Foreign Remittance through Banking System of NCC Bank

Main objective of this report is to analysis Foreign Remittance through Banking System of NCC Bank. Other objectives are observe and analyze the performance of the specific branch and the Bank as a whole and explain the role played by NCC Bank in the economy of Bangladesh by foreign remittance. Finally identify some typical problem faced by NCC Bank and suggest some measures towards overcoming the identified problem in foreign remittance.

Objectives of the Study

The core objectives of the study are as follows:

• To review how NCC Bank perform their activities.
• To observe and analyze the performance of the specific branch and the Bank as a whole.
• To identify some typical problem faced by NCC Bank.
• To suggest some measures towards overcoming the identified problem.
• To examine the role played by NCC Bank in the economy of Bangladesh.
• To be acquainted with day to day functioning of service oriented Banking business.
• To suggest remedial measure for the development of NCC Bank Limited.

NCC Bank Ltd a Profile

The organization commence its functions in the financial sector of the country as an investment company as named “National Credit Limited (NCL)” in 1985. For the greater impingement in financial market it coverts as a schedule bank as “National Credit and Commerce Bank Limited” in 1993.

The initial authorized capital of the Bank was Tk. 75.00 crore and, paid–up capital Tk. 19.50, crore at the time of conversion which is now raised, to Tk. 135.21 crore paid–up and Tk 250 crore authorized capital. The sponsors of the new bank consisted of 26 (Twenty six) Members, who comprised the first Board of Directors.

NCC Bank is now positioned to best suit the financial needs of its customers and make them partners of progress

Corporate Mission

To mobilize financial resources from within resources from within and abroad to contribute to agricultures, Industry and socio-economic development of the country  and to play a catalytic role in the formation of capital market.

Corporate Vision

To become the bank of choice in serving the nation as a progressive and socially responsible financial institution by bringing credit and commerce together for profit and sustainable growth.

Corporate Culture

NCC Bank is one of the most disciplined Bank with a distinctive corporate culture. In this bank, it believes in shared meaning, shared understanding and shared sense making. The people of bank can see and understand events, activities, objects and situation in a distinctive way. They mould their manners and etiquette, character individually to suit the purpose of the Bank and the needs of the customers who are of paramount importance to them. The people in the Bank see themselves as a tight knit team/family that believes in working together for growth. The corporate culture they belong has not been imposed; it has rather been achieved through their corporate culture.

Business Objectives

• Make sound investments.
• Meet capital adequacy requirement at all the time.
• Ensure 95% recovery of all advances.
• Ensure a satisfied work force.
• Focus on fee-based income.
• Adopt an appropriate management technology.
• Install a scientific MIS to monitor Bank’s activities.

Product Services Information

• Cash Credit
• Secured Overdraft
• Bank Guarantee
• Long Term and Short term financing
• House Building Loan
• Car Loan
• Small Business Loan

Finance/Loans:

Foreign Exchange:

• Non Resident Foreign Currency Deposit Account (NFCD)
• Non Resident BDT Deposit Account (NRTA)
• Resident Foreign Currency Deposit Account (RFCD)
• Foreign Currency Deposit Account
• Money Gram
• UAE Exchange
• Placid Express
• Arab National Bank (ANB)
• Dhaka Janata
• Habib Qatar
• Al Fardan

Deposit Scheme:

• Saving Bank Account (SB A/C)
• Current Deposit Account (CD A/C)
• NCC Bank Special Savings Scheme(SSS)
• Fixed Term Deposit (FDR)
• Short Term Deposit (STD)
• Money Double deposit programs
• Premium term Deposit
• Interest Earning Term Deposit

General Banking

General banking service is the main part of bank. It consists some basic activities on which other sectors continue their operations. The activities of this section are briefly discussed below.

[a] ACCOUNTS OPENING:

A bank receives and pays through an account. So, account opening is the fundamental important thing.

[b] CASH SECTION:

Another important part of a bank is the cash section. It maintains a reserve to satisfy the daily transaction. This section maintains also some books such as Receipts Register, Payment Register, Cash Balance Book, Value Book etc. Bank receive money in various forms as cheque cash etc. and pay in various forms as cash cheque, D.D., T.T, etc.

[c] BILLS COLLECTION:

NCCBL collects T&T, Aktel and ICN (Internet bill) and various types of remittance through the D.D, M.T, P.O, etc. This business, in a word, deals with the sending of money to a distance.

[d] CLEAN CASH:

It holds all the transactions of a bank on a particular day. Accounting procedure of a bank ends here and it gives on abstract figure and describes exact condition of the bank on the particular day.

TYPES OF DEPOSIT ACCOUNT OF NCCBL

According to the Banking law and practice the banker- customer relation arises only from contract between the two and opening of account is the contract that establishes the relationship between a banker and as customer, so this section plays a very important role in attracting customer and therefore should be handled within extra care.

The deposit liabilities of a NCCBL are classified into two categories:

• Time liabilities or Term Deposits
• Demand liabilities or Demand Deposits

TERM DEPOSITS:

Term deposits are included all those deposits which are deposited with the bank for a fixed period specified in advance such deposits are therefore called Fixed deposits or Term deposits.

DEMAND DEPOSITS:

Demand Deposits are included all those deposits which are payable on demand.

Term Deposits are divided into three:

• Fixed Deposit Account (FDR)
• Short Term Deposit (STD)
• Special Savings Scheme (SSS)

Demand Deposits are divided into two:

• Savings Bank A/C (SB)
• Current Deposit A/C (CD)

SAVINGS BANK A/C (SB)

A savings bank account is a meant for the people of the lower and middle classes who wish to save a part of their incomes to meet their future needs and intent to earn an income from their savings. The banks, therefore, impose certain restrictions on the savings banks account and also offer a reasonable rate of interest. The need of keeping cash reserves against such deposits is comparatively larger vis-à-vis the fixed deposits. In Savings A/C the depositor enjoys a flat rate of interest on the deposited amount.

Savings Bank A/C could be opened by

• Individual
• Joint
• Minor

BASIC FEATURE OF THE SAVINGS BANK A/C

• The current interest rate on deposit in NCCBL is 5.5%
• Interest on SB is paid for the lowest amount in deposit during the period of 1 (one) month
• No restriction on withdrawal.
• Interest is now calculated on the minimum balance to the credit of the account during the period from 6th to the last day of each calendar month of every half year at the end of June and December.
• Service charge and 10% source tax on interest will be deducted from each A/C.

CURRENRT DEPOSIT A/C

A current account is a running account that may be operated upon any number of times during a working day. There is no restriction on the number of amount of withdrawals from a current account.

BASIC FEATURE OF THE CURRENT ACCOUNT

• No interest is paid on current deposits.
• The banks cut an incidental charge from each A/C each year. Head Office circular determines the amount of the incidental charge.
• The banks give overdraft facilities also in certain cases.
• The banks through current accounts grant the loans and advances.

FIXED DEPOSIT ACCOUNT

FDR A/C can be opened for the period of three months, six months, one year, two years, and three years and above. The period is agreed upon at the time of making the deposit and the depositor cannot withdraw his money before the expiry of the fixed period if he at all needs to withdraw his money before the expiry of the fixed period, he can do so at the discretion of the banker on surveying a previous notice. Fixed deposits bring a handsome interest to the depositors and the rate of interest varies directly with the period for which the depositors are made. FDR A/C can be individual or joint. Besides it can be opened by the name of a minor with the operation of his or her guardian.

SHORT TERM DEPOSIT (STD)

It is same as current account exception that notice is required to be given to the bank before each withdrawal is made. Interest will be allowed on the daily balance being calculated and applied half yearly at the end of June and December. The interest rate of STD A/C is 4.5%.

NCC BANK SPECIAL SAVING SCHEME

The main objectives of the scheme are to develop a regular habit of savings in the depositors.

• Monthly installments of deposits will be Tk. 500, Tk. 1000, Tk. 1500, Tk. 2000, Tk. 2500, Tk. 3000, Tk. 3500, Tk. 4000 Tk. 4500, Tk. 5000 and Tk. 10000 to be deposited for entire duration as fixed at the time of opening the account. Account may be opened for any installments but later on the same is not changeable.
• Two types of account can be opened under this scheme. One for term of 5 years and another for a term of 10 years. Rules for both the accounts shall be the same.
• The depositor will be paid a fixed amount after expiry of the term.
• Account in the name of minor can also be opened.
• A person is allowed to open more than one account for different installment in a branch.
• No withdrawals shall usually be allowed before five years. If any account needed to be closed before 5 years, interest at prevailing rate on saving account shall be paid along with the principal.
• No interest on the deposited amount shall be paid if the account is closed before the six months.
• Monthly installment will have to be deposited by 10th day of each month.
• In case of failure to deposit monthly installment on time (maximum 3 installments) account holder will have to pay Tk. 10 for each installment with subsequent deposit.
• Depositors may nominate one or more persons against the account as “Nominee”
• The customer can receive loan 80% of his deposit after depositing money for two years continuously.

Investment Department

National Credit and Commerce Bank Limited is a new generation Bank. It is committed to provide high quality financial services/products to contribute to the growth of G.D.P of the country through stimulating trade and commerce, accelerating the pace of industrialization, boosting up export, creating employment opportunity for the educated youth, poverty alleviation, raising standard of living of limited income group and over all sustainable socio-economic development of the country.

Like every other business activity Banks are profit oriented and profit is the central point on which the entire business activity rotates. A Bank invests its funds in many ways to earn income. The bulk of its income is derived from investment. Since major part of Bank’s income is derived from credit and since the money credited by Bank is customer’s fund, Banks should follow a cautious policy and sound lending principles in the matter of lending.

Credit Policy Guidelines

The guidelines contained herein are NCC Bank’s general principals that are designed for implementation by bank. The investment proposal should be forwarded to Head Office for sanction with recommendation showing justification that should include the following:

Industry and Business Focus

The Bank shall provide suitable Investment services & products for the following sectors, which must meet the other requisites as set by the Bank from time to time.

Every year at the time of investment budgeting a clear indication of Bank’s appetite for growth to be reflected. Approved investment budget shall be strictly followed for the development of the Bank.

Credit Categories

As initiated by Bangladesh Bank Vide BCD Circular No. 33 dated 16-11-89 different kinds of lending were subdivided into 11 categories w.e.f. 01-01-90, which was subsequently reduced to 9 vide BCD circular No. 23 dated 09-10-93 and again to 7 prime sectors vide BCD Circular No. 8 dated 25-04-94 for fixation for rates of profit by the individual banks on competitive basis depending on the cost of Funds, prevailing market condition and monetary policy of the country.

Loans have primarily been divided into two major groups:

Term Loan:

These are the loans made by the Bank with fixed repayment schedules. The term of investment are defined as follows:

Short Term      :         Up to 12 months

Medium Term :         More than 12 and up to 36 months

Long term       :           More than 36 months

Continuing Loans:

These are the loans and advances having no fixed repayment schedule, but have an expiry date at which it is renewable on satisfactory performance.

Types of Loans and Advances

Depending on the various nature of financing, all the lending activities have been brought under the following major heads:

1. SOD (FO)

Advance is granted to a client against financial obligations. The security of advance is granted to the person to whom the instrument belongs. The discharged instrument is surrendered to the bank along with a letter signed by holder/holders. The bank’s lien is prominently noted on the face of the instrument under the signature of an authorized bank official.

Interest rate is 14% to 16%.

2. SOD (G)

Granted against the work order of government departments, corporation’s autonomous bodies and reported multinational private organization. To arrive at logical decision, the client’s managerial capability, equity strength, nature of scheduled work is to be judged. Disbursement is made after completion of documentation formalities, besides usual charge, documents like a notarized irrevocable power of attorney to collect the bills from the concerned authority and a letter from the concerned authority confirming direct payment to the bank is also obtained. The work is strictly monitored to review the progress at each interval.

Interest rate is 14% to 16%

3. Cash Credit (Hypothecation)

The mortgage of movable property for securing loan is called hypothecation. Hypothecation is a legal transaction where by goods are made available to the lending banker as security for a debt without transferring either the property in the goods or either possessing. The banker has only equitable charge on stocks, which practically means nothing. Since the goods always remain in the physical possession of the borrower, there is much risk to the bank. So, it is granted to parties of undoubted means with highest integrity.

Interest rate is 16%

4. Cash Credit (Pledge)

Transfer of possession in the judicial sense of essential in the valid pledge. In case of pledge, the bank acquire the possession of the goods or a right to hold goods until the repayment for credit with a special right to sell after due notice to the borrower in the event of non-repayment.Interest rate is 16%

5. Consumer Credit Scheme

This scheme is aimed to attract consumers from the middle and upper middle class population with limited income. The borrower should have saving or current deposit account with the bank. Minimum 25% of the purchase cost of the product is to be deposited be the borrower with the bank is equity before the disbursement of the loan. The rest 75% is to be kept as cash collateral (FDR, Shanchay Patra etc.) with the bank. The purchased items are hypothecated with the bank. The disbursement of the loan is effected by debiting loan (general) account to the opened in the same of the borrower. Loan amount is disbursed through a/c payee pay order/demand draft directly to the seller after submission of the indent, deposit of client equity and completion of documentation formalities. The bank obtains post dated a/c payee cheques drawn in favor of the bank for the monthly installments covering the lending period from the borrower and the loan amount is adjusted on the due date of installments.

6. Loan (general)

NCCBL considers the loans, which are sanctioned for more than one year as loan (g). Under this facility, an enterprise of financed from the stating to its finishing, i.e. from installment to its production. NCCBL offers this facility only to big industries.

7. Working Credit

Loans allowed to the manufacturing unit to meet their working capital requirement, irrespective of their size big, medium or large fall under the category.

8. Staff Loan

Bank official from senior officer and above is eligible for this loan. The maximum amount disbursed is tk. 50,000/- for a period of 2 years.

9. House Building Loan

This loan is provided against 100% cash collateral, besides; the land & building are also mortgaged with the bank

Interest rate is 17% p.a.

10. Small Loan Scheme

NCCBL introduced three new small loan scheme are:

a) House Renovation Loan

b) Personal Loan

c) Small Business Loan

a) House Repairing/Renovation Loan Scheme

This loan is offered for renovation and modernization of the house/building/flat which are acquired by inheritably or purchasing and other ways to make the properties liable and durable.

Interest rate is 16%

b) Personal Loan for Salaried Person

This loan is provided to fixed salaried persons in various organizations to meet any emergency cash needs at various events- treatment/operations of critical disease, matrimonial, maternity expenditure etc.

Interest rate is 17% p.a. and maximum credit ceiling is Tk1, 00,000/-

c) Small Business Loan Scheme

This loan is offered to the small and promising entrepreneurs to meet their capital requirement and enable them to operate and expand the business purposely.

Maximum credit ceiling is Tk 5.00 lac with interest rate is 16% p.a.

11. Loan against Imported Merchandise (LIM)

Advances allowed for retirement of shipping documents and release 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 to the exporter against import L/C, than NCCBL gives loan against imported merchandise to the importer. The importer will bear all the expenses i.e. the godown charge, insurance fees, etc. and the ownership of the goods is retain to the bank. This is also a temporary advance connected with import, which is known as post import finance.

Interest rate is 16%

12. Loan against Trust Receipt (LTR)

Investment allowed for retirement of shipping documents and release of goods imported through L/C fall under this heard. The goods are handed over to the importer under trust with the arrangement that sale proceeds should be deposited to liquidate the investments within a given period. These are also a temporary investment connected with import and know as post-import finance and falls under the category “Commercial Lending”.

Interest rate is 16%

13. Loan documentary Bill Purchase (LDBP)

Payment made against documents representing sell of goods to local export oriented industries, which are deemed as exports, and which are deemed as exports, and which are dominated in local currency/foreign currency falls under this head. The bill of exchange is held as the primary security. The client submits the usance bill and the bank discounts it. This temporarily liability is adjustable from the proceeds off the bill.

Interest rate is 16%

14. Loan against Other Securities (LAOS)

Loan against other securities is a 100% secured advance, which requires no sanction from the Head Officer. It is sanctioned by marketing lien of FDR, ICB Unit Certificate.

Interest rate is16%

15. Heir Purchase

Heir Purchase is a type of installment investment under which the Purchaser agrees to taka the goods on hire at a stated rental, which is inclusive of the repayment of principal as well as profit for adjustment of the investment within a specified period.

16. Inland Bill Purchase (IBP)

Payment made through purchase of inland bills/cheques to meet urgent requirement of the customer falls under this type of investment facility. This temporary investment is adjustable from the proceeds of bills/cheques purchased for collection. It falls under he category “Commercial Landing”

17. Foreign Bill Purchase (FBP)

Payment made to customer through Purchase of Foreign Currency Cheques/Drafts fall under this head. This temporary investment is adjustable from the proceeds of the cheque/draft.

General procedure for Investment

The following procedure is applicable for giving advance to the customer. These are:

1. Duly fill-up first information sheet
2. Application for Investment
3. Collecting CIB report from Bangladesh Bank
4. Making Investment proposal
5. Project appraisal
6. Head office approval
7. Sanction letter
8. Documentation
9. Charges on Securities
10. Recovery

Accounts Department

Accounts Department is the nerve center of a Bank. Account department maintains all records of transactions and all types of statement. At the end of the transactions hour all concern department sends to this department vouchers of transaction. The accounts section of branch is fully computerized. The computer now maintains the ledgers. Computer also provides all the statements required for the branch, Head Office and Bangladesh Bank. Accounts department compares all figures/amount, contents of transaction with supplementary statement prepared by compute. If any discrepancy arises regarding any transaction then this department reports to the concerned department.

NCCBL maintain accounts according to the double entry system of accounting. The method of recording the transaction is illustrated below:

Lots of transactions are happening every day in NCCBL through vouchers. From these vouchers cash transactions are recorded in cash book and transfers are recorded in the transfer book. Then credit vouchers are recorded in the credit supplementary and debit vouchers are recorded in debit supplementary sheet. From this supplementary sheet prepare the summery sheet. Mean while, there are some subsidiary accounts created with the general account. For those they maintain subsidiary book. In the same way earnings and expenses are posted to the respective subsidiary book. Then balancing comes to the role to justify the correctness. From the summery sheet cash cum-day book and general ledgers are prepared.

Followings are the activities of accounts department

• To record all transaction in the cashbook.
• To record all transaction in the general and subsidiary ledger
• To prepare daily fund position, weekly position, periodic statement of affairs etc.
• Prepare necessary statement for reporting purpose
• To pay all expenditure on behalf of the branch
• Make salary statement and pay salary
• Branch to branch fund remittance and supporting accounting treatment
• Budgeting for branch.

Foreign Exchange Department

Foreign Exchange refers to the process or mechanism by which the currency of one country is converted into the currency of another country. Dr. Paul Einzing defines “Foreign Exchange as the system of process of converting one national currency into another & of transferring money from one country to another”. The Foreign Exchange Regulation Act 1947 as adopted in Bangladesh defines Foreign Exchange as foreign currency including any investment draws, accepted, made or issued as per clause 13 of article 16 of Bangladesh Bank order 1972 & all deposits, credits & balances payable in any foreign currency, any drafts, travelers cheques, L/C & bill of exchange express or drawn in currency but payable in foreign currency.

According to Bangladesh Bank order 1972, FE means foreign currency & includes any instrument drawn, accepted made or issued under clause 13 of section 16 of the Bangladesh Bank order 1972, all deposits & credit & balance payable in any foreign currency, any drafts, travelers cheques, L/C & bill of exchange express or drawn in  Bangladeshi currency but payable in foreign currency.

All branches of a bank cannot practice the foreign Exchange. To practice the foreign Exchange it must be Authorized Dealer (AD). To become AD, the bank must show that the branch is capable & has sufficient manpower to practice FE business.

Foreign Trade

The foreign trade of a country refers to its imports & exports of merchandize from & to other countries under control of sale. No country in the world produces all the commodities it requires. On the contrary, a country may produce more of those commodities in the production which it has a greater or comparative advantage & May or may not produce smaller quantities of those in the production of which it has a greater or comparative disadvantage. The commodities which country can economically produce it exports, which those in it has greater disadvantage if imports. Foreign trade constitutes a sizable position of international transaction of a country.

International Commercial terms/ Foreign Exchange terminology

The Inco Terms were evolved by the International Chamber of Commerce to provide a set of International rules for the interpretation of the chief terms used in foreign trade contracts. Inco Terms were first published in 1936 & subsequently revised in 1953, 1967, 1976, 1980, 1990 & 2000 version defines 13 terms, providing & up-to-date set of rules broadly in line with the current practices of majority of businessmen engaged in International trade.

Rate of Exchange

The rate of exchange is the price of one currency in terms of another or in other words, the number of units of one currency which exchange for a given number of units of another currency. It varies continuously with every variation in the relationship between the world demand & supply of the currency concerned. Thus the exchange rate of a country is determined by the interaction of demand for the supply of the same.

The Rate of Exchange is guided in two ways:

1. Rate quoted in terms of a given number of units of foreign currency per one unit of home currency is known as “Currency Rate”. In case of currency rate buy high & sell low. It is known as indirect quotation.
2. Rate quoted in terms of a given of home currency per one unit of foreign currency is known as “Pence Rate”. In case of Pence Rate, buy low & sell high. It is known as direct quotation.

The basic rate of exchange of Bangladeshi Taka with US dollar is fixed periodically by Bangladesh Bank depending on REER & the rates of exchange of other major currencies with Bangladeshi Taka are fixed daily on the basis of New York/ Tokyo/ Hong Kong/ Singapore Exchange market.

The Exchange or Currency Position:

The currency position of NCCBL includes the daily total sales & purchase, both spot & forward in a particular currency. That means the daily total sales & purchase; both spot & forward in a particular currency indicates the banker’s currencies position in the concerned currency. It is expressed in US $.

Fund or Cash Position:

The fund position or cash position of an exchange dealer is the actual balances in his overseas account in particular currency. In case of NCCBL in a particular currency the dealer takes into consideration the actual amount of foreign currency that is to be received & to be paid out on the date for calculating the cash position.

Exchange Control:

In Bangladesh, the exchange control is administered under the provision of foreign exchange regulation act, 1947 as adopted in Bangladesh. Authorized dealers are guided by Guide Lines for foreign Exchange Transaction issued by Bangladesh Bank- 1996 Edition.

The main objectives of exchange control:

1. To conserve scarce foreign exchange & to ensure its best utilization.
2. Acquisition by the Government of all foreign currency.
3. Rationing of these holding for such purpose as the Govt. may consider essential in the interest of the country’s economy.

Authorized Dealer:

NCCBL deals in foreign exchange when he is so authorized by license by the Bangladesh Bank under section 3 of the foreign exchange regulation act 1947, which are known as Authorized dealers.

Authorized Money Changer:

In NCCBL, who are not Authorized dealers; those people are authorized to change the money or can do limited foreign exchange licensed by Bangladesh Bank Agency arrangement.

Agency Arrangement:

International agency arrangements are being maintained between the bank different countries for the purpose of the easy & early settlement of accounting procedures arising out of the bank (home & abroad) transactions. In NCCBL, agency arrangement refers to an arrange for conducting banking transaction between an authorized dealer & a foreign bank branch. Each one is Foreign Correspondent of the other.

All branches of a bank cannot practice the Foreign Exchange. To practice the Foreign Exchange it must be the Authorized dealer (AD). To become AD, the bank must show that the branch is capable & has sufficient manpower to practice FE business.

Remittance

Remittance is another important sector of the NCCBL from where it earns a lot of foreign exchange every year. Remittance means to send or transfer money or money worth from one place to another. In this case the bank as the media to transfer or remit the money. Against the service it charges some commission from the client.

Types of Remittance

Generally the process of remittance can be divided into major categories:

• Inward Remittance
• Outward Remittance

Inward remittance

Inward remittance deals with funds from overseas. The remittance can be performed in two ways:

• Cash remittance through TT ( Telegraphic Transfer)/DD ( Demand Draft)
• Remittance due to export.

Outward remittance

Outward remittance id funds remitted to overseas on the behalf of the client. It may be in the following form:

• Telegraphic Transfer (TT)
• Demand Draft (DD)
• Mail Transfer
• Remittance due to import

FUNCTIONS OF FOREIGN REMITTANCE SECTION:

Selling

• Selling of traveler’s cheques to Bangladeshi travelers.
• Selling cash foreign currency in the form of draft and ties to Bangladeshi students for education abroad.
• Selling of foreign currency to Bangladeshi for medical expenses.
• Selling of foreign exchange to non resident stock investor.

Buying

• Buying of International currency from foreigner and Bangladeshi.
• Buying cash foreign currency from foreigner and Bangladeshi.
• Buying of draft from Bangladeshi.
• Buying of foreign currency from FC account of Bangladeshis individual as well as from exporters.
• Buying of foreign currency from non resident investing in shares and stocks of Bangladesh.

Others

Other foreign exchange operation of NCCBL includes FC A/C Such as Non resident Foreign currency Deposits (NFCD), Non Resident Bangladeshi’s in Initial Public offer etc. These schemes are only for the non-resident Bangladeshi. These are maintained by the foreign currency. These schemes are very much profitable both for NCCBL and non Resident Bangladeshi.

Documents for Foreign Exchange Business:

Letter of Credit (L/C)

Letter of Credit can be defined as a ‘credit contract’ whereby the buyer’s Bank is committed (on behalf of the buyer) to place an agreed amount of money at the seller’s disposal under some agreed conditions. L/C is also known as documentary credit. A documentary credit may either be revocable or irrevocable

Summary of the Procedure of L/C Operation:

1. The buyer and the seller conclude a sales contract providing for payment by documentary credit.
2. The buyer instructs his Bank-the “issuing” Bank to issue a credit favor of the seller (beneficiary).
3. The issuing Bank asks another Banks, usually in the country of the seller, to advise or confirm the credit.
4. The advising or confirming Bank informs the seller that the credit has been issued.
5. As soon as the seller receives the credit and satisfied that he can meet its terms and conditions, he is in a position to load the goods and dispatch them.
6. The seller then sends the documents evidencing the shipment to the Bank where the credit is available (the nominated Bank). This may be the issuing Bank, or the confirming Bank, or a Bank named in the credit as the paying, a accepting or negotiating Bank.
7. The Bank checks the documents against the credit. If the documents meet the requirements of the credit, the Bank will pay, accept, or negotiate according to the terms of the credit.
8. The Bank, if other than the issuing Bank, sends the documents to the issuing Bank.
9. The issuing Bank checks the documents.

10. When the documents have been checked by the issuing Bank and found to meet the credit requirements they are released to the buyer upon payment of the amount due or upon other terms agreed between him and the issuing Bank.
11. The buyer the transport document to the carrier who will then proceed to deliver the goods.

Legal Framework

Foreign exchange business is a crucial and complex business all over the world. Fraud and forgery may arise in very sphere of this business. To overcome those mishapenings and to settle international disputes, a legal framework is a must. An apex body is doing these functions named International Chambers of Commerce (ICC). The publication made by the ICC is treated as compulsory law for each and every country. Among many publications no. 500 is related to L/C opening and such other purposes.

Import L/C

By opening a letter of credit on behalf of the customer (importer) Bank undertakes to make payment to an exporter subject to submission of documents drawn in strict compliance with letter of credit terms giving title to goods to the importer.

Following documents must be submitted by the buyer/importer at the time of opening a L/C:

1. Import Registration Certificate – IRC
2. Tax Identification Number – TIN
3. Membership Certificate from registered organization or trade association
4. Pro forma Invoice
5. LCA form and L/C application form duly filled in and signed by the importer
6. Insurance cover note with Bank clause along with premium paid receipt.

If the import L/C application is found to be order in all respect then mark the serial on the appropriate space in the L/C application.

International Department (ID) of NCC Bank, Head Office grants any L/C proposal forwarded by the branch. ID of NCC Bank gives sanction of L/C subject to the following conditions:

1. Proposed importer is a current account holder.
2. The items to be imported according to import policy.
3. Proposed importer is a good and reliable constituent and he is a man of commitment.
4. Excess cost of imported merchandise due to fluctuation of Foreign Trade rate must be beard by the importer.
5. L/C must be opened according to the specified invoice.
6. The constituent is not a defaulter of the Bank nor is the guarantor of any defaulter.

Having completed all the formalities discussed there, the Bank grants credit as required by the importer in favor of the exporter.

Preparation of L/C

All the terms and conditions as embodied in the L/C application of the imported are typed in the L/C pro forma in manifold.

Scrutiny of the typed L/C

They typed L/C is scrutinized as under:

1. Documents required to be clear mentioned
2. Separate re-imbursement instruction is clearly given
3. All other instruction have been incorporated
4. L/C number, date and amount in foreign currency has been mentioned on the L/C
5. The L/C has been prepared in accordance with Uniform Customs and Practices for Documentary Credit (UCPDC).

Then the particulars of L/C are recorded in the L/C opening register:

1. Date and L/C number
2. Name of the party
3. Amount in Tk. and foreign currency
4. Merchandise to be imported and country of origin
5. Name of advising bank
6. Expiry date
7. Percentage of margin and amount of margin
8. Amount of commission, postage charges, telex charges and foreign correspondence charge.

Disposal of L/C

L/C types in the printed form are disposed in the following manner.

1. First two copies to the advising Bank original for beneficiary and 2^nd copy for advising Bank
2. One copy Head Office
3. One is sent to the importer
4. One copy is retained as office copy

Then L/C is advised either by Airmail or by telex to the advising Bank.

After receiving the document the advising Banker may negotiate the document or may not (in case of negotiating) banker before negotiation to see that full sets of documents have been received and that they are in order and have been correctly drawn in accordance with the terms of the credit.

Export L/C

Export L/C operation is just reverse of the import L/C operation. For exporting goods by the local exporter, Bank may act as advising bank and negotiating for the exporter. As a negotiating Bank, it receives documents from the foreign importer and hand it over to the exporter. Sometimes it adds confirmation on the L/C on request from the opening Bank. By adding confirmation it assumes the responsibility to make payment to the exporter.

As negotiating Bank, it negotiates the bills and other shipping documents in favor of the exporter. That is, it collects proceed of the export-bill from the drawee and credits the exporter’s account for the same. Sometimes the bank purchases the bills at discount from the local exporter and waits till maturity of the bill. When the bill matures, Bank presents it to the drawee to encash.

In our country, export and import operation of Bank is very much related with one another because of use on Back to Back L/C. Most of the L/C opened is Back to Back L/C and maturity of payment for Back to Back L/C is set in such that it can be paid our of export proceeds. So export and import sections works as one unit. These two operations can hardly be separated from one another in the branch.

Back-to-Back L/C

As per existing provisions recognized export oriented units permitted to make import of raw materials and packing materials under the Back to Back L/C arrangement where import payments are made out of realized proceeds of exports of the manufacture’s products.

Back-to-Back L/C Condition

Security

1. Lien and physical possession of export L/C in favor of the Bank (affixing lien mark on it).
2. Imported items will be stored in a bonded warehouse under joint and effective control of Bank and customs authority after clearing through the approved C& F agent.

Other Conditions

1. Drawing to draft clause
2. Import of raw materials in proportion to the working capacity and convenience of the factory
3. Treatment of interest
4. Undertaking must be given by the party in case of any failure to export the goods
5. Time of opening L/C and negotiation within specified period
6. Back-to-Back L/C shall be opened only in the currency in which export L/C would be received to avoid loss due to exchange fluctuation.

Inland L/C

Bank also finances export trade normally by opening and Inland Letter of Credit on behalf of the exporter, who has received on export letter of credit from overseas buyers. The suppliers are generally paid after negotiation of export documents submitted by the exporters. Documents for negotiation are:

• Bill of Exchange
• Delivery Chalan
• Commercial Invoice
• Country of Origin Certificate
• Packing list
• Transport document

Credit Facilities in L/C Operation

Bank provides some credit facilities to the importer and exporter during L/C operation. These facilities described below:

PAD

Since Bank pay to exporter on the basis of shipping documents, that’s why it is known as Payment Against Documents (PAD). After opening L/C, foreign exporter sends goods to the importer and a bill of exchange along with shipping documents to the L/C opening Bank. Bank hands over the shipping documents to the importer only after his recovery of the payment from the importer.

ECC

Export Cash Credit is given for processing of raw materials such as light, gas, wages, and rent etc. so that the exporter can manufacture the goods for export.

LIM

Since this loan is given on the imported goods, this is called Loan Against Imported Merchandise. Sometime or financial crisis, importer fails to pay the amount stipulated in bill or exchange to the opening Bank. In this case, he requests to the Bank to treat PAD as credit and hand over the shipping documents to him so that he can clear the imported goods from the port. Then Bank converts the PAD to regular credit and hand over the documents to the importer and takes the imported goods as security for the loan.

SWOT ANALYSIS

SWOT analysis is an important tool for evaluating the company’s Strength, Weaknesses, Opportunities, and Threats. It helps the organization to identify the how to evaluate its performance and scan the micro environment, which in turn would help the organization to navigate in the turbulent ocean of competition.

STRENGTH

• Innovation

The major strength of NCCBL is product innovation. They have introduced new product every year. Their innovative product creates a positive image. In this year they have introduced the Festival loan for the business man and the salaried person to meet their extra finance during the Festival period i.e. Eid-ul-Fitr, Eid-ul-Azha, Durga Puza that are highly appreciated among the customers.

• Top Management

The top management of the bank is a key strength for the NCCBL and the contributed heavily towards the growth and development of the bank. The top management officials all have had reputed of banking experience, skill and proficiency.

• Company Reputation

NCCBL has created a standing in the banking industry of the country chiefly among the new comers. NCCBL has already established a firm grip in the banking sector having tremendous growth in the profits and deposits within a phase of five years.

• Sponsors

NCCBL has been founded by a group of prominent entrepreneur of the country. The sponsor’s directors belongs large industrial conglomerates of the country. The giant name in director’s list is Nurul Islam, owner of Sanawara Corporation, Abdul Halim, the owner of Prime Group.

Modern facilities and Online Banking

From the very beginning of the NCC Bank tried to furnish their work surroundings with modern equipment and facilities. For the speedy services to the customer NCC has installed money-counting machine in teller counter. The bank has already started online banking operation.

String of Branches

From the formative stage NCC tried to furnish their branches by impressive style. These well decorated branches get attention of the potential customers; this is one kind of strategy. The Gulshan branch, Dhanmondi branch is also impressive and is comparable to foreign banks.

Good customer service

Good customer service is another major strength of the NCCBL. They provide a one-stop service. In a highly competitive market the quality of service rendered by the bank to their valued customers is absolutely vital to ensure growth of both deposits loans and advances.

Interactive corporate Culture

The corporate culture of NCC is very much interactive compare to our other local organization. This interactive environment encourages the employees to work attentively. Since the banking job is very much routine work oriented, NCC’s friendly, interactive and also lovely environment boosts up the work capability of the employees.

Alliance in ATM

ATM is the fastest growing modern banking concept. NCC has launched ATM along with seven other contemporary banks jointly which gave the product more acceptability.

Weaknesses

• Advertising and promotion

Advertising and promotion is the one of the weak point of NCC. NCC does not have any effective truck for aggressive marketing activities. This lacking pushes the bank far behind the form the other competitor. At present only the neon sign at Shabag is visible.

• Disguised Employment

Reference appointment is very much effective in NCC. As a result of this there are many people who are only drawing salaries at end of the month but making a minimum contribution towards the organization. And this is related to the problem of reference appointment. On the other hand there are officers who work hard but are not appreciated accordingly. Those frustrated officers leaving the bank to other bank.

Limitation of Information System (Micro Banker)

Micro Banker is not comprehensive banking software. It is desirable that a more comprehensive banking system should be replaced Micro Banker system.

Limited Network

NCC has limited branches. Now 59 branches are operating over the country. Bank should open their branches in prime locations.

Opportunity

• Diversification

NCC can pursue a diversification strategy in expanding its current line of business. The management can consider option of starting merchant banking or diversify into leasing and insurance. By expending business portfolio, NCC can shrink business risk.

• Credit cards and Tele banking:

These are the new retail banking services provided by the foreign banks. NCC can evaluate the option of launching credit cards and Tele Banking system.

Threats

• Contemporary Banks

The contemporary banks of NCC like Prime Bank, Dhaka Bank and Southeast Bank are its major rivals. They are carrying out aggressive campaign to attract lucrative corporate clients as well as big time depositor. NCC should remain vigilant about the steps taken by these banks, as this will in turn affect NCC strategies.

• Multinational Bank

The rapid expansion of multinational bank poses a potential threat to the PCB’s. Due to the booming energy sector more foreign banks are expected to operate in Bangladesh. Moreover the already existing foreign banks such as Standard Chartered and CITI NA are mew pursing an aggressive branch expansion strategy. Since the foreign bank has tremendous financial strength, it will pose a threat to local banks to a certain extent in terms of grabbing the lucrative clients.

•  Upcoming Banks

The upcoming local private banks can also pose threats to the existing PCB’s. The govt. has planned to permit new banks. It is expected that in the next few years more local private banks may emerge. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete against foreign banks.

•  Default Culture

Default culture is very much familiar to our country. For a bank is very harmful.  NCC has not faced seriously yet. However the bank grows older it may be ill with this situation.

Financial Ratio Analysis

Return on Assets (ROA) (%)

Major Findings

While working at NCC Bank ltd, Mirpur Branch, I have attained to a newer kind of experience. After the collection of data, I have got some findings. These findings are completely from my personal point of view. Those are given below:

• NCC Bank Limited has already achieved a high growth rate accompanied by an impressive profit growth rate in 2005. The number of deposit and investment are also increasing rapidly.
• NCC Bank has an interactive corporate culture. The working environment is very friendly, interactive and informal. And there are no hidden barriers or boundaries while communication between the superior and the subordinate. This corporate culture provides as a great motivation factor to the employees.
• NCC Bank Limited has already established a favorable reputation in the banking industry of the country. It is one of the leading private sector commercial banks in Bangladesh. The bank has already shown a tremendous growth in the profits and deposits sector.
• They follow the traditional banking system in general banking department. The entire general banking procedure is not fully computerized.
• From the clients view introducer is one of the problems to open an account. It is general problem to all commercial bank.
• NCC Bank uses manual system to verify specimen signature of clients it consumes a lot of time.
• Lack of update products is also a drawback of the general banking area of the NCC Bank. The bank provides only some limited traditional services.
• They face troubles with those clients who have not any knowledge in banking transactions and banking rules.

NCC Bank has own training Institution for its employees, so they don’t require to train them in other training Institutions.

They are not using Data Base Network in information technology Department. So they have to transfer data from branch to head office by using floppy disk. For example clearing cheque.

Bank has no office assistance that’s why officer of Bank transfer papers and documents from one desk to another, it consumes time of officer and also clients.

NCC Bank has insufficiencies of Authorized Dealer Branch in respect of the total foreign exchange business. Bank has only six branches, which have AD licenses. As a result it total foreign exchange business is very small in respect of total market.

NCC Bank’s numbers of customers are also very small in compared to other banks in the market. This is because of small number of branches.

The number of branches is not sufficient to cover the country most.

The bank failed to provide standard recruitment policies in lower level like Assistant Officer to Junior Officer. As a result the services of the bank face problems in resent   days.

Present Problems

• There are no party wise files.
• There are no file lists.
• There are no country wise beneficiary’s credit report files.
• Sanction letter is not kept in the concerned files.
• Inspection of godown is not done & we are depending on the godown keepers having cores of LIM liabilities.
• Regularization of documentation & other works are not done.
• It was that no letters were send to the parties who haven’t submitted the bill of entry.

• They follow the traditional banking system in general banking department. The entire general banking procedure is not fully computerized.
• From the clients view introducer is one of the problems to open an account. It is general problem to all commercial bank.
• NCC Bank uses manual system to verify specimen signature of clients it consumes a lot of time.
• Lack of update products is also a drawback of the general banking area of the NCC Bank. The bank provides only some limited traditional services.
• They face troubles with those clients who have not any knowledge in banking transactions and banking rules.
• NCC Bank has own training Institution for its employees, so they don’t require to train them in other training Institutions.
• They are not using Data Base Network in information technology Department. So they have to transfer data from branch to head office by using floppy disk. For example clearing cheque.
• Bank has no office assistance that’s why officer of Bank transfer papers and documents from one desk to another, it consumes time of officer and also clients.
• NCC Bank has insufficiencies of Authorized Dealer Branch in respect of the total foreign exchange business. Bank has only 17 branches, which have AD licenses. As a result it total foreign exchange business is very small in respect of total market.
• NCC Bank’s numbers of customers are also very small in compared to other banks in the market. This is because of small number of branches.
• The number of branches is not sufficient to cover the country most.
• The bank failed to provide standard recruitment policies in lower level like Assistant Officer to Junior Officer. As a result the services of the bank face problems in resent

Recommendations

For the probable solutions of the identified problems ensure better progress to NCC Bank in future, some necessary steps are recommended bellow on the basis of collected data, observation, expert staffs opinion and my knowledge and judgment.

If the entire banking system is fully online on computerized system then they satisfy the customer by providing fast service with minimum service charge.

NCC Bank should ensure networking system with its branches then it could easily transfer data within short time.

• NCC Bank should give more attention to advertisement for creating more attraction among its customers, which is helpful to collect more deposits and increase investments scope. That’s why bank should give emphasis on advertisement in various media like TV, News Paper, Internet and Billboard.

The entire department should be well informed regarding their goals and objectives. It is essential to execute company objective into individual target.

A philosophy of working for the customer instead of working for boss must be introduced.

Job description should be clarified and proper training facilities should ensure to improve the performance of bottom line management.

It was observed that the officers of NCC Bank have to spend more time in preparing vouchers; this can be avoided by the automation.

• NCC Bank should develop online banking system to compete with other commercial banks.

The bank has the provision of internship but there is no organized program for internship.

Credit Card and Automated Teller Machine (ATM) should be introduced as soon as possible because of present market demand of the customer and the educated customer now wants technology based banking.

Attractive incentives packages for the exporters will help to increase the export and accordingly it will diminish the balance of payment gap of NCC bank.

• NCC Bank is to be concentrating in always monitoring the performances of its competitors in the field of foreign trade.

Bank can provide foreign market reports that will enable the exporter to evaluate the demand for their products in foreign countries.

Due to lack of proper knowledge about the operation procedure and services provide to the customers by SWIFT certain customers are facing problem as they have to wait for certain time to get service. And sometimes personnel are not being able to operate SWIFT without any confutation. They are not fully independent handing SWIFT. Official training is the solution of this problem.

Bangladesh Bank should take initiative to form a high-powered committee consisting scholars and experts from different disciplines and professions such as academicians, economists bankers, lawyers etc. to design an appropriate and useful legal framework for Islami Shariah Based Banking. This type of committee may be helpful for the necessary correction of government policies in Islami Banking.

NCC Bank will have to encourage entrepreneurs, businessmen, rich people and government to come forward to established ancillary organizations.

Branches of NCC Bank are not sufficient as per demand of the people. So NCC Bank should setup new branches

• They should also focus on the marketing aspects by informing the customers about its products and offering services charges.
• NCC Bank Ltd. Should focuses on their promotional activities on its marketable products.

CONCLUSION

There are a number of Private Commercial Banks, Nationalized Commercial Banks and foreign Banks operating their activities in Bangladesh. The NCC Bank ltd is one of them. For the future planning and the successful operation for achieving its prime goal in this current competitive environment this report can be a helpful guideline.

From the practical point of view I can declare boldly that I really have enjoyed my internship at NCC Bank from the first day. Moreover, internship program that is mandatory for my BBA program, although it is obviously helpful for my further thinking about my career.

Banks always contribute towards the economic development of a country. Compared with other Banks NCC Bank is contributing more by investing most of its funds in fruitful projects leading to increase in production of the country. It is obvious that right channel of Banking establish a successful network over the country and increases resources; will be able to play a considerable role in the portfolio of development in developing country like ours.

NCC Bank playing its leading role in socio-economic development of the country. Since inception NCC Bank has been rendering its Banking services with the needs of the nation to cope with the demands of people in the country. By doing many other works for state & society, NCC Bank has emerged as the pioneer of playing key role in the country.