Term Paper on Liquidity Vs Profitability and Loan and Advance Policy of a Bank

Banks are financial Intermediaries, which take deposits from surplus sources and invest it in deficit area at a higher rate. This is the primary function of a bank. But bank cannot invest all his money, as some of its deposit should be kept as mandatory reserve of Bangladesh Bank. Also a part of the deposit is required for day-to-day transaction. For making maximum profit Bank have to maintain a proper ratio between its assets and liabilities. As a student of EMBA Banking, in Dhaka University I would like to present on Liquidity VS Profitability in a Bank. In this paper I shall discuss how a bank maintains its safe liquidity as well as earns maximum profit.

 Data Source
To perform the assignment I have considered my self as the manager of south East Bank Ltd. karwan Bazar Branch, Dhaka and Taken the required data. I have considered the branch for my assignment as this branch has all types of business transaction i.e Deposit, Advance, Export & Import. Also this branch does huge ancillary business. From the basis of real transactions of the Bank I analyzed them with hypothetically taken figures.
South East Bank Ltd.
Karwan Bazar Branch, Dhaka
Deposits :
Particulars
Amount (In Lac.)
Current Deposit
397.45
Savings Deposit
265.70
Fixed Deposit :
1)    3 Months
2)    6 Months
3)    12 Months

211
522
2363.70
Total Deposit                                       3959.85

Fund Available for Credit/Advance
1)    Total Deposit                          : 3959.85 ( In Lac.)
2)    Cash Reserve Ratio (4.5%)     : -178.194
3)     Stationary Liquidity Ratio     : -534.58
With Bangladesh Bank (13.5%)        : -165.28
4)    Cash in Hand                          : -165.28
Fund available for advance               : 3081.80

Interest Paid on Deposit :
Types of Deposit
Amount (in Lac.)
Interest Rate (%)
Total Interest (In Lac.)
Current Deposit
397.45
0
0
Savings Deposit
265.70
6
15.94
FDR (3 months)
211
9
19
FDR (6 months)
522
10
52.2
FDR (12 months)
2563.70
11
282.007
                                                                   Total Interest  : 369.147