17 June, 2011

Guide Line for Induction of Client and Appraisal of Proposal


First of all, request potential Client to open an Al-Wadia (Current Account). Let him maintain the Current Account satisfactory for a reasonable period. (This will generally mean six months). Hold preliminary discussion with the prospective Client regarding his Investment needs and business experience. Brief him on the salient features of Concerned Mode of Investment. Apprise, in particular, the usual terms and conditions under which the Bank makes such Investments. Look to the past performance of the Client. Check-up Head Office Current Investment Policy and Branch’s track record of Concerned Mode of Investment. If the Proposal is found suitable, advise the Client to submit formal Application. If not found suitable, regret politely.  After purchase of goods the Bank must bear the risk of goods until those are actually sold and delivered to the Client, i.e. after purchase of the goods by the Bank and before selling of those to the Client buyer, the Bank shall bear the consequences of any damages or defects, unless there is an agreement with the Client releasing the Bank of the defects, that means, if the goods are damaged, Bank is liable, if the goods are defective, (a defect that is not included in the release) the Bank bears the responsibility.


For processing investment (Credit) proposal, examine Shariah permissibility of the Goods. Reject the proposal outright if not permitted by Shariah. Then Check-up Credit Restriction Schedule of Bangladesh Bank and Head Office Current Investment Policy Guidelines. Visit the Business establishment of the Client. Now, tally the Particulars, Information and Figures in the Application Form with the original Documents/Papers and be sanguine about its genuineness and correctness. Obtain additional information, particulars, facts and figures if required. You need to talk to the business and important personalities of the locality to ascertain the Honesty, Integrity and Business dealings of the Client. You should obtain CIB report from Central Bank and request for Confidential Report of the Client from local Bank Branches. Do not finalize the proposal until the Confidential/CIB Report are received. Confidential Reports should also be obtained from local Financial, Credit and Leasing Institutions, if felt necessary. Obtain declaration of the Client about his liability (both Contingent & Real) with other Banks/Financial Institutions/Leasing Companies including any other Branches of Pubali Bank Ltd. Collect Financial Statement/Balance Sheet of the Client for the last three consecutive years for Investment Proposals of Tk. 50.00 lac or above or as per Head Office Instruction. This is to be furnished by all Clients irrespective of their status, i.e. Individual, Proprietorship, Partnership, Private/Public Limited Company, Trust Body etc. engaged in business. Now, Inspect Land, Buildings (s), other Assets and Properties proposed to be Mortgaged or Hypothecated. Ascertain Prima-facie genuineness and correctness of those in cross references to Documents, Title Deeds and other relevant papers. Ascertain primarily the market value and the forced sale value of the proposed collaterals. Its very important to verify the genuineness of title documents from concerned Sub-registry Office/Tahashil Office. Don’t accept any title document for mortgage without verification of genuineness. Now, forward Documents, Title Deeds and other relevant Papers to the approved Lawyer of the Bank for examination and furnishing his opinion. (Lawyer’s Opinion should be clean and without ambiguity).

Please study the following carefully and note down the actual findings in the Appraisal Form against each item;

a.    Whether the goods which the Client intends to purchase are readily saleable and have constant and effective demand in the Market.

b.    Whether the Price of the goods is subject to frequent and violent changes.

c.    Whether the goods are available in the market and the Bank will be in a position to purchase the Goods in time and at a negotiated price.

d.    Whether sale price of the goods is payable by the Client at specified future date in lump sum or in Installments as per proposal.

Mention that, Market price and Cost price should be carefully studied by the Investment Committee of the Branch and properly recorded, verified and signed.
In big Branches, the Investment Committee shall be formed where the Branch Incumbent, Incharge of Investment Department, Foreign Exchange Department and General Banking Department shall be the members. In Small Branches, Investment Committee shall consist of the Branch Incumbent, Second Officer/Investment Officer & Cash In charge. For Commercial and Industrial Investments, you have to prepare Appraisal Report on specified format.
In course of preparation of the Appraisal Report please ensure incorporation of all Information, Particulars, Figures and Statistics in Appraisal Form correctly with special attention to the following:

a.    Composition of Assets of the Client viz. Cash, Goods, Investment, Building, Landed Property, Stock-in-trade, Work-in-process, marketable securities etc.:

b.    Extent and nature of liabilities of the Client i.e. whether the volume is within the manageable capacity of the Client. Opinion in this regard and justification thereof must be clearly mentioned.

c.    The value of Liquid Assets, viz., Cash and Book Debts of the Client.

d.    Respectability and Business Reputation of the Client in the Market;

e.    Experience of the Client in the Business.

f.    Where the goods will be stored and how the same will be sold. Whether the arrangement is satisfactory and Bank’s interest will be protected properly.

Now its time to contact primarily with the Producers/Sellers/Suppliers of the Goods in the Market, study the market price and workout the purchase and sale prices of the goods as per following Guidelines, and ascertain whether the purchase of the goods by the Client from the Bank will be profitable to him and whether the Client shall be able to pay the price of Bai-Mujjal goods to the Bank within the due date.

Guideline for working out the Cost and Sale Price 
Work out the sale price of goods and other expenses to be incurred as per following Guidelines and see whether the purchase of goods shall be profitable to the Client and whether the Client shall be able to pay the price of the goods to the Bank timely:

Cost and Sale Price of the Goods:

A.    Purchase Price/Landed cost of the goods
B.    Other expenditures in connection with the Purchase, Transportation and Storage of
      the Goods incurred by the Bank before sale to the Client:

a.    Conveyance-TA/DA of Bank Official or the Agent, if any
b.    Commission paid to the Agent, if any
c.    Cost of Remittance of Fund
d.    Transportation Cost up to Bank’s Godown (if not sold just after purchase)
e.    Transit Insurance and Incidental Expenses
f.    Other Expenses except interest incurred (if any). Interest element, if any, is to
      be paid by the Client himself.
g.    Godown Rent and Godown Staff Salary (if the Goods are kept in the Bank’s
      Godown before sale to the Client).

C.    Total Cost Price (A+B) Tk........................

D.    Estimated Profit of the Bank Tk.......................(Percentage of Profit.................%)

E.    Sale Price (C+D) Tk.....................................(                                                          )

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