Internship Report

FOREIGN EXCHANGE BUSINESS OF NCC BANK LIMITED

-A Study on Jubilee Road Branch, Chittagong

(This internship report is submitted for the partial fulfillment of the degree of Masters of Business Administration with a major in Finance & Banking)

Prepared by
Didarul Alam
ID No: R-121137 Program: RMBA Semester: Autumn-2012

Internship Duration: Submission Date:

Department of Business Administration Faculty of Business Studies

International Islamic University Chittagong

Internship Report
FOREIGN EXCHANGE BUSINESS OF NCC BANK LIMITED

-A Study on Jubilee Road Branch, Chittagong

(This internship report is submitted for the partial fulfillment of the degree of Masters of Business Administration with a major in Finance & Banking)

Supervised by
Mr. Muhammad Mahbubur Rahman
Associate Professor Department of Business Administration

Prepared by
Didarul Alam
ID No: R-121137 Program: RMBA Semester: Autumn-2012

Internship Duration: Submission Date:

. Signature of Supervisor

Department of Business Administration Faculty of Business Studies

International Islamic University Chittagong

To The Dean Faculty of Business Studies International Islamic University, Chittagong Subject: Submission of Internship Report.

Dear Sir, It is my pleasure to submit my Internship Report on Foreign Exchange Business of the NCC Bank Ltd Jubilee Road Branch, as a part of my MBA final examination. Though its a new experience for me, I tried my best to gather relevant information for preparing a complete paper on this subject. Without the sincere co-operation and proper guidance of you, it was not possible for me to prepare the report. For this act of kindness I am grateful to you. This paper is not totally free from mistake due to some unavoidable limitations. I hope you accept it with gracious consideration. Thank you Sincerely Yours,

DidarulAlam ID-R121137 MBA (major in Finance & Banking) Trimester: Autumn-2012 IIUC

Acknowledgements
At the very beginning, I would like to express my deepest gratitude to the almighty Allah, the merciful and the benevolent who have enabled me to complete this report. It is indubitably an immense contentment on my part to have the opportunity to submit this internship report after 7 weeks of practical orientation in National Credit and Commerce Bank Ltd. (NCCBL), Jubilee Road Branch, Chittagong. It was not an easy task to fit in a situation where I was never before. But I have I got an amiable and affable working atmosphere there. With the kind supervision of my honorable internship supervisor teacher and some cordial officials in the bank I was able to complete my internship program smoothly. Thats why at the outset, I would like to convey my deepest gratitude to my honorable supervisor Mr. Muhammad Mahbubur Rahman, Associate Professor Department, of Business Administration, International Islamic University, Chittagong. I have been fortunate that I received encouragement and cooperation from him. I would not be able to complete this study without his counsel and kind cooperation. I am very much indebted to Mr. Abdur Rahman Vice President and Manager, Jubilee Road Branch, NCCBL to give permission to do internship in the NCC Bank Ltd, Jubilee Road Branch, Chittagong. I also want to render my special thanks to Mr. A.K.M..Humayun Kabir, Asstt.Vice President for his valuable guidance, support, co-operation, encouragement and advice throughout the internship program. I also want to give thanks to Mr.Shaha Alam Head of the Foreign Exchange Department, Mr.Shahidul Alam, Senior officer of Foreign Exchange And Mr. DidarulAlam senior officer of Import section of foreign Exchange Department who helped me very much during my internship period. Finally, I would like to express my gratitude to all the Executives and Officers of NCC Bank Ltd, Jubilee Road Branch who have given me their precious time.

Executive Summary

The internship program is a partial fulfillment requirement of one year MBA program by which a student can gather practical knowledge. The aim of this program is to connect practical knowledge and theoretical knowledge. I was decisive to serve a financial institution and I got chance to placement in NCC Bank Ltd, jubilee Road branch Chittagong. To fulfillment of internship, time is not sufficient to prepare report on Foreign Exchange Business of NCC Bank Ltd at Jubilee Road Branch Chittagong. The main objective of the study is to Analysis the Foreign Exchange Business of the NCC Bank Jubilee Road branch, Chittagong. To discuss the rules and regulations, Foreign Exchange Mechanisms are also in the way attaining the main goal. In this study primary data as well as secondary data has used. Primary data collected by personal interview and observation .The secondary data collected by bank annual report &web site, different training materials and articles etc. This report has contained comprising with introductory chapter, Organizational overview, and foreign exchange business and performance evaluation of the Branch. Organizational overview parts includes different information related with introduction NCC bank, management, mission, vision, product & services, rendered by the company for the customer. The foreign exchange business discusses the rules and regulation, activities of import and export procedure, remittance, foreign exchange operation mechanism. The performance Analysis has presented regarding Foreign exchange business which exists Import and Export performance, Remittance, L/C opening, major importing and exporting country etc. Finding of the Report have been presented that NCC Bank Jubilee Road Branch mostly deals in Import related business rather than export. Most of the clients are highly satisfied with the service provided by the officials in the branch and the find it best in comparison to other banks. The foreign exchange is running its operation by efficient hands and at the same time some minor problems have been identified from different sector of the department. The report has been conducted by some Recommendation that identified problem and evaluation should be implemented to save the time, cost, difficulties and increase best performance of the bank.

Finally, the report concluded that proper financial system of a country can contribute towards the development of its economy. In our country, Banks are leading in the financial system. Certainly NCC Bank Jubilee Road Branch is mobilizing its all resources on this track to achieve maximum possible contribution to the nation. And the Foreign Exchange Department is performing this task is very efficient way.

CHAPTER 01

1.1 INTRODUCTION
Bangladesh is a developing country. The common scene of Bangladesh now is that its economic condition is improving and it is taken forward by the Banks of Bangladesh. Commercial banking industry is one of the most important financial intermediaries which are playing a great role to generate savings and it makes sure the proper investment of the savings in different sector of our economy. Commercial banks are cooperating different types of business in various ways which is ensuring prosperity of business which ultimately means prosperity of economy as a whole. By, now it has been proved that literally bank is the heart of all commercial activities in Bangladesh and one of the most flourishing sector of our country. And, foreign exchange business can help expansion of our economy. Thats why the banks are now giving the maximum importance in financing Export, Import, and Remittance business enormously. This report concentrates on the overall performance of Foreign Exchange & Foreign Trade in NCC Bank Ltd, Jubilee Road Branch Chittagong. From the very beginning of taking birth, this Branch is playing an outstanding role for the betterment of the Import & Export market in this country.

1.2 RATIONALE OF THE STUDY

The rationale of the study is to assess the banking system of National Credit & Commerce Bank Limited (NCCBL). NCCBLs banking service is one of the finest services among the banking industry. With the state-of-the-art technology, efficient employees and diversified services NCCBL is facilitating the banking operation for Bangladeshi national. The benefit of the existence of NCCBLs banking service in this country is enormous because, NCCBL has countrywide operation with worldwide network which facilitates the trade function of domestic exporter and importer with a

great professionalism and care. This also increases the opportunity for this countrys entrepreneurs to expose in the industrial growth of the country with finance of NCCBL. The increased financial growth of the bank over the year attributes the trust and reliability of depositors and investors on NCCBLs banking service. Simply, this is one of the most important indicators of the superior performance of NCCBL. In a situation of low rate of economic growth, high rate of inflation, unemployment, the analysis of the status of contribution indicators of NCCBL banking operation to the economy of Bangladesh is of immense significance.

1.3 OBJECTIVES OF THE STUDY

The main objective of the study is analyze the Foreign Exchange Business of NCCBL Jubilee Road Branch, Chittagong. In line with the broad objective, the detailed objectives of the study may be spelled out as follows: To know about the Foreign Exchange Business of NCC Bank Ltd. To discuss about the Export Business procedure of the sample bank. To discuss about the Import Business procedure of the sample bank To analyze the financial performance of Foreign Exchange Business of the sample branch.

1.4 METHODOLOGY OF THE STUDY

The study is based on both primary and secondary data sources which have been mentioned below-

Primary Sources:
Face to Face conversation with the respective officers and staffs In-depth study of selected cases. Interview with the Clients.

Secondary Sources:
Annual Report of NCCBL

Official Website of NCCBL NCC Bank Training Books, Catalogs Relevant Books, Research Papers, News Papers and Journals Internet and various study selected reports

1.5 SCOPE OF THE STUDY

Through a reliable report demands an effective comparison between different branches of bank, this could not materialized due to paucity of time. However, an exhaustive endeavor is taken by studying depth of National Credit & Commerce Bank Ltd (NCCBL), Jubilee Road Branch, Chittagong keeping in view of several departments of the branch.

1.6 LIMITATIONS OF THE STUDY

From the beginning to end, the study has been conducted with the intention of making it as a complete and truthful one. However, many problems appeared in the way of conducting the study. During the study, it was not possible to get know all about the account opening systems and its procedures covered by the bank although the financial statements and other information regarding the study have been considered. The study considers following limitations Banking sector and its operation is a complex issue. Authoress lack of in-depth knowledge and analytical ability for writing such report on this issue pose problems for the report preparation. Getting required information from busy officials within limited time period is hamper the data collection. This report suffers from a narrow data range for analysis. Changing environment from the educational area to the professional area. Banking sector is a large area and the time period for study in this area was short

CHAPTER 02

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2.1 PROFILE OF NCC BANK LTD

As Banking structure is changing day by day and the far-reaching program of economic reform is carried out towards efficient utilization of scarce resources and the development of private entrepreneurship, in the vast changing business environment, financial intermediaries are gradually being left to be guided by market forces rather than regulations. Competition is strengthened by the entry of new and innovative providers of financial services through the development of Money Market and Capital Market. Under the ongoing financial liberalization program, the NCC Bank Ltd emerged as a fast growing leading and prominent bank in the private sector to operate on the commercial arena of Bangladesh. The bank has been sponsored by a group of renowned personalities from the field of trade, commerce and industries including some eminent entrepreneur. Highly skilled professionals having wide experience in domestic and international banking manage the bank. The NCC Bank Ltd has already occupied a challenging position among its competitors after achieving success in all areas of banking operation. It offers all kind of commercial, corporate and personal banking services covering almost all segments of the society. To serve the customers through capacity building across multi delivery channel is one of the main strategies of the NCCBL. The bank is gradually expanding branch for coming nearer to its customers for providing various convenient services. Thus, in the local market the operation of the NCCBL is highly appreciated for its customer oriented focus.

2.2 HISTORICAL BACKGROUND OF NCCBL

At the first leg of the decade of 1980s, the Government of Bangladesh changed its policy regarding Banking Business, which was until then restricted to the public sector only besides a few number of foreign banks. With the change of policy, the country witnessed advent of banks in private sector. This shift in policy also paved the Way of establishing non-banking finance company to build up capital market of the country. At that time on 25th November 1985 National Credit Limited here in after called NCL was established and incorporated as a public limited company in order to operate as a financial company with its registered Head Office at 7-8, Motijheel C/A, Dhaka-1000.

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The aim of the company was to mobilize resources from within and invest them in such a way so as to develop countrys industrial and trade sector and playing a catalyst role in the formation of capital market as well. The NCL faced severe setback in 1992 in respect of business and came on the verge of collapse. However, with the initiative of Boards of Directors and Management and with the permission of the Central Bank, NCL was converted to a full-fledged private commercial bank in the name and style of National Credit and Commerce Bank Limited hereinafter called NCCBL on 17th May, 1993 with authorized capital TK 75.00 crore and paid up capital TK 39.00 crore. Day by day NCC Bank has achieved a standard position among all financial institution as a full-fledge commercial bank.

2.4 MISSION & VISION OF NCCBL

Mission: To mobilize financial resources from within and abroad to contribute to Agricultures, Industry & Socio-economic development of the country and to Pay a catalytic role in the formation of capital market. Vision: To become the Bank of choice in serving the Nation as a progressive and Socially Responsible financial institution by bringing credit & commerce Together for profit and sustainable growth.

2.5 GOAL OF NCCBL

General goal: 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: Short term goal: To maximize the wealth of shareholders. To earn satisfactory rate of return on investment by providing wide range of banking services.

2.6 PHILOSOPHY OF NCCBL

At present, the bank has as many as 84 branches across the country and it is committed to become equal service providers compatible with the norms of commercial schedule bank. It renders all types of personal, commercial and corporate banking services to its customers within the purview of the Bank Companies Act,

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1991 and in line with the directives and policy guidelines laid by down, by Bangladesh bank.

2.7 OBJECTIVES OF NCCBL

The NCCBL has been established with the objective of providing efficient and innovative banking services to the people of all sections of our Society One of this bank is that it is backed by the disciplined and strongest Institution of Bangladesh. The bank has extensively in the countrys industrial and agricultural sectors in the coming days. The bank is committed to contribute as such as possible within its limitations for the economic growth and for ensuring value of its available resources.

2.8 BRANCH NETWORK OF NCCBL

NCC is the Private bank in Bangladesh. There are 84 branches all over the country. Among them 34in Dhaka Division, 33 branches in Chittagong Division, 3 branch in Khulna Division, 6 branches in Sylhet Division , 7 branch in Rajshahi Division and 1 branch in Barisal Division . Dhaka 34

Rajshahi 7

Sylhet 6

National Credit & Commerc e Bank Ltd.

Barisal 1

Khulna 3

Chittagon g 33

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Figure: Total Branch of the National Credit and Commerce Bank Limited

2.9 ORGANIZATIONAL STRUCTURE OF NCCBL Managing Director (MD) Deputy Managing Director (DMD) Senior Executive Vice President (SEVP) Executive Vice President (EVP) Senior Vice President (SVP) Vice President (VP) Senior Assistant Vice President (SAVP) Assistant Vice President (AVP) Senior Principal Officer (SPO) Principal Officer (PO) Senior Officer (SO) Officer (G-1) Junior Officer (JO) Assistant Officer (AO)
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2.10 EXECUTIVE STRUCTURE OF JUBILEE ROAD BRANCH

Vice President (VP) Assistant Vice President (AVP) Senior Principal Officer (SPO) Principal Officer (PO) Senior Officer (SO) Officer (G-1) Junior Officer (JO)
Assistant Officer (AO)

Others

2.11 DEPARTMENTS OF JUBILEE ROAD BRANCH

Several departments are in Jubilee road toRoad support for smooth running of the Departments of branch Jubilee Branch banking operation. General Banking Loan and Advance Foreign Exchange

Accounts Opening

Accounts Ledger & Deposit Cash

Import Export
Foreign Remittance
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Remittance Clearing

Fixed Deposit Receipt (FDR)

2.12Products & Services of NCCBL

Deposit Products Current A/C Savings Bank Deposit A/C Short Term Deposit A/C Term Deposit A/C Premium Term Deposit A/C Instant Earnings Term Deposit A/C Special Savings Scheme Special Fixed Deposit Scheme NFCD RFCD Money Double Program Loans and Advance Products 1. Commercial and Trade Financing 2. Long Term (Capital) Financing 3. House Building Financing 4. Retail and Consumer Financing 5. SME Financing 6. Agricultural Financing 7. Imports and Export Financing 8. Working Capital Financing

Cards
1. ATM Card 2. Credit Card (Local, International and Dual)

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Remittance Products 1. Special Interest rate on Savings and Term Deposits 2. Wage Earners Welfare Deposit Pension Scheme 3. Loans for Real Estate (Land purchase and House construction/renovation) 4. Advance against Regular Remittance

Services
Brokerage House 1. Member, Dhaka Stock Exchange Ltd. 2. Full Service Depository Participant Treasury Service 1. Primary Dealer of Govt. Approved Securities Remittance Service 1. Correspondence arrangement with more than 330 Financial Institutions all over the World For Wage Earners Remittance we have Agency arrangement with 12 reputed Exchange Houses covering major Locations of our Expatriates

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2.13PERFORMANE OF NCC BANK LTD Five Years Financial Highlights Taka in Million
Particulars Authorized Capital Paid up Capital Reserve fund & other Reserve Equity Fund Deposit Loans & Advances Investments Import Business Export Business Operating Income Operating Expenses Operating Profit Profit before Tax Profit after Tex Retained Profit Total Assets (Excluding Contra) Fixed Assets Number of Branches Number of Employees Earnings per Share Dividend (Cash %) Dividend (Bonus %) ROE % ROA % Capital Adequacy Ratio Nonperforming loan as % of Total Advances Volume of Non-performing Loans Amount of Provision against Classified Loans 2008 2009 2010 2011 2012 2500.00 2500.00 2500.00 5000.00 10000.00 1201.79 1215.58 2417.37 28147.34 24678.36 3552.08 17646.80 8557.00 3913.19 2645.62 1267.57 1056.51 479.22 7.83 32615.01 353.71 48 1118 3.99 10.00 12.50 19.82 1.47 9.78 4.95 1212.26 523.58 1352.01 1995.36 3326.52 34901.77 32687.75 6266.62 28779.21 9577.92 5269.03 3488.78 1780.25 1356.32 677.18 8.13 42522.85 522.00 53 1230 5.01 30.00 20.23 1.59 10.61 4.17 1353.31 644.11 1757.62 2863.63 4621.25 46904.66 46332.69 6526.82 38796.88 12522.04 7417.64 5054.15 2363.49 1788.96 882.28 5.34 57365.52 775.31 57 1400 5.02 30.00 21.76 .54 10.61 4.14 1902.58 912.90 2284.90 4371.62 6656.52 53900.15 50387.68 9671.53 33078.44 11903.72 9333.03 61.95.33 3137.70 2686.49 1719.50 46.47 65937.49 849.10 65 1496 7.53 47.00 28.49 2.61 13.55 2.84 1420.57 720.22 4501.25 5771.09 10272.34 67961.24 63230.14 10980.81 41245.21 16125.52 10157.99 6057.79 4100.20 3248.23 2371.68 388.11 83554.18 1191.49 79 1622 5.33 32.00 25.35 2.84 10.91 2.27 1425.28 742.80

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Amount of Provision against 282.09 388.78 unclassified Loans Amount of Provision against - 51.69 Off-balance sheet exposures Advance Deposit Ratio% 87.68% 93.66%
Source: Annual Report 2011, NCCB

456.07 109.41 98.78%

509.67 111.93 93.48%

740.31 174.93 93.04%

2.14 SWOT Analysis

SWOT stands for Strength, Weakness, Opportunity and Threat. The SWOT of NCCBL has been shown belowInternal factors Strength Existence of strict and standard Foreign exchange department. Young Enthusiastic workforce Experienced manpower in Foreign in foreign exchange department Strong financial position Weaknesses Lack of trained and highly educated officers. Absence of modern equipment in banking needs. Lack of proper media presence. Lack of advertisement of the Foreign exchange banking Some officials are having attitude problem at workspace. Threats

External factors Opportunities

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Country wide Network More Experienced and Managerial Know-How Debit Cards Can recruit fresh graduates and train them to bring up a team of talented officers. Can take initiative for introducing Islamic Banking system.

Govt. policies are not in favor of the private banks. Up Coming Bank Moderate levels of Customer Satisfaction Effects of the World Economic Slums

CHAPTER 03

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3.1FOREIGN EXCHANGE
Foreign Exchange refers to the process or mechanism by which the currency of one country is converted into the currency of another country. Foreign exchange is the means and methods by which rights to wealth in a countrys currency are converted into rights to wealth in another currency to effect International Trade payment. This mechanism by which commercial investment and others transactions between countries are being settled. (Chowdhury, L.R. (2000), A Text Book on Foreign Exchange, p. 3).

3.1.1FOREIGN EXCHANGE REGULATION ACT

Foreign Exchange Regulation Act 1947 was adopted in Bangladesh immediately after independence. A few provisions have been added under the foreign exchange regulation ordinance, 1947. Actually this Act empowered Bangladesh Bank to regulate certain payments, dealing in foreign exchange and securities and the import

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and export of currency and bullion. After 1947, the Act was adopted by Pakistan and after 1971 by Bangladesh. The Act has 27 sections and a number of sub sections. The main objective of the Act are to conserve the limited foreign exchange resources and to ensure that the available foreign exchange is utilized only for priority requirements in the economy and financial interest of Bangladesh and the maintenance of the proper accounting of foreign exchange receipts and payments. Bangladesh Bank issues license to deal in foreign exchange empowered by the Foreign Exchange Regulation Act 1947. Central Bank may issue general license or license with authority to perform limited functions only. (Chowdhury, L.R. (2000), A Text Book on Foreign Exchange, p. 6).

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3.1.2 Balance of Payment

Balance of payment is a record of the value of all transactions between residents of a country with outsiders. All international transactions, both commercial and industrial in a year which gives rise to claims by residents of the country on foreigners and claims by foreigners on nationals of the country are included in the balance of payments.

3.1.3 Balance of Trade

The difference between the money value of a nations merchandise exports and imports, as shown by customs data adjustment for difference in timing and coverage for calculation of a nations balance of payment, there fore reflecting the visible. If import merchandise of a nation is rated higher then the export merchandise over a year then its referred as imbalance trade. Because national reserves of foreign remittance privileged by export but its lost the reserve by import. So, if import is running higher then export then government loss its foreign stock which effects non national economy.

3.1.4 Functions of AD in Foreign Exchange and Foreign Trade

The Authorized Dealer (AD) Bank has vital role in the foreign trade of a country. They provide the finance needed to execute the transaction. They form the channel through which the documents and money are exchanged between the exporter and importer. NCCBL Jubilee Road Branch is an AD branch having the right to perform foreign exchange operation with the foreign trade of the country. Including Jubilee Road Branch, there are 5 branches of NCCBL in Chittagong area that perform foreign exchange operation. They are

Khatungong Branch O. R. Nizam Road Branch Agrabad Branch

Majirghat Branch

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3.1.5Transaction by Jubilee Road Branch as AD Branch

Foreign Transaction Foreign Trade Impor t C LT R
L/

Exchange

Foreign Exchange other Transaction

Expor t PA D LI M Foreign Other Remittance Transaction Outward Remittance Inward Remittance TC/ CFC

&

Foreign Guarantee

F.C A/C Opening Private F.C A/CNRFCD A/c RFCD A/c AP G PG BID

Import Trade

finance Export Trade finance ECC (P)/ECC (H) B to B

Dealing in Foreign

Forward Dealing in Foreign Exchange

Currency

L/C Packing Credit IFDBC FDBP

FC = Foreign Currency A/C = Account, BID = Bid-Bond PAD = Payment Against Import Document FDBC = Foreign Documentary Bill For Collection FDBP = Foreign Documentary Bill For Purchase TC = Traveler Cheque CFC = Cash Foreign Currency PG = Performance Guarantee APG= Advanced Payment Guarantee LIM = Loan Against Import Merchandise LTR = Loan Against Trust receipt CC (P/H) = Cash Credit ECC (P/H) = Export Cash Credit NRFCD = Non Resident Foreign Currency Deposit RFCD = Resident Foreign Currency Deposit

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3.1.6Activities of Foreign Exchange

Foreign exchange means exchange of foreign currency between two countries. If we consider Foreign exchange as a subject than it means all kinds of transactions related to foreign currency. In other words Foreign exchange deals foreign financial transactions related to Import Export Foreign Remittance

3.1.7 Letter of Credit

The Letter of Credit signifies a commitment on behalf of the buyer (importer) by the buyers bank to effect payment to the seller (exporter) subject to fulfillment of certain condition by the seller. The Uniform Customs and Practice for Documentary Credits 2007 Revision, International Chamber of Commerce (ICC) Publication No. 600 defines documentary credit agreement, however named or described, whereby a bank acts at the request and on the instruction of a customer: To make a payment or to order the third party (the beneficiary) Authorized another bank to make due payment or to accept and pay such bill of exchange or authorizes another bank to negotiable against stipulated documents provided that the terms and conditions are complied with. The customary clauses contained in a L/C are as follows: A clause authorizing the beneficiary to draw the bill of exchange up to a certain amount on the opener List of shipping document that are accompany the bill Description of the goods to be shipped An underwriting by the opening bank that bill drown in accordance with the conditions will be duly honored. Instruction to negotiating bank for abstaining reimbursement of payment under the credit.

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3.1.8 Types of L/C

Generally L/C has two types. These are

Clean letter L/C

Documentary L/C

Clean L/C Here L/C is issued without documents. Documentary L/C Documentary is two types. These are

Revocable L/C
Irrevocable L/C

Revocable L/C Revocable credit is a credit, which can be amended or revoked or cancelled by the issuing bank at any time without prior notice to the seller/ beneficiary. Irrevocable L/C Irrevocable credit constitutes a definite undertaking of the issuing bank provided that the stipulated documents are presented and the terms and conditions are compiled with for payment, acceptance and payments of drafts or negotiation. An Irrevocable credit can neither be amended nor cancelled without the agreement of the issuing / confirming bank and the beneficiary.

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3.1.9 Parties of Documentary L/C

Under UCPDC 600, 2007 Revision, published by ICC Importer / Buyer/ Opener/ Applicant: Importer / Buyer/ Opener/ Applicant is a person who request or instructs the bank to open a L/C. Issuing/ Opening Bank: Issuing bank means the bank that issues a credit at the request of an applicant or its own behalf. Exporter/ Seller/ Beneficiary: Beneficiary means the party in whose favor a credit is issued. Advising / Notifying bank: Advising bank means the bank that advises the credit at the request of the issuing bank. Conforming Bank: Conforming bank means a bank that adds its confirmation to a credit upon the issuing banks authorization or request. Negotiating Bank: Negotiating bank means the bank that negotiates and pays the amount to the beneficiary. It has to certify scrutinize the documentary credit before negotiation in order to see whether the documents apparently are in order or not.
Paying/ Reimbursing bank: Paying/ Reimbursing bank is the bank on whom the bill will be drawn. It is nominated in the credit to make payment against stipulated documents complying with the terms of the credit. It may or may not the issuing bank

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3.1.10 Process of Documentary L/C

Advises and/or confirms l/c

BUYER/ IMPORTER

INDENTOR

SELLER EXPORTER BENEFICIARY

Submit Documents

Present Document

Application for Opening L/C

Makes Payment

ISSUING BANK

ADVISING BANK/ NEGOTIATING

OR

Foreign Exchange Department

REIMBURSING BANK

FIG: FOREIGN EXCHANGE MECHANISM

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Pays or Reimburses

Makes Payment against Document Instruction to pay or reimburse

3.1.11 Operational Procedure of L/C

Importer L/C opener Or Applicant
Performa Invoice Contract Intenders Intend

Exporter Or Supplier Beneficiary

Shipment of Goods

Issuing Bank The bank will deal with L/C for the buyer against supplier & through the L/C advising bank.

Negotiation Bank This bank negotiates with issuing bank in the favor of exporter for the bill and pays the amount to the exporter.

Reimbursement Bank This bank deals with payment in favor of issuing bank.

Advising Bank This bank will deals with the exporter & inform the supplier that a L/C came from the buyer.

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3.2 IMPORT BUSINESS

Import refers to bringing foreign goods and services into the country from abroad.

3.2.1 Flow Chart of Opening L/C for Import

Following document duly signed L/C application form LCA form IMP form authority to debit account. Documents submitted by the importer by the importer indent/ PI/ Insurance cover note etc. Banker examines the liability position of the importer from different departments and whether the item is importable or not.

L/C is opened and sent to advising bank through swift.

Credit report of the exporter asked from the negotiation bank.

Original IRC submitted to the bank Positive or Negative TIN certificate Trade License (up to date) copy Membership certificate of chamber of Commerce

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3.2.2 Application for L/C Limit

Before opening L/C, importer applies for L/C limit. To have an import L/C limit, an importer submits an application to the bank furnishing the following information Full Particular of Bank A/C maintained with the bank Nature of Business Required Amount of Limit Payment Terms and Conditions Goods to be Imported Offered Security Repayment Schedule

A credit officer scrutinizes this application and according prepares a proposal (CLP) and forwards it to Head Office Credit Committee (HOCC). The committee, if satisfied, sanctions the limit and \returns back to the branch. Thus the importer is entitled for the limit.

3.2.3 L/C Application

After getting the importer applies to the bank to open a letter of credit on behalf of him with required papers. Documentary Credit Application Form: NCCBL provides a printed form for opening of L/C to the importer. This form is known as Credit Application Form. A special adhesive stamp is affixed on the form. Proforma Invoice: It states description of the goods including quantity, unit price etc. Insurance Cover Note: The name of issuing company and the insurance number are to be mentioned on it. LCA: The Later of Credit form should be duly attested. IMP Form TIN Certificate VAT Certificate Forwarding for Pre-Shipment Inspection (PSI): Importer sends forwarding letter to exporter for Pre-Shipment Inspection. But all types of goods do not required PSI.
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3.2.4 Securitizations of L/C Application

The NCCBL Officer scrutinizes the application in the following manner The terms and conditions of the L/C must be complied with UCPDC 600 and Exchange Control and Import Trade Regulation. Eligibility of the goods to be imported 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 Carrying vessel is not of Israel Certificate declaring that the item is in operation not more than 5 years in case of car. As soon as a L/C is opened, the following vouchers are passed in the books of the opening bank: Customers liabilities on L/C DR Bankers liabilities on L/C CR Margin commission postage and SWIFT charges are recovered from the party by the passing entry as follows: Partys A/C - DR Margin A/C on L/C - CR Commission Postage - CR - CR

3.2.5 Transmitting L/C

The Transmission of L/C is done through telex or fax to advice the L/C to the advising bank. The advising bank verifies the authenticity of the L/C. NCCBL has corresponding relationship or arrangement throughout the world by which the L/C is advised. Actually the advising bank does not take any liability if otherwise not requested.

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3.2.6 Credit Report

If the amount of L/C exceeds US $10,000 then NCCBL takes the credit report of the beneficiary to ensure the worthiness of the supply of goods.

3.2.7 Amendment of Credit

Parties involved in L/C, particularly the seller and the buyer cannot always satisfy the terms and conditions in full as expected due to the some obvious and genuine reasons. In such a situation the credit should be amended. In case of revocable it can de amended or cancelled by the issuing bank at any moment any without prior notice to the beneficiary. But in case of irrevocable credit it can neither be amended nor cancelled without agreement of the issuing bank, the confirming bank (if any) and the beneficiary.

3.2.8 Presentation of Documents

The seller being satisfied with the terms and conditions of the credit makes shipment of the goods as per L/C terms. After making the shipment of the goods in favor of the importer the exporter submits the documents to the negotiating bank. 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 negotiates to NCCBL. Branch & bank received seal to be affixed on the forwarding schedule. The Bill of Exchange & transport documents must immediately be crossed to protect loss or fraudulent.

3.2.9 Settlement
the documents and the draft and if it is a bank other than the issuing bank, then sends the documents to the issuing bank stating that it has accept the draft and at Settlement means fulfillment the commitment of issuing bank in regard to effecting payment subject to satisfying the credit terms fully. This settlement may be done under three separate agreements as stipulated in the credit. This are
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Settlement by payment Settlement by acceptance Settlement by negotiation

Settlement by Payment Here the seller presents the documents to the paying bank and the bank then scrutinizes the documents. If satisfied the paying bank makes payments to the beneficiary and in case of this bank is other than the issuing bank, then sends the documents to the issuing bank. If issuing bank is satisfied with the requirement, payment is obtained from the issuing bank. Settlement by Acceptance Under the agreement the seller submits the documents evidencing the shipment to the accepting bank accompanied by the draft down on the bank at the specific tenor. after being satisfied with the documents, the banks accept maturity the reimbursement will be obtained in pre-agreed manner. Settlement by Negotiation This settlement process start with the submission of documents by the negotiating bank accompanied by a draft on the buyer or other drawee, at sight or at a tenor, as specified in the credit. After scrutinizing that the documents meet the credit requirement, the bank may negotiate the draft. This bank if other than the issuing bank, then send the documents and draft to the issuing bank. As usual, reimbursement will be in the pre agreed manner.

3.2.10 Modes of Transmission of L/C

In international trade the transmission of L/C is preferred by the following means Cable Telex FAX SWIFT Airmail

In NCCBL transmission of L/C is done through SWIFT.

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3.2.11 Documents used in L/C Operation

The most commonly used documents in foreign exchange are Bill of exchange Bill of Lading Commercial invoice Certificate of origin Inspection certificate Packing list Insurance document Pro Forma Invoice (P1)/Indent

3.2.12 Clean Report of Freight (CRF)

This certificate is provided by the Pre Shipment Inspection (PSI) Concerns. The entire world has been brought under the three supervision of the three pre - shipment inspection concerns based on different territory. These are as follows Intertek Testing Service Inspectorate Griffith Ltd Bureau Veritas

After receiving all the documents, the negotiating bank then checks the documents against credit. If the documents are found in order the bank will pay, accept, or negotiate in accordance with the terms and conditions of the credit. Then the bank will send the documents to the L/C issuing bank (NCCBL).

3.2.13 Examination of Import Document

One of the basic principals of documentary credit is that all parties deal with document and not with goods. That is why the documents should be scrutinized properly. If any discrepancy in the document is found that is informed to the party. A checklist may be followed for examining the documents. The following things can be happen. These are indicated in the following Discrepancy found but importer accepts then the bank lodges the documents.

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Discrepancy found and importer not agrees to accept issuing bank would imitate negotiation bank for revised document or return the documents to the

Negotiation bank for necessary action. Ere the issuing bank is not bound to pay because the documents send by the exporter is not in accordance with the terms of L/C. Documents are ok importer is not willing to retire the documents in this case bank is obligated to pay the price of exported goods. Since imported did not pay for bill of exchange, this payment by bank is one kind of credit to the importer and this credit in banking is known as FORCED PAD. Every things is ok but importer is fail to clear goods from port and request bank to clear in, this case the banks clears the goods and takes delivery of the same by paying customers duty and sales tax etc. So this expenditure is debited to the importers account and in banking called LIM. Some times bank gives the documents to the importer before paying money depend on importers goodwill and in banking it is called LTR.

3.2.14 Payment through the Reimbursing Bank

The L/C issuing bank after getting the document and check the document and if the terms and condition met the requirement the issuing bank take initiative to make payment to the exporter through reimbursing Bank.

L/C opening Bank

Reimbursing Bank

Negotiating Bank

The issuing bank then informs the importer that his/her document has come to the bank and by giving the payment he/she can release the document and unloading his/her goods form the ship or any other place as per L/C terms and conditions. After realizing the SWIFT charge, service charge, interest (if any), and the shipping Documents is then stamped with PAD number and entered in a PAD Register. Information is given to the customer calling on the banks counter requesting Retirement of the shipping document. After passing the necessary vouches, endorsement is made on the bank of the bill of exchange as Received Payment and the Bill of Lading is endorsed to the effect please deliver to the order of M/S
37

under two authorized signatures of banks officers (P.A Holder). Then the documents are delivered to the importer.

3.2.15 Lodgment
Lodgment means requirement of funds. Usually payment is made within seven days after the documents have been received. If the payment becomes deferred, the negotiating bank may claim interest making delay. Lodgment constitute the followings Requisition for the Foreign Currency: For arranging necessary fund for payment, a requisition is sent to the International Department. Preparing Sale Memo: A 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 exchange trading. Finally, an IBETCA is send to ID. Creation of PAD Liability: NCCBL lodges the converted the bill amount at Bill Collection (BC) rate prevailing on the date of lodgment to PAD A/C and an IBETCA prepared at the converted bill amount at T.T clear is sent to ID. PAD A/C should be adjusted within 21 days. Payment Instruction: Payment instruction is given to the reimbursement bank to debit the issuing banks. NOSTRO A/C to make payment to the negotiating bank. Payment Intimation to the Negotiating Bank: Intimation is sent negotiating bank ensuring that payment has been made. Stamping: Shipping documents are then stamped with PAD number and entered in the PAD register. Intimation to the Applicant: As soon as above formalities are completed the importers are served with PAD bill intimations for retirement of concerned import documents. A letter of intimation regarding receipt of the documents Should be sent to the applicant with a request to take delivery of the documents on settlement of all dues against it.

The following accounting treating are givenClients A/C .. Dr

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Margin on L/CCr VAT (15% of Commission)Cr FCCCr Registration Fee A/C.Cr SWIFT chargeCr Miscellaneous Charges A/C...Cr After that L/C number and the above entries are given in the L/C register. The Contra entries stating the liabilities of the bank and the client are as follow Customer liability.Dr Bankers LiabilityCr

3.2.16 Retirement of Documents

After lodgment the issuing bank will send the importer an intimation regarding the document arrival notice. On intimation the importer calls on the banks counter requesting retirement of the shipping documents against payment to the debit of their account by the bill amount and other charges payable. Steps involved in retirement are Calculation of interest it any. Preparation o the Memo, Bill amount, Interest commission, overdue interest if any, Agents charges, postage etc. Passing vouchers. Entry in the register. Endorsement is made on the back of the bill or exchange as Received Payment On the back of bill of lading endorsed to the effect that Please deliver to the order of MIS under two authorized signatures of the bank.

Acknowledgement received on the office copy of the cost memo from the importer in his authorized agent.

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Filling of the office copy. Then the documents ape delivered to the L/C (Importer)

On scrutiny if it is found that the document drawn in conformity with the terms of the credit, the documents are in order NCCBL lodges the document in PAD and L/C Margin A/C. L/C Margin A/CDr PAD A/CCr (Margin amount transferred to PAD A/C) Customer A/CDr PAD A/C..Cr (Customers A/C debited for the remaining amount) PAD A/C..Dr NCCBL General A/C..Cr Exchange gain A/C.Cr (Amount given to MCCBL General A/C and interest credited) Reversal Entries Bankers liability.Dr Customers liability..Cr (When lodgment is given)

3.3 IMPORT FINANCING

NCCBL foreign Exchange provide three types of post import finance for the clients Payment Against Documents (PAD) Loan Against Import Merchandise (LIM) Loan Again Trust Receipt (LTR)

3.3.1 Payment Against Documents (PAD)

Advance Against Import Bills originate from the lodgment of shipping documents received foreign correspondent against letter of credit established by the bank on behalf of its clients. PAD is created for 30 days at interest of 15% of L/C. If importer

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dose not take the documents within these days then bank may sell the imported goods to recover the given credit.

3.3.2 Loan Against Import Merchandise (LIM)

Advances allowed for retirement of shipping documents and re of goods imported through L/C taking effective control over the goods by pledge fall under this type of advance. When the importer failed to pay the amount payable the exporter against import L/C, then NCCBL gives Loan against Imported Merchandise ((LIM) to the importer. The importer will bear all the expenses i.e. go down charges, insurance fees, etc. and the ownership of the goods is retaining to the bank and the outstanding under PAD or Bills of Exchange (B/F) is transferred to Loan Against Imported Merchandise (LIM) account. Normally part delivery is not allowed white on LIM account.

3.3.3 Loan Against Trust Receipt (LTR)

This is excluded by the Borrower(s) to release shipping documents for taking delivery of merchandise, which is hypothecated, to bank. The goods are handed over to the importer under trust with the arrangement that sale proceeds should be deposited to liquidate the advances within a given period. The borrower(s) agree to take delivery of the merchandise as the banks agent(s) arid acknowledge(s) that the bank remains owner of the goods and they will holding the goods on behalf of the bank as trustees until complete repayment of the debts to the bank. Usually the roan is granted on the basis of trust and is allowed 60-90 days time to make payment. For giving these types of loan, officer makes loan proposal and sends it to H/O for approval. After getting Approval from H/O, bank grants loan in the form of LIR. Its needless to say that bank only deals with the documents, not with goods & services in case of foreign exchange business.

3.4 EXPORT BUSINESS

The goods and services sold by Bangladesh to foreign country called export. In broader aspect the major responsibility that re performed here are
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L/C Advising. Documents Collection Documents negotiation

Export financing, L/C issuing Bank Importer Exporter L/C advising Bank Negotiation Bank The Paying / Reimbursing Bank

3.4.1 Parties Involves In Export L/C

3.4.2 Export Procedures & Formalities

The export trade of the country is regulated by the Imports and Exports (control) Act, 1950. There are a number of formalities, which an exporter has to fulfill before and after shipment of goods. These forma or procedures are enumerated on follows. Registration of the Exporter The foremost requirement to engage in the business of import and export is registration with the Chief Controller of Imports and Exports (CCI&E). For this purpose an application in the prescribed, form is require to be submitted to that office along with the following documents Trade license issued by the municipal Authority. Nationality Certificate from the Local Authority. Bank Certificate. Income Tax Clearance Certificate. Payment of Registration fees and renewal fees in a Treasury Chalan. Copies of Contract or L,/C (if any)

Export Registration Certificate (ERC) The exports from Bangladesh are subject to export trade control exercised by the Ministry Of Commerce through Chief Controller of Imports and Exports (CCI&E No exporter is allowed to export any commodity permissible for export from Bangladesh unless he is registered with CCI & E and holds valid Export Registration Certificate (ERC). The ERC is to be renewed every year. The ERC number is to be incorporated on EXP forms and other documents connected with exporters.

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Export Permit Form (EXP) Alter having the registration, the exporter applies to TBL with the trade license: ERC, and the Certificate from the concerned Government Organization to get EXP. If the bank is satisfied then an EXP is issued to the exporter. An EXP contains the following particulars Name & address of the authorized dealer Particulars of the commodity to be exported with code Country of destination Port of destination Quantity L/C value in foreign currency Terms of sales Name & address of the importer Bill of lading The L/C is an irrevocable one, preferably confirmed by the advising bank. The L/C allows sufficient time for shipment and a reasonable time for registration. If the exporter wants the L/C to be Transferable, divisible and advisable, he should ensure those stipulations are specially mentioned in the LIC. Procuring the Materials No & date Port of shipment Land custom post Shipment date Name & address of the exporter CCI & Es Registration number and date of the exporter

Securing the Order Upon registration, the exporter may proceed to secure the export order. Contracting the buyers directly through correspondence can do this. Signing of the Contract
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While making a contract, the following points are to be mentioned Description of the goods Quantity of the commodity Price of the commodity Shipment Insurance and marks Inspection Arbitration

Receiving Letter of Credit Alter getting 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 of Documentary Credit The terms of the L/C are in conformity with those of the contract.

After making the deal and on have the L/C opened in favor, the next step for the exporter is to set about the task of procuring or manufacturing the contracted merchandise. Registration of Sale This s needed when the items propos to be exported are raw jute and jute goods. Shipment of Goods The follow are documents normally involved at the stage of shipment EXP Form Photocopy of registration certificate Photocopy of the contract Photocopy of the L/C Customs copy of ERF Form for shipment of jute goods and EPC Form For raw jute.

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Freight certificate from the bank In case of payment of the freight at the port of lading is involved. Railway receipt, Berg Receipt or Truck Receipt. Shipping instructions. Insurance policy.

After those, exporter submits all these documents along with a Letter of Indemnity to NCCBL for negotiation. An officer scrutinizes all the documents, if the document is a clean one, NCCBL purchases the documents on the basis of banker- customer relationship.

3.4.3 Documents for Export L/C

These documents should be submitted to the bank for negotiation Export L/C EXP form Commercial invoice Bill of Exchange Certificate of origin Bill of Lading Packing list Inspection certificate Insurance document Any other document as per L/C

Respective officer must scrutinize all the documents with reasonable care to confirm whether the terms and conditions are right or wrong

3.4.4 Realization of Export Proceeds

The period prescribes by the Bangladesh Bank within which exporter must receive full foreign exchange proceeds of exporter in four months if the receipt of the full

45

Proceeds of any shipment is delayed beyond the period without a special authority from the Bangladesh Bank. The exporter will be liable to action under FER Act, 1947.

3.4.5 Modes of payments of Export Bills under L/C

The most common methods of payment under a L/C are as follows: At Sight Payment Credit

Deferred payment Credit Payment Method under L/C

Negotiation Payment Credit

Acceptance Payment Credit

3.4.6 Advising L/C

When export L/C is transmitted to the bank for advising, the bank sends an Advising Letter to the beneficiary depicting that, L/C has been issued.

3.4.7 In Land L/C

ILC means LJC within the same country. These types of L/Cs are opened when the seller does not believe the buyer though they are of the same country and also in the cases where the sales contract is of a big amount.

3.4.8 Bills Negotiation

The beneficiary (exporter) receives the letter of credit from advising bank. After proper shipment of goods as per terms and conditions of the L/C, required documents like Commercial Invoice Bill of Lading and bill of exchange are presented to the negotiating bank by the beneficiary for negotiation. For sight L/C, if the documents are in order as per L/C then the negotiating bank negotiates the drafts making payment to the beneficiary. Then the negotiating bank forwards the drafts along with the shipping documents to the L/C opening bank

3.5 EXPORT FINANCING

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An exporter is one who exports the goods to another customer whether n domestic country or in abroad. In exporting the stipulated goods he nay requires financing. So export financing may be required at two stages Pre-shipment credit. Post shipment credit,

3.5.1 Pre-shipment Credit

Pre shipment credit, as the name suggests, Is given to finance the act of an exporter prior to the actual shipment of the goods for export. The purpose of such credit is to meet working capital needs starting from the point of purchasing of raw materials to final shipment of goods for export to foreign country. Before allowing such credit to exporters the bank takes into consideration about the credit worthiness, export performance of the exporters, together with all other necessary information require for sanctioning the credit in accordance with the existing rules and regulations. Pre credit is given for the following purposes Cash for local procurement and meeting related expenses. Procuring and processing of goods for export. Packing and transporting of goods are export. Payment of Insurance premium. Inspection fees Freight charges etc.

An exporter can obtain credit facilities against lien on the irrevocable, confirmed and unrestricted export letter of credit in farm of the followings Packing credit (PC). Back-to-Back letter of credit. Export Cash Credit (Hypo). Export Cash Credit (Pledge).

3.5.2 Packing Credit (PC)

Packing Credit is essentially a short-term advance granted by a Bank to an exporter for assisting him to buy, process, manufacture, packing and ships the goods. This type
47

of credit is sanctioned for the transitional period starting from dispatch of goods till the negotiation of the export documents. Exporter can get PC up to 10% of the Export L/C value and has to be liquidated by negotiation / purchase of Bills of Exchange. The drawings of P.C are required to be adjusted fully once within a period of 180 days. Charge Documents for PC Banker should obtain the Following charge documents duly stamped prior to disbursement Demand Promissory Note Letter c Arrangement Letter of Lien of Packing Credit (On special adhesive stamp) Letter of Disbursement Packing Credit Letter

3.5.3 Back-to-Back Letter of Credit

A Back-to-Back letter of credit, a new L/C (an Import L/C) is opened on the basis of an original L/C (an Export L/C). Under the Back-to-Back concept, the seller as the Beneficiary of the First L/C offers it as a security to the advising Bank for the issuance of the second L/C. The Beneficiary of the Back-to-Back L/C may be located inside or outside the original Beneficiarys country. As per instruction of the central bank commercial banks are rendering Back-to-Back L/C at nil margins. Ready-made garment industries and specialized textile units are allowed the facility of importing fabrics and other materials needed for manufacture of garments/ specialized textiles against back-to-back L/C arrangement, Back-to-Back L/C is of two types Foreign back-to-back L/C. Inland back-to-back L/C.

A Back-to-Back L/C is opened against an irrevocable L/C opened bank having reasonable period of validity to cover shipment of merchandise after completion of validity to cover shipment of merchandise after completion of the manufacturing process. The export L/C is lien marked with the back-to-back L/C issuing branch, import t is opened on issuance basis covering usance of not more than 180 days. The Import L/C is opened for 8O% of the value of Export L/C. The payments normally made form the proceeds or export bills negotiated after shipment. Payment of Back-to-Back L/C

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In case Back-to-Back L/C as 60-90-120-180 days of maturity period, deferred payment is made. Payment is given after realizing export proceeds from the L/C issuing bank. For Back-to-Back L/C, opener has to pay interest at LIBOR rate (London Inter Bank Offering Rate). Generally LIBOR rate fluctuates from 5% to 7%.

3.5.4 Export Cash Credit (Hypothecation)

Under this arrangement the bank sanction the loan to the 1st class exporter, as there is no security against this loan. The letter of hypothecation creates a charge against the merchandise in favor of the bank but neither the ownership nor the possession is passed to it.

3.5.5 Export Cash Credit (Pledge)

Under this arrangement the bank advance loan to the exporter against pledge of raw materials or exportable goods. The exporter surrenders the physical possession of goods under banks control till the payment of dues is made. If the exporter does not able to pay the loan the bank can sell the exportable goods to recover the credit.

3.5.6 Post-shipment Credit

This type of credit refers to the credit facilities, extended to the exporters by the banks after shipment of the goods against export documents. Necessity for such credit arises, as the exporter cannot afford to wait for a long time for without paying manufacturers / suppliers. Before extending such credit, it is necessary on the Part of banks to look into carefully the financial soundness of exporters and buyers as well as other relevant documents connected with the export in accordance with the rules and regulations in force, Banks in our country extend post shipment credit to the exporters through Foreign Documentary Bills Purchased (FDBP). Local Documentary Bills Purchased (LDBP).

3.5.7 Foreign Documentary Bills Purchased (FDBP)

In case of Deferred L/C the payment usually received after a certain period that is 90,120180 days later. In that case party (exporter) sometimes wants to negotiate the bills to the negotiating bank, for incise or need of money. In FDBP bank negotiates the bills & documents to adjust the Packing Credit (PC) or back to-back L/C payment and gives the rest amount to the client in cash or by crediting his account. In this process the negotiating bank collect acceptance letter from the payment bank and
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purchase the export bills at a usance rate of currency. FDBP is created only for the foreign documents. For this purpose, NCCBL maintains a separate register named FDBP Register. This register contains the following information Date Reference number (FDBP) Name of the drawee Name of the collecting bank Conversion rate Bill amount both in forei9n currency & Taka. Export L/C number

3.5.8 Local Documentary Bills Purchased (LDBP)

It created only for the local export documents. Local exporters are usually small one and act ns backward linkage industry to the large foreign exporters. So, in case of deferred L/C (Usually done in Textiles/ Garments) the exports want to negotiate the bills for quick receiving of payments. The negotiating bank checked the documents thoroughly and transferred the discounted value of Bills by converting it into Bangladeshi Taka at a ruling usance rate. This temporary liability is adjustable from the proceeds of the bills.

3.6 REMMITANCE
Remittance means sending of fund from one place to another place, When fund in transferred to or received from foreign country it is called foreign remittance. The word Foreign Remittance means sending/ transferring of fund through a bank from one place to another between two countries. Foreign Remittance means purchase and sale of freely convertible foreign currencies as admissible by Foreign Exchange Regulations Act-1947 and Guidelines for Foreign Exchange Transaction VOL. 1&2 of the country. Purchase of foreign currencies constitutes inward foreign remittance and sale of foreign currencies constitutes out ward foreign remittance.

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3.6.1Local Remittance Local remittance is the process of transfer money one place to another place through bank within the country of a bank Mode of Local Remittance Advice: Advice is an instrument for transferred fund from one branch to another in order to perform its internal activities. This is one kind of order payment. Payment Order (PO): Payment Order is an instrument which makes the order of payment to a certain institution from a particular bank. Demand Draft (DD): This is an instrument through which customers money is remitted to another person/ firm / organization in outside the clearinghouse area from branch of one bank to an outstation branch of the same bank or to a branch of another bank. Telegraphic Transfer (TT): This is a mode of transfer of customers money from a branch of one bank to another branch of the same bank through telegraphic.

3.6.2 Foreign remittance

Foreign remittance is the process of transfer of money from one country to another country via bank

Mode of Foreign Remittance

Channels Habib Qatar Al Fardan Dhaka Janata UAE Exchange LLC Federal Exchange Country Qatar Middle East Italy UAE Middle East

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Placid Express KAYMAKS First solution Wall street Money Gram Xpress money Arab National Bank

USA England England UAE Worldwide Worldwide KSA

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3.6.3 Country Wise Remittance Performance

Country KSA UAE Kuwait Malaysia UK USA Oman Bahrain Singapore Qatar Others Total 2008 800.66 389.66 171.82 201.22 162.03 93.10 108.65 5.97 18.34 10.15 2009 1450.54 197.76 115.44 203.05 197.28 28.66 121.27 13.20 35.06 128.96 1.58 2010 1854.07 297.15 318.69 380.90 290.53 85.61 291.97 45.18 58.22 221.53 12.15 3856.00 2011 2844.52 953.37 805.74 672.80 568.01 178.92 572.14 91.48 130.09 526.14 104.28 7443.50

Figure In million 2012 4300.65 1728.39 1346.15 1318.21 1116.72 446.39 1184.53 260.80 431.50 1126.93 37.91 12098.18 (%) of Total 40.44 14.96 13.08 11.11 4.07 5.11 3.95 2.12 1.10 3.12 0.94 100

1961.60

2492.30

Country Wise Remittance Position

KSA UAE Kuwai t M al aysi a UK USA Oman Bahrai n Si ngapore Qatar Others

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CHAPTER 04

54

4.2 PERFORMANCE OF NCCBL JUBILEE ROAD BRANCH

4.2.1 Import
As on 30th November, 2012 branchs total import stood at $ 1041.848 Million, in the year of 2011 it was $1390.5 million and at the end of the 2010 it was 1221.6million. Year Import 2010 1221.6 2011 1390.5 2012 1041.484

Graphical Representation Figure in million

Analysis:
From the above graphical presentation we can see that import of the bank is fluctuating over the three years. But in 2011 the import of the Branch was 1390.5 million & in the year of 2012 the branch total import was 1041.484 which is represents that the import of the branch is reducing.

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4.2.2 Export
As on 30th November, 2012 branchs total export $891.7million stood at the end of 2011 it was $149.95million & at the end of year 2010 it was 225million.

Year Export

2010 225

2011 149.5

2012 891.7

Graphical Representation Figure in million

Analysis:
At the year of 2012 the total export volume is increased by 742.2 million against at the end of year 2011. Which shows the export of the branch is rapidly increased.

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4.2.3 Number of L/C

The total number of L/C issued by the branch 2012 is 533 and at the year of 2011 the number of total L/C was 594

Year Number of L/C

2010 601

2011 594

2012 533

Graphical Representation Figure in million

Analysis: From the above graphical presentation we can easily understand that in the year of 2010 the total number of L/C was the highest among the three years but remaining two years number of L/C is decreasing where as it is sharply decreased in the year of 2012.

4.2.4 Remittance
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At the end of year 2012 the Brunch received total remittance 182.64 million; at the end of 2011 it was 152.68million and at the end of 2010 it was 142.28million. Year Remittance 2010 142.28 2011 152.68 2012 182.64

Graphical Representation Figure in million

Analysis:
From the above graph we can say that the remittance of the branch is gradually increased over the three years in the year of 2012 it was 182.64million which represents that it was the highest among the three years.

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CHAPTER 05

5.2 Findings of the Study

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After analyzing the performance and during the organizational attachment of internship program the following findings have been found out: The position of NCC Bank Ltd in import business and remittance is not as higher as some other banks operation in Bangladesh. This might be keeping NCCBL away from deriving the dominant position among the banks in Bangladesh. In this modern technological era banks of this country are still relying on lots of paper works which are possible to accomplish electronically. In Bangladesh, NCC Bank Ltd also doing lots of manual tasks in order to comply with local systems. Specifically, Foreign Exchange Department of NCCBL in this country is still maintaining different forms, registers etc. Remittance Department preparing advice for inter branch transaction with register in order to serve the purposes of local corporate clients and comply with different domestic rules and regulations. Management of NCC Bank Ltd introduces Flora software to the employee for better service. But its not properly ready yet. Some times problems create on data storing and finding records by using Flora.
The advertisement of National Credit and Commerce Bank Limited (NCCBL) in TV, Newspaper, or in any mass media is not available. National Credit and Commerce Bank Limited (NCCBL) does not update their website properly as a result the client or customer can not get details about the bank. Booth facility of the bank is not sufficient. Training facility is not sufficient especially of the lower level officer. For better marketing of the bank products, the bank doesnt have a dedicated team of officials who will only concentrate on marketing. Recovery of classified loans is very slow, as because the bank doesnt have individual recovery unit.

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5.3 Recommendations

NCC Bank Ltd should increase their investment in Trade Services and branches into the major areas so that they can lead the highest position among banks in Bangladesh.

Online banking must need to be fast enough for quick service to the client. Banks need to modify and develop the Flora Software Service for avoiding further blunder in service.

NCCBL can provide an effective training program for the junior level officer as though they can perform their task efficiently.. Continuous advertisement need to be circulated in electronic and print media to inform and make popular of the National Credit and Commerce Bank Limited (NCCBL).

National Credit and Commerce Bank Limited (NCCBL) is a reputed bank in Bangladesh so they should be up dated their website regularly. National Credit and Commerce Bank Limited (NCCBL) has to create a new marketing strategy which will attract more client, as a result number import and export business increase.

National Credit and Commerce Bank Limited (NCCBL) can introduce debit card facilities. National Credit and Commerce Bank Limited (NCCBL) need to launch their own ATM booth, so that their customers can withdraw cash at a low commission.

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Conclusion
The banking sector plays an important role in modern society and private banks are more competitive, diversified and dynamic compare to traditional banking system. Every day new competitors are entering into the industry with better innovative ideas, products and services. In banking sector National Credit and Commerce Bank Limited is a name of trust, now it is an icon of best services. Foreign Exchange section is the busiest section in this branch. This department is increasing their business and earning profit every year for well communication of V.P. and Foreign Exchange In-charge with their clients. The bank has to introduce new services for the clients so that they may achieve competitive advantage over other commercial banks. The adjustment of Loans against L/C is satisfactory enough.

The consistent performance of the bank over the last few years is the evidence of the strengths of the bank, efficiency of management team, and uphill struggle of employees. Despite the existence of deficiencies in some areas, the overall performance of NCCBL was outstanding among the banking industry in Bangladesh. The bank has to overcome the shortcomings in the near future and offer new innovative services in order to retain its position as a leader amongst banks year after year.

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References
Books & Guidelines

Chowdhury, L.R .(2000), A Text Book on Foreign Exchange (pp. 3-7), Fair Corporation, Dhaka. Foreign Exchange Guideline - NCC Bank Ltd Guideline for Foreign Exchange Transaction (Volume 1) Bangladesh Bank Guideline for Foreign Exchange Transaction (Volume 2) Bangladesh Bank Maheshwari S.N. & Maheshwari S.K.(2001), Banking Law and Practice (sec 4, p. 11), Kalyani Publishers, New Delhi.
NCC Bank Training Book - NCC Bank Ltd

Publications

Annual reports of NCC Bank Ltd

Financial Statements of NCC Bank Ltd

Websites

www.bangladesh-bank.org,

accessed on 16 June 2011

www.nccbank.com.bd, accessed on 24 June 2011

Observed Documents Accounts opening form Bill of Leading

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Certificate of Origin Credit Advice Issue Register Invoice L/C File Letter of Credit Application Form

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