LETTER OF TRANSMITTAL

Date: ……/……/………

Rabeya Bosri,

Lecturer

School of Business

University Of Information Technology & Sciences

Subject: Submission of Internship Report.

Dear Madam,

This is my pleasure to present my internship report entitled “Identification of cash management practices of Al-arafah islami Bank Ltd." I have conducted my internship program in Al Arafah Islami Bank Limited, Natun Bazar Baridhara Branch (1206 Madani Avanue Natun Bazar Batara, Dhaka-1212) under your close supervision.

I believe that knowledge and experience I gathered during the internship period will be helpful in my future professional life. I will be grateful to you if you accept the report. I will be available for defense on this report at any time.

Your support in this regard will be highly appreciated.

Thanking you.

Sincerely yours

Md.

ID:

Subject: Finance (Major)

School of Business

University Of Information Technology & Sciences

ACKHOWELDGEMENT

Completion of this report has made me grateful to a number of persons. First of all I would like to acknowledge my supervisor and teacher ……………………., not only for giving the opportunity to prepare the report but also for providing me a lot of support to improve the report. He was always available when I needed his help, suggestions and guidelines. I am also grateful to Mr. Abdul Hakim, Head of Human Resources, Al-Arafah Islami Bank Limited, for giving me the valuable opportunity to do my internship program and supporting me with knowledge and resources. I am also grateful to the entire Team Natun Bazar, Baridhara Branch of Al-Arafah Islami Bank Limited as they had always been there for me when I needed them the most. Their active participation to all my questions, queries during my internship has made this journey a true success. Especially I want to thank my organizational supervisor Md. Ibrahim Khlil Ullah, Officer, Natun Bazar, Baridhara Branch. I would like to name here Md. Eleaus Mufti (Branch Manager), Md. Monirul Islam (Second Officer), Md. Jalal Uddin (Senior Executive Officer), Md. Anisur Rahman Raju (Officer) & Imam Hasan (Officer), Mahbub Alam Ripon(Executive officer) Thanks to all of them for providing valuable suggestions and information to prepare this report. It was my privilege and I feel truly honored working with such a wonderful team.

PREFACE

First of all I would like to be grateful to the Almighty Allah, the merciful & the benevolent that has enabled me to complete this report.

The internship, a part of the academic discipline, for the BBA students has been designed to acquire practical knowledge. It is expected that the integration of knowledge in theories and practices will enable us to become effective. Through this program, I have got the chance to acquire some experience in a reputed bank. Which is expected to enlighten my career.

It's really a great opportunity to have the chance to make a report on various aspects of the bank. I have chosen "Analysis of Investment Management of Al-Arafah Islami Bank Limited" as subject matter for my internship program due to personal curiosity & interest to achieve some practical knowledge about this sector. Besides this banking activity is much important for the economic development. Without bank it’s difficult to run financial activities or operation. So it’s normally claims a research on it for better understanding at present.

Finally, it is my earnest & sincere hope that this report on "Analysis of Investment Management of Al-Arafah Islami Bank Limited” would be found useful by the individuals. I tried to make the report effective, informative and representative.

EXECUTIVE SUMMERY

As part of my academic requirement and completion of my BBA program, I needed to complete a three month period of Internship program. I chose to do my Internship at Al-Arafah Islami Bank Limited, Notun Bazaar Branch. At AIBL I was assigned to do my intern in two different sections as general banking, and in foreign division. In General Banking Division I took the opportunity to learn about as much as possible while I was working on the division. Al-Arafah Islami Bank Limited is one of the prominent banks in Bangladesh. In these years of long journey the bank has achieved trust from people by providing its services. The main motto of the bank is to give best quality and swift service to customers. In these three months of internship period I learn from them how to motivate customers and give quick services. General banking division is a very important department of a bank. Relationships with customers develop from here. In this report I describe the different functions of these three divisions. Here I also did a research about customer satisfaction level of AIBL. The report also gives an idea of different products and offerings given by Al-Arafah Islami Bank Limited.

Table of Content

Serial No:	Contents	Page Number
1	*Chapter 1:* *Objectives & Data Method*
	Objectives of the Study	1
	Collection Data Method	2
2	*Chapter 2: The Organization*
	Introduction	3
	History	4-5
	Products/Services offering	5-6
	Investment Product of Al-Arafah Islami Bank Limited	6
3	*Chapter 3: Investment*
	Investment of AIBL	7
	Investment Objectives of AIBL	7-8
	Investment Policy of AIBL	8
	Features of Salient Investment	8
	Investment Strategies	8-9
	Vision for the Future	9-10
	Mission of AIBL	10
4	*Chapter 4: JOB*
	Nature of the jobs	11
	Cash Section	11
	Account Opening	12-15
	Cheque Clearing	15-16
	Debit Advice	16
	Local Remittance	17-18
	Specific Responsibilities Of the Job	18
	Different aspect of job performance	19
5	*Chapter 5 : The Project* *Identification of Cash Management Practices of* *Al-Arafah Islami Bank Ltd*
	Introduction	20-21
	CMO Department: Cash Management Services	21-22
	Cash Management Cycle	22
	Cash Management Corporations	23-25
	Payment of Cash	25-26

Serial No:	Contents	Page Number
	Vault Register	27
	Cash-in-safe, Cash-on-Counter and Cash-in-Transit Limit	27
	Maintaining Vault Limit	27
	Cash Limit	28
	Cash Management	28-29
	Cash Management for Financial Institution	30
	E-Commerce and E-Banking	31
	Common Service	31-34
	Others Service	34-36
6	*Chapter 6: SWOT Analysis*
	SWOT Analysis of AIBL	37
	Strengths of AIBL	37
	Weaknesses of AIBL	37
	Opportunity of AIBL	38
	Threats of AIBL	38
	Findings	39
	Recommendation	40
	Conclusion	41
7	*References*	42

Chapter 1: Objectives & Data Method

Objectives of the Study:

The first objective of preparing this report is to fulfill the partial requirements of the BBA program. In this report, I have attempted to give on overview of Al-Arafah Islami Bank Limited in general. Also in the major part, I have shown the practical approach of Identification of cash management practices of Al-arafah islami Bank Ltd. Some following objectives of the report are as shown.

· To gain or achieve the practical Idea of banking System of AIBL.

· To explain the general banking activities of AIBL.

· To identify the problems of AIBL prevailing in its banking system

· To suggest some possible recommendations to overcome the problems.

Methodology of the study:

This report is based on exploratory research. Because, to make SWOT analysis, Findings, Ratio analysis I required to investigate on various sources.

In order to make the report more meaningful and presentable two sources of data and information have been used widely

‘’The primary sources’’ which are as follows;

1. Face-to-face conversation with the Executives and officers of Bank.

2. Informal conversation with the client.

3. Practical work exposures from the different desks of the various departments of the Branch covered.

4. Relevant file study as provided by the officer’s concerned.

‘’The Secondary Sources’’ of data and information are:

1. Annual Report of Al-Arafah Islami Bank Ltd.

2. Periodicals published by Bangladesh Bank.

3. Various books, articles, compilations etc. Regarding general banking functions.

Collection Data Method:

Scope of the report:

The scope of the organizational part covers the organizational structure, background, and objectives, functional, departmental and Business performance of AIBL as a whole and the main part covers foreign exchange department of AIBL.

Importance of the study

To identify the problem of AIBL.

To achieve practical knowledge of banking side of AIBL.

To observe interrelated activities of foreign exchange department of AIBL.

To gain practical knowledge about over all banking system & especially foreign exchange sector.

Limitations:

Objective of the practical orientation program is to have practical exposure for the students. My tenure was for twelve weeks only, which was somehow not sufficient. After working whole day in the office it way very much difficult, it not impossible to study again the. theoretical aspects of banking. On the other hand to prepare my internship report I have faced some limitations as follows.

It is a common tendency of any departments to keep back their departmental data and information. Unavailability to required published documents.

Chapter 2: The Organization

Introduction

The term “Al-Arafah Islami Bank Limited” refers to a system of banking or banking activity that is consistent with Islamic law (Shariah) principles and guided by Islamic economics. In particular, Islamic law prohibits usury, the collection and payment of interest, also commonly called riba in Islamic discourse. In addition, Islamic law prohibits investing in businesses that are considered unlawful, or haraam (such as businesses that sell alcohol or pork, or businesses that produce media such as gossip columns or pornography, which are contrary to Islamic values). Islamic banking has the same purpose as conventional banking: to make money for the banking institute by lending out capital. But that is not the sole purpose either. The basic principle of Islamic banking is based on risk-sharing which is a component of trade rather than risk-transfer which is seen in conventional banking. Islamic banking introduces concepts such as profit sharing (Mudharabah), safekeeping (Wadiah), joint venture (Musharakah), cost plus (Murabahah), and leasing (Ijar).

There are three types of schedule commercial banks are in operation in our economy. They are Nationalized Commercial Banks, Local Private Commercial Banks and Foreign Private Commercial Banks. AIBL has discovered a new horizon in the field of banking area, which offers different General Banking, Investments and Foreign Exchange banking system. The authorized capital of the Bank is Tk.10000.00 million and the paid up capital is Tk. 7130.98 million as on 31.12.2012. Renowned Islamic Scholars and pious businessmen of the country are the sponsors of the Bank. 100% of paid up capital is being owned by indigenous shareholders. The equity of the bank stood at Tk. 14050.69 million as on 31 December 2012, the manpower was 2110 and the number of shareholders was 52739. It has achieved a continuous profit and declared a good dividend over the years. High quality customer service through the integration of modern technology and new products is the tool of the bank to achieve success.

(Annual report-2012)

History

Islam provides us a complete lifestyle. Main objective of Islami lifestyle is to be successful both in our mortal and immortal life. Therefore in every aspect of our life we should follow the doctrine of Al-Quran and lifestyle of Hazrat Muhammad (sm) for our supreme success. Al-Arafah Islami Bank started it’s journey on 18 June 1995 with the said principles in mind and the opening ceremony took place on 27 September 1995. The bank also known as AIBL and the head office of the bank is based in Dhaka. A group of established, dedicated and pious personalities of Bangladesh are the architects and directors of the Bank. Among them a noted Islamic scholar, economist, writer and ex-bureau craft of Bangladesh government Mr. A.Z.M. Shamsul Alam is the founder Chairman of the bank High quality customer service through the integration of modern technology and new products is the tool of the bank to achieve success. The bank has a diverse array of carefully tailored products and services to satisfy customer needs. The Bank is committed to contribute significantly to the national economy. AIBL provides many opportunities to their clients. They provide Deposit Scheme, Investment, SME Banking, Micro Finance, Foreign Trade etc. In Deposit Scheme, the provides Al Wadiah Current Deposit Scheme, Mudaraba Savings Deposit Scheme, Mudaraba Term Deposit Receipt, Mudaraba Short Notice Deposit etc. In Investment, they invest in Transportation sector, Hire purchase sector, Mosque and Madrasa, Village and Small investment etc. In SME Banking service, they provide SME Entrepreneurs, Agro Industries, Small business, women entrepreneurs etc. In Micro Finance, they work to facilitate rural entrepreneurs, to develop socio economic condition of rural people, to create employment scope etc. The bank also provide others services such as Internet banking, SMS banking, Mobile banking, Locker service, Remittance service, ATM service etc. The bank has 89 branches, 8 SME units and 1807 manpower, 38 authorized dealers (AD) throughout the country and the number of shareholders were 54267. Its authorized capital is Taka 10,000.00 million and the paid-up capital is Taka 5893.37 million o. (up to December 2011) the bank uses all latest banking system to serve their clients and also use latest technology. Wisdom of the directors, Islamic bankers and the wish of Almighty Allah make Al-Arafah Islami Bank Ltd most modern and a leading bank in Bangladesh. In August 1974, Bangladesh signed the charter of Islamic Development Bank and committed itself to reorganize its economic and financial system as per Islamic Shariah. For the favorable attitude of the government of the people’s republic of Bangladesh,

at present seven Islamic Banks operate in Bangladesh Financial market, These are:

§ Islamic Bank Bangladesh Ltd.

§ The Oriental Bank Ltd. (Al-Baraka Bank Bangladesh Ltd.)

§ Al–Arafah Islami Bank Ltd.

§ Social Investment Bank Ltd.

§ Shahjalal Islamic Bank Ltd.

§ Exim Bank Ltd

§ ICB Islamic Bank

Products / Services Offering

1. Al wadiah current account (CD).

2. Mudaraba short notice deposit (SND).

3. Mudaraba savings deposit (MSD).

4. Mudaraba term deposit receipt (MTDR).

a. 36 Months

b. 24 Months

c. 12 Months

d. 06 months

e. 03 Months

5. Monthly installment based term deposit (ITD).

a. 2 years

b. 3 years

c. 5 years

d. 8 years

e. 10 years

f. 12 years

6. Monthly profit based term deposit (MPTD).

7. Al-Arafah monthly Hajj deposit (MHD).

8. Al-Arafah term Hajj deposit (THD)

9. Monthly installment based marriage savings investment scheme (MIS).

10. Al-Arafah savings bond (ASB).

11. Foreign currency deposit (FCD).

12. Pension deposit scheme (PDS).

13. Cash deposit waqf deposit scheme (CWD).

14. Mudaraba lakhpoti deposit scheme (LDS).

15. Mudaraba millionaire deposit scheme (MDS).

16. Mudaraba (special) pension deposit scheme (MSPDS).

17. Mudaraba kotipoti deposit scheme (MKDS).

18. Mudaraba double benefit deposit scheme (MDBDS).

19. Mudaraba triple benefit deposit scheme (MTBDS).

Investment Product of Al Arafah Islami Bank Limited

General Investment:

· Murabaha Investment.

· Bai-Muajjal Investment.

· Hire-Purchase Investment.

· Pre shipment Investment.

· Quard Uzrat Bill Wakala.

Maturity grouping of Investment:

· Payable on Demand

· Up to 1 Month

· Over 1 Month but not more than 3 Month

· Over 3 Month but not more than 1 Year

· Over 1 Year but not more than 5 Year

· Over 5 Year.

Chapter 3: Investment

Investment of AIBL

The most important difference between the Conventional and Islamic bank is that both the banks operate to earn profit but they differ in the way of operation. Islami Bank gives emphasis on legitimate (Halal) business. On the other hand traditional bank is not operated by the following rules and regulations approved by Islam that is the most powerful contradiction between them. Islamic Bank does not invest in loans and fixed interest securities. It can invest in ordinary share only while interest based bank can invest in loans and different kinds of securities. Islami Bank establishes and participate projects with its client as a partner and bears the risk along with the client on a proportionate basis. Besides, other conventional banks sometimes finance projects but do not bear risk. Finally, the concept of Islamic Bank is to establish on egalitarian society based on principles of social justice and equity. Whereas traditional banks pay a fixed interest on savings, time deposit and grant loans with interest for any purpose. We have gathered the fact that investment management is the theme of AIBL. The bank takes deposits and invests the same based on the profit-loss sharing. Bank go for the investment mainly which are long term and profitable in nature. AIBL also give high concentration on the investment that will generate more employment. As investment is one of the most priority areas for the AIBL, so it needs to cautious in investment decision. To ensure proper investment AIBL always go with in-depth study before making the investment.

Investment Objectives of AIBL

The objectives and principles of investment operations of the Banks are:

· The investment fund strictly in accordance with the principles of Islamic Shariah.

· To diversifies its portfolio by size of investment, by sectors (public and private), by economic purpose, by securities and by geographical area including industrial, commercial and agricultural.

· To ensure mutual benefit both for the Bank and the investment client by professional appraisal of investment proposals, judicious sanction of investment, close and constant supervision and monitoring therefore.

· To make investment keeping the socio-economic requirement of the country in view.

· To increase the number of potential investors by making participatory and productive investment.

· To finance various developments schemes for poverty alleviation, income and employment generation with a view to accelerating sustainable socio-economic growth and uplift men of the society.

· To invest in the form of goods and commodities rather than give out cash money to the investment clients.

· To encourage social uplift men enterprises.

· To shun even highly profitable investment in fields forbidden under Islamic Shariah and is harmful for the society.

The Bank extends investments under the principles of Bai-Marabaha, Bai-Muazzal Hire purchase under Shairkatul Melk and Musharaka. The Bank is making sincere efforts to go for investment under Mudaraba principle in near future.

Investment Policy of AIBL

Investment operation of a Bank is very important as the greatest share of total revenue is generated from it, maximum risk is centered in it and the very existence of a Bank mostly depends on prudent management of its Investment Port-folio. For efficient deployment of mobilized resources in profitable, safe and liquid sector a sound, well-defined and appropriate Investment Policy is necessary.

The important feature of the investment policy of the Bank is to invest on the basis of profit-loss sharing system in accordance with the tenets and principles of Islami Shariah. Earning of profit is not the only motive and objective of the Bank’s investment policy rather emphasis is given in attaining social good and in creating employment opportunities.

The plan aims at diversification of the investment port-folio by size sector geographical area, economic purpose and securities to bring in phases all sectors of the economy and all types of economic groups of the society within the fold of Bank’s investment operations.

A sound well defined, well planned and appropriate investment policy frame work is a pre-requisite for achieving the goal of the Bank i.e. implementation and materialization of the economic and financial principles of Islam in the Banking area and justice in trade, commerce and industry and to build socio-economic infrastructure, create opportunity for income and sustained economic growth of the country.

Features of Salient Investment

· Observance of the legal investment limit of the bank.

· Observance of the legal investment limit of the client.

· Optimum utilization of investment fund.

· Profitability of the investments.

· Safety and security of the investments.

· Investment at minimum possible risk.

· Liquidity of investments.

· Conform to central bank’s investment restrictions.

· Preference to short term investments.

· Preference to the investments for small size.

· Satisfactory return on investments.

Investment Strategies

Risk in the investment and return thereon are interrelated. An investment policy that emphasizes a high return must accept relatively high risk. Conversely, an investment policy that will tolerate only small amount of risk must be prepared to accept a relatively low return. As such, it is really difficult whether to select a high return portfolio on high risk or low risk port-folio with a low return. Nevertheless, considering all aspects following guidelines shall be followed as strategy for banks investment:

1. If two portfolios have the same risk but different returns, the port-folio having higher return shall be preferred.

2. If the two portfolios have the same expected returns, but different degrees of risk, the port-folio with lower risk shall get preference.

3. If one portfolio has both a higher return and a lower risk than another, the first port-folio shall be preferred.

4. Keeping in view the risk factor, the bank shall maintain flexibility in determination of rate of return on investments on case to case basis in consideration of the risk element involved in the respective investment.

5. Emphasis is given for expansion and strengthening cottage and small industries sector and rural industries. This immensely potential industrial sub-sector shall create employment opportunities to rural and semi-urban population and shall have positive contribution in employment and income generation and poverty alleviation of the low-income group.

6. Investment facilities shall be extended for establishment and expansion of export oriented forward / back ward linkage and import substitute industries.

7. The bank requires retaining 10% of its total deposit liability as Statutory Liquidity Ratio (SLR) including 4% Cash Reserve Ratio (CRR) with the central bank. The bank may go for investments up to 90% of its total deposit. The perspective investment plan is being formulated quantifying the allocation of investments size-wise, sector-wise, and geographical area-wise, economic purpose-wise, security-wise and mode-wise keeping in view 20% projected growth of deposit each year.

8. Taking into consideration the broad objectives of the bank, national priority, socio-economic need, growth level of the economy, the investments port-folio of the bank may gradually be diversified and allocated in term of size, sector, geographical area, economic purpose, security and mode.

9. Safety, security, profitability and liquidity of Bank’s investments.

10. Each branch invests, at least 50% of its deposits locally.

11. Enhance of extending limit of good investment clients.

12. Adopting of modern technology.

Vision for the Future of AIBL:

Al-Arafah Islami Bank is a customer focused modern Al-Arafah Islamic bank that want to achieve sound and steady growth in both mobilizing deposit and making quality investment to keep their position as a leading Al-Arafah Islami bank in Bangladesh.

To deliver financial services with the touch of their heart to retail, small and medium scale enterprises, as well as corporate clients through their branches across the country.

Their business initiatives are designed to match the changing trade & industrial needs of the clients.

Visions for the Future are Given Bellow:

To operate based on Islamic principles of transactions along with ensuring justice and equity in the economy.

To be a pioneer in Al-Arafah Islami Banking in Bangladesh and contribute

Significantly to the growth of the national economy.

To improve Banker customer relationship through improving Customer service.

To develop now and innovate product/service through integration of technology and policy and principle.

Mission of Al-Arafah Islami Bank Limited:

1. Achieving the satisfaction of Almighty Allah both here and hereafter.

2. Proliferation of Shariah Based Banking practices.

3. Quality financial services adopting the latest technology.

4. Fast and efficient customer service.

5. Balanced growth.

6. Steady & competitive return on shareholder’s equity.

7. Innovative banking at a competitive price.

8. Maintain high standard of business ethics.

9. Attract and retain quality human resources.

10. Extending competitive compensation packages to the employees.

11. Firm committed to the growth of national economy.

12. Involving more in Micro and SME financing.

Goal of the Bank:

The motto of the Al-Arafah Islami Bank Ltd is to explore a new horizon of innovative modern banking creating an automated and computerized environment providing one stop service and prepare itself to face the new.

Chapter 4: JOB

Nature of the jobs:

1. Cash section

2. Accounts opening section

3. Cheque clearing section

4. Local remittance section (Pay order, DD, &TT)

5. MTDR section

6. Accounts section

7. Establishment section

Cash Section

Cash department is the most vital and sensitive organ of the branch as it deals with all kinds of cash transactions. This department starts the day with cash in vault. Each day some cash that is opening cash Al-Arafah Islami Bank are transferred to the cash officers from the cash vault. Net figure of this cash receipts and payments are added to the opening cash Al-Arafah Islami Bank. The figure is called closing Al-Arafah Islami Bank. This closing Al-Arafah Islami Bank is then added to the vault. And this is the final cash Al-Arafah Islami Bank figure for the bank at the end of any particular day.

A) Functions of Cash Department

Cash Payment

Cash payment is made only against cheque. This is the unique function of the banking system which is known as. payment on demand. It makes payment only against its printed valid Cheque.

Cash Receipt

It receives deposits from the depositors in form of cash. So it is the mobilization unit of the

banking system. It collects money only its receipts forms.

B) Cash Payment or Cheque Cancellation Process

Step A) Receiving Cheque by the employee in the cash counter

Step B) Verification of the followings by the cash Officer in the computer Section

Date of the Cheque (it is presented within 6 month from issue date) Issued from this branch

Amounts in figure and sentence written does not differ Signature of the drawer does not differ cheque is not torn or damage.

Step C) Gives pay cash seal and sends to the payment counter.

Step D) Payment officer makes payment.

Account Opening

This section opens accounts. Selection of customer is very important for the bank because

banks success and failure largely depends on their customers. If customer is bad, they may

create fraud and forgery by their account with bank and thus destroy goodwill of banks

KYC (Know Your Customer)

For opening A/C the following things are mandatory-

1. Commissioner Certificate

2. Two copy passport size photo of client.

3. One copy nominee’s photo.

4. Sign of introducer is verified

A. Accounts opening process

Step 1: Receiving filled up application in bank’s prescribed form mentioning what type of

Account is desired to be opened.

Step 2: The form is filled up by the applicant himself/herself two copies of passport size Photographs from individual are taken, in case of firms photographs of all partners are taken Applicants must submit required documents Application must sign specimen signature sheet and give mandate Introducer’s signature and accounts number.

Step 3: Authorized Officer accepts the application.

Step 4: Account is opened and a Cheque book and pay-in-slip book is given.

B. Types of Deposit Accounts and Their Formalities

Current Account

In this kind of account a customer can deposit his money and can write one or more check to withdraw their money. For doing this notice is not required. He can deposit whenever he/ she wants to and also can withdraw it whenever he/ she wants to.

In the name of Individual,

The client has to fill up a light green account opening form. Terms and conditions are printed on the back of the form. The form contains the declaration clause, special instructions etc. two copies of passport size photograph duly attested by the introducer are affixed with the form.

In Joint Name

In this type, the formality is same as individual account, but in the special instruction clause,

either or „survivor. or „former or survivor. clause is marked.

Private Limited Company

Certificate of Commencement is not necessary Certificate of Incorporation, Copy of Memorandum and Articles of Association, Copy of Resolution of the Board of Directors.

Proprietorship

In addition the customer has to submit the valid Trade License and Tax Paying Identification

Number (TIN) along with the application.

Partnership Firm

Partnership deed must be taken Mandate from the partners is essential indicating who will

operate the account. In case of partnership account, the bank asks for:

1 A copy of the partnership agreement (Partnership Deed)

1 A letter signed by all the partners containing the following particulars.

1 The name and addresses of all partners

1 The nature of the firm’s business

The name of the partner authorized to operate the account in the name of the firm, including

the authority to draw, endorse and accepting the bills and mortgage and sell the properties

belonging to the firm.

Limited Company

On having the desire to open an account from a limited company, an AIBL Bank Officer asks

for the following documents:

1. Registration Certificate from the Registrar of Joint Stock of Companies

2. Certificate of Incorporation

3. Certificate of Commencement of Business

4. Memorandum of Association

5. Articles of Association

6. Copies of Annual Accounts

7. Copies of the Board’s resolution, which contains

Joint Account in the name of Minor

A minor cannot open an account in his own name due to the incapacity to enter into a contract.

He can open an account in Al-Arafah Islami Bank Ltd in Joint name of another person who

will be guardian of him.

Dormant account

If any account is inoperative for more than one year is called dormant account. To operate

these accounts manager permission is necessary.

Savings Bank Account

This deposit is basically meant for small-scale savers. There is restriction on withdrawals in a

month. Heavy withdrawals are permitted only against prior notice. Interest is paid on these

types of accounts.

Short-term Deposit (STD)

In Short-term Deposit, the deposit should be kept for at least seven days to get interest. The

interest offered for STD is less than that of savings deposit. In Al-Arafah Islami Bank Ltd

various big companies, Organizations, Government Departments keep money in STD

accounts. Frequent withdrawal is discouraged and requires prior notice.

Fixed Deposit

They are also known as time liabilities or term deposits. These are deposits, which are made

with the bank for a fixed period specified in advance. The bank need not maintain cash

reserves against these deposits and therefore, the bank offers high are of interest on such

deposits.

Opening of Fixed Deposit Account

The depositor has to fill an application form wherein he mentions the amount of deposit, the period for which deposit is to be made & the name/ names is which the fixed deposit receipt is to be issued. In case of a deposit in Joint name Al-Arafah Islami Bank Ltd. also takes the instructions regarding payment of money maturity of the deposit. The banker also takes the instructions regarding payment of money on maturity of the deposit. The banker also takers the instructions regarding payment of money on maturity of the deposit. The banker also taker specimen signatures of the depositors. A fixed deposit account is then issued to the depositor acknowledging receipt of the sum of money mentioned therein. It also contains the rate of interest & the date on which the deposit will fall due for payment.

C) Payment of Interest

It is usually paid on maturity of the fixed deposit. Al-Arafah Islami Bank Ltd calculates

interest at each maturity date and provision is made on that “Miscellaneous

creditor expenditure payable accounts” is debited for the accrued interest.

D) Encashment of F.D.R

In case of premature FDR, Al-Arafah Islami Bank Ltd is not bound to accept surrender of the

deposit before its maturity date. In order to deter such a tendency the interest on such a fixed deposit is made cut a certain percentage less a the agreed rate. Normally savings bank deposit interest rate is allowed.

Loss of FDR

In case of a lost FDR, the customer is asked to record a GD (General Diary) in the nearest

Police Station. After that the customer has to furnish an Indemnity Bond to Al-Arafah Islami

Bank Ltd a duplicate FDR is then issued to the customer by the bank.

Renewal of F.R.D.

In Al-Arafah Islami Bank Ltd, the instrument is automatically renewed within seven days

after the date of its maturity if the customer does not come to en-cash the FDR. The period for renewal is determined as the previous one.

Cheque Clearing

This section receives all kinds of Cheques in favor of the client for clearing as the part of their banking service. After receiving the Cheque it is necessary to endorse it and cross it specially.

Basically the Cheques for clearing are of following types:

A) Outward Clearing

OBC (Outward Bills for Collection) Cheques of other branch of Al-Arafah Islami Bank within our clearing house area. These Cheques are directly sent to the respective branch and request them to send IBCA. When IBCA comes, then customer’s accounts are credited for the amount of the Cheque. Clearing Cheque Cheques of another bank within These Cheques are sent to clearing house via the Motijheel Branch. When drawee bank our clearing house area honor the Cheques, then the account of Cheque depositors are credited. OBC (Outward Bills for Collection) Cheques of another bank which is situated outside the clearing area

These Cheques are cleared in two ways: Firstly, if any branch of our bank exists within the

clearinghouse area of drawee bank, then we send the Cheque to that branch of our bank and that branch collects the proceeds through clearing house formalities and sends an IBCA to us. In second way, if there is no branch of our bank, then we directly sends the Cheque to the drawee bank and request them to send the proceeds by TT, MT, or DD or by in any other

means.

B) Inward Bills for Collection (IBC)

From other branch of Al-Arafah Islami Bank These Cheques are settled by sending IBCA, i.e. debiting depositor’s account and crediting sender’s branch account. From another bank

outside the clearinghouse These Cheques are settled debiting depositor’s account and sending DD, MT, TT in favor of Sender’s bank.

C) Cheque may be Dishonor

1. If the Cheque leaf is toned.

2. If there is no date.

3. If there is no similarity between the amount and word.

Debit Advice

Suppose the shyamoly Branch of AIBL has gotten the Cheque of some clearing house. Then

Shyamoly Branch will send debit advice to local office for collection. That means Shyamoly

Branches do debit the local office branch and local office branch will debit Shyamoly Branch.

Credit Advice When local office make a payment in favor of Shyamoly Branch (assume), then Shyamoly Branch, will send credit advice to local office because local office is accounts payable to Shyamoly Branch.

Local Remittance

AIBL sells and purchase P.O., D.D. and T.T. to its customers only. IT does not offer remittance service frequently to those other than its customer.

A) Pay Order:

Pay order is and instrument that is used to remit money within a city through banking channel the instruments are generally safe as most of them are crossed. Charges of issuing P.O:

Service charge

Tk. 1 to Tk. 10,000 = Tk. 10/-

Tk, 10,001 to Tk, 1, 00,000 = Tk, 20/-

Tk. 1, 00,001 to Tk. 5, 00,000 = Tk. 30/-

Tk, 5, 00,001 to Tk, 10, 00,000 = Tk, 40/-

Tk. 10, 00,001 and above = Tk. 50/-

Vat

15% of principle amount

B) Demand Draft (DD)

Demand Draft is very much popular instrument for remitting money from one corner of a

country another. The instrument is basically used for transfer and payment. Difference

between pay order and demand draft is in terms of place only P.O. is used for remitting

money within the city whereas D.D. is used for within the country. D.D. too constitutes

current liability on the part of a bank. At IBBL D.D. is not sold to people other than its

customer.

Charges of DD

Service charge

Tk. 1 to Tk. 10,000 = Tk. 107

Above Tk. 10,000/- 1 Tk. for every 1,000

Vat

15% of principle amount

C) Telegraphic Transfer (TT)

Telegraphic transfer is one of the fastest means of transferring money from one branch to

another or from one to another. The T.T. issuing bank instructs its counterpart by tested telex message regarding remittance of money. No instrument is given for T.T. unless both parties have account, as money is transferred.

Charges for issuing TT

Telephone charge Tk. 307

Service charge:

Tk. 1 to Tk. 10,000 = Tk. 107

Above Tk. 10,000 = 1 Tk. for every 1,000

Specific responsibilities of the job

During my internship period I did lots of jobs, which were totally new to me. I got practical

job experiment on my internship. The specific jobs which I need to attempt most of the time

are following.

· Entering credit data into different excel templates

· Putting seal and signature

· Dealing with clients as per the demand of client and officials

· Responding to the queries in detail about different types of deposit schemes and accounts

· Preparing form of different deposit scheme and accounts

· Inspecting the form boxes and making forms as per need

· Filling up the important unfilled items on a form

· Filing the used, closed and pending forms

· Finding and delivering cheque books

· Processing and enlisting cheque books

· Giving guidelines to fully fill a deposit scheme or account opening form

· Informing client about account balance and transaction

· Delivering ATM Cards

Different aspect of job performance

· Banking jobs are critical and also need lots of time and patients to perform

because bankers have to deal with every aspect in order to satisfy clients and also

earn revenue for the bank.

· Manager or head of the branch is in total in charge of the bank to take any

decision. Officers mainly follow his instruction to perform their job successfully.

· General banking is mostly responsible for doing different formulation of works

such as preparing report, statements, salary sheets, discussing any reports and

providing ideas. They also do some sensitive work related to provide money by

receiving checques, computerized account information, provide interest on deposit.

· Remittance is responsible to give daily transactions, receiving and crossing

checques, provide foreign currency which comes from abroad with the support of

Western Union Money Transfer. Preparing demand draft and other bill related

activities. Open new account like current or saving accounts.

· Foreign exchange department deals with opening Letter of Credit and providing

support to client through bank guarantees and deal with other foreign banks and

institutions from the clients. point of views.

· Card division mainly provides client information related to debit/credit card. The

types of benefits the customer will get if he/she have the card. Often they go for

clients. office to convince them to have the credit card. They also prepare different

statements and voucher related to card.

Chapter 5: The Project

Identification of Cash Management Practices of Al-arafah Islami Bank Ltd.

Introduction

DEFINITION of 'Cash Management'

The corporate process of collecting, managing and (short-term) investing cash. A key component of ensuring a company's financial stability and solvency. Frequently corporate treasurers or a business manager is responsible for overall cash management.

Successful cash management involves not only avoiding insolvency (and therefore bankruptcy), but also reducing days in account receivables (AR), increasing collection rates, selecting appropriate short-term investment vehicles, and increasing days cash on hand all in order to improve a company's overall financial profitability.

Cash Management services include local and cross border payments, collections, information management and investment services for both corporate, Institutions and individual clients. As part of Standard Charterer’s global transaction solutions to Corporate, Institutions and individual, they provide Cash Management, Securities Services and Trade Services through their strong market networks in Asia, Africa, the Middle East and Latin America. AIBL also provide a connection to these markets for clients from other region of the world.

They are committed to providing with:

• Integrated, superior cross-border and local services

• Efficient transaction processing

• Innovative products

• World-class clearing services

Cash Management Operations (CMO) Department

Cash Management Services:

The Cash Management service provides total solutions to improve cash flows. AIBL is highly recognized as a leading cash management supplier across the emerging markets. Cash Management Services cover local and cross border payments, collections, information management, account services and liquidity management for corporate, institutional and individual customers. With AIBL Cash Management Services, customers always know where their money is. They can take advantage of AIBL outstanding range of payment, collection, liquidity and investment services and receive reports detailing when and where cash has been moving.

A. Clearing Services

AIBL possesses 140 years of experience in Trade Finance. AIBL broad international customer base, professional insight and knowledge of the risks and rewards of international trade earned the bank a unique position in the industry. The bank offers world-class support across the worldwide buyer chain to minimize overall cost, maximize buyer base, and shorten administrative processes.

To enable customers to capture global opportunities, it has a presence in over 50 countries, in addition to the extensive network of overseas banking partners and correspondents.

AIBL has a wide array of financing tools to ease customer's cash flow burden and help them grow their business.

B. Receivables Services

It gives financial security to explore new markets overseas or grow your business locally, reducing risk and cost.

C. Import Services

Instead of paying for imports immediately, SCB is able to offer import financing, to finance a drawing under an Import Letter of Credit or Import Bill for Collection, giving customer's time for the goods to be cleared and resold.

D. Export Services

AIBL offers the opportunity to obtain pre-shipment and post-shipment financing.

Cash Management Cycle:

Cash Management for Corporations:

A. Cash Collection Services

Large retailers who collect a great deal of cash may have the bank pick this cash up via an armored car company, instead of asking its employees to deposit the cash.

AIBL understands that operating and sustaining a profitable business these days is extremely tough. In an environment of constant changes and uncertainties, most businesses face challenges of costs and efficiency. Key concerns include;

· Receivables Management

Ensuring receivables are collected in an efficient and timely manner to optimize utilization of funds.

· Risk Management

Ensuring effective management of debtors to eliminate risk of returns and losses caused by defaulters and delayed payments.

· Inventory Management

Ensures efficient and quick turnaround of inventory to maximize returns.

· Cost Management

Reduces interest costs through optimal utilization of funds.

· Solution

This Collections Solution, delivered through a standardized international platform, has the flexibility to cater to customers’ local needs, thus enabling to meet objectives of reducing costs and increasing efficiency and profitability through better receivables and risk management.

The key components of our solution include the following:

· Extensive Clearing Network

· Guaranteed Credit

· Comprehensive MIS

· System Integration

· Outsourcing of Collection

Receipt of Cash

Before receiving cash from depositors in Pay-in-Slip / Credit Voucher the concerned cash official shall:

1. Verify/check the (a) Title of Account, (b) A/C Number, (c) Amount in Words and Figures, (d) Date, etc. written on Pay in Slip/Credit Vouchers with the records of computer program and shall satisfy on their correctness and genuineness.

2. Carefully check and Count the Currency Notes

3. Write down denomination

4. Affix Cash Received stamp

5. Make entry of particulars of the Cash Received

6. Verify entries / Particulars of Pay-in-Slip / Credit Voucher with those of the Cash Receiving Register

7. Keep Cash in the Drawer of Cash Counter under lock and Key (within Counter limit) during transaction hours.

B. Liquidity Management

With global experience and on-the-ground market knowledge, AIBL will help to define an overall cash management strategy which incorporates a liquidity management solution that best meets customer’s needs.

Solutions for efficient management of customers’ funds:

· A corporate treasurers’ main challenge often revolves round ensuring that the company’s cash resources are utilized to its maximum advantage.

· Maximize interest income on surplus balances; minimize interest expense on deficit balances for domestic, regional and global accounts

· Minimize FX conversion for cross-currency cash concentration

· Customize liquidity management solutions for different entities in different countries

· Centralize information management of consolidated account balances.

C. Payment Services

It helps customers save time and money by reducing processing costs while providing a value-added service to suppliers.

Full range of payment capabilities offered by AIBL:

Type of payments	Facilities
Cross-border payments	Telegraphic transfers International bank cheques / drafts
Domestic payments	Local bank cheques / drafts /Cashiers order Corporate cheque Direct credits –ACH / GIRO / credit vouchers Local bank transfers (RTGS) Book transfers (account transfer between AIBL branches)

Payments system integration:

Straight2Bank channels caters to different levels of customer payment sophistication, including simple online transaction via Internet, bulk file payment via internet or lease line, and the ability to send industry standard messages directly to the bank. It’s in-country specialists are available to help customize a solution that enables customers to manage their working capital in a more efficient manner.

Payment of Cash

While Paying Cash against debit instruments namely Cheques, Demand Drafts (DD), Pay Order (PO), Pay Slip (PS), SDR, FDR, etc. and also against other debit instruments issued under scheme deposits of the Branch as well as Cash Debit Vouchers, the following formalities have to observed.

· Verify Genuineness & Authenticity of the instrument make posting, passing & cancellation of the Cheques and, thereafter, count relevant cash and note down denominations there against on reverse/ back side of respective instruments/ vouchers.

· Obtain 2^nd signature of payee/ recipients on the back of the instruments, affixing stamp and cancellation of instruments.

· Enter particulars of instruments/ Cheque in Cash payment register in Serial order and write down that serial number in a red circle to be made on the face of the instruments.

· And finally after completion of all above formalities the Cash official, upon satisfaction, shall pay/ handover cash against the instrument/ cheque to the payee/ Recipients.

· However, paying cash officials shall hold all paid debit instrument’s until cash is closed and handed over to Cash-in-charge at the close of business.

Balancing of Cash Receiving Register

After receipt of total cash during the day the ‘Cash Receiving Official’ shall (i) aggregate the amount after the last entry in the ‘Cash Receiving Register’, (ii) write down the total amount in words and figure under the summation and ensure that it is okay and the figure agrees with the computer generated supplementary figure.

Balancing of Cash Payment Register

Paying Cash shall accomplish the following formalities:

§ Make date-wise entry of all payment Vouchers in “Cash Payment Register” in serial order.

§ Make sure that total amount of such payments of the day agrees with the total amount shown in the parallel computer generated supplementary.

§ Write down the total amount of cash paid during the day both in words and figures in ‘Cash Payment Register’ and authenticate the same by full signature.

Writing and Checking of Cash Balance Book:

After Balancing of (i) Cash Receiving Register and (ii) Cash Payment Register by the respective Cash Officials, Cash In-Charge shall prepare and sign the Cash Balance Book and shall submit the same to the Deposit In-charge/Manager Operation (MoP), who, upon satisfaction about its accuracy and genuineness shall authenticate the same by his / her countersignature thereon.

Checking / Closing of Cash and writing of Cash Position Memo:

At the end of day’s Cash transaction Cash In-charge shall Count, Sort and Balance the remaining cash (after receipt & payment) and shall prepare and sign the Cash Position Memo. However, Deposit In-charge / Manager Operation shall check and confirm that the figures mentioned in the Cash Position Memo agree with the total figures of (i) Cash Payment Register, (ii) Cash Receiving Register and (iii) Daily Affairs (cash in hand figure) and, upon satisfaction, shall authenticate the Cash Position Memo by his full signature / countersignature.

Safe Custody of Cash (after transaction) over night:

Cash balance of the counter at the end of a day together with Cash in Safe if any shall be preserved in the ‘Fire Proof Iron Safe’ of Branch’s Vault for Safe-Triple-Custody until next reopening of the Vault. But before storing cash in the Iron Safe, the Triple Custodian shall additionally ensure that entire cash i.e. Closing Balance of the day as per Cash Position Book (Balance Cash of Cash Counter and remaining Cash Iron Safe) are accurate and correct.

Vault Register

Cash In-Charge shall Maintain Vault Register for keeping record of Cash Movement to and from the Iron Safe. Denominations of Cash in Hand mentioned in the Cash Balance Book must match with the denominations recorded in the Vault Register at the end of day’s transaction.

Cash-in-safe, Cash-on-Counter and Cash-in-Transit Limit

Branch must handle cash within Cash-in-Safe, Cash-on-Counter and Cash-in-Transit Limit duly approved by Head Office. Excess cash over the approved limit shall not be held in the Branch at any time either on Counter or in Iron Safe. However, the Cash In-charge, under due record & acknowledgment in the relevant register, shall immediately move the Excess Cash of the counter, to the Strong Room during transaction hours. AIBL Natun Bazar, Baridhara Branch transit Limit is 2,00,00,000/= Tk.

Cash Enclosure

Access of unauthorized person’s, including officials of other departments, to the Cash Enclosure of the Branch, is strictly prohibited. Only the officials working in the Cash Department shall have access to the Cash enclosure but normally they will not be allowed to go outside the Bank premises until entire cash is balanced and handed over to the Cash-in-Charge. Counting, Stitching / Banding of cash (as per instructions / guidelines of Bangladesh Bank / Head Office) should be made inside Cash Enclosure by the concerned staff’s who will not be allowed to leave Cash enclosure until cash is duly handed over to the Cash-in-charge in his full satisfaction & acknowledgement.

Safety / Security of Strong Room during Transaction Hours

Strong Room / Vault must be kept Closed / Locked during transactions hours under Joint Control of two key holders from Triple Custodians and both the Joint Controllers must be present whenever the strong room is re-opened during the Day / Office Hours. Cash In-charge must keep his / her hand balance (exceeding counter limit) in a steel box under lock & key in the strong room.

Maintaining vault limit

Branch has to ensure the vault/cash in safe limit as set by the Head Office time to time. Cash in excess of vault has to be deposited immediately with BB/Al-arafah Islami Bank or designated cash feeding branch.

AIBL Natun Bazar, Baridhara Branch Vault Limit is 50,00,000/= Tk.

Cash Limit

Available credit limit: It is the difference between your credit limit and total amount due. If your credit limit is 50,000/= Tk. and you have spent 1,500/= Tk, your available credit limit reduces to 48,500/= Tk. Cash limit: Cash limit sets the maximum money you can withdraw as cash. AIBL Natun Bazar, Baridhara Branch cash limit is 20,00,000/= Tk.

Cash Management

Security Measure of Cash-in-Transit

Branch shall ensure adequate and effective security measures while carrying cash to and from link branches of the Bank and Bangladesh Bank / any other banks, where the branch maintains Bankers’ Account.

Rotation of Cash Officers’ Duty

Rotation of duties between Paying and Receiving Cash Officials should be made at regular monthly frequency.

Surprise Verification of Cash

Head of Branch (HoB) shall make surprise verification by physical counting of entire Cash-in-Safe at least once a month and shall confirm its accuracy with the remarks “Entire Cash Checked and Found Correct” on the particular page of Cash Position Book under his / her signature.

Recording Denomination of Note’s / Coin’s

Cash at Bank (in hand, in iron Safe / Vault and on counter of Branch) is to be noted down denomination-wise in Cash Position Book and that denomination must go with the denomination to be recorded in the Vault Register at the end of transaction of the day. Again, cash official shall record denominations of all the cash received and paid daily on the back of each respective credit and debit voucher.

Packing / Banding of Currency Notes

Currency notes in till of the Branch are to be packed denomination-wise separately with 100 pieces in each packet and those packets shall be stitched / banded as per specification of Bangladesh Bank. A cash slip (fly leaf) bending at left side of each packet is to be pasted and signed by the official who has counted / verified the notes in the packet. Branch’s rubber stamp (round seal) is to be affixed on both sides of each packet covering part of Cash Slip (fly leaf) and a part of the currency notes.

Cash balance with less than 100 pieces notes (unstitched / unbanded) is to be kept denomination-wise in separate loose packets. 10 packets of 100 pieces notes in each packet (100 x 10) shall make a ring / bundle which should be tied up with rope and stacked denomination-wise in Fireproof Iron Safe(s) under Triple Custody.

Soiled Notes

Branch, with due record in a register, shall always keep Soiled and Mutilated Notes separated from the notes for circulation and shall arrange Change of the same at necessary interval from Bangladesh Bank / AIB Ltd. / Main Branch of the Bank to avoid irrational accumulation.

Forged Notes

Whenever a forged note is detected in branch the matter must be brought to the notice of Head of Branch (HoB) for disposal in the light of directives issued by Bangladesh Bank.

Coins to be kept in Bags

Coins should be kept denomination wise in bags of uniform size. A Cash Slip Form, with description of the coin, signed by two officials who counted and checked them, should be placed inside each coin bag. Bags full of Coins are to be stored in the Iron safe in orderly manner. All coin bags in Iron Safe are to be checked to ascertain genuineness and accuracy of its contents.

Cash Shortage / Discrepancy

Any discrepancy in cash (excess payment / short receipt, forged, mutilated, counterfeit, notes, etc.) should immediately be brought to the notice of Head of Branch, who, upon its enormity, (particularly Cash shortage and forged notes), shall inform Head Office right away. If shortfall is caused due to less receipt / excess payment, branch authority shall recover the amount from concerned cash official and or from the concerned customer’s if he is identified to be liable or culpable. On failure to recover at the end of the day, the said shortfall shall have to be covered/made up by debiting “Suspense A/C Cash Shortage” with the concurrence of Head Office/Controlling Office. Outstanding entry so created in “Suspense A/C Cash Shortage shall have to be reversed at the earliest by recovering / realizing the money from the delinquent official’s and or customer’s or from both as per their involvement in the matter. However, Police Action, if required, shall be taken in time against delinquent official’s / customers in concurrence with Head Office.

Cash Management for Financial Institution:

· Clearing Services

With increasing business globalization, customer banking network may not have sufficient reach. They may not want to put in the extra infrastructure or resources to expand their network but still want to ensure their clients' transactions are serviced efficiently. Clearing is one of the important services in which customer bank would need support to facilitate clients’ smooth international trade and cross-border transactions.

· Solution:

a) AIBL international network and multi-currency capabilities are well placed to provide with a seamless service for all clearing requirements worldwide. AIBL network extends across Africa, the Middle East, South Asia, Latin America, the USA and the UK.

b) Over 150 years of on-the-ground experience to tailor a clearing solution that meets by AIBL, is a correspondent banking partner to make this potentially complicated process much easier.

c) AIBL offers “Best in Class” technology and processes in clearing services wherever customer are, in whichever country customer do business and in whatever currency.

d) With AIBL Cash Management services, exact financial position can be determined. So it’s easy to manage company’s complete financial position directly from computer workstation.

e) With outstanding range of Payments, Collections, Liquidity and Investment Services and receive comprehensive reports can be determined. With AIBL, everything it takes to manage clients’ cash flow more accurately.

Cash Management Facilities:

* Manage the availability of funds efficiently

* Monitor and control the movement of funds

* Settle payments to suppliers in a timely and cost-effective manner

* Capture every investment opportunity to increase income

E-Commerce and E-Banking

E-Commerce provides with a full range of reporting capabilities, and a comprehensive range of transaction initiation options. Whether it is cash or trade related, the user-friendly E-Banking customer workstation will provide with a secure, reliable and effective link between client and his accounts anywhere across the AIBL network with more than 600 offices in more than 70 countries. E-Banking also incorporates an “events scheduler” which automatically executes tasks. Moreover, e-Banking offers Data Export/Import capability to/from other widely used Windows-based software (e.g. MS Excel, MS Access etc)

Common Service:

The following is a list of services generally offered by banks and utilized by larger businesses and corporations;

Account reconciliation

Balancing a cheque book can be a difficult process for a very large business, since it issues so many cheques it can take a lot of human monitoring to understand which cheques have not cleared and therefore what the company's true balance is. To address this, banks have developed a system which allows companies to upload a list of all the checks that they issue on a daily basis, so that at the end of the month the bank statement will show not only which checks have cleared, but also which have not. More recently, banks have used this system to prevent checks from being fraudulently cashed if they are not on the list, a process known as positive pay.

Advanced web services

Most banks have an Internet-based system which is more advanced than the one available to consumers. This enables managers to create and authorize special internal logon credentials, allowing employees to send wires and access other cash management features normally not found on the consumer web site.

Armored car services/cash collection

Large retailers who collect a great deal of cash may have the bank pick this cash up via an armored car company, instead of asking its employees to deposit the cash.

Automated clearing house

Usually offered by the cash management division of a bank. The automated clearing house is an electronic system used to transfer funds between banks. Companies use this to pay others, especially employees (this is how direct deposit works). Certain companies also use it to collect funds from customers (this is generally how automatic payment plans work). This system is criticized by some consumer advocacy groups, because under this system banks assume that the company initiating the debit is correct until proven otherwise.

Balance reporting

Corporate clients who actively manage their cash balances usually subscribe to secure web-based reporting of their account and transaction information at their lead bank. These sophisticated compilations of banking activity may include balances in foreign currencies, as well as those at other banks. They include information on cash positions as well as 'float' (e.g., checks in the process of collection). Finally, they offer transaction-specific details on all forms of payment activity, including deposits, checks, wire transfers in and out, ACH (automated clearinghouse debits and credits), investments, etc.

Cash concentration services

Large or national chain retailers often are in areas where their primary bank does not have branches. Therefore, they open bank accounts at various local banks in the area. To prevent funds in these accounts from being idle and not earning sufficient interest, many of these companies have an agreement set with their primary bank, whereby their primary bank uses the automated clearing house to electronically "pull" the money from these banks into a single interest-bearing bank account. See also: Cash concentration.

Controlled disbursement

This is another product offered by banks under Cash Management Services. The bank provides a daily report, typically early in the day, that provides the amount of disbursements that will be charged to the customer's account. This early knowledge of daily funds requirement allows the customer to invest any surplus in intraday investment opportunities, typically money market investments. This is different from delayed disbursements, where payments are issued through a remote branch of a bank and customer is able to delay the payment due to increased float time.

Lockbox—wholesale services

Often companies (such as utilities) which receive a large number of payments via checks in the mail have the bank set up a post office box for them, open their mail, and deposit any checks found. This is referred to as a "lockbox" service.

Lockbox—retail services

Are for companies with small numbers of payments, sometimes with detailed requirements for processing. This might be a company like a dentist's office or small manufacturing company.

Positive pay

Positive pay is a service whereby the company electronically shares its check register of all written checks with the bank. The bank therefore will only pay checks listed in that register, with exactly the same specifications as listed in the register (amount, payee, serial number, etc.). This system dramatically reduces check fraud.

Reverse positive pay

Reverse positive pay is similar to positive pay, but the process is reversed, with the company, not the bank, maintaining the list of checks issued. When checks are presented for payment and clear through the Federal Reserve System, the Federal Reserve prepares a file of the checks' account numbers, serial numbers, and dollar amounts and sends the file to the bank. In reverse positive pay, the bank sends that file to the company, where the company compares the information to its internal records. The company lets the bank know which checks match its internal information, and the bank pays those items. The bank then researches the checks that do not match, corrects any misreads or encoding errors, and determines if any items are fraudulent. The bank pays only "true" exceptions, that is, those that can be reconciled with the company's files.

Sweep accounts

Sweep accounts are typically offered by the cash management division of a bank. Under this system, excess funds from a company's bank accounts are automatically moved into a money market mutual fund overnight, and then moved back the next morning. This allows them to earn interest overnight. This is the primary use of money market mutual funds.

Zero balance account

A Zero balance account can be thought of as somewhat of a hack. Companies with large numbers of stores or locations can very often be confused if all those stores are depositing into a single bank account. Traditionally, it would be impossible to know which deposits were from which stores without seeking to view images of those deposits. To help correct this problem, banks developed a system where each store is given their own bank account,

but all the money deposited into the individual store accounts are automatically moved or swept into the company's main bank account. This allows the company to look at individual statements for each store. U.S. banks are almost all converting their systems so that companies can tell which store made a particular deposit, even if these deposits are all deposited into a single account. Therefore, zero balance accounting is being used less frequently.

Wire transfer

A wire transfer is an electronic transfer of funds. Wire transfers can be done by a simple bank account transfer, or by a transfer of cash at a cash office. Bank wire transfers are often the most expedient method for transferring funds between bank accounts. A bank wire transfer is a message to the receiving bank requesting them to effect payment in accordance with the instructions given. The message also includes settlement instructions. The actual wire transfer itself is virtually instantaneous, requiring no longer for transmission than a telephone call.

In the past, other services have been offered the usefulness of which has diminished with the rise of the Internet. For example, companies could have daily faxes of their most recent transactions or be sent CD-ROMs of images of their cashed checks.

Cash management services can be costly but usually the cost to a company is outweighed by the benefits: cost savings, accuracy, efficiencies, etc.

Others Service

A. Inward Telegraphic Transfer (ITT)

ITT is a unit under Cash Management Operations department. When the bank receives remittance on behalf of the customer, it is inward remittance / Inward telegraphic transfer. The bank receives the remittance instruction through SWIFT message, and then the following steps are taken by ITT unit:

• Receive ITT instruction via SWIFT in MT103, 202, 101 formats. Different message type

Indicates the remitting form

• Sort messages

• Generate pre-advice and inform customer about remittance and receive supporting documents from customer for the payments

• Verify details / checking for confirmations

• Payment instruction / encashment to customer’s account

• If necessary documents are not been provided or required documents are not updated then items move to UCD (Unclaimed Cover for Drawings) file, and hold the remittance for regulatory requirement.

• It works through four transaction systems: SWIFT>AIBSTAR>DO TO pal>eBBS

B. Outward Telegraphic Transfer (OTT)

OTT unit processes outward remittances where fund is transferred from accounts held with AIBL Bangladesh. Though the telegraphic system has been decommissioned for such transfers, the term ‘telegraphic transfer’ broadly is being used throughout the banking industry.

OTT unit works in following steps:

· Receive OTT instruction

· Verify details

· Reject / input OTT transaction

· Check and approve transaction

· Generate and send payment message

· Prepare customer advice.

C. Local Collection Unit (LCU)

Local Collection Unit collects local cheque of other bank. When local cheques are received by local cheque collection unit then the following steps are followed:

· Receive other bank local cheque

· Verify details

· Reject / input cheque transaction

· Check and approve transaction

· Generate and send payment message

D. Foreign Collection Unit (FCU)

Foreign Collection Unit also works under cash management operations department. FCU collects foreign cheques, inward cheques and process in the following steps:

· Receive other bank foreign cheque

· Collects inward cheque

· Verify details

· Reject / input cheque transaction

· Check and approve transaction

· Generate and send payment message

E. Bills Pay

Bills pay, the most convenient way to settle monthly utility bills. Bills pay unit not only provide convenience but also allow flexibility to pay customer bills as and when chosen. Once who sign up for the services, customer will no longer have to go out of his way to pay bills for electricity, mobile phones, internet, etc., every month. Bills pay provides one-stop payment solution where the department will debit customers’ account to pay bills.

F. Premium Service-Banking (PSB)

Premium Service-Banking offers a choice of service improvements which can be tailored to individual business needs. These service enhancements collectively allow managing business finances and cashing resources more effectively and conveniently. PSB unit works in following steps:

· Receive daily fax of routine transaction of ITT, OTT, PODD units

· Entry all the transaction into the system with CMO suite software

· Verify and forward each transaction to the related unit

· When other units clear the transaction / credit amount to the customer the status updated by PSB unit in CMO suite

· PSB unit also allows customer to full range of transaction banking enquiry relating to balances, account statements, cheque payment status and other transactions

G. Ops, Risk & MIS

This unit at CMO department maintains and upgrades Database and provides MIS updates on different issues to Management, Branches & different teams on a routine basis. The unit generates and updates different Management Information reports regarding ITT, OTT, STS/PODD customer’s information and clarification etc. This unit also verifies operational activities and risk on overall CMO department’s activities. Thus this unit plays an important role in maintaining efficiency of SCB Bangladesh.

H. Straight through Services & Pay-Order/Demand Draft

“Straight through Services” / Pay Order Demand-Draft system to introduced speedy technology for issuing huge volume of pay-order and demand draft of customer instructions. With the system a huge volume of customer instructions can be approved with short time with accuracy.

· Receive pay order/demand draft request

· Verify details

· Accept/reject transaction

· Input transaction

· Print copy then check and sign

· Release copy to customer

· File documents.

Chapter 6: SWOT Analysis

SWOT Analysis of AIBL:

SWOT analysis provides an opinion and adjustment whether organizations currently position is satisfactory or not.

Strengths of AIBL:

All activities of the bank are conducted according to Islamic shariah where profit is the legal alternative to interest.

The bank has earned customer loyalty as organizational loyalty.
AIBL maintain corresponding relationship with many foreign banks so that it is an effective measure for the smooth business.
Skilled manpower and efficient employees are being involved to meet the clients’ satisfaction.
The amount of deposits is one of the biggest strengths of AIBL.
AIBL is always trying to add new and modern equipment.

Weaknesses of AIBL:

In addition to that a huge number of financial institution working besides commercial Banks of our country. As such their business is becoming more and more vital weakness of AIBL because our financial market is not expanding in comparison with the establishment of new banks.
The advertising and promotional activities of this bank are up the mark.
There some officer who work hard but are not appreciated by the authority.
AIBL has not set up proper network system among branches.
The bank does not have any research and development division
Risk Management system is not strong. The bank has already exposed to a variety of risks the most important of which are credit risk, market risk and liquidity risk.
IT Division is not strong because bank put due importance to utilization of technology-based service to the customers.

Opportunity of AIBL:

Favorable business climate for commercial banks in the country in comparison with other business.
The bank can introduce more innovative modern customer service to better survive in the competition.
It is high time that they should move towards the online banking system, because some bank already introduces the online banking operations.
They can also offer the micro credit business for individual and small business.
Expanding the financial policy with credit facility customer is very secure in business environment.

Threats of AIBL:

The world is advancing towards technology very fast. Though AIBL taken effort to join the stream, it is not possible to complete the mission due to the poor technological infrastructure of our country.
Local competitors can also capture as huge market share by offering similar products and services provided by the bank.
Though the innovative working is in contentious process but the other rival banks are coping it within the short time.
They are carrying out aggressive campaign to attract lucrative corporate client as well as big-time depositor.
Bangladesh Bank is always supervising the local and foreign banks in Bangladesh and sometimes it is hampering the normal operation of private bank.

Findings:

AIBL is committed to provide banking services that is purely based on Islamic Shariah transparent and efficient in this competitive environment. From this report we get some positive and negative findings. The findings are necessary for bank to take corrective measure.

So we disclose the findings bellow:

In every year the deposit amount and the investment amount increases gradually in AIBL.

Among the different sector AIBL invest highly in industry and Commerce sector.

It is seen that AIBL is providing more investment facilities in urban areas than rural areas.

Among the different modes AIBL highly concentrate in Bai-Muazzal and Murabaha.

The growth rate of investment of Al-Arafah Islami Bank is increasing year by year.

The investment amount storage sector and water works & sanitary services were decrease year by year.

The debt ratio of AIBL is escalating year by year.

The return of investment in security of AIBL through varies with year but it is seen that recent year the bank is trying it’s best to keep it up.

The classified investment against take total investment of Al-Arafah Islami bank is increasing year by year.

Income from investment of Al-Arafah Islami bank is increasing year by year but the growth rate here also varies from 3.47% to 54.09% from the year 2007 to 2010 and it also increasing.

The return on investment in security increasing year by year.

Recommendation:

Banking sector is now more competitive. Each bank wants to capture maximum market share and to become a market leader. Like other Al-Arafah Islami Bank also wants to be market leader. I think they have capability to be market leader. The private commercial bank that are currently operating in Bangladesh offering different product but there are few basic difference among them in term of structure and performance. Thus the competitions increase day by day. So, based on finding it can be recommendation to progress in future, AIBL should adopt some policy which will help the bank to capture a large market share.

The recommendation can be disclose below:

They should give more attention in increasing their deposits in different accounts.

Al-Arafah Islami Bank should attention highly to hold their position in industry and commerce sector investment, more over they should try to improve their position for their near future competition.

As it has seen that AIBL investment income were more than double by last 4 years, it convey very good sing. They should try to retaining their position.

From the geographical allocation it has seen that AIBL give less concentration at Khulna and Barisal region but more concentration at Dhaka and Chittagong, they should give concentration at Khulna and Barisal region also.

Classified investment is changeable from 2006 to 2013 and should give concentration to control this.

Optimal cost for sanctioning and disbursing investment should be minimized.

As non-performing loan is decreasing gradually they should try to retain their position.

A depth evaluation of projects and use effective monitoring of investment portfolios are needed to improve the high productivity for the bank.

Conclusion:

Al-Arafah Islami Bank Limited is a leading private islami bank in Bangladesh with superior customer bases that are loyal, faithful, worthy towards the bank. The service provided by the young energetic officials of the AIBL is very satisfactory. As an islami bank AIBL has to follow the rules of Bangladesh bank despite the fact that these rules sometime restrict the foreign business to some extent. During my internship in this branch I have found the investment department to be very efficient, there for this department plays a major role in the overall profitability of the branch and to the Bank as a whole.

Al-Arafah Islami Bank Ltd is one of the most potential Islami Bank in the islami banking sector. It has a large portfolio with huge assets to meet up it’s liabilities and the management of this bank is equipped with the expert bankers and managers in all level of management. I would rather feel like producing my personal opinion about the ongoing in Mirpur-10 Branch.

The Bank’s drive towards market leadership as well as quality in choosing business will continue in the coming years although competition is intensified with the opening of more financial institutions. The bank is optimistic that the volume of business will increase in future through pragmatic and market friendly policies. The bank shall continue to explore new fields of investment and take steps to open new techniques that will help to earn profit and increase greater confidence of the existing prospective customers.

References

Books

Lawrence, J Gitman (2003), “Principal of Managerial Finance”, 10^th Edition.

Bedi, H.L. “Practical Banking Advance” UBS Publishers Distribution Ltd. New Delhi

Frederic S. “Miskin the Economic of money and Financial Market” 6^th Edition, 2003, Boston.

Frank K. Reilly and Keith C. Brown, “Investment Analysis Portfolio Management”, 7^th Edition.

C.R Kotheri, “Research Methodology” Second Edition, 2003-2004, wishwa Prakashan, Calcutta, India.

Prospectors

Annual Report, Al-Arafah Islami Bank Ltd, 2006-2013

Bangladesh Bank, Guideline to fill in the Banking, Statistic Department.

Bangladesh Bank (Banking Supervision and Regulation Department).

Al-Arafah Islami Bank , Guideline to fill in the Report , Cash management Department.

Websites

https://en.wikipedia.org/wiki/Cash_management

http://www.assignmentpoint.com/business/finance/internship-report-on-al-arafah-islami-bank-ltd.html

http://www.al-arafahbank.com/profile.php

https://www.diva-portal.org/smash/get/diva2:545527/FULLTEXT01

Thursday, May 26, 2016

Identification of cash management practices of Al-arafah islami Bank Ltd

Introduction

DEFINITION of 'Cash Management'