 CRR & SLR:

Cash Reserve Requirement (CRR) and Statutory Liquidity Requirement (SLR) have been calculated and
maintained as per Section 33 of the Bank Company Act. 1991 & amended Act 2013 and DOS circuler
no. 01 dated 19 January 2014MPD circular No. 01 dated 23 June 2014.

CRR: Cash Reserve Ratio

At present, the required CRR is 6.50% on bi-weekly average basis of the average total demand and
time liabilities (ATDTL) with a provision of minimum 6.00% on daily basis of the same ATDTL

SLR: Statutory Liquidity Ratio

At present, the required SLR is 13% daily for conventional banks and 13% daily for Islamic Shari'ah
based banks and Islamic Shari'ah based banking of conventional banks of their average total demand
and time liabilities.

 Capital Adequacy Ratio (CAR): 10% of total Risk weighted Assets.

Core Capital (Tier-i)
 Paid up Capital
 Share Premium Account
 Statutory Reserve
 Retained Earning
 Non-repayable share premium account
 Minority interest in subsidiaries
 Dividend equalization account
 Non-cumulative irredeemable preference shares

Supplementary Capital (Tier-ii)

 General Provision against unclassified Loans & advances 1%
 Provision against Off Balance Sheet exposure 1%
 Revaluation Reserve of HFT Securities (50 % of the total revaluation reserve)
 Assets Revaluation Reserve (50 % of the total revaluation reserve)

 Banks have to maintain at least 50% of required capital as Tier 1 capital.

 Core Risk
There are six core risk of Bank:
 Credit Risk
 Foreign Exchange Risk
 Asset Liability Management Risk
 Money Laundering risk
 Internal Control and Compliance Risk
 Information & Communication Technology Risk
 Capital Market Exposure Limit
DOS circular no. 2 dated 16 September 2013 issued by Bangladesh Bank, the total exposure will be
reduced to 25% within the year of 2016. Investment cell which includes all investment in shares,
corporate bond, debenture, mutual fund and total market value of other capital certificates and loan
facilities given to own subsidiary company or companies directly or indirectly involved in capital
market
 What is Cost of Fund?
 What is Cost of Deposit?
 What is spread?
 What is Corporate Governance?
 What is Green Banking?
 L/C Related
 Master L/C
 BTB L/C
Payment at sight
Payment as deferred
 Share Capital
Authorized Capital: Minimum tk 400 core.
Paid up Capital: Minimum 25% of Authorized Capital.

 Accounting for share capital:
 When shares are issued at their nominal value and they are fully paid:
Cash ---- Debit
Share capital ---- Credit
 When shares are issued at a premium to their nominal value, and the full amount is paid:
Cash ---- Debit
Share capital ---- Credit
Share Premium---- Credit

 Bonus Share:
 Bonus issue: An issue of fully paid shares to existing shareholders, free of charge, in proportion to
their existing shareholdings.

 When a company makes a bonus issue, it can use its retained earnings reserve, should it wish to do
So. However, it can also use its share premium account.

Retained Earnings/Share Premium A/c ---- Debit

Share capital -------------------------------------------Credit

 Rights issue: New shares are offered to existing shareholders in proportion to their existing
shareholding,usually at a discount to the current market price.
 Accounting for dividends:
 Payment of final ordinary dividend:

Retained earnings --- Debit

Cash ---- Credit

 Declaration of interim ordinary dividend in period:

Retained earnings -- Debit

Dividend payable---- Credit

 Corporate Tax@ 40.00% for Bank

 Corporate Tax@ 42.5% for Foreign Bank
 Corporate Tax@ 42.5% for Merchant Bank
 OFF-BALANCE SHEET ITEMS Note Taka Taka
 Contingent liabilities 30
 Acceptances and endorsements
 Letters of guarantee
 Irrevocable letters of credit
 Bills for collection
 Other contingent liabilities
 Other commitments
 Documentary credits and short term trade-related transactions - -
 Forward assets purchased and forward deposits placed - -
 Undrawn note issuance and revolving underwriting facilities - -
 Undrawn formal standby facilities, credit lines and other commitments - -
 Total off-balance sheet items including contingent liabilities


 Dhaka, 03

Loans and Advances

 Categories of Loans and Advances :

All loans and advances will be grouped into four (4) categories for the purpose of classification,
namely- (a) Continuous Loan (b) Demand Loan (c) Fixed Term Loan and (d) Short-term
Agricultural & Micro- Credit.

a) Continuous Loan: The loan accounts in which transactions may be made within certain
limit and have an expiry date for full adjustment will be treated as Continuous Loan. Examples
are: Cash Credit, Overdraft, etc.

b) Demand Loan: The loans that become repayable on demand by the bank will be treated as
Demand Loan. If any contingent or any other liabilities are turned to forced loan (i.e. without any
 prior approval as regular loan) those too will be treated as Demand Loan. Such as: Forced Loan
against Imported Merchandise, Payment against Document, Foreign Bill Purchased, and Inland Bill
Purchased, etc.

c) Fixed Term Loan: The loans, which are repayable within a specific time period under a
specific repayment schedule, will be treated as Fixed Term Loan.

d) Short-term Agricultural & Micro-Credit: Short-term Agricultural Credit will include the
short-term credits as listed under the Annual Credit Programmed issued by the Agricultural Credit
and Financial Inclusion Department (ACFID) of Bangladesh Bank.

 Basis for Loan Classification:

a) Objective Criteria:
(1) Past Due/Over Due:
(i) Any Continuous Loan if not repaid/renewed within the fixed expiry date for repayment or after the
demand by the bank will be treated as past due/overdue from the following day of the expiry date.

(ii) Any Demand Loan if not repaid within the fixed expiry date for repayment or after the demand by
the bank will be treated as past due/overdue from the following day of the
expiry date.

(iii) In case of any installment(s) or part of installment(s) of a Fixed Term Loan is not repaid within the
fixed expiry date, the amount of unpaid installment(s) will be treated as past due/overdue from the
following day of the expiry date.

Any continuous loan will be classified as:

i. ‘Sub-standard’ if it is past due/overdue for 03 (three) months or beyond but less than 06 (six)
months.

ii. ‘Doubtful’ if it is past due/overdue for 06 (six) months or beyond but less than 09v(nine) months

iii. ‘Bad/Loss’ if it is past due/overdue for 09 (nine) months or beyond.

Any Demand Loan will be classified as:

i. ‘Sub-standard’ if it remains past due/overdue for 03 (three) months or beyond but not over 06 (six)
months from the date of expiry or claim by the bank or from the
Date of creation of forced loan.

ii. ‘Doubtful’ if it remains past due/overdue for 06 (six) months or beyond but not over 09 (nine)
months from the date of expiry or claim by the bank or from the date of creation of forced loan.

iii. ‘Bad/Loss’ if it remains past due/overdue for 09 (nine) months or beyond from the date of expiry
or claim by the bank or from the date of creation of forced loan.

In case of any installment(s) or part of installment(s) of a Fixed Term Loan is not repaid within the
due date, the amount of unpaid installment(s) will be termed as ‘past due or overdue installment’.
In case of Fixed Term Loans: -
i. If the amount of past due installment is equal to or more than the amount of installment(s) due
within 03 (three) months, the entire loan will be classified as ''Sub-standard''.

ii. If the amount of past due installment is equal to or more than the amount of installment(s) due
within 06 (six) months, the entire loan will be classified as ''Doubtful".

iii. If the amount of 'past due installment is equal to or more than the amount of installment(s) due
within 09 (nine) months, the entire loan will be classified as ''Bad/Loss''.

Explanation: If any Fixed Term Loan is repayable on monthly installment basis, the amount of
installment(s) due within 06 (six) months will be equal to the sum of 06 monthly installments.
Similarly, if the loan is repayable on quarterly installment basis, the amount of installment(s) due
within 06 (six) months will be equal to the sum of 2 quarterly installments.

The Short-term Agricultural and Micro-Credit will be considered irregular if not

Repaid within the due date as stipulated in the loan agreement. If the said irregular status
Continues, the credit will be classified as 'Substandard ' after a period of 12 months, as 'Doubtful'
After a period of 36 months and as 'Bad/Loss' after a period of 60 months from the stipulated due
Date as per the loan agreement.

Maintenance of Provision:

a) General Provision: Banks will be required to maintain General Provision in the

Following way:
(1) @ 0.25% against all unclassified loans of Small and Medium Enterprise (SME).
and @ 1% against all unclassified loans (other than loans under Consumer Financing, Loans
to Brokerage House, Merchant Banks, Stock dealers etc., Special Mention Account as well as
SME Financing.)
(2) @ 5% on the unclassified amount for Consumer Financing
@ 2% on the unclassified amount for (i) Housing Finance and (ii) Loans for
Professionals to set up business under Consumer Financing Scheme.
(3) @ 2% on the unclassified amount for Loans to Brokerage House, Merchant Banks,
Stock dealers, etc.
(4) @ 5% on the outstanding amount of loans kept in the 'Special Mention Account'.
(5) @1% on the off-balance sheet exposures.

b) Specific Provision: Banks will maintain provision at the following rates in respect of
classified Continuous, Demand and Fixed Term Loans:
(1) Sub-standard : 20%
(2) Doubtful : 50%
(3) Bad/Loss : 100%

c) Provision for Short-term Agricultural and Micro-Credits:

(1)All UC :2.5%
2) All credits except 'Bad/Loss' (i.e. 'Doubtful', 'Sub-standard', irregular and regular
 credit accounts) : 5%
(2) 'Bad/Loss' : 100%

Base for Provision:

For eligible collaterals of the following types, provision will be maintained at the
stated
rates in Para 4 on the outstanding balance of the classified loans less the amount of
Interest
Suspense and the value of eligible collateral:
a. Deposit with the same bank under lien against the loan,
b. Government bond/savings certificate under lien,
c. Guarantee given by Government or Bangladesh Bank.
For all other eligible collaterals, the provision will be maintained at the stated
rates in Para 4 on the balance calculated as the greater of the following two amounts:
i. outstanding balance of the classified loan less the amount of Interest Suspense
and the value of eligible collateral; and
ii. 15% of the outstanding balance of the loan.
However, the base for provision shall be further reviewed towards closer
convergence with international best practice standards.

 Eligible Collateral :
In the definition of 'Eligible Collateral' as mentioned in the above paragraph the following
collateral will be included as eligible collateral in determining base for provision:
-100% of deposit under lien against the loan
-100% of the value of government bond/savings certificate under lien
-100% of the value of guarantee given by Government or Bangladesh Bank
-100% of the market value of gold or gold ornaments pledged with the bank.
- 50% of the market value of easily marketable commodities kept under control of the bank
- Maximum 50% of the market value of land and building mortgaged with the bank
- 50% of the average market value for last 06 months or 50% of the face value,
whichever is less, of the shares traded in stock exchange.

Security:
 Accounting of the Interest of Classified Loans:
If any loan or advance is classified as 'Sub-standard' and 'Doubtful', interest accrued on such loan
will be credited to Interest Suspense Account, instead of crediting the same to Income Account.
In case of rescheduled loans the unrealized interest, if any, will be credited to Interest Suspense
Account, instead of crediting the same to Income Account.
 If any interest is charged on any 'Bad/Loss' account for any other special reason, the same will be
preserved in the 'Interest Suspense' account. If classified loan or part of it is recovered i.e., real
deposit is effected in the loan account, first the interest charged and accrued but not charged is to be
recovered from the said deposit and the principal to be adjusted afterwards.

 CL
(i) CL-1 is the compilation/summary of 5 other forms. This form is for showing summary
of classification status for different loan categories mentioned earlier along with staff
loan.
(ii) CL-2 is for reporting loan classification of Continuous Loan
(iii) CL-3 is for reporting loan classification of Demand Loan
(iv) CL-4 is for reporting loan classification of Term Loan
(v) CL-5 is for reporting loan classification of Short-term Agricultural and Micro-Credit.

TIME LIMIT FOR RESCHEDULING:

The rescheduling shall be for a minimum reasonable period of time. Time limit for
rescheduling of different categories of loans will be as follows:

(Note: These time limits are absolute maximums only, and banks are encouraged to establish shorter
time limits in their internal policies. Each loan that is being considered for rescheduling should be
evaluated on its own merits and not automatically rescheduled for the maximum time period or
rescheduled for the maximum number of three (03) times.)

Internal Audit
 What is Audit?
Ans: The objective of an audit of financial statements is to enable the auditor to express an opinion
whether the financial statements are prepared, in all material respects, in accordance with an
applicable financial reporting framework.

 What is internal audit?

Ans: Internal audit is an appraisal or monitoring activity established within an entity as a service
which includes examining, evaluating and monitoring to management and directors on the adequacy
and effectiveness of components of the accounting and internal control systems.

 What is external audit?

Ans: An audit carried out by an external, as opposed to an internal, auditor. Remember that
the objective of an external audit of financial statements is to enable auditors to express an
opinion on whether the financial statements are prepared (in all material respects) in
accordance with the applicable financial reporting framework.

 Distinguish between internal audit and external audit.

 Reason
 Internal audit is an activity designed to add value and to improve an organization’s operations;
 External audit is an exercise to enable auditors to express an opinion on the financial statements.
  Reporting to
 Internal auditors report to the board of directors or the audit committee;
 External auditors report the shareholders on the truth and fairness of the financial statements.
 Relating to
 Internal audits work relates to the operation of the organization;
 External audit’s work relates to the financial statements.
 Relationship with the company
 Internal auditors are very often employees of the organization;
 External auditors are independent of the company.
 Appointment
 Internal auditors are appointed by the management;
 External auditors are appointed by the shareholders.

 Engagement Letter:
The auditors should send an engagement letter to all new clients soon after their appointment as
Auditors and, in any event, before the commencement of the first audit assignment. The engagement
letter must document and confirm the auditor's acceptance of the appointment, and Include a
summary of the responsibilities of those charged with governance and the auditor, the scope of the
audit and the form of any reports.

Audit strategy:
The formulation of the general strategy for the audit, which sets the scope, timing and direction of
the audit and guides the development of the audit plan.

Audit plan:
An audit plan is more detailed than the strategy and sets out the nature, timing and extent of audit
procedures (including risk assessment procedures) to be performed by engagement team members
in order to obtain sufficient appropriate audit evidence.
Materiality:
Materiality is a matter is material if its omission or misstatement would reasonably influence the
economic decisions of users taken on the basis of the financial statements

Expectation gap:
Expectations gap – meaning that there is a gap between what the assurance provider understands he
is doing and what the user of theinformation believes he is doing.

Audit risk:
The risk that the auditors give an inappropriate opinion on the financial statements.

Inherent risk:
The susceptibility of an account balance or class of transactions to misstatement that could be
material individually or when aggregated with misstatements in other balances or classes, assuming
there were no related internal controls.
Control risk:
 The risk that a material misstatement would not be prevented, detected or corrected by the
accounting and internal control systems.

Detection risk:
The risk that the auditors' procedures will not detect a misstatement that exists in an account
balance or class of transactions that could be material, either individually or when aggregated with
misstatements in other balances or classes.

Internal control:
Internal control is the process designed to mitigate risks to the business and ensure that the business
operates efficiently and effectively.

 What are the objectives of internal controls?

The objectives of internal controls are:

 Minimizing the company’s business risks;

 Ensuring the continuing effective functioning of the company; and
 Ensuring compliance with relevant laws and regulations.

 What are the components of internal controls?

Internal control comprises five components:
 Control environment;
 Risk management process;
 Information system;
 Control environment; and
 Monitoring of controls.

 Objective of Financial Statements:

The objective of financial statements is to provide information about the financial position,
performance and changes in financial position of an entity that is useful to a wide range of users in
making economic decisions.'

 Elements of Financial Statements:

 Assets
Liabilities
 Equity
 Income and expenses (including gains and losses)
Other changes in equity
 Cash flows

 Components of Financial Statements:

 Balance sheet
 Income statement
 Accounting policies note
 A statement showing changes in equity
 Cash flow statement
 Explanatory notes
 What is annual general meeting (AGM)?
Ans: AGM the statutory meeting of the directors and shareholders of a company, held once every
financial year, at which the annual report is presented.

 Schedule X - Annual summary of share capital and list of shareholders, Directors:

 Form 23B - Notice by Auditor
 Form XII - Particulars of the Directors, Manager and Managing Agents and of any change therein
 Form IX - Consent of Director
 Form XV - Return of allotment

 What is an audit committee? What are the activities of this committee?

Ans: Audit committee: An audit committee is a subsection of the board of directors which has a
particular interest in the finance and accounting activities of the company.
The activities of an audit committee include:
 to review the integrity of the financial statements and announcements of performance;
 to review the internal financial controls and risk management systems;
 to monitor and review the effectiveness of the internal audit function;
 to recommend the board about the external auditor;
 to monitor the independence of the external auditors;
 to implement policy on the provision of non- audit services by the external auditor.

 According to BSA 700, the audit report should include the following basic elements, :
 Title
 Addressee
 Introductory paragraph identifying the financial statements audited
 A statement of management's responsibility for the financial statements
 A statement of the auditor's responsibility
 Scope paragraph, including a description of the work performed by the auditor
 Opinion paragraph containing an expression of opinion on the financial statements
 Date of the report
 Auditor's address
 Auditor's signature
 List of IAS and IFRS

International Accounting Standard

IAS 1 Presentation of Financial Statements
IAS 2 Inventories
IAS 7 Cash Flow Statements
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
IAS 10 Events after the balance sheet date
IAS 11 Construction Contracts
IAS 12 Income Taxes
IAS 16 Property, Plant and Equipment
IAS 17 Leases
IAS 18 Revenue
IAS 19 Employee Benefits
IAS 20 Accounting for Government Grants and Disclosure of Government Assistance
IAS 21 The effects of changes in foreign exchange rates and
SIC 7: Introduction of the Euro
IAS 23 Borrowing Costs
IAS 24 Related Party Disclosures
IAS 26 Accounting And Reporting By Retirement Benefit Plans
IAS 27 Consolidated and Separate Financial Statements
IAS 28 Investments in Associates
IAS 29 Financial Reporting in hyperinflationary economies
IAS 32 Financial Instruments: Presentation

IAS 33 Earnings Per Share(EPS)

IAS 36 Impairment of Assets
IAS 37 Provisions, contingent liabilities and contingent assets
IAS 38 Intangible Assets
IAS 39 Financial Instruments: Recognition and
Measurement
IAS 40 Investment property
IAS 41 Agriculture
 International Financial Reporting Standard
IFRS 1 First Time Adoption of IFRS
IFRS 2 Share Based Payments
IFRS 3 Business Combinations
IFRS 4 Insurance Contracts
IFRS 5 Non-Current Assets Held for Resale and Discontinued Operations
IFRS 6 Exploration for and Evaluation of Mineral Resources
IFRS 7 Financial Instruments - Disclosures
IFRS 8 Operating Segments

 List of ISA

International Standard on Auditing

200-299 General Principles And Responsibilities

ISA-200 Overall objectives of the independent auditor and the conduct of an audit
ISA-210 Agreeing the terms of audit engagements
ISA-220 Quality control for an audit of financial statements
ISA-230 Audit documentation
ISA-240 The Auditors Responsibilities Relating to Fraud in an audit of financial statement
ISA-250 Consideration of law and regulations in an audit of financial statement
ISA-260 Communication with those charged with governance
ISA-265 Communicating deficiencies in internal control to those charged with governance
300-499 Risk Assessment and Response to Assessed Risks
ISA-300 Planning an audit of financial Statements
ISA-315 Identifying and assessing the risk of material misstatement through understanding
the entity and its environment
ISA-320 Materiality in planning performing an audit
ISA-330 The auditors responses to assessed risks
ISA-402 Audit considerations relating to an entity using a service organization
ISA-450 Evaluation of misstatement identified during the year
500-599 Audit Evidence
ISA-500 Audit evidence
ISA-501 Audit evidence- Specific consideration for selected items
ISA-505 External confirmation
ISA-510 Initial audit engagement- opening balance
ISA-520 Analytical procedures
ISA-530 Audit sampling
ISA-540 Auditing accounting estimates including fair value accounting estimates and
related disclosure
ISA-550 Related parties
ISA-560 Subsequent events
ISA-570 Going concern
ISA-580 Written representations

600-699 Using work of others

ISA-600 Special consideration- Audits of group financial statements (including the work of
component auditors)
ISA-610 Using the work of internal auditors
ISA-620 Using the work of an auditors expert

700-799 Audit Conclusions and reporting

ISA-700 Forming an opinion and reporting on financial statements
ISA-705 Modifications to the opinion in the independent auditors report
ISA-706 Emphasis of matter paragraph and other matter paragraphs in the independent
auditors report
ISA-710 Comparative information-corresponding figures and comparative financial
statements
ISA-720 The auditor s responsibilities relating to the other information in documents
containing audited financial statements
800-899 Specialized areas
ISA-800 Special consideration-Audit of financial statements prepared in accordance with
special purpose framework
ISA-805 Special consideration-Audit of single financial statement and specific elements ,
accounts or items of a financial statements
ISA-810 Engagements to report on summary financial statements