Report on Shahjalal Islami Bank Limited Essay

Introduction1.1 Preface everydayly by the word confide we can easily understand that the fiscal launching deals with money. But in that respect argon diametrical types of situates like Central Banks, Commercial Banks, Savings Banks, investment Banks, Industrial Banks, Co-operative Banks etc. But when we use the term Bank without every prefix, or qualification, it refers to the Commercial trusts. Commercial rims are the primary contributors to the economy of a country. So we can say Commercial coin beach is a profit-making institution that holds the deposits of individuals & business in checking & savings accounts and then uses these finances to make loans. For these volume and the governing is very much dependent on these banks as the fiscal intermediary. As banks are profit -earning concern they call for deposit at the setoff-class honours degreeest practicable cost and provide loans and advances at higher cost. The differences surrounded by two are the profit for the bank.Banking heavens is expanding its hand in dissimilar monetary events every daylight. At the same time the banking abut is worthy faster, easier and the banking arena is becoming wider. As the demand for better ope mark increases day by day, they are coming with different innovative ideas & products. In assemble to survive in the competitive field of the banking sector, alone banking government uses are aspect for better service opportunities to provide their fellow clients. As a result, it has pay back essential for every person to have about idea on the bank and banking procedure.Internship program is essential for every student, especi anyy for the students of Business Administration, which helps them to be intimate the real life situation. For this reason a student takes the internship program at the net stage of the BBA Program, to launch a career with some applicatory experience.The Banking Companies Ordinance was promulgated on the 7th June 1962. This has been adopted in Bangladesh and is relevant to the banking companies only. Nothing of this ordinance shall apply to a co-operative Securities Act (1912).Shahjalal Islami Bank control has a vision and mission to improve the financial sector of Bangladesh i.e. economicalal condition of Bangladesh by providing effective and innovative banking and financial product in financial mart. However, in every economy of the world financial sector is highly regulated sector. Therefore, financial products of every bank are nigh same as same law & regulations regulate them. Commercial Banks, as the very name indicates, function primarily as deposit takers and lenders to barter and commerce. But through a historical process, these Banks are now as thoroughly as engaged in long medium and short term industrial lending, agricultural financing including emergence financing. Commercial Banks are of ternary types Nationalized, local Private and Foreign Commercial Banks.1.2 Background of the regardThe BBA program (Stamford University Bangladesh) is in tennertional to focus on theoretical and professional development of peck give way to take up business as a profession as well as service as a career. This internship provides the students to link up their theoretical knowledge into practical fields. This report is prepared for the internship program consisting of a major(ip) in depth con of the overall activities of Shahjalal Islami Bank in banana branch. This program enables a student to develop his analytic skill and scholastic aptitude.1.3 Rational of the studyIn todays modern and globalization world, business sector is competitive. Theoretical knowledge is not enough for a business student because there is a hoo-hah between theoretical knowledge and practical field. It is more competitive in the financial institution like bank. Now a days local banks are playing a key role for economic produce and development of the country. In that case Shahjalal Islami B ank is playing a pioneer role for structural development of the country. This study mainly cover the areas of performance of Shahjalal Islami bank, its services, types of deposits, remittance, loans & advance, retrieval arrangement and its growth.1.4 Objective of the study1.4.1 General nonsubjectivesThe General objectives of the study are To fulfill the requirement for the completion of (BBA) program. The general objective of this report is to fulfill the requirement for the completion of (BBA) program through internship report. To memorize practical experience in different banking services of Shahjalal Islami bank. Understand the Moslem Sharia Based General Banking, Foreign Exchange and Investment guidance of Shahjalal Islami Bank.1.4.2 Specific ObjectivesThe Specific objectives of the study are To make a bridge over between the theories and practical procedures of banking day-to-day operations. To gather knowledge about the doing of different department of the branch. T o familiar with banking environment, clients, working hours, values, conditions and different things related to bank To understand present an overview of Shahjalal Islami bank1.5 Scope of the studyAn infrastructure of the organization has been detailed, accompanied by a global perspective and look into the future. The range of a function of this report is limited to the overall description of the company, its services, and its position in the merchandise and its marketing strategy. The scope of the study is limited to organizational setup, functions, and performances for customer satisf consummation.The study would focus on the following areas General Banking of Shahjalal Islami bank Ltd. Remittance and elucidation section of SJIBL. faith operation of Shahjalal Islami bank Ltd. Foreign Trade of Shahjalal Islami bank Ltd.Each of the above areas would be critically analyzed in come in to identify the service quality of the bank.1.6 Methodology of the studyDifferent entropy and reading are required to meet the goal of this report. Those info and information were collected from various rises, such as, primary and alternate which is showed below entropy AnalysisFor the analysis purpose I have basically undergone some financial analysis and also judged some qualitative factors responsible for the Shahjalal islami bank position in banking sector. To go by the study, I have collected the expedient data by two 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 incorporated in this report has been gathered from primary and secondary sources. Apart from this, a review of related notice and office 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 boundary to cover this study. It was not po ssible due(p) to shortage of time to cover each and every activity performed by the bank. So the study has covered only the General banking Activities of Shahjalal Islami bank Limited. Like any other articles and theories, this study is not free from limitations. I have tried my level best to overcome these limitations through encompassing study, hard 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 get the proper information which I need. The bank personnel and officials were very busy with their occupational activities. Hence it was little firearm difficult for them to help within their high schedule. Relevant data and inventory collection were difficult due to the organization confidentiality.Chapter TwoOverall Banking corpse2.1 Banking EnvironmentDuring 2008, Bangladesh witnessed higher inflation that impact life of common people, advertise unrest in garments sector- the highe st contributor in export sector affected economic activities and business operations.Higher import cost of commodity costs, price hike in international oil market as well as money and credit growth resulted in higher inflation. As a result, the economy of the country showed every sign of recession. Despite this legion(predicate) adversities, closed the balance sheet of the Bank with an enormous per-tax profit of TK. 1216 one million million million with excellent growth rate of 54.44% while the whole financial sector faced a slowdown. This credit worthy achievement has been possible due to our professional smoothness and confidence.2.2 Global bankingIn the 1970s, a number of littler crashes tied to the policies put in place following the depression, resulted in deregulating and privatization of government-owned enterprises in the 1980s, indicating that governments of industrial countries around the world found private-sector solutions to problems of economic growth and developme nt preferable to state-operated, semi-socialist programs. This spurred a trend that was already prevalent in the business sector, heavy(a) companies becoming global and dealing with customers, suppliers, manufacturing, and information centers all over the world. Global banking and metropolis market services proliferated during the 1980s and mid-nineties as a result of a great increase in demand from companies, governments, and financial institutions, but also because financial market conditions were floaty and, on the whole, bullish. Interest order in the United States declined from about 15% for two-year U.S. Treasury line of productss to about 5% during the 20-year point, and financial assets grew then at a rate approximately twice the rate of the world economy. much(prenominal) growth rate would have been lower, in the last twenty years, were it not for the profound effects of the internationalization of financial markets especially U.S. Foreign investments, oddly from Jap an, 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 far into the cock-a-hoopst in the world. Nevertheless, in recent years, the dominance of U.S. financial markets has been disappearing and there has been an increase interest in distant stocks. The extraordinary growth of foreign financial markets results from both 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 opportunities abroad, prompting the development in the U.S. of unwashed funds specializing in trading in foreign stock markets. such(prenominal) growing internationalization and opportunity in financial services has alone changed the competitive landscape, as now many an(prenominal) banks have demonstrated a p reference for the universal banking model 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 wholesale financial services. many another(prenominal) 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 record 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 quaternion European), and the remaining 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 vector sum entrance into the market of other financial intermediaries nonbanks. Large corporate players were reference to find their way into the financial service community, offering competition to found banks. The main services offered included insurances, pension, mutual, money market and hedge funds, loans and impute 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 enormously increasing the importance and positiveness of nonbank finance. Such profitability priory restricted to the nonbanking industry, has prompted the Office of the Comptroller of the Currency (OCC) to get along banks to explore other financial instruments, diversifying banks business as well as improving banking economic health. Hence, as the distinct financial instruments are being explored and adopted by the banking and nonbanking industries, the distinction between different financial institutions is gradually vanishing.2.3 O verall Banking SectorFinancial sector reforms to strengthen the regulatory and supervisory framework for banks made headway in 2006 although at a slow than expected pace. Overall health of the banking arrangement showed improvement since 2002 as the unwashed Non-performing Loans (NPL) declined from 28 percent to 14 percent while net NPL (less Provision) cut back to 8 percent from 21 percent. This led significant 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 vulnerable and showed very high NPL at 25 percent. The NCBs have large capital shortfalls with a risk-weighted capital asset ratio of just 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 prudential guidelines during the year 2006 and the first quarter of 2007 wh ich among others relate to (i) Rationalization of prudential norms for loan classification and provisioning, (ii) constitution for rescheduling of loans,(iii) Designing and enforcing an integrated credit risk grading manual,(iv) Credit rating of the banks, and(v) Revisions to the make-up of Tier- 2capital.Besides, recent decision of the Government to corporatize the remaining three NCBs along with the initiative to sale the Rupali Bank are bound to lead in changes in the banking sector competitiveness aspect. Bangladesh Bank has also interpreted 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 Finance 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 parvenu model is known as CAMELS.2.4 Banking Syste m of BangladeshThe banking system at freedom consisted of two branch offices of the former State Bank of Pakistan and seventeen 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 newly independent government immediately designated the Dhaka branch of the State Bank of Pakistan as the primaeval bank and renamed 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 system 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. Cooperative credit systems and postal savings offices handled service to small individual and rural accounts.The new banking system succeeded in establishing pretty efficient 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 jailed 75 percent of total 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 choose borrowers and projects and were often instructed by the political authorities.In addition, the incentive system for the banks stressed disbursements rather than recoveries, and the score and debt collection systems were inadequate to deal with the problems of loan recovery. It became more common for borrowers to evasion on loans than to repay them the lending system was simply disbursing grant supporter 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 unretentive showing, major donors applied pressure to induce the government and banks to take firmer action to strengthen.2.5 Perspective of Islamic Banking SystemBanking plays a pivotal role in the development processes of a country. It helps accelerate the pace of development by securing invariable sum of financial resources to people engaged in numerous economic activities. The tremendous development that the present world experienced in the last few decades was contributed by several factors among which growing institutional supply of loanable funds must have played the pivotal role. The role of banking is comparable to what an artery system does in human body. Banks both commerc ial and another development financial institution provide short, medium and long -term credits to bourgeois and entrepreneurs who usually take the lead in ventures of economic development.Institutional supply of credits has been made possible by a system of financial intermediation organized in a way where conventional banks collect small saving from the public by offering them a touch on rate of interest and advancing the loanable funds out of the deposited money to energetic 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 well. Despite the outstanding contribution of conventional banking system (interest-based), several ancient and modern economists are critical about its efficacy level. Some economists consider role of interest in the conventional banking implement as a major destabilizing factor that contributes to cyclical fluctuations in the ec onomy. Specifically, the ineffectualness of interest rate as a stabilization tool during the period of Great depression is a case to note. Thus most of the economists called for pressing reform of the World Economies Order.In response though not but to that exigency but for quite 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 half of the twentieth century witnessed a clear separate line of thinking on banking. The thought 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 important 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 ersatz to its conventional counterpart. It is the prohibition of riba in the Holy Quran that, according to the proponents of the PLS-system, was the source of inspiration for establishing Banks in line with Islamic shariah.