Report on Banking System of National Credit and Commerce Bank

Background of the Report

Economy of Bangladesh is in the group of world’s most underdeveloped economics. One  of the reasons may be its underdeveloped banking system. Modern banking system plays a vital role for a nation’s economic development. Over the last few years the banking  world has been undergoing a lot of changes due to deregulation, technological innovations, globalization etc. These changes also made revolutionary changes of a country’s economy. Present world is changing rapidly to face the challenge of competitive free market economy. It is well recognized that there is an urgent need for better-qualified management and better-trained staff in the dynamic global financial market. Bangladesh is no excepting of this trend. Banking sector in Bangladesh is facing challenges from different angles though its prospect is bright in the future. Money and banking is the center around which all-economic science clusters.

Objectives of the Report

The primary objective of the study is to meet the partial requirement for the fulfillment

 of MBA Program. The core objectives of the study are as follows:

1.      To gain practical exposures in different banking activities, this will be help for MBA Program.

2       To familiar with the working environment in bank.

3       To apply theoretical knowledge in the practical field.

4       To observe and analyze the performance of the specific branch.

5       To be acquainted with day to day functioning of service oriented banking business.

6       To study existing bankers customers relationship.

7       To learn about Foreign Exchange Business.

8       To learn about loan and advance.

9       To learn about general banking.

10     To know about the function of administration.

Methodology

In order to make the report more meaningful and presentable, two sources of data and information have been used widely.

The ‘Primary Sources’ are as follows:

1.      Face-to-face conversation with the respective officers in the branch.

2.      Informal conversation with the clients.

3.      Practical work exposures on different desks of the branch covered.

4.      Relevant file study as provided by the officers concerned.

The ‘Secondary Sources’ are as follows:

1.      Annual report(2002)of NCCBL

2.      Periodicals Published by Bangladesh Bank.

3.      Different publications regarding banking functions, foreign exchange operation and credit policies.

4.      Internet was also used as a theoretical source of information.

A proper procedure has been taken to complete this study. The procedure were as follows:

1.      Observing the procedure of banking activities followed by each department.

2.      Face to face discussion with the respective personnel.

3.      Reading various files.

Limitation of the report:

A good report ‘sells’ the result of the study, but it should not oversell. Every project has limitation. I also faced some usual constraints during the course of my Practical Orientation:

1.      Inadequate data sources.

2.      Experience constraints.

3.      Organization constraints

4.      Time constraints.

Vision Statement

To establish itself as one of the leading commercial banks in the country wide, NCCBL offering a wide range of banking services by the 2015.

Mission Statement

To contribute trade commerce and industry of the country by providing banking services.

Goal of the bank

To share a significant portion of the banking sector by utilizing available manpower and state of the art technology for maximizing the shareholders wealth.

Long Term Goal

To maximize the wealth of the share holders.

Short term Goal

To earn satisfactory rate of return on investment by providing wide range of banking services.

Brief view of NCCBL

Particulars

20012002
Authorized Capital

75,00,00,000

75,00,00,000

Paid up Capital

42,90,00,000

39,00,00,000

Resource Fund & Other Resources

35,35,80,000

25,73,20,000

Deposit & other Account

1,28,47,05,170

10,55,77,22,355

Advances

10,78,86,12,905

7,96,51,44,901

Investment

1,75,68,85,269

1,72,20,12,869

Letter of Credit

13,75,40,00,000

13,53,40,00,000

Letter of Guarantee

1,10,19,18,172

89,23,88,565

Borrowing from other Banks, Financial Institution & Agent

1,08,86,99,079

2,74,83,382

Total Assets

16,09,12,39,971

12,42,81,63,208

Profit

56,86,50,712

42,92,35,990

Present position of NCCBL, Agrabad Branch

‘Figure in crore’

Particulars

Year

2000

2001

2002

2003

Deposit

111.34

127.35

136.74

125.28

Advance

188.79

203.25

187.47

140.89

Profit

6.19

10.07

10.20

7.44

Letter of Credit (LC)

211.00

265.28

285.15

149.77

Export

17.00

27.72

25.92

23.74

GARMENT EXPORTS FROM BANGLADESH:

The tremendous success of readymade garment exports from Bangladesh over the last two decades has surpassed the most optimistic expectations.  Today the apparel export sector is a multi-billion-dollar manufacturing and export industry in the country. The overall impact of the readymade garment exports is certainly one of the most significant social and economic developments in contemporary Bangladesh.  With over one and a half million women workers employed in semi-skilled and skilled jobs producing clothing for exports, the development of the apparel export industry has had far-reaching implications for the society and economy of Bangladesh.

Several authors have analyzed aspects of the garment industry in Bangladesh. Of the various aspects of the industry, the problems and the working conditions of female workers have received the greatest attention.  There are several studies including the Bangladesh Institute of Development Studies (BIDS) study by:

Salma Chowdhury and Protima Mazumdar (1991) and the Bangladesh Unnayan Parisad (1990)study  on this topic.  Both of these studies use accepted survey and research methodology to analyze a wealth of data on the social and economic background, problems and prospects of female workers in the RMG sector.  Professor Muzaffar Ahmad looks at the industrial organization of the sector and discusses robustness and long-term viability of apparel manufacturing in Bangladesh

Wiig (1990) provides a good overview of this industry, especially the developments in

the early years.

One of the few studies on the Bangladesh apparel industry to be published in a reputed journal in the U.S. is that of Yung Whee Rhee (1990) who presents what he calls a “catalyst model” of development.  The Bangladesh Planning Commission under

theTrade and Industrial Policy (TIP) project also commissioned several studies on the industry.

Hossain and Brar (1992) consider some labor-related issues in the garment industry.

Quddus (1993) presents a profile of the apparel sector in Bangladesh and discusses some other aspects of the industry.

Quddus (1996) presents results from a survey of apparel entrepreneurs and evaluates the performance of entrepreneurs and their contribution to the success of this industry.

Islam and Quddus (1996) present an overall analysis of the industry to evaluate its potential as a catalyst for the development of the rest of the Bangladesh economy.

Impact of Globalization process on Corporate Planning of Commercial Banks in Bangladesh:

Globalization may be defined as the broadening and depending linkages of national economics into a world wide market for goods, services and especially capital ( Ohiorhenuan, 1998). Impact of globalization process on the economy of Bangladesh is in evitable. The country is facing challenges towards its integration with the global economy. To cater to the need of global opportunities as well as threats, Bangladeshi local banks must redesign their long term planning. Before redesigning the planning. Local banks must take into consideration both domestic as well as international scenario.

Corporate Planning may be defined as long term planning covering a period of five years of more than five years. Corporate planning has the potential to make a break through in the various development measures of the economy. Globalization is a continuous process. Information. Technological innovations and globalization processes have a direct impact on the financial sector, especially in the banking sector nationalized commercial banks, is not well equipped to respond to the needs of the coordination between proper manpower planning, etc. are creating bottleneck for local banks to attain international standard. The role of a commercial bank in the economy is to satisfy the diverse desire of both the ultimate borrowers and lenders. Though reform measures in the financial sector started in the nineties, the overall scenario of the banking sector is not satisfactory. Further , global integration in the world economy is creating difficulty position for local banks.

Taylor, (1982) comments that the top management of ht organization is responsible to select the most appropriate strategies from the various alternatives prepared by the senior managers with the assistance from the corporate planner.

Burnett et al. (1991) comment, that long range planning is certainly one of the most creative aspects of management, and it is easy to see why it gives management such a tremendous advantage in competition. They also describe that no wonder many executives are so excited about it that, they are referring to long range planning as their profit insurance. Ghosh and Kumar (1991) remark that the process of business planning can be considered as four parts viz. The analysis of factors affecting the future, forecasting the future environment, preparing the plan, and installing the plan.

Naughton et al. (1992) mentions, that the operational plans must encompass all the aspects of banking operations and management to fulfill its multipurpose plan.

Hemple et al. (1994) argue that continuing change in the money and capital market has affected banks’ financial management. These changes include (I) the globalization of money and capital markets; (ii) the coalition of numerous new securities in these markets; and (iii) the development of new secondary markets for many financial assets.

Strengrevics (1996) comments that many companies with sophisticated planning systems have been caught off guard by unforeseen events, such as political upheavals of change in oil prices, of move by their competitors. Plenert and Hibino (1998) argue that many factors trigger change, such as human awareness’, human values and human motivation, and all of these, factors can be refocused towards new perception of change, in a new viewpoint.

Cornett and Saunders (1999) remark that a well-developed financial service firm potentially enjoys far more earnings and profit stream over time than does a product – specialized bank. Rose (1999) describes that reshaping the global banking industry as a banking revolution. According to him the proliferation of new services, rising competition between domestic and foreign financial firms, deregulation of banking and the financial markets, rising bank operating costs, the expanding use of banking and the financial markets, rising operating costs, the expanding use of automated equipment and electronic transfers of financial information, consolidation of the banking industry into fewer units, globalizations of financial markets and increased risk of bank failure, liquidation of absorption are happening.

Nair et. Al. (2000) argue that globalization promises substantial opportunities but also accompanies considerable risks. Higher returns come along with higher risk, higher return without risk could at best be a temporary phenomenon. Embracing globalization without a right country and a specific policy framework is like driving a car without an  insurance. Rangaker (2000) remarks that corporate planning is vital for the long – term success of the organization. The planning process involves SWOT analysis, that is, analysis of strength, weakness, opportunities and threats. Out of the strategies, analyzed and evaluated, priority strategies are selected using logic and intuition to prepare an implementation of the plan.

Ahmed (2001) describes, that if Bangladesh cannot avail the opportunities and minimize the dangers created by globalization. It will lose tremendously. Imam and Ali (2000) show how to design the planning of the bank with regard to database while launching new bank product. They argue that the maintenance of database system for diversified bank products would enhance not only the efficiency of a retail bank and also the cost effectiveness of different approaches undertaken by banks. Jewell (2001) describes that technological change is the most potent source of a change in the environment of business organizations. It can be seen as the process of “creative destruction” in which new products, processes and therefore working practices replace old ones. A strong decision and political will is required to provide better managerial and operational efficiency in the nationalized banking sector.

Eichengreen (2002) describes that limiting volatility in a financial globalize world requires building credible policy making institutions. The greater the ability of the individuals and institutions responsible for monetary policy, the less the danger that a shock will incite an investor panic and a self fulfilling crisis. To the contrary, if policy makers have accumulated sufficient credibility, the markets will do much of the stabilizing work for them.

Working Experience

A Bank is a service oriented as well as profit oriented organization. Bank’s aim is to earn profit by providing various service to its customer and satisfying its stakeholders as well as stockholders. To perform these function simultaneously the bank divides its operations in three parts that is General Banking, Loan and Advances and Foreign Exchange.

General Banking: 

General Banking includes the customer service(Account opening and closing), Remittance, clearing, Accounts and cash department. To be a customer of a bank, a person must have a contract/agreement with the bank ,which is the legal basis of banker-customer relationship. By opening an account a person can be a customer of a bank. In NCCBL, there are mainly two type of deposit-(1)Demand deposit(Savings Account & Current Account), (2)Time deposit(FDR,STD).

Following are the major section in general banking:

1.      Account opening section

2.      Clearing section

3.      Remittance section

4.      FDR section

5.      Cash section

Account Opening Section

According to the law and practice the banker- customer relation arise only from contract between the two. And opening of account is the contract that establishes the relationship between banker and customer. So this section plays a very important role in attracting customer and therefore should be handled with extra care. Following types of account are generally opened by the NCCBL:

a.      Savings Bank Account

b.      Short Term Deposit

c.      Term Deposit or Fixed Deposit

d.      Current Deposit Account

e.      Special Savings Scheme

f.       Special Fixed Deposit Scheme

Clearing Section

Cheque clearing section of NCCBL, Agrabad Branch receives cheque, demand drafts and pay orders of their clients. Upon the receipt of the instrument the cheque clearing section examines:

  1. Whether the paying bank within the Clearing House.
  2. Whether the paying bank outside the Clearing House.
  3.  Whether the paying bank of their own branch

Types of Clearing

Outward Clearing: Outward clearing means when a particular branch receives instruments drawn on the other bank within the clearing zone and those instruments for collection through the clearing arrangement is considered as outward clearing for that particular branch.

Inward Clearing: When a particular branch receives instruments, which on them and sent by other member bank for collection are treated as inward clearing.

Remittance Section:

Customer of a bank need to transfer his fund of money to anywhere within the country they can do it through the remittance section of the bank. Remittance section of general banking deals with only local remittances. During internship I have observed branch deals with four types of local remittances. These are:

  1. Demand Draft (DD)
  2. Telegraphic Transfer (TT)
  3. Pay Order (PO)
  4. Mail Transfer (MT)

FDR Section:

This section deals with Fixed Deposit Receipt and Bearer Certificate Deposit. FDR is an  important factor for the bank and volume of FDR determines the investment bases of the bank.

Cash section:

Cash is the  most liquid asset and it should be dealt very carefully. So this department is really handled with intensive care. This department starts the day with cash in vault. All cash receipts and payments are made through this department.

Cash section is a very sensitive organ of the branch and handle with extra care. I was not authorized to deal in this section because of its sensitivity. But I was lucky enough to know the procedures of this section. operation of this section begins at the start of the banking hour. Cash officer beings his/ her transaction with taking money from the vault, known as the opening cash balance .Vault is kept in a very secured room. Keys to the room are kept under control of cash officer and branch in charge. The amount of opening cash balance is entered into a register. After whole day’s transaction, the surplus money remain in the cash counter is put bank in the vault and known as the closing balance. Money is received and paid in this section.

Loan and Advance:

Credit is the confidence of the lender in the ability and willingness to the borrower to repay the loan at a future date. It is generally believed that confidence is the basis of all credit transaction. The fundamental principle upon which credit is generally based are character, capacity, capital, Responsibility, reliability and resources of borrower. Lending is a function that is crucial to the banker, because of the associate risk and profit potential. Quality of lending depends on safety, liquidity, yield, diversity, productivity, purpose national and social interest, management ability, borrower analysis and business analysis.Classification of Advance:

                                                                 ADVANCE

 Loan Cash Credit Over Draft Discount 
  1. Loan General
  2. House Building Loan
  3. Loan against trust receipt
  4. Loan against imported merchandise
a. Cash Credit

(Hypothecation)

b. Cash Credit (pledge)

c. Cash Credit(export)

  1. Secured Overdraft

(FO)

  1. Secured Overdraft (RE)
  2. Temporary Overdraft.
  3. In Land Bill Purchase.
  4. Foreign Bill purchase.
  5. Foreign Documentary Bill Purchase.
  6. Payment against Document.

Foreign Exchange:

Foreign exchange means exchange of foreign currency between two countries. Foreign exchange deals with foreign financial transactions. there are three types of foreign

exchange transactions:

(1)Import

(2)Export and

(3)Foreign Remittance.

The main topic of my internship report is “Foreign Exchange Business of NCCBL”.I will discuss about the topic in the later chapter.

Accounts Section:

Account is the nerve center of a bank. Account department maintains all records of transactions and all types of statements. At the end of the transactions hour all concern department sends to this department vouchers of transaction.

Following are the activities of accounts department:

  1. To record all transaction in the cash book
  2. To record all transaction in the general and subsidiary ledger.
  3. To prepare daily fund position, weekly position, periodic statement of affairs etc.
  4. Prepare necessary statement for reporting purpose.
  5. To pay all expenditure on behalf of the branch.
  6. Make salary statement and pay salary.
  7. Branch to branch fund remittance and supporting accounting treatment.
  8. Budgeting for branch.

Foreign Exchange Business of NCC Bank Ltd.

Definition of foreign exchange:

Foreign Exchange means foreign currency and includes all deposits, credits and Balance Payable in Foreign Currency as well as in foreign currency instruments such as drafts, T.C.S, Bills of Exchange, Promissory notes and Letter of Credit payable in any foreign currency.

Sources and uses of Foreign Exchange:

Foreign Exchange is mainly earned through export of goods and services by the residents of our country to the countries outside Bangladesh. Foreign exchange may  also be acquired out of aids, grants and credits received by us from foreign countries. Remittances of the Bangladesh Nationals working abroad (wage earns) are also an important source of foreign exchange for Bangladesh.

Foreign exchange is acquired for settlement of international payments in connection with import of goods into the country as well as for meeting payments covering freight charges, insurance banking, debt servicing, travel and educational expenses etc.

Letter of Credit (L/C):

The letter of credit is an undertaking issued by a bank for the account of the buyer (the applicant) or for its own account to pay the beneficiary the value of the Draft and/ or documents provided that the terms and conditions of the Documentary credit are complied with.

As per import and Export Control Act 1950 no person can indent, import or export any goods in Bangladesh except incase of exemption issued by the government of the peoples republic of Bangladesh. So for doing import business at first every importer should obtain Import Registration Certificate (ICR).

Procedure for obtaining ICR

 Through public notice or import policy the Chief Controller of Import and Export (CCI&E) invites application usually for registration of importers. The following paper and documents are required for submission to CCI and E for Import Registration Certificate:

  1. Application form
  2. Nationality Certificate
  3. Income tax registration certificate with GIR
  4. Trade License
  5. Membership Certificate
  6.  Partnership Deed (For partnership firm)
  7. Certificate of Registration with the Register of joint Co. and Articles & Memorandum of Association in case of Limited Company.
  8. Bank Certificate

The nominated of the applicant will examine the paper/ document and verify the signature of the applicant and forward the same to the concerned office of the ICC and E with a forwarding schedule in duplicate through bank representative. The duplicate copy of the same bearing the acknowledgement of CCI and E office of the receipt of the document is received by the bank and is preserved.

Role of L/C in the Import procedure of NCCBL

 A letter of credit is a letter that is issued by a bank (issuing bank) at the request of its clients addressed to a person (beneficiary) undertaking that the bills drawn by the beneficiary will be duly honored by the issuing bank providing certain condition mentioned in the letter.

The Clauses Contained In A L/C

*A clause authorizes the beneficiary to drawn bill of exchange up to a certain on the opener.

  • List of shipping documents, which are to accompany the bill.
  • Description of the goods to be shipped.
  • An undertaking by the issuing bank that bill drawn in accordance with the conditions will be duly honored.
  • Instructions to the negotiating bank for obtaining reimbursement of payment under the credit.
Importer’s Application for L/C limit/ margin

To have an import L/C limit, an importer submits an application to NCCBL. In that application he/ she gives full detail of the following:

  1. Full particulars of bank accounts
  2. Nature of business.
  3. Required amount of limit
  4. Payments terms and condition.
  5. Goods to be imported.
  6. Offered security
  7. Repayments schedule.

 A credit officer scrutinizes this application and accordingly prepares a proposal and forwards it to the Head Office Credit Committee. The committee, if satisfied, sanctions the limit and returns back to the branch. In this manner the importer is entitled for the limit.

The L/C Application

NCCBL provides a painted from for opening of L/C to the importer. A special stamp is attached on the form. While opening, the stamp is cancelled. The importer gives the following information is that form:

-          Full name & address of importer.

-          Date & place of expiry of the credit.

-          The made of transmission of document (courier/mail/telex)

-          Whether the confirmation of the credit is requested by the beneficiary or not.

-          Whether the partial shipment is allowed or not.

-          The type of loading (loading on boarding).

-          Brief description of the goods to be imported.

-          Availability of the credit by sight payment acceptance/deferred payment.

-          The time bar within which the document should be presented.

-          Sales terms (FOB/CIF/C&F)

-          Account number.

-          L/C account.

-          Shipping mark.

-          H.S. code number of the goods to be imported.

-          IRC number.

-          LCA number.

-          Insurance number.

-          Insurance cover note.

-          Country of origin.

The above information are given along with the following documents

-          Proforma Invoice, which give description of the goods including quantity, unit price etc.

-          Four set of IMP form.

-          The insurance cover note, issuing company & the insurance number.

Scrutinization of L/C application

The official of NCCBL scrutinize the application for the following reasons:

-          The terms & conditions of the L/C must be complied with Exchange control & Import Trade Regulation.

-          Officers examine whether the goods to be imported are legal.

-          The L/C must not be opened in favor of the importer.

-          Radioactivity report in case of food item.

-          Survey report or certificate in case of old machinery.

-          Good & carrying vessel from all the countries in the world except Israel.

-          Certificate declaring that the item is in operation not more than five years in case of vehicles.

-          To see whether the application is signed by the importer.

-          Indenting registration  number.

-          Insurance cover note with date of shipment.

-          Whether IRC updated or not.

-          Whether IMP from dully signed or not

Accounting Treatment is Case of L/C Opening

After sanctioning the L/C proposal by the branch incumbent/competent authority, the respective officer will pass the following vouchers:-

Party A/C—————————————————————–           Dr.

Margin on L/C———————————————————–           Cr.

Commission on L/C—————————————————-           Cr.

VAT (15% of commission) on L/C———————————–          Cr.

FCC (Foreign Correspondent Charge) A/C————————-         Cr.

Telex/Postage Charges A/C——————————————-           Cr.

A liability voucher is also passed. Such as-

Customer liability against L/C—————————————           Dr.

Bankers Liability Against L/C—————————————           Cr.

Transmission of L/C

The way of transmission of L/C are as follows:

i)                    Through SWIFT

ii)                  Through Telex

iii)                Through DHL or FEDEX

iv)                Through Emergency Mail service (EMS)

Amendment of Letter of Credit:

Parties involved in a L/C, particularly the exporter & cannot always satisfy the terms & conditions in full as expected due to some unexpected reason. In such a situation, the credit should be amended. NCCBL transmits the amendment by tested telex to the advising bank. In case of revocable credit, it can be amended or cancelled by the issuing bank at any moment & without prior notice to the beneficiary. But in case of irrevocable L/C, it can neither be amended nor cancelled without the agreement of the issuing bank, the advising bank & the beneficiary. If the L/C is amended, service & telex charge is debited from the party account.

Presentation & Examination of Shipping Documents

The seller being satisfied with the terms and the conditions of the credit proceeds to dispatch the required goods to the buyer and after that, has to present the documents evidencing dispatching of goods to the Negotiating Bank on or before the stipulated expiry date of the credit. After receiving all the documents, the negotiating Bank then checks the documents against the credit. If the documents are found in order, the bank will pay, accept or negotiate the documents and will dispatch to this Branch. The branch checks the documents. The usual documents are:

  • Invoice
  • Bill of Lading
  • Certificate of Origin
  • Packing list
  • Shipping Advice
  • Non-negotiable Copy of Bill of Lading
  • Bill Exchange
  • Pre-shipment inspection report
  • Shipment Certificate

Respective officials check whether these document have any discrepancy or not. Here “Discrepancy” means the dissimilarity of any of the documents with the terms and conditions of L/C. in case of discrepant documents; the branch advises the discrepancy/ discrepancies  to the negotiating bank within seven (07) working days after receiving the documents.

Some of usual discrepancies are
  • L/C expired
  • Late shipment
  • Amount drawn in excess of the letter of credit
  • Bill of exchange not properly drawn
  • Description of goods differ
  • Interest clause is missing in Bill of Exchange, where stipulated
  • Bill of Exchange is not drawn/signed by the beneficiary of the credit
  • Bill of lading or Airway Bill of lading is issued under a charter party
  • Insurance cover not as per terms of L/C and insurance does not cover the entire voyage and insurance policy is not properly stamped
Lodgment & Retirement of Shipping Documents

It is found that the documents have consistency with the terms written in L/C, then the documents are lodged in PAD & the following vouchers are prepared:

Sundry deposit L/C margin A/C———————————————–          Dr.

PAD A/C————————————————————————–            Cr.

(margin amount transferred to PAD A/C)

Customer A/C——————————————————————- Dr.

PAD A/C————————————————————————- Cr.

(Customer accounts debited for the remaining amount)

PAD A/C———————————————————————-     Dr.

H.O general A/C————————————————————-     Cr.

Interest A/C——————————————————————                  Cr.

(Amount given to Head office ID & Interest credited)

Reverse Entry:

Banker’s Liability A/C—————————————————–                  Dr.

Customer’s  Liability A/C————————————————-                  Cr.

(After the lodgment is given)

After realizing the telex charge, service, interest (if any), the shipping document is then stamped with PAD no. & entered in the PAD register. After repairing the necessary vouchers, endorsement is made on the bank of the B/E as Received Payment & the B/L is endorsed as please delivery to the order of M/S——— under two authorized signatures of NCCBL’s officers (P.A. holders). Then the documents are given to the Importer.

Payment procedure of Import Documents
Date of Payment

Usually payment is made within seven days after the documents have been received. If the payment is deferred, the negotiating bank may claim interest for making delay.

Preparing Sale Memo

As sale memo is made at B.C rate to the customer. As the T.T. & O.D. rate is paid to the ID, the difference between these two rates is known as Exchange Trading. Then  an Inter Branch Exchange Trading Credit advice is sent to Inter ID.

Requisition for the foreign currency

For arranging necessary fund for payment, a requisition is sent to the ID.

Transmission of Telex

A telex transmitted to the correspondent bank ensuring that payment is being made.

Back to Back letter of Credit

A back to back letter of credit is a new credit. Is is different from the original credit based on which the bank undertakes the risk under the back to back credit. In this case, the bank’s main security is the original credit (selling credit) and the back to back credit (buying credit) are separate instruments independent of each other and no way legally connected, although both are part of the same business operation. The supplier ( beneficiary of the the back to back credit) ships goods to the importer or supplies goods to the exporter and presents documents to the bank as is the credit. It is intended that the exporter would substitute his own documents and ships the goods to the importer, if necessary, and present documents for negotiation under the original credit, his liability under the back to back credit would be adjusted out of these proceeds. The export L/C is marked lien and no margin is taken.

Documents that required to submit at NCCBL for the opening of a back to back L/C are given below:

-          Mastered L/C

-          Valid Import Registration Certificate (IRC) & Export registration Certificate (ERC).

-          L/C application & LCA from dully filled up & signed.

-          Proforma Invoice or Indent.

-          Insurance cover note with money receipt.

-          Duly signed IMP form.

Processing of L/C Proposal
  1. Name & address of the party,
  2. Name & address of the government,
  3. TIN & IRC Number,
  4. Date of opening of Account,
  5. Turnover id CD Account (last 6 month)
  6. Amount of L/C Applied,
  7. Commodity to be imported,
  8. Branch’s total exposure on the proposal item,
  9. branch’s total exposure ( Total outstanding on account of the party)
  10. name & Address of the beneficiary,
  11. Status report on the beneficiary,
  12. Country of origin,
  13. Mode of Shipment,
  14. Shipment validity,
  15. Margin proposed by the party,
  16. Margin recommended by the branch manager,
  17. Past performance of the party,
  18. Present liabilities position of the party in its own name and on account os sister concerns:
  • L/C liabilities,
  • PAD Liabilities,
  • LIM Liabilities.
  1. landed Cost (of the item to be imported)
  2.  a) landed cost per unit,

 b) Market price per unit.

  1. Retirement of documents.
  2. Business worth / ability of the applicant.
  3. Branch Manager Recommendation.

Approval / Sanction of L/C proposal

  1. name of importer  & Address
  2. Name of Guarantor & Address (if any)
  3. Amount of L/C Approved,
  4. Margin to be retained in cash,
  5. Import Finance (Amount)
  6. item (Goods to be imported)
  7. Commission,
  8. Other terms & condition:

a)      Approval valid for 1 months,

b)      Security i.e B/L & charge documents to be obtained .

c)      Interest on PAD/LTR/LIM @ 15% per annum.

d)     15% Vat to be realized on L/C commission,

e)      Fluctuation in exchange rate will be borne by importer.

Various steps involve in the operation of letter of credit
  1. The importer and exporter have made a contract before a L/C is issued.
  2. Importer applies for a letter of credit from his banker known as the issuing bank. he may have to use his credit lines. If he is a new customer, margin deposit may be required : e.g. 20% deposit on credit amount.
  3. Issuing bank opens the L/C which is channeled through its overseas corresponding bank, known as advising bank.
  4. Advising bank informs the exporter (the beneficiary) of the arrival of the L/C.
  5. Exporter ships the goods to the importer or other designated place as stipulated in the L/C.
  6. Meanwhile, he prepares his own documents and collect transport documents or other documents  (e.g. insurance policy) from relevant parties. All these documents will be sent to his banker which is acting as the negotiating bank.
  7. Negotiation of export bills happens when the banker agrees to provide him with finance. In such case, he obtains payment immediately upon presentation of documents. If not, the documents will be sent to the issuing bank for payment or on an approval basis as in the next step.
  8. Documents are sent to issuing bank (or reimbursement bank which is a bank nominated by the issuing bank to honour reimbursement from negotiation bank) for reimbursement or payment.
  9. Issuing bank honour it’s undertaking to pay the negotiating bank on condition comply with L/C terms and conditions.
  10. Issuing bank releases documents to importer when the letter makes payment to the former or against the letter’s trust receipt facility.
  11. The importer takes delivery of goods upon presentation of the transport documents.
Export Procedure of NCCBL

Export is one of the most important activities that can increase economic and social well being through transaction of goods and services from domestic economic agent to foreign economic agent for which domestic economic agents receives payments, preferably in valuable foreign currency. The import and export trade in our country is regulated by the Import & Export Control Act, 1950. There are some formalities, which an exporter has to fulfill before & after shipment of goods. There procedures are described in the following lines.

Registration from Chief Controller of Import & Export (CCI & E)

No persons without registration granted by the chief controller of importers and exports shall anything into or out of Bangladesh except in case of exemption issued by the government. Under the export policy of Bangladesh the exporter has to get the valid Export Registration Certificate (ERC) from Chief Controller of Import and Export (CC&E). The ERC is required to renew every year. The ERC number is to be incorporated on EXP forms and other papers connected with exports.

Registration of Exporters

For obtaining Export Registration Certificate Bangladesh exporters are required to apply to the controller of import & export in the prescribe from along with the following documents:

i)                    Nationality & Assets certificates;

ii)                  Memorandum and Articles of Associates and certificate of incorporation in case of Limited Company;

iii)                Bank Certificates;

iv)                Income Tax Certificate;

v)                  Trade License etc;

Obtaining EXP

After getting ERC the export applies to NCCBL (or any other commercial bank) with trade license & if the bank is satisfied, an EXP issued to the exporter.

Securing of Order

After getting the ERC the exporter may proceed the secure the export order. He can do this by contacting the buyers directly through correspondence. I this purpose exporter can get help from:

i)                    Liaison Offices;

ii)                  Buyer’s Local Agent;

iii)                Export Promoting Organization;

iv)                Bangladesh Mission Abroad;

v)                  Chamber of Commerce (Local & Foreign);

vi)                Trade Fair etc.

Signing the Contract

While making a contract, the points are to be motioned:

i)                    Price of the goods

ii)                  Describe of the goods

iii)                Quantity of the goods

Receiving the Letter of Credit

After going contract for sale, exporter should ask the buyer for letter of credit (L/C) clearly stating terms and conditions of export and payment. The following are the main points to be looked into for receiving / collecting export proceeds by means Documentary Credit:

i)                    The terms of the L/C are in conformity with those of the contract

ii)                  The L/C is an irrevocable one, preferably confirmed by the bank,

iii)                The L/C allows sufficient time for shipment and negotiation.

Procuring the Materials

After making the deal and on having the L/C opened in his favor, the next step for the exporters is to set about the task of procuring or manufacturing the contracted merchandise.

Shipment of Goods

The following are the documents normally involved at the stage of shipment:

i)                    EXP form

ii)                  ERC (valid)

iii)                L/C Copy

iv)                Customs duty certificate

v)                  Shipping Instruction

vi)                Transport Documents

vii)              Insurance Document

viii)            Invoice

ix)                Bill of Exchange (if required)

x)                  Certificate of Origin

xi)                Inspection Certificate

xii)              Quality Control certificate

Now export submits all these documents along with a letter of Indemnity to NCCBL for negotiation. An officer scrutinize all these documents. If the documents are clean, NCCBL purchase the documents on the basis of banker customer relationship. This is known as Foreign Documentary Bill Purchase (FDBP).

Forwarding Foreign Bill for Collection

i)                    If the documents have discrepancies.

ii)                  If the banker is in doubt.

iii)                If the exporter is a new customer.

iv)                Foreign Documentary Bills of collection signifies that the exporter will receive payment only when the issuing bank gives payment.

Important Documents Associates with Export.

(1)        Letter of Credit.

(2)        Bill of Exchange.

(3)        Invoice.

(4)        Bill of Lading.

(5)        Certificate of Origin.

Common Discrepancies

NCCBL official usually find the following discrepancies while checking the above-mentioned documents:

i)                    On board nation of in Bill of lading undated/unauthenticated.

ii)                  Shipment effected from port other than that stipulated in the credit.

iii)                Full set of Bill of lading not presented.

iv)                Certificate of country of origin not provided.

v)                   Weighment certificate not presented.

vi)                Cuttings/alternations in documents no authenticated.

vii)              Documents inconsistent with each other.

viii)            Description of goods on invoice differs from that in the credit .

ix)                Credit (L/C) amount exceeded.

x)                  Credit (L/C) expired.

xi)                Documents not presented in timed/ state bill of lading.

xii)              Late shipment.

xiii)            Absence of signature, where required, on documents presented.

xiv)            bill of lading does not evidence whether freight is paid of not.

xv)              Packing list not submitted.

xvi)            notify party differs / not as per L/C stipulation.

xvii)          Inspection certificates no submitted.

xviii)        Unit price not mentioned in invoice.

xix)            health certificate (fit for human consumption) not submited.

Recommendations

In order to get competitive advantage & to deliver quality service top management always try to modify the services. For the better condition of the service the following measures may be taken:

a)      Customer’s Convenience :  For customer’s convenience, NCCB should provide more personnel to deliver faster to their honorable customer.

b)      Human Development: Development of human resources should be ensured to increase efficiency in work.

c)      Interest: More interest should be paid on deposit account so that customers are convinced to deposit their money in bank.

d)     Computerization: To ensure error free fast task bank should be fully computerized.

e)      R & D : Research & Development wing must be more extensive & rich.

f)       Strategy : Effective strategies must be undertaken against defaulter.

g)      Project management : ‘Project  Management’ must be practiced in case of investing in the project. Feasibility study of the project, project planning, Monitoring & evaluation should be undertaken.

h)      Financial Analysis : Branch should  have a separate section to analyze the financial statement for fining its liquidity. Profitability & ownership ratios.

i)        Image: They should try to attract people for bank development.

Some other important factors that should be focused on the development process

a)      Evaluate customer’s needs from their perspective and explain logically the shortcomings.

b)      Improve ATM facility to every branch.

c)      To deliver quality service top management should try to mitigate the gap between customer’s expectation & employee’s perception.

d)     Use of effective AIS.

Conclusion

There are a number of nationalized and foreign banks operating their activities in Bangladesh. The NCCB is one of them. For the future planning and the successful operation for achieving its prime goal in this current competitive environment this report can be a guideline.

Form the practical point of view I can declare boldly that I really have enjoyed  my internship at NCCB from the first day. Moreover, internship program that is mandatory for my MBA program. Although short – dated obviously has helped my further thinking about my career.

Banks always contribute towards the economic development of a country. NCCB compared with other banks are contributing more by investing most of their funds in fruitful projects leading to increase in production. It is obvious that right thinking of this bank including establishing a successful network over the country and increasing resources, Will be able to play a considerable role in the portfolio of development financing in the developing country like ours.

NCCB continues to play its’ leading role in socio – economic development of the country. Since inception NCCB  has been rendering its’ banking services with the necks of the nation to cope with the demands of people in the country. By doing many other works of state & society, NCCB has emerged as the pioneer of playing key role in the country.

LIST OF THE BRANCHES

SL. NO.

NAME OF THE BRANCH

ADDRESS

1.Motijheel Main Branch6, Motijheel C/A, Dhaka.
2.Agrabad BranchNur Chamber 34, Agrabad C/A,Chittagong.
3.Khatungonj Branch601, Ramjoy Mahajan Lane, Khatungonj, Chittagong
4.Khulna Branch3, KD Ghosh Road, Khulna.
5.Babaubazar BranchReaz Medicine Market, 57, Mitford Road, Babubazar, Dhaka.
6.Jubilee Road BranchDominion Plaza (1st Floor), 5, Jubilee Road, Chittagong
7.O.R. Nizam Road Branch659, OR Nizam Road, Central Plaza, Chittagong.
8.Chowhatta BranchSyed Complex, Air Port Road, Ambarkhana, Sylhet.
9.Dhanmondi BranchHouse # 275/G, Road # 27 (Old), Dhanmondi, Dhaka.
10.Moghbazar Branch382, Moghbazar, Tongi Diversion Road, Dhaka.
11.Gulshan Branch85, Gulshan Avenue, Gulshan, Dhaka.
12.Malibagh BranchB-61, Malibagh Chowdhury Para, DIT Road, Dhaka.
13.Cox’s Bazar BranchMain Road, Bazaar Ghata, Cox’s Bazar.
14.Laldighirpar BranchIdrish Bhaban, Mahajan Patty, Laldighirpar, Suylhet.
15.Jatrabari Branch123/1-A, South Jatrabari, Dhaka.
16.Mirpur BranchAnwar Mansion, Plot No. 1/1 & ½, Road No. 1 & 2, Section 10, Mirpur, Dhaka.
17.Feni BranchHazi Ibrahim Hossain Market, 10, Trank Road, Feni.
18.Kadamtali BranchRafique Plaza, 1151, Dhaka Trank Road, Kadamtali, Chittagong.
19.Laxmipur BranchChowdhury Super Market, College Road, Laxmipur.
20.Mitford Branch34, Mitford Road, (1st Floor), Dhaka.
21.Bangshal Branch216, Bangshal Road, Dhaka.
22.Majhirhat Branch15, Strand Road, Chittagong.
23.Moulvibazar BranchYakub Mansion, Sylhet Road, Moulvibazar.
24.Jessore BranchKess Tower, M.K. Road, Jessore.
25.Rangpur BranchRainbow Plaza, GL Roy Road, Rangpur.
26.Kawran Bazar BranchHasney Tower, 3/A, Kawran Bazar C/A, Dhaka.
27.Dilkusha BranchHossain Chamber, 43, Dilkusha C/A, Dhaka.
28.Islammpur Branch2/1, Ahsanullah Road (2nd floor), Islampur, Dhaka.
29.Halishahar BranchPlot No. 9, Block-L, Halishahar, Chittagong.
30.Foreign Exchange Branch29/1, Toyenbee Circular Road, Motijheel C/A, Dhaka.
31.Madunaghat BranchMadunaghat Bazaar, Main Road, Chittagong.
32.Uttara Branch (Proposed)House # 6, Road # 12, Sector-6, Uttara, Dhaka.
   

Last 3 years Import Performance of NCCBL, Agrabad Branch, Chittagong:

Particulars

200120022003
Dack- to – Back L/C15,70,17,00017,64,73,88918,03,85,311
Cash L/C249,57,83,000267,50,60,111131,73,50,689
Total Import265,28,00,000285,15,34,000149,77,36,000

Last 3 years Export Performance of NCCBL, Agrabad branch, Chittagong:

Particulars

2001

2002

2003

Total Export

27,72,76,305

25,92,25,000

23,73,70,909

 

SWOT ANALYSIS

Internal Factors:

Internal factors that are prevailing inside the concern, which include strength and weakness.

Strength

  • The NCCBL has well reputation in the market
  • Not engaged in unfair business practices
  • Concentrated market
  • Executives are experienced in banking business
  • Well – furnished & air – conditioned banks
  • Cooperation among the officers & executives
  • Lack of classified loan
  • Good Banker – Customer relationship

Weakness

Short period of experience of the bank

Officers have limited experience and not enough trained

Reluctant to AD Campaign

Most of the officers are not business gradguate and not highly qualified.

Selection and recruiting process of wore force is not scientific

Lack of energetic, dynamic, talent and smart work force.

Small market share.

High interest rate of loan.

The bank has no ATM service.

 The bank is not conscious about its social responsibilities.

Insufficient number of deposit Scheme and loan

Information gap between Head Office and Branch

  Long – term credit is not sufficient

External Factors

External factors are factors, which act as opportunities and threats.

Opportunities

Can increase the deposit and credit scheme

 Private commercial banks are becoming more reliable to the local public

Govt. has banned some “Jatiya Sanchaya Patra”

Govt. has taken step against illegal remittance

Threats

Intense competition in the market

Competitors have more deposits

 Different sors of services are offerde by foreign banks

 Existing Card services of standard Charterde Grindlays Bank, Dhaka Bank, National bank, Bank Asia etc.

Daily Basis interest on deposit offerde by more banks

Entrance  of new private commercial banks

Young, energetic, dynamic, talent and smart work force of competiors

Competitors have more attractive deposit schemes

Tomorrow’s business world is for knowledge organization

Govt. imposes high rate of taxes and VAT

Govt. pressures to reduce interest rate

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