Major purpose of this report is to analysis the Whole Banking Practices of NCC Bank Limited. Other objectives are to know the organizational framework of the bank and find out how the general banking system works. Also discuss on the loans and advances are provided to the borrowers and analyze the growth of deposits in the bank. Finally analyze the growth of investment in the bank and compare the financial performance among several years of the Bank and with other banks.
National Credit and commerce Bank limited was incorporated in Bangladesh as banking company under the Companies Act 1994. The Bank commenced its Banking business with sixteen Branches from 17 may, 1993. The Bank is listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange limited as a public quoted company for its shares. Paid up capital of the company was Tk.5.00 core only at that time. National Credit Ltd. (NCL) performed well for near about 7 years. The core objective of the company was to play a catalyst role in the capital market of the country by way of participating in security trading, underwriting, etc.
Subsequently NCL converted into a full fledge commercial Bank on 17. 05. 1993 after obtaining license from Bangladesh Bank under the name & style “National Credit and Commerce Bank Ltd.” The authorized capital of the bank was fixed at Tk. 75.00 crore and paid up capital at Tk.39.00 crore of which 19.50 crore was subscribed by the sponsors at that time. The principal place of business is the registered office at 7-8 Motijheel commercial area, Dhaka 1000. It has 92 branches as over Bangladesh as 31december 2012. It carries out all banking activities through its branches in Bangladesh.
After working for three months in NCC Bank Limited as an internee I have found many things which are positive and many things which are negative for NCC Bank. A bank deals with customer or client, government etc. but it was very difficult for me to deal with all the side of the bank. So as per suggestion of my instructor I tried to analyze the competitive situation “On The Whole Banking Practices of NCC Bank Limited”.
Objective of the Study:
Though the main objective is to prepare myself in such a manner as though I can equip myself with the practical field as well as I will be able to know the different aspect of the banking sector and to evaluate how a bank is performing in Loans and Advance sector. In addition, the study seeks to achieve the following objectives:
a) To know the organizational framework of the bank.
b) To know the work environment and organizational behaviors of the Bank.
c) To find out how the general banking system works.
d) To see how the loans and advances are provided to the borrowers.
e) To acquire knowledge about the foreign exchange system of the bank.
f) To analyze the growth of deposits in the bank.
g) To analyze the growth of advances in the bank.
h) To analyze the growth of investment in the bank.
i) To compare the financial performance among several years of the Bank and with other banks.
Methodology of the report
The report is a combination of primary and secondary data analysis along with financial analysis. To accomplish the report both primary and secondary data were necessary. Primary data is collected though meetings, surveys and secondary data are collected through annual reports, books, articles, journals, brochures, website etc.
Methods for primary & secondary data collection:
a) Primary data:- The primary data of this report are:
- Direct interviews with the officers of the bank.
- Practical experiences gained during performing duties in different desks and departments.
b) Secondary data:- Secondary data is collected from the following sources:
- Annual reports of NCC Bank Ltd.
- Printed forms and documents supplied by NCC Bank Ltd.
- Booklets of international division of NCC Bank Ltd.
- Different publications and journals regarding banking activities and policies.
- Auditor’s reports of NCC Bank Ltd.
- Website of NCCBL (www.nccbank.com.bd)
The purpose of the bank is to become “The Bank of Choice” in the communities we serve. We accomplish this by offering to our customers the financial services they expect while providing a return to our owners. In accomplishing this mission, the bank has now been free from all the natures of a problem bank through fulfilling all the conditions set by the central bank. We proudly say: “NCC Bank Ltd. is’ profit-making and problem-free.”
Philosophically, a bank is a financial institution, which accepts depositors’ money for safe-keeping and contracts with the depositors to lend this money at interest to invidious who are in need of its use and who can give ample security that the loans will be paid. From the profits made from lending money at interest the banker agrees to pay the legitimate depositors a fixed sum of interest besides safe-guarding the deposits. Moreover the bank follows the followings as its mission:
- Maximize the profit within the shortest possible time
- Try the best level to satisfy customers
- Establish NCC Bank Ltd. as the best performing bank in the country.
Account operational area of NCC bank LTD:
The relationship between banker and customer begins with the opening of an account by the customer. Opening an account binds the banker and customer into contractual Deposit Account relationship. In fact, all kinds of fraud and forgery start by opening an account. So the bank should take extreme caution in section customers.
Different Types of Account:-
a) Current Deposit Account
b) Saving Deposit Account
c) Short term Deposit Account
d) Fixed Deposit Account
e) Monthly Saving Deposit Account.
A current deposit account may be operated in several times during a working day. There is no restriction on the number and the amount of withdraws from a current account and the banker does not allow any interest on the current account. As the banker is under an obligation to repay these deposits on demand, they called demand liabilities of a bank. To meet such liability the banker keeps sufficient cash reserves against such deposit. There are two facilities for the people who open a current account. They are:-Over draft facility
Collection of check transfer of money rendering agency, general utility service. A person can open a current a/c or any entity. The entity can be a partnership firm, limited company, proprietorship firm, association, clubs etc. For opening a current account of the above, the requirements and steps, which are followed by this branch, are like: –
Individual Account opening:
There is an individual application form for opening personal current a/c. The person, who wants to open this type of a/c, is said to fulfill the following requirement:
a) Name/ Father’s Name/ Husband’s Name
b) Present and Permanent Address
d) Mandate in Writing
e) Declaration of Nominee
f) Letter of Introduction
g) Specimen Signature
h) Two copies of passport size photograph
i) Initial deposit of Tk.1000.
Join Stock Companies, Association, Clubs etc. Account opening:
In case of opening a current a/c of join stock companies, association, clubs etc. the following requirements are said to fulfill:
- True copies of certificate of incorporation or registration (in case of companies and registered bodies)
- True copies of certificate of commencement of business (in case of limited company)
- True copies of memorandum and articles of association (in case of limited company). The rules of regulation by laws (in case of associations, clubs etc.)
- True copy of resolution of the Board of Directors of Managing Committee/ Governing Body, regarding conduct of account.
- Certificate list containing names and signature of the Board of Directors/ Officer Bearers.
Partnership / Proprietorship Company Account Opening:
To open a current a/c on the name of any partnership or Proprietorship Company, the following documents are required:
- Filled up application form stating about the name and address of the firm.
- Partnership deed.
- Trade License
- Two copies of photographs
- Endorsement of an a/c holder of the same branch (for partnership companies).
- Undertaking / declaration about the partnership is taken by the bank in a white paper (for proprietorship firm.
Private & Public Limited Company Account opening:
The documents are required by the bank to open a current a/c be:
- Copy of the certificate of incorporation or registration.
- Copy of the certificate of business.
- True copy of memorandum of association and articles of association abide by laws.
- True copy of resolution of the Board of Directors/ Managing Committee/ Governing Body regarding conduct of the account.
Certificate list containing the names and signature of the Board of Directors/Officer Bearers. In order to open an account, the customer is first of all asked to fill up the application form given from the bank. The bank requires few documents of the client due to the producers, such as proposal for opening an a/c, name and full address (both present and permanent).
Saving Account / (SB)
A saving a/c is meant for the person of the lower and middle classes who wishes to save a part of their income to meet their future needs and intend to earn an income from their saving.
- All the feature are like CD a/c except some restrictions imposed by the bank.
- The bank offers a reasonable rate of interest.
- The number of withdrawals over period of times is limited. Only two withdrawals are permitted per week. But more than that no interest will be paid on rest of the amount for that month.
- The total amount of one or more withdrawals on any date should not exceed 25% of the balance in the a/c unless 7 days advance notice is given.
The necessary requirements for opening a saving account:
- Father’s or Husband Name
- Permanent and Present Address
- Special Instruction regarding operation of the a/c
- Mandate in Writing
- Declaration of nominee
- Letter of introduction
- Specimen signature
- Two copies of passport size photograph
- Initial deposit of tk. 5000.
In this, the deposits are supplied with the pass and checkbook for depositing and withdrawal purposes of money for which the banker maintain saving bank a/c opening register.
Letter of Introduction:
This is a letter of certification, from a person, who is a valid customer of that particular branch and maintaining any kind of a/c. usually a customer from other branch is not allowed to be the introducer, but it is permitted. The process of introducing a new client can be done on the form itself. There is a space in the application where the introducer will write his/her a/c no. and sign his/her specimen signature. It always advisable on the part of the banker to allow the prospective customer to open an a/c only with a proper introduction from a responsible person, known to both the parties.
A letter of introduction always protects a banker in the following ways:-
- Protection against fraud.
- Protection against invariant overdraft.
- Protection against undiscouraged bankrupt.
- Protection against negligence under sec. 131 of NI Act.
- Protection against giving incorrect information follow the banker
Declaration of Nominee:
The person who wants to open an a/c can mention one or two nominee. The application will give a declaration in the space given on the a/c opening form, stating the name and father’s name, age address, relation and percentage of share (if more than one). The a/c holder can change the nominee any time and it will be valid, only after the of the a/c holder.
The applicant will sign on the application and he will be provided with an extra paper where he will sign three or more signatures, which he has to maintain all through the duration of the account.
At the time of the opening of a new a/c, this concerned branched always takes an interview with prospective customer so as to obviate the chances of preparation of any fraud at the letter stage.
It is always a common practice among the bankers to allow a new customer to open an A/c only in cash and NCC Bank Ltd main branch takes Tk.5000.00 as initial deposit for saving A/c and Tk.1000.00 for current a/c.
If any party wants his/her a/c to be operated by some body else, he/She will provide the banker in writing statement about the operator.
Verification of Document:
The banker should verify some of the important documents, like the Memorandum of Association, Article Association by laws Copy etc. In verification of certain other documents like, trust Deed Probate, Letter of Administration etc. may be needed. Conversant with the provision of special acts, since a banker is to deal with different classes of customers, s/he has to be thoroughly conversant with certain laws.
Pay in Slip, Check Book and Pass Book:
The customer is supplied with a pay in slip book to use for depositing cash or check of bill into a/c. The customer is also supplied with a checkbook for drawing money as and when the customer wishes, which normally contains 10 to 50 bank forms. If the customer does not like to have a checkbook, then s/he can make use of withdrawal form for withdrawing money. But there is no use of such kind of form in this branch. In addition to the above, a customer is given a passbook, which reflects the customer’s a/c in the banker’s ledger. It usually contains the rules and regulations of the bank and terms and conditions of deposits.
Fixed Deposit Accounts:
A fixed deposit a/c is repayable after the expiry of a predetermined period fixed by the customer himself. The period varies from three months to five years. The customer may open his/her a/c for different time periods, which may be for three months, six months, one year, two years, three years, four years, five years. Though FDR is an a/c, it is something different from other a/c. FDR is a long-term deposit. Usually customers are allowed to open this a/c for a certain period. The rate of interest varies in accordance with the terms of deposit.
The terms and their rate of interest in NCCBL are as follows:
|Category of Deposits||Interest Rate||Amount Limit|
|1/3/6 months||12.50%||Upto 1 lac|
|1/3/6 months||13.00%||Above tk.1 lac to below tk.1 Crore|
|1/3/6 months||13.00%||Tk. 1 crore and Above|
|FDR for 12 months||Rate same as above||Rate same as above|
Note: This configuration active from November 2008, for a short time.
The amount of FDR is payable once at a time. After the term for which the a/c was opened, the FDR gets its maturity. Paying the principle amount plus interest less 10% income tax then fulfills the claim.
Opening of FDR:
There is a prescribed form for opening FDR. No introducer photograph is required for opening this account. A minimum amount as determined by the heard office is required to open such an a/c.
Premature Encashment of FDR:
A depositor has the right to claim for refund of his/her deposit before expiry of the fixed term thereof. Bank may in special consideration allow premature encashment on application of the depositor subject to the under noted conditions:
- For FDR which are 3 months or 6 months maturity no interest will be payable, only the principle amount will be refunded.
- When premature encashment is allowed of and FDR with tenure of over 6 months no interest will be paid if enchased before expiry of 6 months.
- For FDR having maturity of 12 months and above only interest for the period of up to the proceeding day of encashment less amount for month, shall only paid. It may be noticed that the rate of interest shall be the same as originally contracted.
Closing of FDR:
If a FDR holder wants to take interest after maturity, banker should consider the following rates:
- Interest Rate
- Excise Duty
- Tax Rate
Process to know interest rate of any matured FDR:
Fixed deposited amount= “X”
Calculate interest= (principal amount × interest rate)
Calculation of any matured FDR= (X+ interest) – (principal+ interest) *10% tax – access duty.
Monthly Saving Scheme:
It is a new project of NCCBL, which is a scheme like DPS in our bank it is called SSS. This scheme started from 1998. The installment payment is to be made to the bank within the first 10 days of each month. It can be opened for 5 years and 10 years maturity for Tk. 500 and 1000.
|Monthly Installment||5 Years||10 Years|
Cash section of any branch plays a very vital role in general banking department, because it deals with the most liquid assets. NCCBL has a very equipped cash section. This section receives cash from depositors and pays cash against check, draft, pay order, pay in slip, over the counter.
Cash Receive Section:
Any person to deposit money will fill up the deposit slip and give the form along the money to the cash officer over the counter. The cash officer counts the cash and compares with figure written in the deposit slip. Then he puts his signature on the slip along with the ‘cash received’ seal and record in the cash receive register book against the number. At the end of this procedure, the cash officer passes the deposit slip to the computer section for posting purpose and delivers the duplicate slip to the client.
The drawer who wants to receive money against check comes to the cash payment counter and presents his check to the officer. The officer verifies the following information:
- Date of the check,
- Signature of the a/c holder,
- Material alteration
- Where the check is crossed or not,
- Where the check is endorsed or not,
- Where the amount in figure and in word correspondent or not,
Then s/he sends the check to the computer for posting. If the computer officer finds everything in order, then s/he passes the check to the cash officer to payment by putting ‘pay cash’ seal on the check. The cash officer gives the cash amount to the holder.
Bills and Clearing:
As a service oriented organization, a bank has to per form some extra services on behalf of his customer. The main function of this section is to collect instruments on behalf of his customers through Bangladesh Bank clearinghouse. Out side Bank clearing (OBC), inter branch clearing (IBC). Upon the receipt of the instruments this section examines the followings:
- Whether the paying bank outside Dhaka City
- Whether the paying bank of their own branch
- Whether the paying bank within Dhaka City
This department has three main jobs. They are:
a) Inward cheque clearing
b) Outward cheque clearing
c) Attending house
Inward Cheque Clearing:
This is the opposite flow of the Inward cheque clearance. When NCC bank ltd. cheque sends to other person of other Bank, that Bank will do the same thing to claim money from NCC Bank Ltd. with the same procedure like Inward clearing of that Bank. At the time of Outward Cheque for clearing, the things must have to be checked: The Clearing Seal, The Endorsement Seal, and The Branch Seal.
Outward cheque clearing:
Whenever any branch of NCC Bank Ltd. receives a cheque of other Bank to collect money, then the branch sends the cheque to its Head Office. The Head Office arranges the cheques separately by the name of different bank and then it send to the respective bank for clearance by the clearinghouse. Those cheques of different Bank to collect money for the ordered person are called Inward Cheque for clearing. Then these cheques go for entry in to the Inward Registry Book and Database of Clearing Department.
Bangladesh Bank conducts this job of clearinghouse name house. This is done twice a day- First house and Return house. First house is to deliver cheques and collect cheques from other banks. Return house is to return the honored cheques. The practice among the bank is to give only the name of those cheques, which were not honored.
Note: Bangladesh Bank keeps separate A/C for the entire bank and settles the balance considering the flow of cheque in both ways that is Inward & Outward.
As soon as the principal branch gets the clearance it sends an Inter Branch Transaction Advice (IBTA) to the branch, who has sent the cheque for collection. Receiving the IBTA is considered as clearance for the payment to the party.
The word OBC means Outward Bills for Collection. There are two types of OBC:
i) Outside Zone
ii) With Different Branch
It is used only for issuing DD or TT. Under this system any other bank of different area can issue DD/TT to this branch. The TT is used for inter branch transaction.
- D.D: Demand Draft
- T.T: Telegraphic Transfer
With Different Branch:
Under this system clients can issue DD/TT to different branches of this Bank
Receiving of cheques:
It has been seen that when the cheques of Sonali Bank, HSBC etc. has deposited in the Dhaka, Uttara branch of Prime Bank, the different accounts which have been maintaining in those particular branches then that particular branches have sent that instrument to the local office (Prime Bank) for collection.
Given entry to the Computer:
The bank has given entry to the computer. There some row box in the clearing. These are from the bank, to the bank, account number, cheque serial number, branch name, issuing date etc.
If the balance of NCC Bank in the Bangladesh Bank account has shown the debit figure then it has been assumed that the drawn amount of instruments drawn on NCC Bank by other banks has exceeded the amount of instruments drawn on other banks by NCC Bank.
Return of the instrument:
It has been seen that when some instruments have been returned from other banks to the local office of NCC Bank. Then the bank has put those in the drawer and then the bank has written a letter to owner of instruments to make them known about the matter. The instruments have been turned with a “Return Memo” which has shown the reasons for what the instruments have been dishonored. When the client has withdrawn the returned instrument from the bank the bank officer has written on the pay slip return.
Remittance: Foreign Exchange takes place in NCCBL.
Remittance means transferring of fund through different instruments other than cheque.The following two types of Remittance are performed by NCCBL.
Types of remittance: Remittance is basically two types:
- local remittance:
- Foreign remittance:
Remittance is significant part of the general banking The bank receives and transfers various types of bills through the remittance within the country. Obviously the bank charges commission on the basis of bills amount NCCBL remittances are safe, swift, inexpensive and simple.
The local remittance includes the following :-
a) Pay Order(PO)
b) Demand Draft(DD)
c) Telegraphic Transfer(TT)
d) Mail Transfer(MT)
(a) Pay Order(PO):
Pay Order is an instrument that contains an order for payment to the payee only incase of local payment whether on behalf of the bank or its constitution. Unlike cheque there is possibility of dishonoring Pay Order. NCCBL charge different amount of commission on the basis of Pay Order amount.
(b) Demand Draft:
By DD any person can send money from one branch to another branch of NCCBL. To send the money he/she must fill up the NCCBL’s prescribed form of DD and paid charge/commission and receives DD block. The following information is included in the DD block:
- Name of the sender branch
- Name and account of the party who receives the money.
- For security purposes a confidential test number are included in the DD block
- Amount of money to be transferred
- Name of receiver branch
(C) Telegraphic Transfer:
To send money urgently NCCBL may be requested for TT on payment of a nominal charge and telegram charge.
Any person urgently sends money from one branch to another branch within NCCBL through TT.
When a message of TT sends through phone from one branch to another branch in that time the message received by the authorized officer who has a right of power of attorney. After that, he/she fills up the TT form.
Following things are included in the TT form:
i). TT number
ii). IT tests number
iii). Name and account number of the payee
IV). Power of attorney number of the sender and receiver of TT.
v). The amount to be transferred.
vi) After fill up the TT form, he tests the test number of TT. If he ensures trouble testing the test number then he credits the account of the payee. On the other hand, if the test number is not proved then he calls back to the sending branch of TT and request to send a new TT.
(d) Mail Transfer:
Money can be sent through mail transfer to any body who has an account in any other branch of the same bank for this purpose the sender shall have to furnish the details like:
- The name of the beneficiary and his account number
- The amount to be transferred
- The name of the branch where the account is maintained
NCC Bank is the member of Money Gram and SWIFT networks. Using the services of this global network, non-resident Bangladesh nationals can send money from abroad to their home country within a few minutes without any risk.
Types of foreign remittance:
Money Gram: Money Gram is represented in over 115 countries and is available at more than 25,000 locations worldwide. In the USA alone Money Gram is available at ignore than 15,000 locations.
Sender completes a “send” form and gets a receipt. Money Gram Agent gives a Ref:
Which has to be passed to the receiver?
NCC Bank makes an enquiry on the Money Gram computer network to obtain authorization to pay recipient and recipient receives the fund.
Money Gram is one of the fastest ways to transfer money. Customers using Money Gram can send or receive money usually within 10 minutes from any world.
To get the money the recipient need not to have a bank account with NCC Bank Ltd. NCCBL does not levy extra charge. It gives better exchange rate to the recipient.
Placid Express: in March 2002, the bank has entered a Taka drawing arrangement with Placid Express, for home remittances of Bangladeshi expatriates in the United States.
X-press money: The X press Money Services would like to welcome NCCBL to their network. X press Money (XM) is a web-based person-to-person money transfer system that allows an individual to send/receive money through any of our network agents instantly. All transactions are done through secure servers using 128-bit encryption technology so as to provide maximum security
Al Fardan: Al Fardan Exchange, the pioneer in money exchange and worldwide remittance services in the U.A.E., established in 1971, is a trusted name for millions of residents and expatriates. A modern exchange house with advanced infrastructure and
Courteous staff has an extensive network of correspondent banks all over the world to facilitate faster, completely reliable transactions.
Habib express: Habib express is another important medium through which wage earner remittance is accepted by NCC Bank. Here head office at first enter in system bserver and received necessary information about the amount of remittance, beneficiary who will receive the amount and any reference number which work as security for Bank as well as beneficiary. Head office gives information through fax to it respective branch from ~where receiver will receive money.
Dhaka Janata: Dhaka Janata are introduces to provide remittance facilities to emigrant and other people of Bangladeshi who work as contractual basis in the Italy. Here Dhaka Janata also maintain same procedure of getting information from system server including the name, reference number, amount, Phone number etc. Here head office sends information through fax to all respective branches. All receivers when come to bank, respective branch check his information with information received from head office.
- Western union
- UAE exchange centre LLC, UAE
- Kaymaks financial services UK
- Telemoney Arab national bank, KSA
- Unicredito italiano, Italy
- Wall street exchange centre LLC, UAE
- Instant cash world wide , UAE
- Three star money transfer. Malaysia
- First solution money transfer ltd. UK
- Zenj exchange , Bahrain (includes turbo cash online remittance)
- Majan exchange , OMAN
- Itau unibanco S.A. Tokyo branch , Japan
- National exchange S.R.I. Italy
- Al zaman ex. Co. Qatar
- Transmit international inc. USA
- Al mulla international ex. Co. Kuwait
- Blue star ,Libya
- IME (M) SDN BHD. Malaysia
- Kushiara financial services limited UK
- NEC money transfer , Spain
- Samsos espress money transfer inc. USA
- Sigue money transfer ,UK
Source: Financial statement of NCC Bank Ltd, F Ex Br.
The above bar diagram is much more satisfactory for the Foreign Exchange Br of NCC Bank Ltd. We can see that unlike the Export and Import condition it is a purely upward sloping curve. It has maintained a consistent growth rate. In the year 2010 the growth rate was the highest and it was 31.96%. In 2011 the growth has been decreased to 11%. But in 2012 the growth increased to 23.5%.
Foreign Exchange Department
Banks play a very vital role in affecting foreign exchange transaction of a country. Mainly transactions with overseas countries are respect of –import; export and foreign remittance come under the purview of foreign exchange transaction. Central bank records all sort of foreign exchange transactions and therefore, transaction affected by the banks other authorized quarters are to be reported regularly to the Bangladesh Bank.
Meaning of foreign exchange:
According to Dr. Paul Einzing “Foreign exchange is the system or process of converting one national currency into another and of transferring the ownership of money from one country to another.
Fundamentals of Foreign exchange:
There are three fundamentals of foreign exchange: –
- Every country has it own currency legal tender.
- Banks effect the conversion of one currency to another by booking keeping entry carried out in the two centers concerned.
- These exchanges are affected by means of credit instruments viz. Draft, mail transfer, telegraphic transfer etc.
Foreign exchange Dept. of NCC bank:
NCC bank foreign exchange dept. plays a vital role to earn the bank’s maximum profit. The dept. is classified according to their activities. The foreign exchange dept. consists of three sections: –
- Import section,
- Export section,
- Foreign remittance section
Import of into Bangladesh is regulated by the Ministry of Commerce in terms of the import & export act 1950, with import policy orders issued periodically and public notices issued from time to time by the office of the Chief Controller of Import & Export (CCI&E). In terns of importers, exporters and indenters order 1981; no person can import goods into Bangladesh unless he is registered with the CCI&E. On the next step the importers applies to Bangladesh Bank through authorized dealers for import goods. In order to import a product from abroad, the importer needs to submit an application letter requesting for opening Letter of Credit (L.C) with the bank.
Definition of L/C:
L/C is a commitment / undertaking of making payment by importer’s bank (issuing bank) on behalf the importer to exporter /Beneficiary provided fulfillment of certain terms and condition by importer.
- Items of goods
- Amounts of goods,
- Date etc.
Parties of L/C:
- Importer/ Applicant
- The issuing Bank (opening Bank)
- The Advising Bank (Notify Bank)
- Exporter / Beneficiary
Opening of L /C:
If an importer wants to import some goods from out side of Bangladesh, at first he has to apply to a bank for opening an L/C. Letter of Credit is a written undertaking of a bank written to the seller /exporter issued at the request of the buyer / importer to at site or a determinable future date. According to import policy unless otherwise specified, all import is to be made by opening irrevocable letter of credit. L/C can be opened against Performa Invoice, if the exporter has no agent and L / C can be opened against Indent if the foreign supplier has indenting agent.
Documentation Required for L/ C:
- A photocopy of the membership Certificate of the Chamber of Commerce of the related business community,
- A photocopy of the Import Registration Certificate (IRC),
- A photocopy of the trade License (has to up date),
- Value Added Certificate (VAT) number,
- A copy of Performa Invoice or Indent,
- Tax Identification Certificate (TIN)
- Certificate of Incorporation,
- Memorandum of incorporation,
- Insurance Cover Note,
- IMP Form,
- LCA Form
Payment of L/C:
The issuing bank gives the payment to the negotiating bank in the following ways:
- Date of payment: Usually payment is made within 7 days after the documents have been received. If the payment is become deferred, the negotiating bank may claim interest for making delay.
- Prepare Sale Memo: A sale memo is prepared at Bangladesh currency rate to the customer. AS the T.T &O.D rate is paid to the international division (ID), the difference between these two rates is exchange trading. Finally an inter branch Exchange trading credit advice is sent to ID.
- Requisition for the foreign currency: For arranging necessary fund for payment, a requisition is sent to the ID.
- Transmission of Telex: A telex is transmitted to the correspondent bank ensuring that payment is being made.
The export section of NCC bank of main branch is responsible for opening L/C negotiation of export documents, purchase of inland bill etc. As per Foreign Exchange Regulation Act, 1947, nobody can export by post and otherwise than by post any goods either directly or indirectly to any place outside Bangladesh, unless a declaration is furnished by the exporter to the collector of customer or to such other person as the Bangladesh Bank may specify in this behalf that foreign exchange representing the full export value of the goods has been or will be disposed by Bangladesh Bank.
Registration of Exporter:
Under the registration order 1952, no person can export any goods from Bangladesh unless he is duly registered as an exporter with the Chief Controller of Bangladesh authorized dears should therefore, ensure before certifying any export forms, as required, that the person is so registered. The registration number should be quoted on the relative export forms. Before the exporter with the customs authorities lodges the forms, they should get all the copies certify by an authorized dealer. After receipt of the EXP forms from the exporters for certification purposes, the authorized dealers will see and ensure that each set of the forms is duly filled in and signed by the authorized dealer.
The following documents are required to apply for registration of exports:
- Trade License
- Income clearance certificate,
- Nationality certificate,
- Bank solvency certificate,
- Asset certificate,
- Registration certificate,
- Memorandum of association,
- Rent receipt of business premises,
- Certificate of incorporation,
Advising of L / C:
The banker provides little import information for example: name of importer and exporter, description of goods, expiry date, and shipment date of L / C etc. The documents the bank receives in cable at first and letter in original. Bank records the details of the L / C and prepare advice after getting the original L / C. Advise is prepared for the beneficiary, issuing bank and for office.
Negotiation of Export Bills:
NCC bank, main branch checks all points in the export documents and if they are free of irregularity the bills are negotiated. Negotiation is nothing but making payment to the exporter and sending the paper to the importer bank for reimbursement. The conversion rate of foreign exchange of negotiating date is applied. The foreign bills negotiate a/c is debited and party’s a/c is credited. Transaction of foreign exchange are consolidated and sent to international division and accounts division of head office. The foreign bills negotiated a/c is credited by head office after the bills are realized.
Bill is drawn or the invoice is written is not less than the invoice value stated on the form. The drafts, invoice, bill of lading, insurance policy and other documents i.e. certificate of origin, packing list, inspection certificate etc. are checked thoroughly.
Back to Back L / C:
It is nothing but a secondary letter of credit opened by the advising bank in favor of a domestic / foreign supplier on behalf of the beneficiary or original foreign L/ C as per original letter of credit of bank by importer letter, it is called Back to Back L / C. The secondary L / c is opened on the strength of the original / master L / C for a smaller amount i.e. Maximum 75% is kept under lien and 10% under packing credit. As per existing provision recognized export oriented units of the country are permitted to make import of their raw and packing material requirements under the back to back L / C arrangement where the importer payments are made out of the realized proceeds of export of the manufacture’s products. Number of Back to Back L / C party now in the NCC bank is increasing.
Back to Back Foreign L/C:
When the back to back L/C is opened in a foreign country supplier it is called back to back foreign. It is generally payable with in 120 days at sight.
Back to Back Local L / C:
When the back to back l/ C is opened local purchaser of materials, it is called back to back local L/ C. It is generally payable within 90 days at sight.
Procedures for back to back L/C:
- Exporter should make application for back to back L/C,
- Export L/C or Master L/C is under lien,
- Opening of a back to back L/C
Foreign remittance means purchase and sale of freely convertible foreign currencies as admissible under Exchange Control Regulations of the country. Purchase of foreign currencies constitutes inward foreign remittance and sale of foreign currencies constitutes outward foreign remittance.
The transaction of the authorized dealer in foreign exchange involves either outward or inward remittances of foreign exchange from one country to another.
A customer is permitted to endorse maximum US $ 3000 per year for countries other than SAARC countries and US $ 1000 for SAARC countries. If SAARC countries are to be visited by road then per year US $500 can be endorsed per passport. At cash can not be endorsed over US $500.
NCC Bank issues following drafts:-
- Traveler’s Check,
- Foreign Demand Draft,
- Endorsement of Cash
SWOT Analysis of NCC Bank:
Every organization is composed of some internal strengths and weakness & also has some external opportunities and threats in its whole life cycle. The following will briefly introduce the customer to the NCC Bank internal strengths and weakness & external opportunities and threats as I have explored in the past two months:
a) Strengths of NCC Bank
i) Superior Quality: NCC Bank provides its customers excellent quality of services. It gives the first priority to customer satisfaction.
ii) Dynamism: NCC Bank draws its strength from the adaptability and dynamism it possesses. it has quickly adapted to world class slandered in terms of banking services. NCC Bank has also adapted state of art technology to connect with the world for better communication to integrate facilities.
iii) Financial Statement: NCC Bank is finally sound company backed by the enormous resources base of the mother concern range group. As result customer fell comfortable in dealing with the company.
iv) Efficient Management: All the level of Management of NCC Bank are solely directed to maintain a culture of the betterment of quality of the services and development of a corporate brand image in the market through organization wide term approach and open communication system.
v) State of the art technology: NCC Bank utilizes state of art technology to ensure consistent quality and operation. The corporate office in equipped with SWIFT. All other branches are also equipped with SWIFT system.
vi) Experts: The key contribution factor behind the success of the NCC Bank is its employees. Who is highly trained and most competent in there own field. NCC Bank provide their employees training both in house and out side of jobs.
b) Weakness of NCC Bank:
i) Limited work forces:
NCC Bank human resources compared to its financial activities. There bare not many people to perform most of tasks. As a result many of the employees are burdened with extra work loads and work load hours without any overtime facilities. This might cause high employee turnover that will prove to be too costly to avoid.
ii) Problem in Delivery:
Few of NCC Bank products offered to its clients like “Personal Credit (PC)” is lying idle due to proper marketing initiative from the management. These products can easily be made available in attractive ways to niceties its client base as well as it’s as its deposited status.
c) Opportunity of NCC Bank
i) Government support:
Government of Bangladesh has rendered its support to the banking sector for a sound financial status of the country. As it has become one of the vital sources of employment in the country now. Such govt. concern will facilitate and support the long term vision of NCC Bank.
ii) Evaluating of E-Banking:
Emergence of e-banking will open more scope for NCC Bank to reach the clients not only in Bangladesh but also in the global banking arena. Although the has already entered the world of e-banking but yet to provide full electronic banking facilities to its customer.
d)Threat of NCC bank:
i) Merger and Acquisition:
The world wide trend and merging and acquisition in financial in station is causing concentration. The industry and competitors are increasing in power their respective areas.
ii) Poor Telecommunication infrastructure:
As previously mentioned, the world is advancing e-technology very rapidly. Though NCC Bank has taken effort to join the stream of information technology.
iii)Frequent currency Devolution:
Frequent devolution of Taka exchange rate fluctuations and particularly South-East Asian currency crisis adversely affects the business globally.
Following the practical work experiences in the NCC Bank Limited, some discrepancies and irregularities have been observed by me and on the basis of the observation some findings have been made to improve the prevailing situation in the branch. These are as follows –
- Quick and prompt customer service is almost absent in the branch and the branch has no computerized cash section. This odd situation is hampering customer service and daily banking procedure and thus a negative impact in total banking of the branch.
- The Account Opening Section is not at all cooperative and customer-friendly. A customer has to stand for a long time when s/he comes to open an account or to do any other businesses related with this section.
- Bank must enrich their service like private commercial bank and efficient employees are required to be employed for collecting deposit from different sectors.
- In order to increase the growth of deposit and loan, the branch must adopt computerize system and should organize seminar, symposium on modern banking.
- The branch needs large office space for its smooth banking operation.
- Interest rates for different types of loans and advances vary to different customers. A prospective customer is allowed to take credit facilities at a lower interest rate. Again, the interest rate is charged at a higher rate to a customer who is not so prospective.
- Loan disbursement procedure is lengthy and time consuming. Though Credit Risk Analysis report is done in the branch, it is not given so much importance in case of Loan Disbursement.
- Even though the percentage of classified loan in the branch is high, there is absence of proper measures in action to recollect the money. Everything is in papers, but in reality, there is no drastic action against those who have been defaulted.
- Loan disbursement procedure is lengthy and time consuming. The lack of proper monitoring often reduces recovery and recovery functions are often hindered by lack of proper communication network.
- Sometime loaner expects that Govt. will give an opportunity of forgiveness that is why they need not pay their loan and interest amount.
- The total loan and advances is increasing gradually from 2011. But the growth rate is not satisfactory
- The position of net profit is not very good. In other word we can say that the banks net profit decreased gradually from 2007 to 2012 but not loss, after that it has increased in 2011.
- Daily general meeting should be held regularly in the branch. As a result manager employee relation will grow better and any employee can know about other section except his.
The aim of practical orientation program is to exercise the practical deskwork of the bank and mainly prepare a report of procedure of work on different desk. But it was difficult enough to cover the entire desk within this short time.
The bank’s employees were very busy in banking hours. So it was very difficult to get them in time.
In the LC section, there are a lot of activities, so they hadn’t shown interest to learn properly to internship student.
The branch does not maintain accounting system properly. So many up date data were not available which would have made my report more informative.
Though out my internship I discovered that NCC have the opportunity to improve in the following sector
- In today’s business, promotional activities is one of the most important tasks for improvement of the business. NCC does not concentrate much about this. Hence the firm could be benefited if it invests in the market promotional activities.
- NCC should arrange more training for its employees so that they can improve their skill.
- NCC should convert its total process into computerized system.
- NCC has only branches. It would be benefited if it opens branches in the other places as there are huge opportunities of business.
- The growth rate of NCC recently plummets due to low retention ratio. The firm could improve its growth rate by reinvesting more from its earning.
- The firm may increase the efficiency of its personnel by increasing incentives.
- NCC could its information technology by employing the high technology based information system and networks.
- Bank should set up more SME center on rural area so that positive trend SME loan in rural area gets stable.
- Proper monitoring system should be developed in order to minimize the amount of non-performing loan.
- High cost deposit must have to be reduced and company should focus on low cost deposits.
- They should go for more advertisement as promotion .Because more of the people still don’t know about the SME.
- The amount of term loans not increasing as the continuous loan.The amount of term loan must have to be increased.
In the prevailing business world, banking is a dynamic business. Today is beset by momentous changes in virtually every fact of industry activities. By assessing the current position of the bank, any hindrances and obstacle must be seen as a challenge and opportunity but not as a threat. Any such problems must be tackled according to the situation. The bank should maintain a well-structured communication from top to bottom level of the management. Each official should be valued and motivated as a part of the bank as if, together thy are a family and they must have the privilege and right to share unique suggestions which they up come regarding decision making, managing or any other activities.
Overall, the bank must make a positive attempt to be more outward looking in their goals and aware of what is happening. They must also emphasis on the domestic scenario more closely and analyze any certain trends and strategies of their competitors. The bank must accept any failures and think of them as an objective to pursue future instead of blaming such failures on other factors.
This report has attempted to explain the banking practice, that are followed by the NCC Bank of Bangladesh Ltd. and also attempt to harmonize and link the theoretical knowledge, with the experience gathered in the period practical orientation.