A COMPARATIVE STUDY ON THE BCBL (BANGLADESH COMMERCE BANK LIMITED) & IBBL (ISLAMIC BANK BANGLADESH LIMITED)
Credit / Investment is the most important and considerable issue for the sound operation of banking business. So credit/investment management for both the conventional and Islamic banking play vital role for the generation of profit. Credit/investment management policy, procedure, operation varies in different ways between the conventional system and Islamic system. In conventional system it is based on interest whereas in Islamic system it is based on sharing profit or loss. In conventional system there is no equitable or justified distribution of equity or wealth. But in
Islamic system it is more justified and equitable where the humanity is considered and there is no exploitation. The terms of investment in Islamic system are more justified and easier than conventional credit sanctioning system. In case of Islamic investment system the investor emphasizes strongly on the business or the project whereas in conventional system the creditor is not so interested about the project failure or success. In Islamic system it develops entrepreneurial ability of the clients whereas in conventional system it does not .there is the possibility of being bankrupt in conventional system but Islamic banking system never be bankrupt. Islamic investment system is getting more preference now days that’s why conventional banks are opening Islamic banking wing.
Credit is an arrangement whereby bank acting at the request and on the instructions of a customer or on its own behalf to make a payment to or to the order of a third party or is to accept and pay bills of exchange drawn by the beneficiary. In an economy banks play the role of an intermediary that channels resources from the surplus group to the deficit group. So obviously one of the core functions of Commercial banks is to sanction Credit facility to its customers as per requirement BangladeshCommerce Bank Ltd. Bank’s Mission is to actively participate in the growth and expansion of our national economy by providing Credit to various customers in most efficient way of delivery and at a competitive price.
Risk is inherent in all aspects of a commercial operation; however for Banks and financial institutions, credit risk is an essential factor that needs to be managed. Credit risk is the possibility that a borrower or counter party may fail to meet its obligations in accordance with agreed terms. Credit risk therefore, arises from the bank’s dealings with or lending to corporate, individuals and other banks or financial institutions.
In general, a banking system aggregates a high number of low value deposits to fund enterprises with a smaller number of high value loans. This intermediation through a well functioning bank helps to achieve some economic benefits for the depositors, the borrowers and above all -- the economy. The Bank must allocate loans effectively for achieving these broad objectives of the Economy. While identifying profitable enterprises, the Bank – in fact -- identifies risks of the borrower and business in order to allow loan in the context of its risk–return profile. In other words, Banks are in the business of risk taking; as such risk management is viewed as a core function of banking.
As a financial enterprise, the prime objective of Bangladesh Commerce Bank Ltd. is to maximize stakeholders’ value (share holders, depositors, borrowers, employees and the public). The loan portfolio of the Bank is the primary source of earnings. But it may also be Bank’s greatest concern for survival and sustainable growth in an ever-changing environment.
The Followings are the objectives of the study of credit/investment management of the BCBL and the IBBL
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To know the basic difference between the conventional banking system
and the Islamic banking system regarding credit/investment management.
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To measure the soundness of credit management of THE BCBL.
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To identify the investment policy, procedure and operation of Islamic
Bank Limited.
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To get an insight about credit/investment monitoring and review for
both the banking system.
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To know the estimation process of provision kept against classified
loan of THE BCBL.
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To get acquainted with the provisioning system of Islamic Bank against
loss.
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To know the overall credit /investment positions of THE BCBL as well as
IBBL.
·
To explore the mode of Islamic investment