserve currency and for the operation of the exchange rate mechanism (ERM).

Elasticity: A measure of the responsiveness of a variable (e.g. quantity demanded or quantity supplied) to a change in one of its determinants (e.g. price or income).

Endogenous variable: A variable whose value is determined by the model of which it is part.

Exogenous variable: A variable whose value is determined independently of the model of which it is part.

Engel curve A line showing how much of a good people will demand at different levels of income.

Forward exchange market: Where contracts are made today for the price at which currency will be exchanged at some specified future date.

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Game theory (or the theory of games): The study of alternative strategies oligopolists may choose to adopt, depending on their assumptions about their rivals’ behaviour.

Giffen good: An inferior good whose demand increases as its price increases as a result of a positive income effect larger than the normal negative substitution effect.

Gini coefficient: The area between the Lorenz curve and the 45° line divided by the total area under the 45° line.

Inferior good: A good whose demand decreases as people’s incomes rise.

Human Development Index (HDI): A composite index made up of three elements: an index for life expectancy, an index for school enrolment and adult literacy, and an index for GDP per capita (in PPP$).

Incidence of tax: The distribution of the burden of tax between sellers and buyers.

Indirect taxes: Taxes on expenditure (e.g. VAT). Paid to the tax authorities, not by the consumer, but indirectly by the suppliers of the goods or services.

Inflationary gap: The excess of national expenditure over income (and injections over withdrawals) at the full-employment level of national income.

Injections (J): Expenditure on the production of domestic firms coming from outside the inner flow of the circular flow of income. Injections equal investment (I) plus government expenditure (G) plus expenditure on exports (X).

Input–output analysis: This involves dividing the economy into sectors where each sector is a user of inputs from and a supplier of outputs to other sectors. The technique examines how these inputs and outputs can be matched to the total resources available in the economy.

Law of demand: The quantity of a good demanded per period of time will fall as price rises and will rise as price falls, other things being equal (ceteris paribus).

Law of diminishing (marginal) returns: When one or more factors are held fixed, there will come a point beyond which the extra output from additional units of the variable factor will diminish.

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Liquidity ratio: The proportion of a bank’s total assets held in liquid form.

Liquidity trap: The absorption of any additional money supply into idle balances at very low rates of interest, leaving aggregate demand unchanged.

Lorenz curve: A curve showing the proportion of national income earned by any given percentage of the population (measured from the poorest upwards).

Marginal cost (of production): The cost of producing one more unit of output: .

Marginal propensity to consume: The proportion of a rise in national income that goes on consumption: .

Microeconomics: The branch of economics that studies individual units: e.g. households, firms and industries. It studies the interrelationships between these units in determining the pattern of production and distribution of goods and services.

Macroeconomics: The branch of economics that studies economic aggregates (grand totals): e.g. the overall level of prices, output and employment in the economy.

Mixed economy: An economy where economic decisions are made partly by the government and partly through the market.

Econometrics: The science of applying statistical techniques to economic data in order to identify and test economic relationships.

Money multiplier: The number of times greater the expansion of money supply is than the expansion of the monetary base that caused it: .

Market: A place or institution where buyers and sellers come together and exchange factor inputs or final goods and services. A market is one particular type of economic rationing system.

Perfect competition: A market structure where there are many firms; where there is freedom of entry into the industry; where all firms produce an identical product; and where all firms are price takers.

Monopoly: A market structure where there is only one firm in the industry.

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Monopolistic Competition: A market structure similar to perfect competition in that there are a large number of firms competing in a given industry. However, each firm is selling a differentiated product and may exploit brand preferences such that is may act as a monopolist with respect to its own customers.

Monopsony: A market with a single buyer or employer.

Oligopoly: An market structure where there are few enough firms to enable barriers to be erected against the entry of new firms.

Oligopsony: A market with just a few buyers or employers.

Open economy: One that trades with and has financial dealings with other countries.

Open-market operations: The sale (or purchase) by the authorities of government securities in the open market in order to reduce (or increase) money supply or influence interest rates.

Opportunity cost: Cost measured in terms of the next best alternative forgone.

Pareto optimality: Where all possible Pareto improvements have been made: where, therefore, it is impossible to make anyone better off without making someone else worse off.

Free-market economy: An economy where all economic decisions are taken by individual households and firms and with no government intervention.

Imperfect competition: The collective name for monopolistic competition and oligopoly.

Phillips curve: A curve showing the relationship between (price) inflation and unemployment. The original Phillips curve plotted wage inflation against unemployment for the years 1861–1957.

Quantity theory of money: The price level (P) is directly related to the quantity of money in the economy (M).

Rate of economic growth The percentage increase in output over a 12-month period.

Rate of Inflation: The percentage increase in the level of prices over a 12-month period.

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Seasonal unemployment: Unemployment associated with industries or regions where the demand for labour is lower at certain times of the year.

Stagflation: A term used in the 1970s to refer to the combination of stagnation (low growth and high unemployment) and high inflation.

Variable factor: An input that can be increased in supply within a given time period.

Velocity of circulation: The number of times annually that money on average is spent on goods and services that make up GDP.

Purchasing power parity: A concept in which the dollar equivalent will purchase the same bundle of goods in all economies. In calculating purchasing power parity, adjustments are made to exchange rates to raise or lower the relative value of currencies to equilibrate purchasing power. The basis for the calculation is the dollar. The end result is to raise currency values of low-income countries while maintaining currency values of high-income countries.

Monetary policy: The set of policies determined by the Board of Governors of the Federal Reserve System involving influence over the money supply, short-term interest rates, and credit market conditions. During periods of recession, lower interest rates and higher money growth can help stimulate the economy. During periods of declining unemployment and increasing inflation, monetary restraint by raising interest rates and slowing the growth of money is usually indicated.

Fiscal policy: The government's program determining the amount of taxes and government expenditures to be made in a year. When an economy is moving into recession, an expansionary economic policy would dictate that the government should provide an economic stimulus by increasing expenditures or reducing taxes. This is referred to as a stimulative fiscal policy. During periods with low unemployment and rising inflation, constraining fiscal policy is often suggested, involving increased taxes or reduced government expenditures.

Classical economics: school of thought developed by Adam Smith. This theory holds that there is no need for government regulation of the economy since the invisible hand of the market will lead to the best possible results.

Neo-classical economics: a theory that calls for the deregulation of the economy in order to allow markets to set prices for all commodities, including labor.

Keynesian macroeconomics: The theory that shows how a market-based capitalist economy may reach equilibrium with large scale

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unemployment and how government spending may be used to raise it out of this to a new equilibrium at the full-employment level of output.

International Monetary Fund – IMF: An international organization with 146 members, including the United States. The main functions of the IMF are to lend funds to member nations to finance temporary balance of payments problems, to facilitate the expansion and balanced growth of international trade, and to promote international monetary cooperation among nations. The IMF also creates special drawing rights (SDR's), which provide member nations with a source of additional reserves. Member nations are required to subscribe to a Fund quota, paid mainly in their own currency. The IMF grew out of the Bretton Woods Conference of 1944. Measure of the U.S. money stock that consists of currency held by the public, travelers checks, demand deposits, and other checkable deposits including NOW (negotiable order of withdrawal) and ATS (automatic transfer service) account balances and share draft account balances at credit unions.

Substitute goods: Goods which may be used in place of other goods.

Complementary Goods: A pair of goods where the quantity demanded of one increases when the price of a related good decreases.

Diminishing Marginal Utility (DMU): An economic concept that refers to the notion that additional units consumed of a particular commodity provide less and less additional satisfaction relative to previous units consumed.

Marginal Rate of Substitution: The rate by which a consumer may substitute a quantity of one good for another holding his/her level of utility constant.

Production Possibilities Frontier: A relationship between two types of output defining the tradeoff that exists in allocating resources from production of one good to the other

Pareto optimality: The condition which exists when it is impossible to make any individual better off without making any other individual worse off.

Say’s law: Supply creates its own demand. In other words, the production of goods will generate sufficient demand to ensure that they are sold.

Game Theory: A modeling technique that accounts for strategic behavior of economic agents reacting to the actions of others

Malthas Theory of Population:

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Rosto Theory:

Purchasing power parity The Economist defines purchasing-power parity theory as follows: Purchasing-power parity theory. A theory which states that the exchange rate between one currency and another is in equilibrium when their domestic purchasing powers at that rate of exchange are equivalent.

The theory that, in the long run, identical products and services in different countries should cost the same in different countries. This is based on the belief that exchange rates will adjust to eliminate the arbitrage opportunity of buying a product or service in one country and selling it in another. For example, consider a laptop computer that costs 1,500 Euros in Germany and an exchange rate of 2 Euros to 1 U.S. Dollar. If the same laptop cost 1,000 dollars in the United States, U.S. consumers would buy the laptop in Germany. If done on a large scale, the influx of U.S. dollars would drive up the price of the Euro, until it equalized at 1.5 Euros to 1 U.S. Dollar - the same ratio of the price of the laptop in Germany to the price of the laptop in the U.S. The theory only applies to tradable goods, not to immobile goods or local services. The theory also discounts several real world factors, such as transportation costs, tarrifs and transaction costs. It also assumes there are competitive markets for the goods and services in both countries.

Govt. Borrowings & it’s implicationIn economics, crowding out theoretically occurs when the government expands its borrowing to finance increased expenditure, or cuts taxes (i.e. is engaged in deficit spending), crowding out private sector investment by way of higher interest rates. To the extent that there is controversy in modern Macroeconomics on the subject, it is because of disagreements about how financial markets would react to more government borrowing. If increased borrowing leads to higher interest rates by creating a greater demand for money and loanable funds and hence a higher "price" (ceteris paribus), the private sector, which is sensitive to interest rates will likely reduce investment due to a lower rate of return. More importantly, a fall in fixed investment by business can hurt long-term economic growth of the supply side, i.e., the growth of potential output. Crowding out can, in principle, be avoided if the deficit is financed by simply printing money, but this carries concerns of accelerating inflation. Crowding out of

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another sort may occur due to the prevalence of floating exchange rates, Government borrowing leads to higher interest rates, which attract inflows of money on the capital account from foreign financial markets into the domestic currency (i.e., into assets denominated in that currency). Under floating exchange rates, that leads to appreciation of the exchange rate and thus the "crowding out" of domestic exports (which become more expensive to those using foreign currency).

Narrow money , broad moneyM1 : Measures of money supply of a country, including all coins and notes plus personal money in current accounts.M2 : Measures of money supply, including all coins and notes plus personal money in current and in all deposit accounts.M3 : Broadest measure of money supply, including coins and notes, personal money in current and deposit accounts, government deposits and deposits in currencies other than local/national currency.

United States they are defined by the Federal ReserveM0: The total of all physical currency, plus accounts at the central bank that can be exchanged for physical currency. M1: M0 - those portions of M0 held as reserves or vault cash + the amount in demand accounts ("checking" or "current" accounts). M2: M1 + most savings accounts, money market accounts, and small denomination time deposits (certificates of deposit of under $100,000). M3: M2 + all other CDs, deposits of eurodollars and repurchase agreements.

There are just two official UK measures. M0 is referred to as the "wide monetary base" or "narrow money" and M4 is referred to as "broad money" or simply "the money supply".M0: Cash outside Bank of England + Banks' operational deposits with Bank of England. M4: Cash outside banks (ie. in circulation with the public and non-bank firms) + private-sector retail bank and building society deposits + Private-sector wholesale bank and building society deposits and Certificate of Deposit.

PSI: Policy Support InstrumentCountries those are not in need of loan from IMF can enter in this agreement. Through this IMF can control the Economic Policy of that country. Only 4 African countries signed this agreement [Nigeria, Uganda, Cape Verde and Tanzania]

Poverty Reduction Strategy Papers (PRSP)Poverty Reduction Strategy Papers (PRSP) are prepared by the member countries through a participatory process involving

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domestic stakeholders as well as external development partners, including the World Bank and International Monetary Fund. Updated every three years with annual progress reports, PRSPs describe the country's macroeconomic, structural and social policies and programs over a three year or longer horizon to promote broad-based growth and reduce poverty, as well as associated external financing needs and major sources of financing. Interim PRSPs (I-PRSPs) summarize the current knowledge and analysis of a country's poverty situation, describe the existing poverty reduction strategy, and lay out the process for producing a fully developed PRSP in a participatory fashion. The country documents, along with the accompanying IMF/World Bank Joint Staff Assessments (JSAs), are being made available on the World Bank and IMF websites by agreement with the member country as a service to users of the World Bank and IMF websites.

Least Developed Countries(LDCs or Fourth World countries) are countries which according to the United Nations exhibit the lowest indicators of socioeconomic development, with the lowest Human Development Index ratings of all countries in the world. A country is classified as a Least Developed Country if it meets three criteria [1] based on:low-income (three-year average GNI per capita of less than US $750, which must exceed $900 to leave the list) human resource weakness (based on indicators of nutrition, health, education and adult literacy) and economic vulnerability (based on instability of agricultural production, instability of exports of goods and services, economic importance of non-traditional activities, merchandise export concentration, and handicap of economic smallness, and the percentage of population displaced by natural disasters) The classification currently applies to around 49 countries (as of June 14, 2007).

CharacteristicsLeast developed countries generally suffer conditions of extreme poverty, ongoing and widespread conflict (including civil war or ethnic clashes), extensive political corruption, and lack political and social stability. The form of government in such countries is often authoritarian in nature, and may comprise a dictatorship, warlordism, or a kleptocracy. AIDS is a major issue in a lot of these countries. The majority of LDCs are in Sub-Saharan Africa.During the last United Nations review in 2003, the UN defined LDCs as countries meeting three criteria, one of which was a three-year average estimate of gross national income (GNI) per capita of less than US $750. Countries with populations over 75 million are excluded. [4]

Trade and LDCs

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Issues surrounding global trade regulations and LDCs have gained a lot of media and policy attention thanks to the recently collapsed Doha Round of WTO negotiations being termed a development round. During the WTO's Hong Kong Ministerial, it was agreed that LDCs could see 100 percent duty-free, quota-free access to U.S. markets if the round were completed. But analysis of the deal by NGOs found that the text of the proposed LDC deal had substantial loopholes that might make the offer less than the full 100 percent access, and could even erase some current duty-free access of LDCs to rich country markets. [5] [6], Dissatisfaction with these loopholes led some economists to call for a reworking of the Hong Kong deal. [7]

Developing countryA developing country has a relatively low standard of living, an undeveloped industrial base, and a moderate to low Human Development Index (HDI) score. In developing countries, there is low per capita income, widespread poverty, and low capital formation. The term has tended to edge out earlier ones, including the Cold War-defined "Third World", which has come to have unintentional negative connotations associated with it, but new terms such as less developed country (LDC) or less economically developed country (LEDC) have not caught on yet. LEDC is a term used by modern geographers to portray the countries classified as "developing countries" more accurately, specifying that they are less economically developed, which usually correlates best with other factors such as low human development. The Correlation between an Ledc and Medc, is characteristic of a sub-economical organistic system of living.Development entails a modern infrastructure (both physical and institutional), and a move away from low value added sectors such as agriculture and natural resource extraction (with the exception of oil and diamonds). Developed countries, in comparison, usually have economic systems based on continuous, self-sustaining economic growth in the tertiary and quaternary sectors and high standards of living.The application of the term developing country to some of the world's less developed countries could be considered inappropriate: a number of poor countries are not improving their economic situation (as the term implies), but have experienced prolonged periods of economic decline.Countries with more advanced economies than developing nations, but which have not yet fully demonstrated the signs of a developed country, are grouped under the term newly industrialized countries.[1] [2] [3] [4]

Measure and concept of developmentThe development of a country is measured with statistical indexes such as income per capita (per person) (GDP), life expectancy, the

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rate of literacy, et cetera. The UN has developed the HDI, a compound indicator of the above statistics, to gauge the level of human development for countries where data is available.Developing countries are in general countries which have not achieved a significant degree of industrialization relative to their populations, and which have a low standard of living. There is a strong correlation between low income and high population growth, both within and between countries.The terms utilized when discussing developing countries refer to the intent and to the constructs of those who utilize these terms. Other terms sometimes used are less developed countries (LDCs), least economically developed countries (LEDCs), "underdeveloped nations" or "undeveloped nations", Third World nations, and "non-industrialized nations". Conversely, the opposite end of the spectrum is termed developed countries, most economically developed countries (MEDCs), First World nations and "industrialized nations".To moderate the euphemistic aspect of the word developing, international organizations have started to use the term Less economically developed country (LEDCs) for the poorest nations which can in no sense be regarded as developing. That is, LEDCs are the poorest subset of LDCs. This also moderates the wrong tendency to believe that the standard of living in the entire developing world is the same.The concept of the developing nation is found, under one term or another, in numerous theoretical systems having diverse orientations — for example, theories of decolonization, liberation theology, Marxism, anti-imperialism, and political economy.Critics believe that at times the word "developing" is a misnomer. In the case of countries ravaged by European colonialism, the word "re-developing" may be more accurate since there were successful economic systems prior to colonialism. Allegedly due to ethnocentrism, Western analysts generally deem these prior interactions invalid and do not consider them "developed". The premise is that "to develop" is the same thing as "to develop in a western manner".

Differences96

PC ECC 01 PC means Packing Credit 01 ECC means Export Cash Credit

02It is a short-term pre-shipment credit allowed to the exporter to process, pack and shipped the goods.

02

It is a form of advance allowed to the exporter in cash for processing goods for export. Such advance is adjusted from export proceeds.

95, 96TOD SOD

01 TOD means Temporary Overdraft 01 SOD means Secured Overdraft

02 It is allowed only for short time such as one or two days. 02 It is sanctioned for a stipulated period

such as one year.

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03 It is allowed without security or against collection of instrument. 03 It is allowed against encashable securities

such as FDR, PSP etc. 04 It has not a sanction limit 04 It has a sanction limit

05 Borrower cannot withdraw any amount as required by him. 05 Borrower can withdraw any amount as

required up to the sanction limit.

06 TOD allowed for meet up temporary crisis of the borrower. 06 It is allowed as working capital to meet

run the business smoothly.95

Order Cheque Crossed Cheque

01When a cheque is ordered to a particular person for payment is called order cheque.

01

When we draw two transverse parallel lines at the left corner of a cheque with or without any word is called crossed cheque.

02 Order cheque can negotiate by endorsement and delivery. 02 Crossed cheque cannot negotiate by

endorsement and delivery.

03 It can be encashed and also collects through Banks. 03 Crossed cheque cannot be encashed and

collects through Bank.

04 Order cheque is insecure for stolen fraud and forgery. 04 It is more secured then order cheque for

stolen fraud and forgery.98, 2001

LTR LIM

01 LTR means ‘Loan against Trust Receipt’ 01 LIM means ‘Loan against Imported Marchandise’

02 It is an import connected loan facilities. 02 It is also an import connected loan facility.

03 LTR liability is adjusted within 30 (thirty) days. 03 LIM liability is adjusted within 45-60

days.04 For this ‘LTR Register is maintained’. 04 For this ‘LIM register is maintained’.

05 Stock of goods kept under borrower control. 05 Stock goods kept under Bank’s control.

97, 98Simple Interest Compound Interest

01Simple interests are those interests, which calculate and charge the account at yearly basis.

01

Compound interests are those interests, which is calculating monthly basis but charge the account at quarterly/half yearly basis.

02In BASIC charge at the Micro Credit and Staff loan A/c at the simple rate of interest.

02 In BASIC charge all SOD and CC account at the compound rate of interest.

97LAN WAN

01 LAN means ‘Local Area Network’. 01 WAN means ‘Wide Area Network’.

02 It is a multi user computer operation in a branch. 02 It is also a multi user computer operation

inside and outside.

03Usually this system being used under UNIX, Windows etc. It is required a server and some dump terminal.

03 This system is required, Host server, Modem and X.28/X.25 T & T line.

04 A Bank can run their computer system by LAN. 04

Under this modern technology a branch can provide their sophisticated electronics Banking service to their valued client.

05 It has short range. 05 It has broad range.97

Single Entry Double Entry

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01 In single entry system only cash and personal accounts are maintained. 01

In double entry system every transactions are recorded twice, one in the debit side of an account and again in the credit side of another account.

02 Incase of single entry Trail Balance can be prepared. 02 Incase of double entry Trial Balance can

be prepared.

03 It is not a golden rule of accounting for recording transactions. 03 In is a golden rule of accounting for

recording transaction.

04 Interpretation is not possible in the single entry system. 04 Interpretation of a transaction is a must in

double entry system.

05 Comparison and future plan is not possible properly in this system. 05 Comparison and future plan is made

possible in double entry system.97

DOS UNIX

01 DOS means Disk Operating System. 01 UNIX is a multi user Computer Operating System.

02 Under this system we can work using only one computer 02 Under this system we can work using

more then one computer at a time.03 It is a normal operating system. 03 It is a high security operating system.

97BASIC BSCIC

01 BASIC means Bangladesh Small Industries and Commerce Bank Limited. 01 BSCIC means Bangladesh Small and

Cottage Industries Corporation.

02 It is a specialized scheduled Bank of the country. 02 It is an autonomous Corporation of

Government of Bangladesh.

03BASIC is a Bank, registered under the Companies Act. 1913 and governed under the Bank Company Act. 1991.

03BSCIC is an autonomous body for development of Small and Cottage Industries.

04 50% of its loanable fund should be used in Small Scale Industries Sector (SSI) 04 The overview of corporation to increase

of production of Small Industries.96

Schedule Bank Non-Schedule Bank

01A Bank which name is enlisted in the list of Central Bank/B Bank is called Schedule Bank.

01A Bank which name is not enlisted in the list of Central Bank/B Bank is called Schedule Bank.

02 It must be maintained 20% Statutory Reserve of total deposit. 02 It does not maintain such reserve.

03 Schedule Bank can take the opportunity of Clearing House. 03 It cannot get this opportunity.

04 It can borrow from Central Bank at their hard time. 04 Non-schedule Bank cannot enjoy such

facility.

05 Schedule Bank control by the Central Bank. 05

Central Bank cannot impose any controlling power upon a non-schedule Bank.

97, 98Bank Financial Institution

01 Bank approved by Bangladesh Bank. 01 Financial Institutions approved by Ministry of Finance.

02 Bank can do all types of Banking activities. 02 It does not work any kind of Banking

activities.

03 Bank is governed under the Banking Company Act, 1991. 03

Financial Institutions are governed under the Non-Banking Financial institution Act, 1993.

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04 Bank is enlisted in the list of Schedule Bank. 04 Financial Institutions are enlisted in the

list of Non-Banking Financial Institutions.05 All Banks are Financial institutions. 05 All Financial Institutes are not Bank.

98Partnership Limited Company

01Partnership firm is formed on the basis of oral or written contract among the partners.

01Limited Company is formed by registration by the register of the companies.

02

Incase of partnership firm minimum member will be 2(two) and maximum are 20 for normal business and 10 for Banking business.

02

Incase of Limited company minimum member will be 2 for Private Ltd. Co. and 7 for Public Ltd. Co. and maximum are 50 for Pvt. Co. Ltd. and unlimited or limited by share for Public Co. Ltd.

03 Incase of partnership liabilities are unlimited of the partners. 03

Incase of Limited Co. liabilities of shareholders are limited by the share value.

04 It would be registered under the Company Act, 1913. 04 It also registered under the Company Act,

1913.94

CC(Pledge) LIM

01 The stocks of goods are under the control of lending Branch/Bank. 01 The stocks of goods are also under the

control of lending Branch/Bank.

02 It is sanctioned in the form of Working Capital. 02 It is an import connected loan facility.

03 CC(Pledge) adjustable within 1(one) year. Time to time is renewable. 03 LIM liability adjustable within 45-60

days.

04 For this maintaining register is called ‘Pledge Register’. 04 For this maintaining register is called

‘LIM Register’.05 CC(Pledge) requires letter of Pledge. 05 LIM requires letter of LIM.

Sight Bill Usance Bill

01 When a bill is payable at sight or on demand is called sight bill or demand bill. 01

When a bill matures for payment after a certain period of time after or after sight is called Usance bills.

02 Incase of sight bill no stamp duty is necessary. 02 Incase of Usance bill proper stamped is

required.1995

L/C Back to Back L/C

01

L/C is a credit contract where by the buyers bank is committed (on behalf) of the buyer to pay a certain sum of money at the sellers disposal under agreed conditions stipulated in L/C.

01

Back to Back L/C means an import L/C which is back by export L/C.

02 L/C opens on cash reimbursement basis. 0

2

Back to back L/C opens against lien on export L/C. Bank provide finance by opening an inland L/C on behalf of the exporter.

03

L/C opens for importing machinery and consumer goods from abroad by the importer.

03

Back to back L/C opens for importing raw materials and accessories generally garments industries opens a L/C.

04

Retirements of documents by the importer cash payment or extension of loan facilities such as LIM, LTR etc.

04

Repayment is made from export proceeds.

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05

L/Cs are two kinds i. Revocable L/C ii. Irrevocable L/C

05

B. to B L/C is two kinds i. Inland B to B L/C ii. ...................... B to B L/C.

1996D/A D/P

01 D/A means Document against Acceptance 01 D/P means Document against Payment.

02

Where the shipping document under the term credit (Usance credit) is deliverable against acceptance of the bill is known as D/A bill.

02Where the shipping document (under a sight credit/ without credit) is deliverable against payment is known as D/P bill.

Development Bank Commercial Bank

01

A development bank is a Bank, which help industrial and agricultural development activities in the economy of the country.

01 A commercial bank is a bank, which help to extend commercial function.

02 Development bank provides long term’s loan. 02 Commercial bank provides short-term

loan.ADB, SABINCO, BSRS, BSB are development bank. 03 Sonali, Rupali, Pubali, Agrani, Janata,

BASIC are commercial bank.1997, 98, 2001

Money Market Capital Market

01 Money market deals with short term trade financing. 01 Capital market deal with long terms

financing.

02The functions of money market are to deal with treasury bill, open market debenture, short term debenture share etc.

02

The functions of capital market are to purchasing heavy machinery setup heavy industry and to meet up fund of development projects.

03The participants of money market are commercial banks, insurance company, stock exchange etc.

03

The participant of capital market is Shilpa Bank, BSRS, special investments Bank, SABINCO, Rajshahi Krishi Unnoyon Bank etc.

1998, 2001Stale Cheque Post dated Cheque

01

If a cheque is not presented for payment within a reasonable period (normal cheque 6 months & Govt. Cheque 3 months) after the date of issue is called Stale Cheque.

01

If the drawer or holder mentions a date on the cheque, which is, later/subsequent to the date on which it is drawn/presented for payment is called post-dated cheque.

02A state cheque is an invalid cheque. Banker cannot make any payment against stale cheque.

02

A post-dated cheque is not an invalid cheque. Banker can make payment such cheque and it becomes effective only on the date mentioned therein.

1998, 2001CRR SLR

01 CRR means Cash Reserve Requirements 01 SLR means Statutory Liquidity Requirements/ Ratio

02As per Bangladesh Bank circular schedule bank’s maintain 4% CRR to Bangladesh Bank

02As per Bangladesh Bank circular schedule banks maintains 16% SLR in his till as liquid money.

03CRR maintain in cash in CD A/c with Bangladesh Bank a foreign currency A/c with Bangladesh Bank.

03SLR maintains in the form of cash Prize Bond, Govt. approved security and account with other banks.

2001

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Overdue Loan Classified Loan

01When the sanctioned time limit is expired to pay the loan then the loan is called overdue loan.

01

After a certain period of overdue considering Qualities Judgment and objective criteria the said loan is classified as substandard, doubtful and bad/loss, which is called, classified loan.

02 It can be renewed to show regular loan. 02 It can be reschedule to recover the loan.

03 Incase of overdue loan this is a primary stage of the party default to pay the loan. 03 Incase of classified loan this is a final

stage of the party default to pay the loan.

04 Banker issue reminder to the party to pay the overdue loan. 04 Banker takes the help of the court to

recover classified loan.

Loan Cash Credit

01Loan is allowed for a specific purpose such as house building loan, transport loan, industrial term loan etc.

01Cash credit is allowed for the purpose of working capital to run the business smoothly.

02 Loan is allowed for a definite period one year or more against proper security. 02

Cash credit is allowed normal one year or shorter period against encashable securities.

03Loan allowed in the form of industrial loan, house building in staff loan, general etc.

03 Cash credit is allowed in the form of CC(H) & CC(P).

04 The installment which once deposited cannot be advance 04

Deposit and withdrawn can be made upto the sanction limit as required by the borrower.

05 Separate loan A/c is created for each loan 05Creation of separate loan A/c is not necessary. Drawing allowed in the current A/c of the borrower.

Cash Credit Overdraft

01

When an advance limit is approved to the businessman, traders and industrialist for meeting working capital requirements under a specific drawing power is called cash credit.

01

When a current account holder is permitted by the banker to draw more than what stands to his credit, such an advance is called on overdraft.

02 Cash credit is allowed against hypo. or pledge of goods. 02 Overdraft is allowed against stock in

trade, shares, and debenture, FDR et.

03Borrower can draw money within sanction limit or drawing power whichever is lower.

03Borrower can draw any amount from his current account at any time within the sanctioned limit.

04 As security basis cash credit are of two types i.CC(Hypo) and ii. CC(Pledge). 04 O.D are of three-type i. TOD ii. COD and

ii. SOD (COD is normally un-used).

05 Separate loan account is created for each loan. 05

No separate account is created. Drawings are allowed through current account of borrower.

2001Bank Solvency Certificate Bank Guarantee

01

Written certified by the Bank to the party is financially solvent and maintains banking transaction regularly is called Bank solvency certificate.

01

Written guarantee given by the bank in behalf of the client to pay a certain some of money if the clients fail to pay his contractual obligation is called Bank guarantee.

02 It does not ensure financial guarantee by the bank to the party if the party fails to

It ensures financial guarantee by the bank to pay certain some of money if the party

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pay any contractual obligation to other. fails to pay his contractual obligation.

03 Bank receives fee from the clients to issue a bank solvency certificate. 03

Bank receives commission at a fixed rate from the guarantee holder for issuing of the Bank guarantee.

04It does not specified certain future time and cannot be cancelled or require to filling in any cancelled file.

04

It issued for a specified future time and must be cancelled on retire after the time is expired and maintains it in the cancelled guarantee file.

2000Cheque Bill of Exchange

01 It must be drawn only on a Banker. 01 It must be drawn on any person including Banker.

02 The amount is always payable on demand. 02 The amount may be payable on demand or

after a specific period.

03 Acceptance is not necessary. 03 A bill payable after sight must be accepted.

04 A cheque can be crossed. 04 Crossing of a bill of exchange is not possible.

05 Notice of dishonour is not necessary. 05 Notice of dishonour is necessary to hold the parties liable thereon.

2000General Crossing Special Crossing

01

Drawing up of two transverse parallel lines with or without any words on the face of the cheque constitutes general crossing.

01

Drawing of two transverse parallel lines in addition of the name of a Bank with branch or only Bank across the face of a cheque constitutes special crossing.

02Example of general crossing are :

02Example of general crossing are :

03 It is done by drawer or holder of the cheque 03 It is done by collective Bank of the

cheque.

04 Drawer can cancel the general crossing with the signature. 04 Special crossing can cancel by the

concerned Bank.96, 2000

97, 2000Computer Type writer Machine

01 Any file can be saved in computer for future need. 01 There is no scope in typewriter machine to

save any file.

02 Any calculation, graphic, design work can be done in computer. 02 There is no scope in typewriter machine.

03 Computer has a CPU (Central Processing Unit). 03 Typewriter machine has no CPU.

04Most important facility like LAN, WAN, Internet connection can be obtained in computer.

04 There is no scope in typewriter machine.

05 Previous any work, which saved can recall from computer memory. 05 There is no scope in typewriter machine to

recall any previous work.96, 2000, 2001

NOSTRO A/C VOSTRO A/C01 It means ‘our account with you’ 01 It means ‘your account with us’.

02Here an authorized dealer maintains foreign currency A/c with its foreign correspondent.

02Here a foreign correspondent maintains A/c with an authorized dealer in local currency.

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95, 2000Equitable Mortgage Legal Mortgage/Register Mortgage

01Equitable mortgage means a mortgage where mortgagor deposits its title deeds to the mortgage property.

01Legal Mortgage is that mortgage where mortgagor transfers its title of property to the mortgage.

02 In that case mortgagor holds only the documents of the property. 02 On repayment of the loans the mortgage is

transferred in also the mortgagor.03 Here registration is not required. 03 In this system registration is required.

96, 97, 2000CC (hypo) CC (Pledge)

01 The stocks of goods are under the control of borrower. 01 The stocks of goods are under the control

of lending Bank.

02 For this ‘letter of hypothecation’ is obtained from the borrower. 02 For this ‘letter of pledge’ is obtained form

the borrower.

03 Borrowers have to submit stock report on monthly basis to the lending Bank. 03 Bank maintains pledge register; stock

reports not require to submit.

04Incase of CC (hypo) Bank obtained sufficient collateral security for covering loan risk.

04Incase of CC(Pledge) Bank takes other collateral security if available in the hand of borrower.

95, 96, 97, 98, 2000BCD FDR

01 BCD means Bearer Certificate of Deposit. 01 FDR means Fixed Deposit Receipt.

02 In BCD depositor’s name is not mentioned. 02 In FDR depositor’s name must be

mentioned.03 Usually BCD interest is lower. 03 Usually FDR interest is higher than BCD.04 BCD encashed by any body. 04 FDR encashed by holder / nominee.

05In BCD interest rate is fixed-up by negotiation between depositors and Banker’s.

05 In FDR interest rate is fixed-up by the Bank’s time-to-time policy.

Finance & BankingBreak-even point

1) The price level at which income equals expense. 2) The expense level at which expense equals income. 3) The market price of a financial instrument that just equals the

purchase price plus cost of carry for an investor owning that instrument.

4) The price level of a call option that equals the sum of the exercise price plus the premium paid to acquire the option, or the price level of a put option that equals the exercise price minus the premium.

Break-even sales

The minimum sales level that a firm must achieve in order to generate enough cash flow to make all required principal and interest payments.

Opportunity cost

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The cost of pursuing one course of action measured in terms of the foregone return that could have been earned on an alternative course of action that was not undertaken.

Asset Liability ManagementThe control/management of a Bank’s deposit and lending policies to ensure safety, liquidity and profitability.

Bonded Ware-houseA customs store or godown where bonded goods are stored and remains there until customs dues are paid.

Correspondent Bank A bank in one country acts as agent for a bank of another country by signing/establishing agency agreement/arrangement.

Square positionWhen the total amount of purchase of foreign currency is equal to the amount of total sales, the bank reaches a Square Position.

MICROne of the important means of efficient funds movement through the organised sector of an economy is the process of clearing of cheques. To facilitate quick processing of cheques and prompt settlement thereof, mechanised cheque processing systems using Magnetic Ink Character Recognition (MICR) technology for cheque clearing is going to be introduced in Bangladesh.

ManagementTheory X

Management theory developed by Douglas McGregor, stating that managers must supervise the subordinates closely in order to motivate them.

Theory YUnder this theory some managers beliefs that given the right conditions and reward, the average employee finds work to be a source of satisfaction, will exercise self-direction towards goals he is committed to, seeks responsibility and in creative and innovative.

Theory ZManagement theory given by William Ouchi, describing the Japanese system of management characterized by the workers’ deep involvement in management, higher productivity than the U.S. management model, and a highly developed system of organizational and sociological rewards. Ouchi contends that this management system can be used anywhere with equal success.

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Qualities of a good manager:a) Leadership skillsb) Team Objectivesc) Knowledge about the organizational goal.d) Better communicatione) Motivating stafff) Setting targetsg) Developing peopleh) Proper delegation of work

Some Important Banking TermsEstoppels A legal term describing the preclusion of a party from alleging in

a legal action anything that is contrary to previous actions or admissions of that party.

Factoring Providing working capital to businesses by buying their receivables (usually at a discount) rather than lending against them. Factoring is not lending; it is an outright purchase of the receivable assets, usually on a nonrecourse basis.

securitization The process and the result of pooling financial assets together and issuing liability and equity obligations backed by the resulting pool of assets to convert those assets into marketable securities. The underlying assets are usually, but always, non-marketable by themselves. Any type of financial asset can be securitized. Securitized mortgage obligations may be called mortgage backed securities or collateralized mortgage obligations. Securitized non-mortgage assets are typically called asset backed securities however the term collateralized debt obligation is increasingly used to refer to securitized corporate debts. A single loan or groups of similar loans may be securitized. Loans to be securitized must usually be underwritten with terms and documents that conform to wholesale market standards. For some securitizations, additional credit support, called credit enhancement, may be obtained through insurance, a letter of credit, over collateralization or other means. Many securitizations use multi-tranche structures that allocate the principal and interest cash flows from the underlying assets in patterns that create higher and lower risk securities.

subordinate, subordinated, subordination

Debts or claims that have a lower status or priority than other debts or claims are subordinate. For example, creditor A may agree in a subordination agreement to have its claims on the cash

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flow or on the assets of a borrower lower in priority than (i.e., subordinate to) the claims to that cash flow or collateral by creditor B. In finance and accounting, the term also refers to debts that include provisions making them subordinate to other liabilities. For example, a bond issue may, by contractual agreement, be subordinate to all other bonds issued by a company.

Basel II The common name for capital guidelines issued by the Bank for International Settlements (BIS) located in Basel, Switzerland. The Basel II capital guidelines replace previous, much simpler, BIS guidelines. The guidelines are developed by an international committee of banking regulators and implemented by rules issued by the national regulators.Risks, under Basel II, are regulated in three general ways called "pillars". Pillar I calls for explicit capital allocations. Credit risk and operations risk fall under pillar I. Pillar II calls for supervisory review of capital adequacy. Interest rate risk and liquidity risk fall under pillar II. Pillar III calls for public disclosure. All risks fall under pillar III.

break-even point (1) The price level at which income equals expense.

(2) The expense level at which expense equals income.

(3) The market price of a financial instrument that just equals the purchase price plus cost of carry for an investor owning that instrument.

(4) The price level of a call option that equals the sum of the exercise price plus the premium paid to acquire the option, or the price level of a put option that equals the exercise price minus the premium.

break-even sales The minimum sales level that a firm must achieve in order to generate enough cash flow to make all required principal and interest payments.

opportunity cost The cost of pursuing one course of action measured in terms of the foregone return that could have been earned on an alternative course of action that was not undertaken.

pari passu A lending term meaning at an equal rate or pace

Securitization The process and the result of pooling financial assets together and issuing liability and equity obligations backed by the resulting pool of assets to convert those assets into marketable securities. The underlying assets are usually, but always, non-marketable by themselves. Any type of financial asset can be securitized. Securitized mortgage obligations may be called mortgage backed securities or collateralized mortgage obligations. Securitized non-mortgage assets are typically called asset backed securities

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however the term collateralized debt obligation is increasingly used to refer to securitized corporate debts. A single loan or groups of similar loans may be securitized. Loans to be securitized must usually be underwritten with terms and documents that conform to wholesale market standards. For some securitizations, additional credit support, called credit enhancement, may be obtained through insurance, a letter of credit, over collateralization or other means. Many securitizations use multi-tranche structures that allocate the principal and interest cash flows from the underlying assets in patterns that create higher and lower risk securities.

zero coupon bond A type of debt security that does not pay periodic interest. Zero coupon securities are bought and sold at prices that are less than the par value of the securities. The discount, or difference between the principal paid to purchase the security and the principal returned at maturity, constitutes the investor's return.

Loan Loss Provisioning

Maintenance of provision:(a) (i) Banks will be required to maintain General Provision in the following way :(1) @ 1% against all unclassified loans (other than loans under Small Enterpriseand Consumer Financing and Special Mention Account.)(2) @ 2% on the unclassified amount for Small Enterprise Financing.(3) @ 5% on the unclassified amount for Consumer Financing whereas it has tobe maintained @ 2% on the unclassified amount for (i) Housing Finance and(ii) Loans for Professionals to set up business under Consumer FinancingScheme.(4) @ 5% on the outstanding amount of loans kept in the 'Special MentionAccount' after netting off the amount of Interest Suspense.(b) (i) Banks will maintain provision at the following rates in respect of classifiedContinuous, Demand and Fixed Term Loans:(1) Sub-standard 20%(2) Doubtful 50%(3) Bad/Loss 100% (ii) Provision in respect of Short-term Agricultural and Micro-Credits is to be maintained at thefollowing rates:(1) All credits except 'Bad/Loss' (i.e. 'Doubtful', 'Sub-standard', irregular and regularcredit accounts) : 5%(2) 'Bad/Loss' : 100%

Base for Provision:

Provision will be maintained at the above rate on the balance to be ascertained bydeducting the amount of 'Interest Suspense' and value of eligible securities from theoutstanding balance of classified accounts.

Various CL Forms

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In terms of the above policies, the banks will conduct their classification- activities on quarterly basis. In this connection revised forms for loan classification, provisioning and interest suspense i.e CL-1to CL-6 have been enclosed herewith which will replace the existing ones.(i) CL-1 is the compilation/summary of 5 other forms. This form is for showing summary of classification status for different loan categories mentioned earlier along with staff loan.(ii) CL-2 is for reporting loan classification of Continuous Loan(iii) CL-3 is for reporting loan classification of Demand Loan(iv) CL-4 is for reporting loan classification of term loans which are repayable within maximum 5(five) years.(v) CL-5 is for reporting loan classification of term loans of over 5(five) years.

vi) CL-6- For STAC and micro credit

Recent Measures to liberalize and strengthen Financial Sectors23) Interest rates were liberalized; 24) Open market operation was activated by introducing new

bills. 25) Attempts were made to improve governance in the financial

sector.26) Reform initiatives attempted to improve legal aspects,

corporate governance, loan recovery,exchange and interest rates management, NCB's functions, risk management and efficiency of the Bangladesh Bank.

27) Better disclosure and transparency standards have been introduced;

28) fit and proper tests prescribed for bank directors, chief executives and advisors;

29) Restriction imposed on the composition of the membership of the board of directors; the roles and functions of the board and management were clarified and redefined.

30) Audit Committees were mandated for all banks with clear guidelines and TORs and Early Warning System (EWS) was introduced.

31) To strengthen the banking operation, minimum capital requirement was raised from Tk. 400 million to Tk. 1000 million and the requirement on risk-weighted basis was also increased. Now it is raised to TK.2000 million.

32) Stringent loan rescheduling conditions were introduced to stop ever greening of loans.

33) An upper limit on a bank's exposure to a particular customer or group was introduced.

34) Strict measures have been laid and enforced on loan loss provisioning.

35) Loan write off guidelines were issued by the Bangladesh Bank, allowing the banks for the first time, to write off 'bad' debts against full provisioning.

36) Large loan limit has been linked to bank's NPL ratio. 37) BB is encouraging syndication of several banks for large

loans and has issued guidelines for restructuring such loans.

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38) The Core Risk Management Guidelines on five major risks has been introduced by BB (credit, foreign exchange, and assets-liabilities risk management, internal control and compliance and anti-money laundering) laying down policies, processes, procedures and structures that will lead to better governance and improved services. Credit Risk Grading Manual is prepared so that bank can follow uniform procedure for taking decision to sanction loan and to judge the quality of loans. Prudential guidelines for SME and consumer finance loan are introduced.

39) In the monetary and foreign exchange front we have an exchange rate regime, which is now market determined. Floating of taka since June 2003 was achieved without encountering undue volatility.

40) Further reform in simplifying and streamlining forex operations and payment system is underway.

41) New financial instruments of varying tenure such as repo and reverse repo and government investment bonds of longer tenor have been introduced. Efforts are underway to develop the government and corporate bond market. BB and the Securities and Exchange Commission (SEC) agreed to allow the government bonds to be traded in the stock exchange.

42) Securitization of receivables of private financial institutions has started.

43) Initiation of capacity building program in the Bangladesh Bank. Service standards have been introduced for work in different departments. Workflow analysis has been initiated to bring in greater speed and ensure quality. The Central Bank Strengthening Project (CBSP) includes (a) computerization of the operations of the Bangladesh Bank, (b) human resource development through reforms of recruitment, promotion and compensation policies, (c) restructuring of the different departments, (d) reengineering the business processes, (e) automation of the Clearing House, (f) capacity building in the core activities i.e. monetary policy, regulation of the financial sector, and research and policy analysis. The goal is to transform the decades-old traditional and manual system to a modern, automated system.

44) BB has got a Policy Analysis Unit (PAU) which produces various analytical policy briefs and publishes Monetary Policy Review, Financial Sector Review and Bangladesh Bank Quarterly.

Risk Weighted Capital Adequacy Ratio

Definition of Capital

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For the purpose of supervision, capital will be categorized into two tiers: Tier 1 i.e. Core Capital comprising the highest quality capital elements and Tier 2 i.e. Supplementary Capital represents other elements, which fall short of some of the characteristics of the core capital but contribute to the overall strength of a bank. The constituents of core capital and supplementary capital are enclosed at Annexure-I.Minimum Capital StandardsEach bank will maintain a ratio of capital to risk weighted assets of not less than 9% (At present 10%) with at least 4.5% (at present 5%) in core capital and this requirement will have to be achieved by 30 June 2003 (within 2009). However, the minimum capital requirements of Tk. 40 crore for locally incorporated banks and an amount equivalent to USD 10 million for banks incorporated outside Bangladesh will remain unchanged until further instructions.Risk-weighted AssetsBoth balance sheet assets and off-balance sheet exposures are to be weighted according to their relative risk. Presently, there are 4(four) categories of risk weights - 0, 20, 50 and 100 percent. For the purpose of assessing capital adequacy, weights for particular items are given in Annexure-II.Off-balance sheet transactions are to be converted into balance sheet equivalents for the purpose of assessing the capital adequacy before assigning a risk weight as shown in section 10(a) of Annexure-II. Four categories of credit equivalents of 0, 20, 50 & 100 percent will apply. Details are shown in Annexure-III.

CONSTITUENTS OF CAPITAL

CORE CAPITAL (TIER-1)A. Paid up CapitalB. Non-repayable Share premium accountC. Statutory ReserveD. General ReserveE. Retained EarningsF. Minority interest in SubsidiariesG. Non-Cumulative irredeemable Preference Shares.H. Dividend Equalization Account

SUPPLEMENTARY CAPITAL (TIER-2)

A. General provision (1% of Unclassified loans)B. Assets Revaluation ReservesC. All other Preference SharesD. Perpetual Subordinated debtE. Exchange Equalization AccountNote 1: Core Capital must be equal to or more than 4.5% (at present 5%) of the risk-weighted assets.Note 2: Reserves created by periodic revaluation of banks' assets can be included as a Component of Tier-2 capital only if the revaluation is formally conducted by professionally qualified valuation firm. Such reserves will be eligible up to 50% for the treatment as Supplementary Capital provided that the rationale of the re-valued amount is duly certified by the external auditors of the bank. Such revaluation may be done once in a year.

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KYC Procedures Documentation requirement KYC Profile Monitoring of account/relationship Risk Categorization (based on activity & KYC profile)

Key elements of KYC procedures Customer Acceptance policy Customer Identification

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