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05 March, 2022

Super NOW (Negotiable Order of Withdrawal) account

Super NOW (Negotiable Order of Withdrawal) account is one type of bank account in which interest rate is tagged with money market dealing interest rate and the rate is lower than the existing money market rate. A minimum deposit amount is required and there is no interest rate ceiling. If money market rate goes up, interest rate also goes up. If money market rate falls, interest rate also falls but never goes below a certain minimum rate of interest. 

The following information is for New Bank Ltd. (in million Tk.): -

Total Income= 1875

Interest Expense = 1210

Total Asset = 15765

Securities gain (loss) = 21

Earning Asset = 12621

Total liabilities = 15440

Taxes = 16

Shares = 145000

Non-Interest Income = 501

Non-Interest Expense = 685

Provision for Loan Loss = 381.

Calculate: ROE, ROA, NIM, EPS, NNIM, Net

Operating Margin.

 Solution: Net Income

= Interest Income + Non Interest Income + Securities Gains - Interest Expense - Non Interest

Expense – Taxes – Provision for Loan Loss

= 1875 + 501 + 21 – 1210 – 685 – 16 – 381

= 105

Total Equity

= Total Assets – Total Liabilities

= 15765 – 15440 = 325

ROE

= Net Income / Total Equity

= 105 / 325

= 32.30% ROA

= Net Income / Total Assets

= 105 / 15765

= 0.66% NIM

= (Interest Income – Interest Expenses) / Earning Assets

= (1875 - 1210) / 12621

Net Income = Interest Income + Non Interest Income + Securities Gains - Interest Expense - Non Interest Expense – Taxes – Provision for Loan Loss

= 1875 + 501 + 21 – 1210 – 685 – 16 – 381 = TK. 105 M

 Total Equity = Total Assets – Total Liabilities

= 15765 – 15440 = TK. 325 M

 

Debt= Deposit Account+ Bills Payable+ Borrowings (from Other or any Bank)

******* Contra will not count (Ignore)

EquityShare Capital + Profit and Loss + ReservFund and other Reserves+ Surplus

Debt Equity Ratio or Burden%= Debt/Equity

Net Interest IncomNIIInterest Income-Interest Expense

(Interest on Advances+ Interest on Investment)-0)

Non Interest Income = Commission, Exchange and Brokerage+ Others Revenue+ Profit on sale on Investment

Non Interest Expenses = SalaryAllowance+ MD’s Fee + Legal Fees + Sales Expenses +

Printing& Stationary + Postage & Telegram Repair & MaintenancNet Non Interest Income =Non Interest Income- Non Interest Expense (Operating Incom(Interest Income-Interest ExpensesOther Income) - Operating Expenses (All Expenditure excluding Interest Paid and Provision))

 

ROE= Return on Equity = Net Income / Total Equity = 105 / 325 = 32.30% ROA = Return on Asset= Net Income / Total Assets = 105 / 15765 = 0.66%

NIM = Net Interest Margin(Interest Income – Interest Expenses) / Total Assets

(1875 - 1210) / 15765 = 665 / 15765= 4.21%

 

EPS = Earnings Per Share = 105,000,000 / 145,000 = Tk. 724.14 per share 

Net Non Interest Margin = (Non Interest Income – Non Interest Expenses) / Total Assets

= (501 – 685) / 15765 = (184) / 15765 = - 1.16%

 

Here,

Total Operating Income = Int. Income + Non Interest Income

= 1875 + 501 = TK. 2376 M

Total Operating Expenses = Int. Expenses + Non Int. Expense + Provision for Loan Loss

= 1210 + 685 + 381 = TK. 2276 M

Net Operating Margin = (Total Op. Income  Total Op. Expenses) / Total Assets

(2376 – 2276) / 15765 = 0.63%

 = 665 / 12621

= ?%

EPS = Net Income / No of Shares = 105,000,000 / 145,000 = Tk. 724.14 per share

Net Non-interest Margin

= (Non-interest Income - Non-interest Expenses) / Earning Assets

= (501 – 685) / 12621

= (184) / 12621

= ?% Here,

Total Operating Income

= Int. Income + Non Interest Income

= 1875 + 501 = 2376

Total Operating Expenses

= Int. Expenses + Non Int. Expense + Provision for Loan Loss

= 1210 + 685 + 381

= 2276

Net Operating Margin

= (Total Op. Income – Total Op. Expenses) / Total Assets

= (2376 – 2276) / 15765

= 0.63%


Stages of money laundering

Money Laundering Prevention Act, 2002 defines money laundering as properties acquired or earned directly or indirectly through illegal means; illegal transfer, conversion and concealment of location of the properties earned through legal or illegal means or assistance in the said acts.

There are three main stages of money laundering. These are:

1. Placement: The physical disposal of the initial proceeds derived from illegal activity e.g. depositing the money earned by theft, robbery, bribery or hijacking to a bank account.

2. Layering: Separating illicit proceeds from their sources by creating complicated layers of financial transactions designed to disguise the audit trail and provide anonymity e.g. electronic

transfer of the fund to a fake firm, issuing overseas bank draft, purchasing travelers cheques, transfer of fund from one bank account to various names of different bank branches.

3. Integration: It means the provision of apparent legitimacy to property gained in an unlawful way. If the layering process is complete, integration process place the laundered proceeds back

into the economy in such a way that they re-enter the financial system appearing as normal business fund e.g. sale of flat/house/land purchased by illegal income.

Explain the concept of mobile banking.

 Mobile banking (also known as M-Banking, m-banking) is a term used for performing balance checks, account transactions, payments, credit applications and other banking transactions through a mobile device such as a mobile phone or Personal Digital Assistant (PDA).

Mobile banking and Mobile payments are often, incorrectly, used interchangeably. The two terms are differentiated by their service provider-to-consumer relationship; financial

institution-to-consumer versus commercial institution-to-consumer for mobile banking and

payments, respectively. Mobile Banking involves using mobile devices gain to access financial services. Mobile payments on the other hand may be defined as the use of mobile devices to pay for goods or services either at the point of purchase or remotely. Bill payment is not considered a form of mobile payment because it does not occur in real time.

The following services are provided by a bank to its customers through mobile banking:

A. Pull services

I. Account balance inquiry

II. Last three transactions

III. Cheque leaf status

IV. Profit/interest rate on deposit V. Foreign currency exchange rate VI. Branch location/ phone number VII. ATM booths location

I. SMS registration information

II. Help list for key words to send SMS III. Help message format to send SMS

A. Request services

I. Fund transfer

II. Mobile bill payment

III. Cheque book request

IV. Account statement print request

V. Account statement request by courier/e-mail

B. Execution services: I. Stop payment

II. Stopped cheque leaf reactivation

III. PIN change

C. Alert services

I. Debit alert

II. Clearing cheque return alert

III. Loan expiry

IV. Scheme deposit maturity alert

How does Bangladesh Bank regulate the money supply through “Bank rate policy” and “Open Market Operation”?

 Bank rate policy:

The bank rate is the rate of interest at which BB re-discounts the first class bills of exchange from commercial banks. Whenever BB wants to reduce credit, the bank rate is raised and whenever the volume of bank credit is to be expanded the bank rate is lowered. This is because by change in the bank rate. BB seeks to influence the cost of bank credit.

The efficacy of bank rate policy depends, to a greater extent, on its power to influence the market rates. There is no organized money market in our country and thereby the market rates seldom respond to bank rate changes. The absence of any kind of conventional relationship between the central bank and other components of the money market further adds to the ineffectiveness of the bank rate policy

 

Open Market Operations:

The Central Bank buys or sells ((on behalf of the Fiscal Authorities (the Treasury)) securities to the banking and non-banking public (that is in the open market). One such security is Treasury

Bills. When the Central Bank sells securities, it reduces the supply of reserves and when it buys

(back) securities-by redeeming them-it increases the supply of reserves to the Deposit Money

Banks, thus affecting the supply of money.