1.

0 Introduction

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1. ABOUT THE INTERNSHIP REPORT

1.1 Origin of the report
This is an Internship report prepared as a requirement for the completion of the BBA
program. The primary goal of Internship work is to provide an opportunity for
translation of theoretical conceptions in real life situation.
At the last semester of BBA program, I was assigned for an Internship from April 16,
2008 under the guidance of my faculty advisor Md. aaaaaaaaa, Senior Lecturer,

vvvvvvv University and organizational supervision of, flkjflkj, Network Services

Center, HSBC Bangladesh Ltd. As a requirement for the completion of the program I

needed to submit this report, which could include an overview of performance of

HSBC.

1.2 Objective of the Term Paper

The objective of the term paper is to learn the practical implementations of the
theories. In additional to serve this purpose it tries to find out all the necessary
information. Objective of this term paper also include knowing about the methods of
different activities of the department where I worked as an intern in HSBC.

1.3 Methodology
In this term paper I have collected data and information from various sources such
as Internet websites, newspapers, related books, journals, brochures etc. All the
information incorporated in this report has been collected both form the primary
sources and as well as from the secondary sources.
Primary source of Information:

Discussion of the official of the banks.

Annual report and product files of the banks.

Data from the companys document.

Page 2 of 44

 Secondary source of Information:

Previous reports and journals relevant to the banking industry.

Other published document of the banks, journal, newspaper etc.

In my Internship report I will use interviewing technique and my focus group will be
mainly executives of the HSBC. I will also use different statistical tool to make my
work more reliable and accurate.

1.4 Scope
Related discussions have been presented with a proper sequence here. Also facts
and figures have been presented too. The information used in this report is the most
updated one. So lacking of information is not a fact here. But some sensitive issues
could not be added for lack of proper clarified and classified information.

1.5 Limitation
There were some limitations in my report that I need to disclose. As student of BBA
department, I started to prepare this term paper during my ongoing course. So I
faced serious time constrains. Moreover, the information available regarding any
possibilities of utilizing an opportunity are always little at best. So I had to work at my
best guess and analyze all the information from a hypothetical perspective.
Following are the limitations. Such as:

Time limitation.

Technical constraints.

Difficulties in data collection.

Confidential information was not accurately obtained.

Some analyses on the obtained data are based upon my sole

interpretation.

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2.0 Organization Part

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2.1 INTRODUCTION TO HSBC HOLDING PLC

2.1.1 Background
HSBC Holdings plc is a public limited company incorporated in England and Wales.
It is headquartered in London. It is the world's largest company and the world's
largest banking group, as calculated based on different metrics by the annual Forbes
list of the world's largest firms published on April 2, 2008. In February 2008, HSBC
was named the world's most valuable banking brand by The Banker magazine.
HSBC Holdings was established in 1991 to become the parent company to The
Hongkong and Shanghai Banking Corporation Limited. The former was established
virtually simultaneously in Hong Kong and Shanghai in 1865 to finance the growing
trade between China and Europe by Scotsman Thomas Sutherland, who wanted a
bank operating on "sound Scottish banking principles". Its heritage in East Asia
means it is a British institution with an extensive international pedigree. HSBC
Holdings is listed on the London, Hong Kong, New York, Paris and Bermuda stock
exchanges.
HSBC is well-known in banking circles for its diversified and risk-averse approach in
its business operations (to the extent that, for instance, Europe contributes around
one-third of its 2007 earnings and commercial banking 30%). According to Forbes
magazine, the world's largest bank (based on a composite score) is currently the
fourth largest bank in the world in terms of assets ($2,348.98 billion), the second
largest in terms of sales ($146.50 billion), the largest in terms of market value
($180.81 billion), and the most profitable bank in the world with $19.13 billion in net
income last year (compared to Citigroup's $3.62 billion in the same period) as of April
2, 2008.
It is also by far the largest bank in the United Kingdom and in Hongkong, prints most
of Hongkong's local currency in its own name, is a lender of last resort in many parts
of the world, and since the end of 2005 has been the largest banking group in the

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world by Tier 1 capital. By acquisitions and organic expansion HSBC is currently

pursuing a strategy of rapid growth in booming China.

2.1.2 Business Lines

HSBC splits its business into fours distinct groups:
Personal financial services: HSBC provides more than 100 million
customers world-wide with a full range of personal financial services, including
current and savings accounts, mortgage loans, car financing, insurance, credit cards,
loans, pensions and investments.
Commercial banking: HSBC provides financial services to small, mediumsized and middle-market enterprises. The group has almost 2.5 million of such
customers, including sole proprietors, partnerships, clubs and associations,
incorporated businesses and publicly quoted companies.
Global banking and markets: This customer group provides tailored
financial services to corporate and institutional clients. Business lines comprise
Global Banking, Global Markets, Global Asset Management, Global Research and
Principal Investments. This division was previously known as Corporate, Investment
Banking and Markets.
Private banking: HSBC Private Bank is the marketing name for the private
banking business conducted by the principal private banking subsidiaries of the
HSBC Group worldwide. HSBC Private Bank, together with HSBC Guyerzeller and
the private banking activities of HSBC Trinkaus & Burkhardt, known collectively as
Group Private Banking, provides services to high net worth individuals and their
families through 93 locations in some 42 countries and territories in Europe, the AsiaPacific region, the Americas, the Middle East and Africa. As of December 2007,
profits before tax were US$1,511 million and combined client assets under
management were US$494 billion.

2.1.3 Global Presence

The HSBC Group has a significant presence in each of the world's major financial
markets, with the Americas, Asia Pacific and Europe each representing around one
third of the business. With 10,000 offices in 83 countries, 210,000 shareholders,

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330,000 staff and 128 million customers worldwide, HSBC arguably has the most
international presence among the world's multinational banking giants.
The Hongkong and Shanghai Banking Corporation maintains a network of around
600 offices in 20 countries in Asia Pacific, as well as owning of a number of HSBC
banks operating in various countries and holding the group's stakes in further
lenders, particularly in mainland China.

2.2 INTRODUCTION TO HSBC BANGLADESH

2.2.1 Background
HSBC obtained license from BANGLADESH

BANK

on 17 April 1996 to conduct banking

business in the country and commenced formal banking operations on 3 December

1996 through opening a branch at Dhaka. In Bangladesh, the HSBC Group is
represented by HongKong Bank, which has its head office in Hong Kong and a
holding company, HSBC Holding Plc, which is incorporated in England.
HSBC currently has a network of 8 branches (including 1 Amanah branch) and is
one of the largest commercial banks in the country. HSBC Bangladesh (here forth
referred to as HSBC) also has a network of 16 ATMs, 6 Customer Service Centers
(which include ATM Machines, Easy Pay Machines, Phone Banking, and Access to
the HSBC website with a dedicated officer at the premises).
HSBC Bangladesh has acquired licensing to provide off-shore banking services to
qualified Export Processing Zone clients. Off-shore banking clients, in applicable
zones in Bangladesh, may conduct banking transactions and avail credit facilities in
foreign currency subject to applicable rules and regulations. Being one of the largest
offshore banking facility providers in the Export Processing zones, HSBC has the
experience and capabilities to assist and fulfill the banking needs of the investors.

2.2.2 Business Lines

The range of services offered by HSBC in Bangladesh is as follows:
Trade Services

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The trade services provided by HSBC can be classified into two broad categories in
accordance to the nature of business.
Import: With over 130 years of experience supporting importers globally,
HSBC is well positioned to fulfill the clients requirements of foreign trade. A full
range of import services handled by experienced staff is available, ensuring that the
clients import documents are processed without delay.

The Import Services include:

Documentary Credits
Import Collections
Import Finance
Shipping Guarantee
Internet Trade Services
Export: HSBC Bangladesh has a dedicated team of experienced trade
professionals to facilitate the clients export requirements in a tailor made fashion,
Leveraging on HSBCs international network, it aims to provide the client with faster
turnaround time and innovative export solutions. The Export Service includes:

Pre-shipment Finance

Post- shipment Finance

Electronic Documentary Credit Advising

Corporate Banking
HSBC has a full range of products and services for corporate clients, which include:
Working Capital Financing, Term Loan, Trade Facilities, Guarantees & Bonds,
Structured Financing & Syndications etc.
Payments & Cash Management
HSBC's Global Payments and Cash Management services provide domestic and
regional transaction solutions to companies throughout the world. Services include a
comprehensive range of traditional account and transaction services, augmented by
liquidity and financial management solutions and delivered via HSBCs global
Internet banking platform, HSBCnet.

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The Payments & Cash Management Services include:

Account Opening for companies
Countrywide Receivables Management Solutions
Countrywide Payables Management Solutions
Cross Border Remittance Services
Internet Banking Solutions
Personal Financial Services
The Bank has a range of products and services designed to cater individual
requirements. The range of products & services for individual customers comprises
of the following:
Online Banking
ATMs/Phone banking
Customer Service Centre (CSC)/Call Centre
Savings/Current/Time Deposit Accounts
My Future - Personal Savings Plans/My Loan - Personal Lending Products
Foreign currency banking services for Resident and Non-resident
Bangladeshis
Along with these products, HSBC is committed to providing a superior level of
personalized customer service, which is being constantly monitored.

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2.3 INTRODUCTION TO THE DEPARTMENT

2.3.1 Background of Network Services Center
The Network Services Center (NSC) is the operational department of HSBC BD. It is
the responsibility of NSC to provide the operational support to the departments that
deal with the clients directly, for example Corporate Banking, Personal Financial
Services etc. NSC was established in the year 2000 with the vision of HSBCs global
policy of centralizing the operational jobs. Under the jurisdiction of COO is being
managed by a Manger designated as Manager NSC.
The department currently employs 67 personnel. The department is headed by a
Manager, Mr. Fuad Y Khan and he has two assistant managers, Mr. Mustafa
Moniruzzaman & Mr. Aseef Iqbal, reporting to him. Other than them there are ten
Staff Officers, two Supervisors and fifty-two Assistant Officers. Each Assistant
manager has five segments reporting to him.

2.3.2 Various Segments

NSC can be further divided into ten segments, each headed by a Staff Officer, according
to the nature of their operations. They are as follows:
Remittance Segment: The remittance segment deals with the inflow and outflow
of funds from Bangladesh. This segment maintains a strict protocol of
Bangladesh Bank regulations while facilitating the flow of funds.
Clearing Segment: The clearing segment deals with the cheques that are
deposited at the bank the cheques that are forwarded to HSBC from other banks
through the Bangladesh Bank Clearing House.
Global Payments & Cash Management Operations (PCM Ops): PCM Ops
deals with the collections and payments of the corporate clients. It is also
responsible for the maintenance of the HSBCnet operations. This segment is on
the verge of launching some new products for the corporate clients.
Support Segment: The Support segment deals with the liaison with Bangladesh
Bank regarding 18A/18B permissions for the corporate clients. This segment also
deals with the special remittance issues.

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Institutional Banking Operations (IB Ops): IB Ops deals with the LCs opened
in local banks that have no foreign presence. IB Ops helps facilitate these LCs
through the global presence of HSBC.
Account Maintenance Segment: The Account Maintenance segment deals with
the loading and maintenance of all the accounts of the clients of HSBC in the
HUB System (HSBC Universal Banking System)
ATM, Bonds & Credit Cards segment: This segment deals with the issuance of
the Credit Cards and ATM cards for the clients of HSBC. This segment also deals
with the purchase of Government Bonds for the clients of HSBC.
Custody & Clearing Operations (C & C Ops): The C & C Ops segment deals
with the foreign investors who wants to invest in Bangladesh. This segment acts
as a middle man in the buying & selling of securities on behalf of the foreign
clients.
Easy Pay Segment: This segment deals with all the bill payments on behalf of
the clients through the Easy Pay Machines that are set up in the customer
service centers across the country.
Customer Activity Monitoring Program (CAMP): The CAMP segment monitors
the transactions of all the clients of HSBC in order to root out money-laundering.

2.4 INTRODUCTION TO THE SEGMENT

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2.4.1 Background of PCM Ops

PCM Ops, referred to as PCM Ops (DAK) represent the management structure for
the delivery and development of payments and cash management products related
backend services, at Group and local level.
The PCM Ops team supports relationship managers (RMs), officers (ROs) in both
PFS (Personal Financial Services) and CMB (Corporate Banking) for the smooth
support services of PCM products to their client base(s). It also delivers payments
services appropriate for Personal Banking (to some extent), in accordance with
propositions defined by the PFS Team.

2.4.2 Products & Services

The activities undertaken by each PCM function varies according to local
requirements, however for PCM OPS, Bangladesh, these may include:
Payments

Telegraphic Transfer (TT)

Cashier's Order (CO)

Demand Draft (DD)

Collection

Upcountry

Overseas (FCY)

Inland Local Currency (LCY) - PFS & PCM Corporate customers

Inland Foreign Currency (FCY)

Travelers Cheque

Bangladesh Bank Cheque (for customers)

Other Payments

Salary

BEPZA Bill Payment

Payments through Hexagon/HSBCnet

HEXAGON/HSBCnet

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Hexagon Operation (Customer Account loading, Rate Sheet input,

Branch Report download & Email printout & update)

Correspondence with Group Offices

Customer Advice Printing, Sorting & Filing

Hexagon Cheque Leaf Delivery & Maintenance

Documentation Checking & Filing

DEPZ Customer visit

Customer Visit (Installation, Training & Troubleshooting)

Customer Query (Over Telephone)

Customer Loading in Shex

HSBCnet user registration approval

Documentation Checking & Filing

Training at Customer end

Implementation management (Hexagon, HSBCnet, Up Country

Collections, Payments, Collections, etc.)
Technical support (related to PCM)
In this context, the section PCM OPS generally manages the Operational issues
related to the aforesaid product range.

2.4.3 Organizational Chart

PCM (DAK) Ops in NSC, is currently under the following structure :

Manager, NSC

Assistant Manager,
NSC
Staff Officer
PCM OPS, NSC

Assistant
Officer
Faruq Al
Banna

Assistant
Officer
Salamun
Karim

Assistant
Officer
Sakibul I Khan

Assistant
Officer

Supervisor

M Sharif -Ul-Arafin

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2.4.4 Functions
In order to provide for the internal/external customers PCM Ops need to perform the
following functions:
Organizes itself to integrate seamlessly with the customer support segments
Maintains close liaison with customer segments, participating in their
management processes, as appropriate,
Provides PCM related training and market intelligence to staff within the
customer segments,
Delivers an excellent level of service to customers, at an acceptable unit cost
in a timely manner,
Investigates and resolve service failures with customers,
Have the necessary capacity,
Are aware of issues raised by customers directly with the PCM function,
Appropriately manage operational and other risks arising from their PCM
related activity,
Are able to support new product developments,
Have strategic and operating plans, with objectives that are aligned to those
of the PCM function and therefore those of HSBC Group as a whole.

2.4.5 Compliance
PCM project management ensures that product developments comply with all
applicable law, codes, rules, regulations and standards of good market practice.
Group policy requires all Group Offices ensure that they have adequate procedures
in place to control and manage legal risk effectively.
The principal areas of Legal Risk are:
Contractual
Litigation
Legislative
Intellectual property
There may also be associated reputation risk.

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2.4.6 Operational Risk

The Groups definition of operational risk is as follows:
Operational risk is the risk of loss arising through fraud, unauthorized activities,
error, omission, inefficiency, systems failure or from external events. It is inherent to
every business organization and covers a wide spectrum of issues.
Credit, market, liquidity, insurance, strategic and reputational risks are excluded from
this definition. The reference to error, omission and inefficiency reflects process
failures and the role of human error.
Operational risks have historically resulted in losses to the Group in the following
major categories:
Fraudulent and other external criminal activities
Breakdowns in processes and procedures due to human error,
misjudgment or malice
Terrorist attacks
System failure or non-availability
In certain parts of the world, vulnerability to natural disasters
The Group must remain alert to the possibility of rare but extreme events, whether or
not mentioned above.

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3.0 Project Part

Page 16 of 44

3.1 WORK FLOWS OF THE SERVICES (PCM OPS)

3.1.1 Up-Country Collections
Up-Country Collection procedure facilitates the clients towards an effective cash
management. In this service, HSBC collect their funds from all over the country
through correspondent banks, reducing risk, hassles and more importantly providing
an efficient time value of money at clients part. The diagram below explains the
work-flow of up-country collections:
Figure 1: Up-country Collections Workflow
HSBC Customers
deposit fund

HSBC Customers
deposit fund

HSBC Customers
deposit fund

Correspondence

Correspondence

Correspondence

Bank Branch 1

Bank Branch 2

Bank Branch 3

HSBC Customers
deposit fund

Correspondence

Bank Branch N

Correspondence Bank
Local Office

HSBC

HSBC Customer
Account Credited

HSBC Customer
Account Credited

HSBC Customer
Account Credited

HSBC Customer
Account Credited

Legend:

Fund Transfer by internal mechanism

Fund Transfer by Bangladesh Bank Cheque, the next day
Deposit Slip sent by Courier, on the same day

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Steps of the Up-Country Collection:

1. [Day 0] Corporate customers deposit funds (cheques, pay-orders, cash, etc.),
to different branches of the correspondent banks; using deposit slips as the
proof of their deposit,
2. [Day 0] The correspondent banks send a copy of the deposit slip by courier
after 3pm, by the designated courier service,
3. [Day 1] The courier delivers the copy of the deposit slips to HSBC the next
day morning by 10.30 am.
4. [Day 1] The correspondent banks transfer the available fund to HSBCs
master account maintained with their local office by 12:00 noon,
5. [Day 1] The local office of the respective correspondent banks issues a
Bangladesh Bank cheque amounting to the sum of all the funds that they
received from their branches till 12 noon,
6. [Day 1] HSBC collects the Bangladesh Bank cheques from the correspondent
banks by 12.30 pm and deposit the same to Bangladesh Bank,
7. [Day 1] Local office gives HSBC a copy of the statement along with the BB
cheques indicating the branch wise break-up of the previous days collection.
8. [Day 1] PCM OPS cross match the deposit slips and the funds received from
the correspondent banks. These datas are captured in an excel sheet and
then transferred the fund to the corporate accounts upon reconciliation,
9. [Day 1] Captured datas are posted to HUB by MT-100 module not later than
3.00 pm.
Reconciliation
HSBC keeps a detailed statement of the Collection Correspondent Banks
NOSTRO accounts indicating the breakdown of the fund received by the Bangladesh
Bank Cheque. HSBC maintain a separate file for each of the Collection
Correspondent Banks. HSBC also keeps the deposit slips in envelopes marked by
the payment date.
FCD checks whether the Total Credit entries on everyday on the NOSTRO account
by Collection Correspondent Banks is matched by a Total Debit entry (narration
indicating the Date) by PCM Ops on the mirror NOSTRO account.

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Collection Correspondent Banks:

1. Uttara Bank Limited
2. National Bank Limited
3. Prime Bank Limited
4. Islami Bank Bangladesh Limited

3.1.2 Telegraphic Transfer (T.T.) Procedure

One of the key goals of Global Payments and Cash Management is to provide fund
transfer mechanism to remote areas of the country through correspondent banks. To
facilitate the payments/transfer of funds and inward remittances to the remote places
in smoother & efficient manner, HSBC maintains accounts with correspondent banks
to facilitate the same.
Figure 2: Telegraphic Transfer Workflow
Beneficiary

Beneficiary

Beneficiary

Account Credited

Account Credited

Account Credited

Correspondence

Correspondence

Correspondence

Bank Branch 1

Bank Branch 2

Bank Branch 3

TT instruction sent

HSBC

HSBC Customer
Account Debited

HSBC Customer
Account Debited

HSBC Customer
Account Debited

Beneficiary
Account Credited

Correspondence

Bank Branch N

Correspondence Bank
Local Office

HSBC Customer
Account Debited

Legend:
TT instruction sent
Fund Transfer by internal mechanism

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Steps of the Payment (T.T):

1. Customer gives an instruction (To branches or other business lines front
offices), or PCM Ops receive inward remittances from abroad.
2. PCM Ops choose the path to remit the fund.
a. If the beneficiary bank is one of HSBCs correspondent banks remote
branch then PCM Ops shall send an instruction through that
correspondent banks local office,
b. If the beneficiary bank is not one of HSBCs correspondent banks
remote branches, then PCM Ops shall send an instruction to any
correspondent banks local office, whose branch can remit the fund to
the beneficiary bank and branch. In other words, PCM Ops choose a
correspondent bank who has a branch closer (probably within the
same clearing zone) to the beneficiary bank branch;
3. Calculation:
a. PCM Ops calculate the appropriate charges that PCM Ops must
deduct from the customer as per agreement with them, or as per
standard tariff.
b. PCM Ops calculate the appropriate charges that the Payment
Correspondent Bank will deduct from the NOSTRO account to
execute the instruction;
4. Transactions:
a. PCM Ops Debit the appropriate TT amount plus total (HSBCs + Other
Banks) charges from the customers account;
b. PCM Ops Credit the TT amount plus Payment Correspondent Bank
charges to the correspondent banks mirror NOSTRO account;
5. After executing the transactions, PCM Ops send a remittance instruction (i.e.
letter) addressing the Payment Correspondent Bank to Debit, the TT amount
plus their charges, from HSBCs NOSTRO account in their book and remit the
fund to their appropriate branch.
Reconciliation:
PCM Ops have files for TT instruction where the customer instruction, charges
calculation and Other Bank forwarding letter is kept.

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FCD checks whether the Credit entries made by PCM Ops (for TT amount plus
charges) on the mirror NOSTRO account, is matched by a Debit entry on the
NOSTRO account for the TT amount; and later on at the end of the moth, whether
the Total Charges of the TT matches or not.
Payment Correspondent Banks:
1. Uttara Bank Limited
2. National Bank Limited
3. Prime Bank Limited
4. Arab Bangladesh Bank Limited
5. Islami Bank Bangladesh Limited

3.1.3 HSBC DD drawn on Sonali Bank

HSBC DD drawn on Sonali Bank service is another way to transfer funds of
customers from their HSBC account to any area in Bangladesh. To facilitate this
service, HSBC maintains an account with Sonali Banks Ramna Corporate Branch to
channel funds to the remote locations of Sonali Bank.
Figure 3: DD Drawn on Sonali Bank work-flow
Customer instruction to issue DD

Customer

HSBC
DD accompanied with Forwarding Letter
Customer instruction to issue DD

DD

Sonali Bank
Remote Branch

Cover through
Bangladesh
Bank Cheque

Sonali Bank Ramna

Corporate Branch

Payment
Ultimate
Beneficiary

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Steps of the HSBC DD drawn on Sonali Bank:

1. The customer deposits an instruction in any HSBC branch, indicating that they
need to transfer funds to a certain branch of Sonali Bank in a remote location.
2. PCM Ops then prepare the forwarding letter and give it to the customer along
with the DD.
3. PCM Ops provides the cover to Sonali Bank Ramna Corporate Branch by
Bangladesh bank cheque on the next day.
4. When the customer, deposits the DD to the branch of Sonali Bank, the fund is
then transferred to the appropriate account mentioned in the DD.
Reconciliation
PCM Ops maintains a file named DD Sonali Bank, which contains the customer
instruction and photocopy of both the forwarding letter and DD.
FCD checks whether the Credit entry to HSBCs Sonali Bank NOSTRO accounts is
matched by a Debit entry by PCM Ops on the mirror NOSTRO account.

3.1.4 Payments - HSBC Cashiers Order (CO)

HSBC CO service is another way to provide payment to the customers and noncustomers through instructions received from customers.
Figure 4: Cashiers Order Work-flow
Customer/ Bank
(PCM Ops)

Customer instruction to issue CO

HSBC

CO accompanied with Forwarding

Letter/Sent to Courier for delivery

CO

Beneficiary Banks
Branch(es)

HSBC Clearing, NSC

Payment
Ultimate
Beneficiary

Page 22 of 44

Steps of the HSBC CO:

1. The customer deposits an instruction in any of HSBCs branches, indicating
that they need to transfer funds to a certain beneficiary (ies).
2. PCM Ops then prepare the forwarding letter and give it to the
customer/cHSBCsier along with the CO.
3. When beneficiary(ies) deposits the CO to their bank branches, the
beneficiary(ies)s bank then claim/place the CO through Bangladesh Bank
clearing house or collection (if not in clearing zone). PCM Ops then honors
the CO.

3.1.5 Foreign Cheque Purchase procedure

PCM Ops also provide cheque purchase facility to some of HSBCs CMB clients
having such agreements. PCM Ops Credit the customers account immediately, and
realize HSBCs fund later on.
Figure 5: Foreign Cheque Purchase Work-flow
Overseas Correspondent Bank
(NOSTRO accounts)

Overseas
Group Offices

Other Local
Banks

FDD drawn on
B. Bank

HSBC BD

Customer
Deposited
FCY Cheque

Customer
Deposited
FCY Cheque

FDD drawn on B. Bank

Customer
Deposited
FCY Cheque

Bangladesh
Bank

Customer
Deposited
FCY Cheque

Legend:
Cheque sent
Fund transfer

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Steps of the Foreign Currency Cheque Purchase:

1. HSBCs customer deposits their cheques in any of HSBCs branches;
2. Usually HSBCs branches purchase the cheques for the PFS clients and send
to PCM Ops for collection. For Corporate clients they send the cheques to
PCM Ops for purchase and collection.
3. PCM Ops then send the cheque to the appropriate bank for collecting the
fund, after proper crossing and endorsement;
a. If it is a cheque drawn on a Local Bank in Bangladesh, then PCM Ops
send the Cheque to that Bank requesting them to issue a Foreign
Currency Demand Draft drawn on Bangladesh Bank Dhaka favoring
HSBC quoting the reference number;
b. PCM Ops have cash letter agreement with HSBC USA, UK and
Germany for USD, GBP, EURO respectively. For any cheque drawn on
a bank in those countries. PCM Ops send those cheques for collection
under cash letter service.
c. If the cheque is drawn on a bank of any other country except those
mentioned above, then PCM Ops send the cheque to HSBCs Group
offices in that country to collect the fund on behalf of PCM Ops and
remit through HSBCs respective NOSTRO accounts.
4. Every week PCM Ops checks HSBCs NOSTRO account with HSBCs
Foreign Currency Cheque Collection Correspondent Banks to verify whether
they have collected the fund and Credited HSBCs NOSTRO account in their
book or not,
5. If they have credited HSBCs NOSTRO account in their book, PCM Ops then
perform

R24

to

Debit

the

Foreign

Currency

Cheque

Collection

Correspondent Banks mirror NOSTRO account in HSBCs book and Credit

the suspense account (which was out-of-fund when the customers account
was earlier Credited).
Return
If any cheques returns unpaid, PCM Ops do perform adjustment entries to the clients
account accordingly and send the returned cheques to the client.

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3.1.6 Salary Payments procedure

Salary Payment function is the most widely used service of Global Payments and
Cash Management. A huge number of organizations prefer to use HSBCs service
instead of issuing cheques to each of their employees.
PCM Ops have the facility to Debit a single account and Credit multiple accounts.
This approach is used in salary payments.
Figure 6: Salary Payments Work-flow
Customer submits instruction
(hard & soft) copy file to
branch office

Necessary
verification

Excel file sent to NSC by LN

for processing

Salary file executed by MT100 & Hexagon at NSC, PCM

Transaction:

Corporate/ Auto Pay

Customer A/C

NSC Auto Pay

A/C

Employee
A/C

Employee
A/C

Employee
A/C

Page 25 of 44

Steps of the Salary Payment:

1. If both the employer and employees maintains account with HSBC:
a. Branches receive the instruction both in hard and soft copies from
clients. They check the authenticity (Proper signature, availability of
fund and matching soft and hard copies) and forward to NSC by LN to
execute the instruction.
b. To execute the salary, the customer account is debited, and the NSCAutopay account is credited.
2. If the employer maintains account with other bank, and employees maintains
account with HSBC:
a. The Manager of the different bank gives PCM Ops the salary
instruction along with a Pay Order, instructing PCM Ops to collect the
fund and then credit the numerous accounts. The instruction is
submitted both as a printed document as PCM Opsll as in an Excel file.
b. PCM Ops place the Pay Order in the clearing-house through HSBCs
clearing department, who deposit the cheque in the Item in Course of
Collection account to clear the fund.
c. Once the fund is cleared to execute the salary, the Item in Course of
Collection account is debited, and the NSC-Auto pay account is
credited.

3.1.7 Bangladesh Bank Cheque Deposit of Customers

Bangladesh Bank Cheque Deposit service is used to transfer funds of customers
from another Bank to HSBC.
Figure 7: BB Cheque Deposit Process

Other Bank
forwarding letter
accompanied with
B. Bank cheque

Cheque
sent

HSBC

Cheque
sent
Fund
Transfer

Bangladesh
Bank

Fund transfer

Customer A/C

Page 26 of 44

Steps of the Bangladesh Bank Cheque Deposit procedure:

1. The Other Bank Manager gives PCM Ops a Bangladesh Bank Cheque, along
with a forwarding letter indicating the account (s) where the fund needs to be
credited.
2. PCM Ops fill the Bangladesh Bank Cheque deposit slip and deposit the
Cheque to Bangladesh Bank along with the deposit slip.
3. If Bangladesh Bank accepts the cheque, they Debit the fund from the Other
Banks NOSTRO account to HSBCs NOSTRO account. Thus PCM Ops
receive the fund.
4. PCM Ops then carry out the transaction of Debiting HSBCs Bangladesh
Bank mirror NOSTRO account and crediting the appropriate account (s)
mentioned in the forwarding letter of the Other Bank.

3.1.8 Outward Cheque Collection procedure

HSBC also provide cheque collection services to nonPCM clients.
Overseas Correspondent
Bank (NOSTRO accounts)

Overseas
Group Offices

Other Local
Banks

FDD drawn
on B.Bank

FDD drawn
on B.Bank

HSBC

Customer
Deposited
FCY
Cheque

Customer
Deposited
FCY
Cheque

Customer
Deposited
FCY
Cheque

Bangladesh

Bank

Customer
Deposited
FCY
Cheque

Figure: FCY Cheque Collection

Page 27 of 44

Figure: LCY Cheque Collection

Banks outside
Dhaka & CHG
clearing zone

Pay Order, drawn on

their Local Offices

PO

B.Bank
Clearing
House

HSBC
Fund received
Deposits LCY cheques

Customer

Steps of the LCY Cheque Collection procedure:

1. Customer deposits the cheques at HSBC branches
2. NSC receives those cheques from HSBC branches through internal mail.
3. If the cheques drawn on bank is within Chittagong clearing, it is sent to HSBC
Chittagong.
4. If the cheques drawn on bank is outside Chittagong clearing:
a. Pass R23 for the cheque.
b. Send the cheque to the drawn on Bank, asking for a Pay Order drawn
on their Local Office.
c. After receiving the Pay Order, it is sent to the clearing department to be
placed in the clearing-house of Bangladesh Bank Dhaka.
d. The clearing department places the fund (with a hold date) in the Item
in Course of Collection account.
5. On the fund available date, R24 is passed which automatically Debits the
Item in Course of Collection account and Credits the Customer account.
Steps of the FCY Domestic Cheque Collection procedure
1. Customer deposits the cheques at HSBC branches
2. NSC receives those cheques from HSBC branches through internal mail.
3. Pass R23 for the cheque.

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4. Send the cheque to the drawn on Bank, asking for a FCY Demand Draft
drawn on Bangladesh Bank.
5. After receiving the FCY Demand Draft, it is sent to Bangladesh Bank Dhaka.
6. If the fund is available, R24 is passed which automatically Debits the HSBC
Bangladesh Bank FCY NOSTRO mirror account and Credits the Customer
account.
Steps of the FCY Foreign Cheque Collection procedure
1. Customer deposits the cheques at HSBC branches
2. NSC receives those cheques from HSBC branches through internal mail.
3. Pass R23 for the cheque.
4. We then send the cheque to the appropriate bank for collecting the fund, after
proper crossing and endorsement;
5. Appropriate bank of the previous Step:
a. We have cash letter agreement with HSBC USA, UK and Germany for
USD, GBP, EURO respectively. For any cheque drawn on a bank in
those countries. We send those cheques for collection under cash
letter service.
b. If the cheque is drawn on a bank of any other country except those
mentioned above, then we send the cheque to our Group offices in that
country to collect the fund on behalf of us and remit through our
respective NOSTRO accounts.
6. Every week we check our NOSTRO account with our

Foreign Currency

Cheque Collection Correspondent Banks to verify whether they have

collected the fund and Credited our NOSTRO account in their book or not;
7. If they have Credited our NOSTRO account in their book; we then perform
R24 to Debit the Foreign Currency Cheque Collection Correspondent Banks
mirror NOSTRO account in our book and Credit the customers account.
a. For any cheques drawn on a bank in USA, indemnity requires if
deposited by PFS clients.

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b. We also practice cooling period. i.e. If the cheque is within New York /
London, we wait for 7 working days; otherwise for 12 working days; to
Credit the customers account.
Return: If any cheques returns unpaid, we do perform return entries via R23 and
charges customers account accordingly and send the returned cheques to the
customer.
Filing: After passing R23, all the documents of the cheque are kept in the LCY/FCY
Unpaid File, which subsequently is moved to the LCY / FCY Paid file upon payment.
In case of returns, all the documents of the cheque are filed in the LCY/FCY Return
file.
Reconciliation: FCD checks whether the Credit entry on our NOSTRO account by
Foreign Currency Cheque Collection Correspondent Banks is matched by a Debit
entry (possibly with the same narration) by us on the mirror NOSTRO account.

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3.1.9 HSBCnet
The back-end maintenance of HSBCnet is done at PCM Ops, NSC. This includes
creating new users, loading of customer accounts and creating /modifying customer
profiles. All the maintenance of HSBCnet is done with software known as Staff
Hexagon (Shex). The workflow of HSBCnet at PCM Ops is shown below:
Figure 8: HSBCnet Operations Process
CMB/PCM
External
Customer
(potential/existing)

Will send a complete

HSBCnet Application Form

Internal
Customer
HSBC DAK

to EBD

Will check the

documentation & filing
EBD
A/C Load
Request
Reply of the
request

S Hex
Maintenance
Customer Loading
A/C Loading/Deletion
Service update as per customer
request
General maintenance
Staff activity

Overseas
Request

HSBCnet User
Maintenance
Link the user registration with
appropriate customer
Review the user status:
add/delete & take necessary
action as per customer/ RSC
instruction

Page 31 of 44

3.2 BILL PAYMENT PROCEDURE

3.2.1 BEPZA Bill Collection procedure
HSBC provide bill collection services to BEPZA. BEPZA bill issuance date is by 7 th of
each month; it is sometimes around 5 th or 6th of month. Receiving the bill, we do
process the bills by debiting clients accounts in HSBC or collecting funds from nonHSBC clients by the due date, preferably 22 nd of the month. We also report it through
RCMS functions.
RCMS System Entries procedure:
NSC to follow the below instruction for RCMS entry and execution:
1.

Use the A/R Template in Appendix 1. Only difference between this

template and the regular one, is "Invoice Amount" and "Bill Amount" Columns, The
figures are results of multiplication of the USD Amounts, to be mentioned in "Invoice
Reference 1" Column, and the rate mentioned in the first row. The rate must be TT
clean Bank buy on the execution day plus BDT0.08. There is also a "ROUNDUP"
Function in the result columns, because RMS must pull upto 2 digits after the
decimal point. Directions on how to use the ROUNDUP function is mentioned below.
If the original payment is in BDT, then the above columns need to be filled out
directly.
Following is the existing Invoice Pattern, given # is an alphabetic character and $ is a
numeric character:
###-###-$$$$$-$$$$$$
Where,
First three ### will be:
WAT for Water, ELE for Electricity, REN for Building Rent, LAN for Land Rent, GAS
for Gas Rent.
Second three ### will be:
DHK for Dhaka, CTG for Chittagong.

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Third five $$$$$ should match the numbers mentioned in the payor ID for that
invoice.
Last 6 $$$$$$ can be:
200508 for August 2005, 200509 for September 2005. This goes by billing month.
Points to note for an effective reconciliation:
If a new payors is needed, then the A/R file may include the payors with basic
details. System will automatically add payor at A/R file upload. For BEPZA Project,
we do not need detailed payor info through Payor File or RMS Screen. Just do
everything through A/R File upload, whether the payors are existing or not.

Payor pattern now is ###-###-$$$$$ for EPZ-DHK (or CTG) - 5 digit customer
number assigned by NSC Ops. Needs to match with the third $$$$$ of the invoice
number for the payor.
2. Transactions: They follow the sequence as follows. The times are mentioned
below for indicative purposes. "Cut off Time Maintenance" screens allow us to
maintain cut - off times as per existing RCMS Manual/EDR.

As you can see, you can trigger the Invoice recon only after the returned cheque
report generation cut-off time and before the EOD. After you triggered the invoice
recon, you can then trigger the report generation for intraday invoice recon report. If
you want the invoice recon report (EOD version) before the EOD is triggered, you

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may generate the EOD invoice recon report. Once you triggered the EOD, you will
not be allowed to generation the intraday report.
Two BEPZA required MIS Format one is a consolidated one required after the
execution and the other each customer wise separate report. The reconciled invoice
report generated through RCMS need to be transformed into the two format.

3.2.2 DEPZ Bill Payment Execution

1. Since DEPZ doesnt have single specific date for the payment (land/rent due
2/3days earlier than electricity bill payments) the first payment date will be
used as the bill payment execution date for all the bills.
2. As per the AR sheet NSC to debit the clients account in OBU or FCY or BDT
were necessary.
3. NSC to Credit BEPZA account separately for each bill. Caution must be taken
while crediting the bill amount, which should match the rate applied.
4. To provide a special rate of BDT 0.08 above HSBC Board rate while crediting
BEPZA account.
5. In case of unavailable fund we liaison with Client services of PCM for further
action.

3.2.3 Other Functions:

Up-country Collection New Branch activation
Send Deposit Slips to Correspondent bank branches or Clients
Sonali Bank New Branch activation
Morning Statements
Evening Daily Collections
MIS information
Collection Monthly Charges
Payment Monthly Charges
Note: HSBC maintain an account with each of our Correspondent Banks, containing
a minimum balance required as per our agreement. This kind of account our
account in their book is also sometimes referred to as NOSTRO account. In HSBC
banking system, we maintain a mirror account with each of our Correspondent
Banks NOSTRO account.

Page 34 of 44

4.0 Analysis of the

Organization

Page 35 of 44

4.1 SOWT ANALYSIS

Here are the strengths, weaknesses, opportunities and threats of HSBC, "The
World's Local Bank"
Strengths
International Finance: Since HSBC is a multinational company itself, it is well
qualified to advise other companies on aspects of international business.

With

offices around the world, for the cosmopolitan client, HSBC often cannot be beaten
in this area. HSBC knows how to succeed in M&A and organic and effective growth
it was mostly an Asian bank until it took over a UK bank in 1992 and now has
become the world's second largest bank by profit.
Listed in London: HSBC is primarily listed on the London and Hong Kong
stock exchanges, which saves the company much grief in complying with new
American Sarbanes Oxley laws. Many companies have chosen to list on foreign
exchanges other than America because of the expensive new regulations.
China: HSBC is the "Hong Kong Shanghai Banking Corporation" and it has 140
years of experience in China.

Since China is the place to be nowadays for

businesses and banks, HSBC benefits for being both an old Chinese company and
trusted by the Chinese people. The best news for HSBC is that as other companies
grow in China, it does, too, because it gains new clients and new global opportunities
with each passing day. HSBC has the largest network of any foreign bank in China
and deeply understands the Chinese market and customer.

In a world that is

increasingly going China's way, this is quite a boon to HSBC.

Record profits: Last year, HSBC experienced the most profits ever for a UK
high street bank, with profits of 11.5bn ($20.97bn) for the whole year.
Weaknesses
Branding: While it is certainly a global company, HSBC came late to the game
on deciding to perform an integrated marketing strategy and capitalize on its global
brand.

Because it had set up so many different banks in different countries at

Page 36 of 44

different times over a hundred year period, it set them up under different names
Hong Kong Bank of Canada, British Bank of the Middle East, HSBC Banco Roberts.
Not even all of these banks, prior to 1998, carried the HSBC logo. In 1998, they
were all branded together, but the previous lack of branding and the name changes
may have hurt HSBC in brand recognition. Customers may have thought that HSBC
was taking over their local bank and not realized that HSBC had already been
serving them for decades. In any case, the rebranding was an overdue move that
should have occurred before 1998.
Record profits ending: As is usually the case, record profits can only last so
long. HSBC announced in December 2006 that it was doing just as well as last year,
but not as well in revenues. It announced that each year, its bad debt rises. Other
banks' shares fell as well on the news.
Opportunities
The Middle East: Other banks are running scared of this region. However,
HSBC has run its regional business locally and been rewarded for its efforts with
numerous awards and honors for the Middle East market. HSBC is a trusted name
there, and the company has taken advantage of Iraq's new democracy by creating a
presence in the country. HSBC is the largest international bank in the Middle East.
Emerging economies: In addition to the growing Chinese middle class,
Brazilians and Indians are beginning to emerge as growing consumers, and
therefore growing consumer spenders. Some denizens of these countries previously
did not even own a bank account, but companies like HSBC are poised to move in
and take advantage of the growing middle class in these areas.

In places like

Argentina and Turkey, HSBC experienced pretax profits of 50% last year. This is
where it is growing the most. By investing in these countries, HSBC can offset
problems it may have as spending in the US and UK declines.
Threats
Employees striking: Last year, British employees held a strike involving 1,500
workers at HSBC branches in London. At its annual meeting, striking workers stood
outside, handing out bags of nuts and saying that they are paid "peanuts" while

Page 37 of 44

HSBC experiences record profits. The scenario in Bangladesh is not any better, with
employees are constantly complaining about their low wages compared to some
Bangladeshi and ks and other multinational companies.
Email viruses: Last year, HSBC Group's CEO announced that HSBC
received tens of thousands of email viruses a day and must spend great amounts of
money to prevent these from causing system wide damage. As most banking is
done on computers, even one virus could cripple HSBC. On their worst day in 2004,
the bank received 100,000 attacks.
At a glance,
Strengths: (S)

Weakness: (W)

HSBC has the largest network

banking around the world. Therefore, it

HSBC has limited number of

cash management clients.

can come up with its successful Cash

High cost of fund.

Management products in Bangladesh.

Higher tariff charges then

Strong global brand image.

local banks.

HSBC has the global electronic

They dont have many types of

banking system Hexagon which woks

Cash Management Products.

globally.

Less

reputation

and

recognition among the corporate

clients.

Opportunities: (O)

Threats: (T)

HSBC came up with new Cash

Management products like Web Bank,

with local banks to provide good

payments plus.

services.

Scope of new PCM products in

the market.

Multinational banks may merge

Engage
welfare activities.

The local banks may provide this

Cash Management service with free

in

different

of cost.

social

Fear of losing market share of

existing PCM market.

Price war

Large network of the established

local banks.

4.2 PEST ANALYSIS

Page 38 of 44

Political Factors:
The political arena has a huge influence upon the regulation of businesses,
and the spending power of consumers and other businesses. Unluckily, the political
environment in Bangladesh currently is not positive. Lack of responsibility,
intolerance and criminalization is the main problem of Bangladeshi politics. High
inflation and interest rate makes the bankers job uncertain and unpredictable. Lack
of clear government policy and weak monetary policy of Bangladesh bank are major
hurdle for banks like HSBC.
Economic Factors:
Although relatively high growth rate, economic activities are halted by political
crisis, which in terns affect all kind of business. As the success of banking industry
depends on economic health, HSBC is being affected adversely by the stagnant
economic condition. Inflation and unemployment rate are also on the rise, creating a
nationwide pessimism all around us.
Socio-cultural Factors:
Peoples preference to good quality foreign banks is well proven in this
country. HSBC has introduced Shariah/Islamic banking to attract a large number of
customers who are cautious about Islamic principles about interest. However recent
misconducts by some phony banks have tarnished the customers faith somewhat.
Peoples attitude about loans such as car lone, home loan, future premium, etc are
changing for the positive, more people are using ATM card and credit cards, so
social environment is quite optimistic.
Technological Factors:
HSBC has its main competitive advantage in technology. Its sophisticated
fund transferring facilities, ATM network, hexagon service, phone banking, gives
Bangladeshi customers a taste of true high tech bank. Therefore, as long as HSBC
can hold onto its good quality service, it has a bright prospect in Bangladesh.

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Recommendations
&
Conclusions

5.1 RECOMMENDATION

Page 40 of 44

Use of Marketing Research:

The management of HSBC should regularly administer marketing research
activities in order to keep a regular track of satisfaction levels. Regular research
should also be conducted to find out customer expectations about various service
aspects. As customer expectations and satisfaction are not static figures regular
research at sufficient intervals should be conducted.
Complaint Management:
HSBC should actively manage the complaints of various customers and
encourage customers to give feedback about the services. The management
should collect, document complaints, use that information to identify dissatisfied
customers, correct individual problems where possible and identify common
service failure points. Research showed that this strategy will radically improve
the overall customer satisfaction.
Market segmentation strategies:
The bank should concentrate on the various demographic segments that are
currently not very satisfied with the banks services. Products and services should
be tailored for these segments. Appropriate research and surveys should be
designed to find out the requirements of these dissatisfied segments. On the
other hand, the bank should capitalize on the segments that are currently very
satisfied with the services.
Focus on relationship strategies:
The bank should focus more on existing customers in order to build strong and
loyal relationship with them as satisfied customers more aptly or certainly
recommends the bank to friends and relatives. Thus the power of relationship will
foster positive Word of Mouth Communication and will attract new customers at a
lower cost.
Clarity of the statements:
The bank should redesign the format of its account statement in to a clearer and
easily understandable format. Customers have huge amount of dissatisfaction
towards the current format of statements. In should be redesigned with inputs
from customers and satisfying their requirements.
Page 41 of 44

Employee Trainings:
Employee trainings and workshops should be administered in order to give them
knowledge and professionalism of customer interactions. With more professional
base employees can better satisfy the customers. They should be taught about
how to deal with problem customers and how to deal problematic situations.
Individual Attention & Care:
Individual attention should be given to customers in order to better understand
their needs and better satisfy them.
New Branches should be introduced:
Customers showed a huge dissatisfaction with current locations as HSBC
provides services from only 5 branches throughout Bangladesh. New branches
should be constructed in Dhaka city satisfying more geographic segments. As
conveniency of branch location was a very important factor for the customers
HSBC should consider building new branches and ATMs within Dhaka city as
well as other metropolitan cities of Bangladesh.
New Investment products:
New investment schemes should be introduced to meet customer demands.
Other banks have high amount of investment schemes and services. New
personal savings, future investment products, Sanchay patra schemes should be
launched to stay ahead of competition and better satisfy customer requirements.
Reconsider interest rates on Savings:
The savings rates of HSBC should be redesign as most of the customers were
currently dissatisfied with the savings rates. HSBC should restructure the interest
schemes of its savings product to attract more valuable customers.
Customer defined Service standards:
A formal service blueprint should be designed with appropriate service level
standards to reduce the variability of service. These standards should customer
defined and customer expectation should be considered while deciding on the
service standards.

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Defensive Strategy of Service Quality:

HSBC should pursue a defensive service quality strategy that is a go slow
strategy rather than offensive service strategy. That is should focus on Costs of
operation, increasing Volume of businesses with existing loyal customers,
Segmentation of the premium customers, foster a positive word of mouth
communication in its existing customers, etc. Though these strategies will take
time to develop a huge customer base, they will in the long run bring more loyal
customers to HSBC.

Faster Delivery of ATM cards:

HSBC should reduce the amount of time required to provide new ATM cards.
Currently it takes 3 weeks while some competitors can provide the card within 2
working days. As the HSBC ATM card comes directly from Hong Kong delays are
obvious. HSBC should make necessary arrangements to produce the new cards
locally in order to reduce the customer difficulties faced in the absence of ATM
card.

Introduction of House Building Credit Facilities:

House building credits & loans should be introduced to more completely satisfy
customer needs. Moreover to compete head to head with other banks HSBC
should launch this product without delay. At present HSBC is financing to
purchase complete flats only.

Locker Services:
While interacting with the customers at customer service point a huge amount of
customers demanded lockers services. With such demand of this service, HSBC
should consider of proving locker services to its customers. This will also attract
new customers from other banks who are currently offering these services.

Advertising & Promotion:

HSBC should pursue an aggressive advertising campaign in order to build up a
strong image and reputation among potential customers. In this context, the

Page 43 of 44

valuable strengths should be used for positioning the corporate image of the
bank. TV ads should be aired to reach a wider array of customers. The ads
should capitalize on building strong relationship, needs of customers and quality
service of the bank rather than features of products. Thus and offensive
marketing strategy emphasizing customer satisfaction and service quality can
bring valuable business for the Bank.

Elimination of Contract Employees:

Contract employees should be eliminated from the customer service departments
as they lack the commitment and willingness to serve customers. One serious
mistake can take away valuable customers and years of relationship.

Control over the mailing network:

HSBC should strictly monitor the courier services that are engaged in delivering
mails and documents. Huge amounts delivery failures are being piled up at
branches. So HSBC should have some control over its couriers and ensure
proper delivery of mails and documents.

Process Management:
The actual procedures, mechanisms and flow of activities at customer service
should be well managed and structured in order to form a good experience of the
service in the minds of customers. As the services of the Bank are complex in
nature, the employees should provide adequate guidance to customers in order
to avoid service failures. Thus the whole process should follow a broad service
philosophy, which is tailored to customer needs.

5.2 CONCLUSION

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