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Feasible Study Of Profitability & Liquidity Of Sonali Bank (2006) (Gazipur Branch)

Overview of the Bank:

Sonali Bank, the largest & leading commercial bank of the country, came into being in 1972 immediately after the emergence of Bangladesh as an independent state. A fully state-owned enterprise, the bank has been discharging its nation-building responsibilities by undertaking government entrusted different socio-economic schemes as well as money market activities of its own volition, covering all spheres of the economy. Sonali Bank singularly enjoys the prestige of being the agent of the Central Bank of Bangladesh in such places where the guardian of the money market has chosen not to act by itself.

Sonali Bank is governed by a Board of Directors consisting of 7(seven) members headed by a Chairman, who is a renowned economist and a former Vice Chancellor of a reputed University. The other members are distinguished representatives from both private and public sectors.The Bank is headed by the Managing Director (Chief Executive), who is a well-known Banker and a reputed professional. The head office of the bank along with its corporate structure is located at Motijheel, Dhaka, the main commercial center of the capital.

Some notable features of the Bank are as follows:

Rank:

Country Rank : 1 (One)Asian Rank : 282 (Asia week, September 14, 2001)World Rank : 925 (The Banker's Almanac, volume-3, July 1999 )

Capital Structure:

Authorized capital : US$ 184.30 millionPaid up capital : US$ 60.30 millionReserve capital : US$ 40.18 million

Branches and Subsidiaries:

Total branches : 1186Branches in Urban areas : 488Branches in Rural areas : 696Overseas branches : 2Subsidiary branches/booths in UK & USA : 15Representative Office in K.S.A : 3

Correspondents/agents : 2000

Employees : 24215 (Officer-12603 and staff- 11612)

Fax :88-02-9561410

E-mail Address: sbhoitd@bttb.net sbhoid@bdmail.net sbhorcd@bttb.net.bd sbhoicd@bttb.net

SWIFT Code: "BSONBDDH"

Division of Sonali Bank Limited:

01.00: RURAL CREDIT DIVISION (RCD)

02.00: MICRO CREDIT DIVISION (MCD)

03.00: INTERNATIONAL TRADE FINANCE DIVISION (ITFD)

04.00: FOREIGN REMITTANCE MANAGEMENT DIVISION (FRMD)

05.00: GENERAL ADVANCES DIVISION (GAD)

06.00: INDUSTRIAL PROJECT FINANCING DIVISION (IPFD)

07.00: AGRO BASED PROJECT FINANCING DIVISION (APFD)

08.00: LOAN RECOVERY & CLASSIFICATION DIVISION (LRCD)

09.00: PROJECT MONITORING & REVIEW DIVISION (PMRD)

10.00: LEGAL MATTERS DIVISION (LMD)

11.00: TREASURY MANAGEMENT DIVISION (TMD)

12.00: GOVT. ACCOUNTS & SERVICES DIVISION (GASD)

13.00: CENTRAL ACCOUNTS DIVISION (CAD)

14.00: INSPECTION & AUDIT DIVISION-1 (I&AD-1)

15.00: INSPECTION & AUDIT DIVISION-2 (I&AD-2)

16.00: VIGILANCE & CONTROL DIVISION (VCD)

17.00: MARKETING & DEVELOPMENT DIVISION (MDD)

18.00: INFORMATION TECHNOLOGY DIVISION (ITD)

19.00: RECONCILIATION DIVISION (RD)

20.00: MIS & STATISTICS DIVISION (MSD)

21.00: MODERNIZATION & RESTRUCTURING DIVISION (MRD)

22.00: PERSONNEL MANAGEMENT DIVISION (PMD)

23.00: HUMAN RESOURCE DEVELOPMENT DIVISION (HRDD)

24.00: SONALI BANK STAFF COLLEGE (SBSC)

25.00: DISCIPLINARY & APPEAL DIVISION (DAD)

26.00: EMPLOYEES WELFARE & TRANSPORT DIVISION (EWTD)

27.00: ESTABLISHMENT & ENGINEERING DIVISION (EED)

28.00: COMMON SERVICES DIVISION (CSD)

29.00: BOARD DIVISION (BD)

30.00: MANAGING DIRECTOR'S SECRETARIAT (MDS)

Branches:

Branches in Bangladesh:

GazipurGazipur (Bengali: গাজীপুর ) is a town located within the Gazipur Sadar sub-district of Gazipur District in the Dhaka Division of Bangladesh.

Gazipur consists of 9 wards and 31 mahallas with an area of 49.32 sq km. The town has a population of 123,531; male 52.52%, female 47.48%; and a population density of 2505 per sq km [1].Contents

Major sites and establishments:

Bangladesh Rice Research Institute (BBRI)Bangladesh Agricultural Research Institute (BARI)Central Extension Resources Development Institute (CERDI)Seed Certification Agency (SCA)Bangladesh Ordnance Factory (BOF)BRAC Dairy FarmBangladesh Institute of Technology (BIT)Gazipur Judge Court.

Personal Banking:

Sonali Bank extends all the major personal banking facilities and services to its customers with its skilled manpower and largest network of around 1186 branches covering all the urban and remote rural areas of Bangladesh.

Deposit Schemes:

Name of Scheme Interest Rates ( Floating )

Current Deposit : Nil

Savings Deposit : 4.00%

Urban Area (City Corporation, Others Municipality, Upazila Sadar Branches ) 5.00% Rural Area 6.00% Savings Deposit from Foreign Remittance 6.00%

Short Term Deposit: 3.50%

Fixed Deposit :

3 Months or above but less than 6 months 7.00% 6 Months or above but less than 1 year 7.50% 1year or above but less than 2 years 7.75% 1years or above but less than 3 years 8.00%

DPS: 15.00%

SDPS: 5 years 8.00% 10years 10.00%

Personal Services:

Sonali Bank provides Local & Foreign Remittance in quickest possible time. Foreign remittance is available in both T.C. & Taka draft.

Transfer of fund from one branch to another by

Demand Draf Mail Transfer

Telegraphic Transfer Transfer of fund on Standing Instruction Arrangement Collection of cheques through Clearing House/beyond Clearing House. Issuance of Payment Order / Call Deposit. Locker facilities for safe keeping of valuables Corporate Client Services with computerized system at selective branches.

International Banking:

Sonali Bank's pioneer and extensive role in international banking has enabled it to broaden and deepen its base of qualified professionals for extending expert service to the valued clients.

Product & Services:

Export Credit (Pre-shipment & Post shipment)Facilitating Supplier's CreditLCs (Letter of Credit) Guarantees in Foreign Currency

Bid Bond Performance Guarantee Advance Payment Guarantee.

Bill Purchasing/Discounting Remittance, collection, purchases & sales of Foreign Currency & Traveller's Cheques.NRAT (Non-Resident Account in Taka)NFCD A/c (Non-Resident Foreign Currency Deposit) RFCD A/c (Resident Foreign Currency Deposit)Convertible and Non-convertible Taka AccountForward contracts

Import Finance:

Sonali Bank supports its customers by providing facilities throughout the import process to ensure smooth running of their business.

The facilities are:-

Import Letter of Credit Post Import Financing (LIM,LTR etc)

Import collection services & Shipping Guarantees

Export Finance:

Sonali Bank offers extra cover to its customers for whole export process to speed up receipt of proceeds.

The facilities are:-

Export Letters of Credit advising Pre-shipment Export Financing Export documents negotiation Letter of Credit confirmation

Guarantee In Foreign Currency: Sonali bank issues guarantee (Bid Bond/Performance Bond/Advance Payment Guarantee) at the request of Bangladeshi exporter through our foreign Correspondent Banks.

Guarantees (Bid Bond/Performance Bond/Advance Payment Guarantee) against Counter Guarantee of foreign correspondent banks in favour of Bangladeshi beneficiaries are also issued. The Government has declared a number of facilities in the Export-Import Policy which, in brief, are as follows:-

Financial incentives General incentives Infrastructure facilities, specially in Export Processing Zone Concessional rate of cargo fair Special facilities to sub-contracting export Higher annual ceiling for sending specimen of exportable goods Facilities for import of specimen for product development Multiple entry visa for foreign importers and investors Facilities for attending to market development and international fair Awarding national trophy and nominating CIP Deemed export facilities Allowing export/import without LC in special cases Liberal terms for import of industrial raw materials of export oriented industries and Incentive for using local raw materials

Trade Financing:

Credit Packages:

Sonali Bank extends multiple credit facilities to boost up trade, commerce and industry. The credit packages and interest rates are as under:

Credit Packages : Interest Rates

(Floating)

Credit to Trade and Commerce 12%Working capital to Industries. 11%Credit for Power Driven Vechicle/Water Transport. 12%Overdraft against:

Fixed deposits 10% DPS/SDPS Accounts 10% National Savings Certificates 10% ICB Certificates 12% Life Insurance Policy 12% Wage Earners' Development Bonds 10% Shares and Debentures of Public Limited Cos. 12% Work Order of Govt./Semi-Govt./Corporations 12%

Housing Loans 12%Small Loans 10% -- 10.50%Packing Cash Credit. 7% --8.50 Consumers credit 12%Working Capital to Diagnostic Centers 11%Loans to Public Sector Enterprises. 12%Cash credit facilities for Small Business enterprises 12%Agricultural loan under various program/project 9%

Industrial Banking:

Credit Schemes: Long term loan for setting up new industrial units and BMRE of existing units including working capital finance are extended by Sonali Bank to cottage industries, small-medium-large scale industries and also to self-employed persons with a view to creating employment opportunities, deployment of resources, increasing GDP and over-all industrial development of the country. Currently the following credit schemes are on offer by the bank:

Some of the main Credit Schemes:

Industrial Financing for Thrust SectorsSonali Bank Industrial Credit SchemeSpecial Investment Scheme for Cottage and Small Industries Financing Large Scale Industries through Banks' Consortium.Financing Software Development and Data Processing.

Besides the traditional and oft-trodden sectors, Sonali Bank has also come up with very low rate of interest to finance the following thrust sectors of the economy as identified by the Government:

Software development and data processing.

Agro-based industries (excepting cold storage for preservation of potatoes).Manufacture of artificial flowers.Frozen foods.Gift items (preferably export oriented).100% export oriented finished leather goods.100% export oriented jute goods.Jewelry and Diamond cutting and polishing.Oil and Gas.Sericulture and silk industries.Stuffed Toys (preferably export oriented).100% export oriented textile industry (excepting garments manufacturing industries).

Other Viable Industrial Sectors:

Composite textile (woven & knit fabrics)Textile / Acrylic SpinningSweater Industry Garments Accessories & Washing PlantDenim Fabrics (export oriented)Tourism / Hotel and Resort facilitiesHospital & ClinicsOther Export linkage industries.Power Generating Plant.LPG, CNG Filling & Conversion plant.Pharmaceutical Ind.Plastic Ind.Tannery/Rubber Foot wear.Other highly rewarding appropriate technology based projects.

Nature of Loan Interest rates (Floating)

1. Term loan/Project loan 9% --11%2. Term loan/project loan (Thrust Sector) 9%3. Working capital 11%

Rural Banking:

Rural lending continues to be one of the core lending programs of Sonali Bank. Sonali Bank stepped into rural lending in 1973. Any comparative study would clearly depict Sonali Bank's supremacy in the Rural Finance Market over other private or public sector commercial banks in Bangladesh. All the on-going rural and micro finance outlets of Sonali Bank aim at increasing agricultural output, promote agro-based Small and Micro Enterprises (SMEs), facilitate agro-based support services, create and sustain employment opportunities through linking the rural and urban poor to the various Income Generating Activitis (IGAs) and reduce poverty. Sonali Bank's Rural / Microcredit has been channeled through a wide network of 1073 rural branches.

Broadly, Sonali Bank's rural and mircocredits are of following categories:

Program Credit:

These outfits aim at addressing the credit need of the mainstream agriculture ( viz. cereal crops, tubers, pulses, oilseeds, etc.) and agro-sub-sectors (viz. dairy, poultry, fisheries, hatchery, etc.) as well as agro-offshoots ranging from medium term as in small and medium agro-enterprises to long term as in agro-based industries.

The programs include:

Special Agricultural Credit Program (credit to subsistence and marginal farmers as well as share-croppers for raising seasonal crops )Financing the poor and subsistence farmers grouped under formal cooperative societies.Finance to agro-based Small and Micro Enterprises (SMEs) under a scheme named Special Investment Scheme.Finance to Agrobased Industries.Finance to various farm and off-farm micro enterprises.Credit to agro-support sectors (viz. various irrigation equipments, agricultural implements, tractors, powertillers etc).

Supervised Credit: These programs predominantly aim at reducing the level of poverty and generate self-employment opportunities with the core objective of improving the quality of life.

Linkage Credit:

Targeted hardcore rural and urban poor, socially as well as technically mobilized and prepared by Partner Organizations (NGOs and various public bodies).

In all the cases, Sonali Bank's microcredits aim at socio-economic development and empowerment of the poor with special focus on disadvantaged/destitute women. Sonali Bank has, interalia, three microcredit products that exclusively target the disadvantaged rural and urban women, namely :

Integrated Rural Women Development Programme (IRWDP).Credit for Urban Women Micro Enterprise Development Programme (CUMED) NGO linkage programme for assisting the women in city slums.

Linkage with Microfinance - NGOs:

Bangladesh has been the world's capital of Microfinance with more than 1,000 Micro Finance Institutions (MFls) concentrating to this sector. Sonali Bank with a mission of building a sustainable business relationship with the MFls has marketed this new product in 1997 and leveraged so far a total sum of Tk. 500 Million (=US$ 10 million approximately) to

a number of MFIs. Sonali Bank's NGO-linkage program has been regarded as the single largest linkage outfit in the world.

Incentives:

Rural/Microcredit clients are usually given incentives for on-time repayments by offering rebate on interest payable.

Nature of Loan Interest Rates

(Floating) 1.Mainstream Agriculture

Crop Loan 8.00% Other agricultural loan 8.00% Thrust sector (viz. Dairy, Poultry, Fisheries etc) 8.00%

2.Microcredit/Microenterprises

a) NGO-linkage 9% b) Microenterprises 12.00%

Investment Banking:

Central Accounts & Fund Management Division at Head Office maintains Investment Portfolio of the Bank. With a view to implementing Government policies & decisions and accelerating the growth of the Capital Market of the country, surplus funds of Sonali Bank are utilized in the following areas:

a) Short Term:

1. Call Loans:

An overnight investment to other Banks & Financial Institutions 2. Treasury Bills:

Investment made to the Government through Treasury Bills. b) Long Term:

1. Government / Public Bonds:

Sonali Bank purchases bonds issued by the Govt. of Bangladesh and other Public Bodies.

2. Shares / Equity Participation:

Sonali Bank participates in the IPO and extends bridge finance to the equity of Public Ltd. Companies, Institutions and Public Bodies.

3. Debentures:

Sonali Bank purchases debentures issued by the Public Bodies and Financial Institutions under Government Guarantee. Besides, Sonali Bank purchases the debentures of the Public Limited Companies.

Government Business:

Reciepts & Paments:

Bangladesh Bank, the central bank of the country has authorized Sonali bank to carry out Government transactions on its behalf in places where it has no branch. At present 572 branches of Sonali Bank carry out Government transactions. These branches receive deposits towards Government exchequer and pay against different Government bills/Payrolls. Besides, 104 more branches of Sonali Bank receive only deposits towards Government exchequer where branches of Bangladesh Bank exist.

Utility Services:

Sonali Bank offers multiple special services with its network of branches throughout the country in addition to its normal banking operations. Collection :

Gas billsElectricity billsTelephone billsWater/Sewerage billsMunicipal holding Tax Passport fees and Travel tax Customs & excise duties

Payment:

Pension of employees of Government and other Corporate BodiesArmy pensionBritish pension Students' stipend/scholarshipOld age allowances Widows, divorcees and destitute women allowancesFreedom Fighters' allowances Govt. & Non-Govt. Teachers' salary. Food procurement bill on behalf of the Govt.

Sale & Encashment/Purchase:

Savings Certificates ICB Unit Certificates Prize BondsWage Earner's Development Bonds Lottery tickets of different Semi-Govt. and Autonomous Bodies.

Total Deposit of the BankDeposit Schemes Amount (Taka) Percentage

Current Deposit 20,000,000 7%

Savings Deposit 260,000,000 87%

Fixed Deposit 20,000,000 7%

Total Deposit (Taka) 300,000,000 100%

Statutory Reserve(TK)

Cash Reserve Ratio(CCR):4.5% of total Deposit

13,500,000

Statutory Liquidity Ratio 13.5% invested as bond or T-Bill

40,500,000

Total Statutory Reserve(taka) 54,000,000

Deposit Available For Investment(Tk) 246,000,000

Cash 3,000,000

Deposit available for loans &advances   70,000,000

Loan to headoffice(Sonali Bank) 173,000,000

Income from Investment & Loans(TK)

Credit Packages Amount Interest Rate Interest Income

Cash credit facilities for Medium Business enterprises(CC)

1. Rice Mill 2,000,000 12%

2,40

0,00

0

2. Electronic Shop 1,800,000 3. Cosmetics market 1,900,000

4. Nursary 3,900,000 5.Working Capital to Diagnostic Centers

4,000,000

6.Credit for power driven vechicle 3,900,000

7.Working capital for Medium Business

2,500,000

Total CC Loan 20,000,000Rural Credit Department(RCD)1. Fishing 4000000

9%

1

,800

,000

2. poultry Firm 38000003. Dairy Firm 39000004.Agricultural loan under various program/project

8,300,000

Total RCD Loan 20,000,000 Staff Housing Loans (At Bank Rate)

Staff Housing Loans 20,000,000 6%

1

,200

,000

Total Staff Housing Loans 20,000,000

Small Loans

Cash credit facilities for Small Business enterprises

10,000,000 10%

1

,000

,000

Total Small Loans 10,000,000 Loan to Head Office

Jodevpur Branch cant invest/loan all of its deposit.The rest of money they give loan to sonali bank head office branch

174,000,000 7.5%

13,

050,

000

Total Loan to Head Office 174,000,000

Total Income from Investments & loans 19,450,000

Income from Other Sources Amount(Taka)

L/C Commision 62,500.00

BG Commision 50,000.00

Commision on PO/DD/TT/MT 200,000.

00

Foreign Exchange Charge 93,750.00

Fees & Charges 187,500.00

miscellaneous 31,250.00

Others Income 625,000.00

Income Summary Amount(Taka)

Income From Loans & Investments   19,450,000

Income from Other Sources   625,000

Total Income   20,075,000

Cost of Fund:

Interest ExpenseDeposit Schemes Amount (Taka ) Interest Rate Interest

Current Deposit 20,000,000.00 0%

-

Savings Deposit 260,000,000.00 5%

13,000,000.00

Fixed Deposit 20,000,000.00 8.5%

1,700,000.00

Total Interest Expense (Taka) 14,700,000.00

Nonfunded Expense:

Salaries & Allowances 2,580,000

Rent 204,000

Taxes & Insurance Head Office

Telephone Bill 60,000

Lighting 24,000

Poatage,Stamps,Telecommunication 12,000

Directors Fees -

Auditors Fees -

Srattionary,Printing,Advertisements 61,000

Depreciation,Leasing expense& Repair of bank  

10,000

Other Expenses 10,000

Total Nonfunded Expenses 2,961,000

Cost of Fund

Interest expense 14,700,000.00

Nonfunded Expense 2961000

Total cost of Fund 17,661,000.00

Profit

Income From Investment 20,075,000

Cost Of Fund 17,661,000

Profitability 2,414,000