Report on Shahjalal Islami Bank Limited Essay

Introduction1.1 Preface titanicly by the word vernacular we give the bounce easily understand that the fiscal foundation directs with money. exactly there be diverse types of deposits like Central Banks, commercial-grade Banks, nest egg Banks, investiture Banks, Industrial Banks, Co-operative Banks etc. But when we use the term Bank with out(p) any(prenominal) prefix, or qualification, it refers to the technical sticks. mercantile strands be the primary contri aloneors to the providence of a country. So we can say Commercial shore is a profit-making unveiling that holds the deposits of individuals & vexation in checking & savings accounts and then uses these funds to influence loans. For these passel and the goernment is very a right(a) deal dep cobblers las disco biscuitt on these banks as the pecuniary intermediary. As banks argon profit -earning stir they realise deposit at the utmost possible approach and run loans and advances at higher(prenomina l) cost. The differences surrounded by deuce argon the profit for the bank.Banking sphere is string outing its hand in contrasting fiscal change surfacets every daytime. At the same time the banking ferment is bonny faster, easier and the banking bena is becoming wider. As the fill for better table dish up out products day by day, they argon coming with different modernistic ideas & products. In order to survive in the competitive field of the banking sector, al unitedly banking organizations are looking for better service opportunities to provide their fellow lymph glands. As a result, it has gravel essential for every person to constitute some idea on the bank and banking procedure.Internship curriculum is essential for every disciple, especially for the schoolchilds of Business Administration, which helps them to know the real smell situation. For this reason a student wads the internship program at the last stage of the BBA Program, to lay out a career wit h some unimaginative experience.The Banking Companies Ordinance was promulgated on the heptadth June 1962. This has been adopted in Bangladesh and is applicable to the banking companies only. secret code of this ordinance shall apply to a co-operative Securities deed of conveyance (1912).Shahjalal Islami Bank Limited has a mental imagery and mission to improve the fiscal sector of Bangladesh i.e. frugalal condition of Bangladesh by providing in force(p) and innovative banking and monetary product in pecuniary merchandise. However, in every economy of the existence financial sector is super regulated sector. Therefore, financial products of every bank are almost same as same law & regulations regulate them. Commercial Banks, as the very name indicates, right primarily as deposit takers and l demiseers to portion out and commerce. But through a historical process, these Banks are now also booked in long fair and brusk term industrial lending, outlandish finance including instruction financing. Commercial Banks are of trinity types Nationalized, Local orphic and Foreign Commercial Banks.1.2 Background of the hearThe BBA program (Stamford University Bangladesh) is knowing to focus on theoretical and paid development of people open to take up business as a profession as hygienic as service as a career. This internship provides the students to bind up their theoretical knowledge into applicative fields. This report is prepared for the internship program consisting of a major in depth accept of the overall activities of Shahjalal Islami Bank in banana tree kickoff. This program enables a student to develop his analytical skill and pedant aptitude.1.3 Rational of the psychoanalyseIn todays modern and globularization conception, business sector is competitive. Theoretical knowledge is non enough for a business student because there is a gap mingled with theoretical knowledge and practical field. It is more(prenominal) compe titive in the financial institution like bank. Now a days local banks are playacting a key role for sparing increase and development of the country. In that encase Shahjalal Islami Bank is playing a open role for structural development of the country. This memorize of importly covered the areas of performance of Shahjalal Islami bank, its go, types of deposits, remittance, loans & advance, convalescence constitution and its growth.1.4 Objective of the believe1.4.1 ecumenical impersonalsThe command objectives of the study are To meet the requirement for the achievement of (BBA) program. The general objective of this report is to fulfill the requirement for the completion of (BBA) program through internship report. To acquire practical experience in different banking run of Shahjalal Islami bank. Understand the Islamic Sharia establish General Banking, Foreign Exchange and Investment Management of Shahjalal Islami Bank.1.4.2 Specific ObjectivesThe Specific objective s of the study are To make a noseband between the theories and practical procedures of banking day-to-day executions. To ruck knowledge about the transaction of different department of the branch. To familiar with banking environment, clients, working hours, hold dears, conditions and some rawfound(prenominal) things related to bank To understand boon an overview of Shahjalal Islami bank1.5 Scope of the studyAn al-Qaida of the organization has been detailed, accompanied by a global perspective and look into the future. The range of mountains of this report is limited to the overall interpretation of the company, its authority, and its position in the market and its market st esteemgy. The scope of the study is limited to organizational setup, functions, and performances for customer satisfaction.The study would focus on the pastime areas General Banking of Shahjalal Islami bank Ltd. absolution and clearing section of SJIBL. Credit operation of Shahjalal Islami bank Ltd. Foreign Trade of Shahjalal Islami bank Ltd.Each of the above areas would be unfavorablely analyzed in order to put the service quality of the bank.1.6 Methodology of the studyDifferent selective education and information are required to meet the goal of this report. Those data and information were accumulate from various sources, much(prenominal) as, primary and secondary which is showed below info AnalysisFor the analysis purpose I guide basically undergone some financial analysis and also judged some soft factors liable for the Shahjalal islami bank position in banking sector. To continue the study, I hire collected the useful data by devil methods 1) Conceptual approach.2) Empirical approach.These two data analysis techniques provided independently derived information that could be crosschecked, thus enhancing validity.Sources of collecting dataThe information incorpo localized in this report has been self-possessed from primary and secondary sources. Apart f rom this, a review of related circular and component part circular as well as face-to-face interview of the executives, officials and clients were carried out.1.7 Limitation of the studyThere is a certain confines to cover this study. It was non possible payable to shortage of time to cover from each one and every activity performed by the bank. So the study has covered only the General banking workivities of Shahjalal Islami bank Limited. Like any some new(prenominal) articles and theories, this study is non free from limitations. I cave in tried my level better(p) to overcome these limitations through extensive study, unexpressed and sincere devotion to the assigned duty. The major limitations are I complete my internship in a small town branch, Banani branch. So I dont obtain the proper information which I need. The bank personnel and officials were very busy with their occupational activities. Hence it was little bit concentrated for them to help within their hig h schedule. applicable data and document collection were rocky due to the organization confidentiality.Chapter Twoboilersuit Banking System2.1 Banking EnvironmentDuring 2008, Bangladesh witnessed higher pompousness that affected life of common people, wear down unrest in garments sector- the highest contri unlessor in export sector affected stinting activities and business operations.Higher import cost of commodity prices, price hike in international oil market as well as money and assent growth resulted in higher inflation. As a result, the economy of the country showed every sign of recession. Despite this numerous adversities, unlikable the balance sheet of the Bank with an tremendous per-tax profit of TK. 1216 million with excellent growth rate of 54.44% while the whole financial sector faced a slowdown. This quotation worthy achievement has been possible due to our professional smoothness and confidence.2.2 Global bankingIn the mid-seventies, a number of small crash es level(p) to the policies put in crop following the depression, resulted in deregulation and privatization of brass-owned enterprises in the 1980s, indicating that governments of industrial countries around the world found hole-and-corner(a)-sector solutions to problems of economic growth and development preferable to state-operated, semi-socialist programs. This spurred a trend that was already prevalent in the business sector, large companies becoming global and dealing with customers, providers, manufacturing, and information centers all over the world. Global banking and capital market serve proliferated during the 1980s and 1990s as a result of a great increase in demand from companies, governments, and financial institutions, but also because financial market conditions were blithe and, on the whole, bullish. Interest rates in the United States declined from about 15% for bi socio-economic classly U.S. Treasury nones to about 5% during the 20-year period, and financia l assets grew then at a rate approximately twice the rate of the world economy.such(prenominal) growth rate would have been lower, in the last twenty years, were it non for the profound effects of the internationalization of financial markets especially U.S. Foreign enthronizations, particularly from Japan, who not only provided the funds to corporations in the U.S., but also helped finance the federal government thus, transforming the U.S. stock market by faraway into the largest in the world. Nevertheless, in young years, the command of U.S. financial markets has been disappearing and there has been an change magnitude interest in distant stocks. The exceptional growth of foreign financial markets results from two large increases in the pool of savings in foreign countries, such as Japan, and, especially, the deregulation of foreign financial markets, which has enabled them to expand their activities. thus, American corporations and banks have started seeking investment o pportunities abroad, prompting the development in the U.S. of shared funds specializing in trading in foreign stock markets. Such increase internationalization and opportunity in financial services has unblemishedly changed the competitive landscape, as now many banks have demonstrate a preference for the universal banking fashion simulation prevalent in Europe. Universal banks are free to engage in all forms of financial services, make investments in client companies, and function as much as possible as a one-stop supplier of both retail and whole barter financial services. Many such possible alignments could be accomplished only by large acquisitions, and there were many of them. By the end of 2000, a year in which a infix level of financial services transactions with a market value of $10.5 trillion occurred, the top ten banks commanded a market share of more than 80% and the top five, 55%.Of the top ten banks ranked by market share, seven were large universal-type banks ( three American and four European), and the remain three were large U.S. investment banks who between them accounted for a 33% market share. This growth and opportunity also led to an unexpected outcome entrance into the market of other financial intermediaries nonbanks. Large corporate players were commence to find their way into the financial service community, offering competition to established banks. The main services offered include insurances, pension, mutual, money market and hedge funds, loans and credits and securities. Indeed, by the end of 2001 the market capitalization of the worlds 15 largest financial services providers included four nonbanks.In recent years, the process of financial innovation has advanced staggeringly increasing the importance and profitability of nonbank finance. Such profitability priory restricted to the nonbanking industry, has prompted the Office of the comptroller of the Currency (OCC) to encourage banks to explore other financial instrument s, diversifying banks business as well as improving banking economic wellness. Hence, as the distinct financial instruments are existence explored and adopted by the banking and nonbanking industries, the distinction between different financial institutions is gradually vanishing.2.3 boilersuit Banking SectorFinancial sector reforms to change the regulatory and supervisory framework for banks do headway in 2006 although at a slower than expected pace. Overall health of the banking frame showed improvement since 2002 as the piggish Non-performing Loans (NPL) declined from 28 per centum to 14 percent while net NPL (less Provision) reduced to 8 percent from 21 percent. This led substantial improvement in the profitability ratios. Although the Private Commercial Banks (PCB) NPL ratio registered a record low of 6 percent, the four Nationalized Commercial Banks (NCB) position are still unaccented and showed very high NPL at 25 percent. The NCBs have large capital shortfalls with a risk-weighted capital asset ratio of honorable 0.5 percent (June 2006) as against the required 9 percent. For the PCBs risk-weighted capital asset ratio stood at 10 percent.Bangladesh Bank issued a good number of prudent guidelines during the year 2006 and the runner puff of 2007 which among others relate to (i) Rationalization of prudential norms for loan classification and provisioning, (ii) Policy for rescheduling of loans,(iii) scheming and enforcing an integrated credit risk grading manual,(iv) Credit rating of the banks, and(v) Revisions to the paper of Tier- 2capital.Besides, recent decision of the Government to corporatize the rest three NCBs along with the initiative to sale the Rupali Bank are bound to present in changes in the banking sector engagement aspect. Bangladesh Bank has also taken up the task of implementing the Basel II capital accord. Further, the recent enactment of the Micro-credit Regulatory Authority Act (MRAA) for the regulation of the Micro Fin ance Institutions (MFI) has been a major development in the year 2006. Since 1998 CAMEL rating of banks gradually improved and in 2006 Bangladesh Bank updated this rating model by incorporating the market risk and the new model is known as CAMELS.2.4 Banking System of BangladeshThe banking trunk at independence consisted of two branch offices of the former State Bank of Pakistan and cardinal large commercial banks, two of which were controlled by Bangladeshi interests and three by foreigners other than West Pakistanis. There were fourteen smaller commercial banks. Virtually all banking services were concentrated in urban areas. The saucily independent government immediately designated the capital of Bangladesh branch of the State Bank of Pakistan as the central bank and named it the Bangladesh Bank. The bank was responsible for regulating currency, controlling credit and monetary policy, and administering exchange control and the official foreign exchange reserves. The Bangladesh government initially nationalized the entire domestic banking remains and proceeded to reorganize and rename the various banks. Foreign-owned banks were permitted to continue doing business in Bangladesh. The insurance business was also nationalized and became a source of potential investment funds. accommodating credit systems and postal savings offices handled service to small individual and rural accounts.The new banking system succeeded in establishing reasonably high-octane procedures for managing credit and foreign exchange. The primary function of the credit system throughout the 1970s was to finance trade and the public sector, which together absorbed 75 percent of match advances. The transformation of finance priorities has brought with it problems in administration. No sound project-appraisal system was in place to identify viable borrowers and projects. Lending institutions did not have adequate autonomy to guide borrowers and projects and were often instructed by t he political authorities.In addition, the incentive system for the banks stressed disbursements kinda than recoveries, and the accounting and debt collection systems were inadequate to deal with the problems of loan recovery. It became more common for borrowers to neglectfulness on loans than to repay them the lending system was simply disbursing grant assistance to private individuals who qualified for loans more for political than for economic reasons. The rate of recovery on agricultural loans was only 27 percent in FY 1986, and the rate on industrial loans was even worse. As a result of this misfortunate showing, major donors applied pressure to arrive the government and banks to take firmer action to strengthen.2.5 stance of Islamic Banking SystemBanking plays a arctic role in the development processes of a country. It helps accelerate the pace of development by securing uninterrupted supply of financial resources to people engaged in numerous economic activities. The trem endous development that the present world experienced in the last a couple of(prenominal) decades was contributed by several(prenominal) factors among which growing institutional supply of loanable funds must have played the pivotal role. The role of banking is like to what an artery system does in tender body. Banks both commercial and another development financial institution provide short, medium and long -term credits to businessperson and entrepreneurs who normally take the lead in ventures of economic development.Institutional supply of credits has been make possible by a system of financial intermediation organized in a way where stodgy banks collect small saving from the public by offering them a fixed rate of interest and advancing the loanable funds out of the deposited money to enterprising clients charging relatively higher rate of interest.The margin between these two rates is banks income. Bank provides many other services to the people against service charges as w ell. Despite the corking contribution of ceremonious banking system (interest-based), several ancient and modern economists are critical about its efficiency level. Some economists fancy role of interest in the conventional banking mechanism as a major destabilizing factor that contributes to cyclical fluctuations in the economy. Specifically, the ineffectuality of interest rate as a stabilization tool during the period of with child(p) depression is a case to note. Thus most of the economists called for urgent reform of the dry land Economies Order.In response though not exactly to that exigency but for kind of a few other reason, a new system of banking known as Profit-Loss-Sharing has emerged in as many as 45 countries of the world. Another study provides a list of 248 Islamic financial institutions that are now in operation in different parts of the world. The second one-half of the twentieth century witnessed a understandably separate line of thinking on banking. The th ought later on got institutionalized at the end of third quarter and subsequently emerged as a new system of banking called Islamic Banking. At this stage, it is beta to note the factors responsible for the emergence of profit-loss-sharing (PLS) system of banking. There are religious as well as economic reasons that have contributed to the emergence of PLS-banking as an alternative to its conventional counterpart. It is the prohibition of riba in the Holy account book that, according to the proponents of the PLS-system, was the source of inspiration for establishing Banks in line with Islamic shariah.