General Banking Service of Uttara Bank Limited

The major objective of this report is to analysis the General Banking System of Uttara Bank Limited and the capacity of bank to satisfy consumer by providing existing product and service. Other objectives are to discuss on the various services the bank offers and to understand the mechanism of the services. Finally identify the strengths and weakness, opportunities and threats and formulate recommendations that could add value to the service of Uttara Bank Limited.

Introduction

Banks are financial-service firms, producing and selling professional management of the public’s funds as well as performing many other roles in the economy. Banks are among the most important financial institutions in the economy. When businesses and consumers need funds, Bank will provide them necessary funds to continue their business.

Banks are those financial institutions that offer the widest range of financial services – especially credit, savings, and payment services – and perform the widest range of financial functions of any business firm in the economy. In other words, Banks are financial service firm, producing and selling professional management of the public’s funds as well as performing many other roles in the economy. The banking process and its area are increasing faster and getting wider day-by-day to understand banking procedure has become essential for every individual.

Objectives

Broad objective:

The major objective of this internship report is –

“Evaluation of General Banking System of Uttara Bank Limited & the capacity of bank to satisfy consumer by providing existing product and service”

Specific Objective:

• To know the banking system of Uttara Bank Limited and to give an idea about how Uttara Bank Limited emerged
• To understand the various services the bank offers and to understand the mechanism of the services
• To identify the strengths and weakness, opportunities and threats of Uttara Bank Limited.
• To presents a brief description about the General Banking Department and their activities.
• To formulate recommendations that could add value to the service of Uttara Bank Limited.

Background of Uttara Bank Limited

Uttara Bank formed in 1972 as a scheduled bank with assets and liabilities of the Eastern Banking Corporation set up in East Pakistan on 28 January 1965. It started banking business 22 June 1965 and became a member of the Dhaka Clearing House on 17 September 1965. At the time of establishment, Eastern Banking Corporation had a paid up capital of Tk 1.42 million and deposit resources of about Tk 10 million. It was the only scheduled bank formed with capital raised entirely from the small income group of people of East Pakistan.

Eastern Banking Corporation was nationalized under the Bangladesh Banks Nationalization Order 1972 and its name was changed to Uttara Bank. At that time, the bank had 182 branches. The government retracted 95% of its share capital and allowed it to operate as a private bank. It was transformed into a limited company on 15 September 1983 then it made its journey like a modern private Bank at its registered office and other branches. The initial Authorized Capital of the Bank was 20 (Twenty) crore Taka. Which paid capital was 10 [ten] crore taka. Government hold 6% share and rest 94% shares are distribute in privet sector. Uttara Bank’s head office is suited in Motijheel c/a. Dhaka-1000. A new opportunity in this field of financial activities was opened for the business. UBL made a careful journey and maintained its successive growth for few years with its qualified professional management under most unpredictable, unregulated, uncertainties and limitations. The bank is listed with both Dhaka and Chittagong Stock Exchanges.

Uttara Bank- At Present

Uttara Bank is one of the largest and oldest private sector commercial bank in Bangladesh, with years of experience. Adaptation of modern technology both in terms of equipment and banking practice ensures efficient service to clients. 207 branches at homo and 600 affiliates worldwide create efficient networking and reach capability. Uttara is a bank that serves both clients and country.

Like clothes shops, candy shops, bake shops, food shops, Uttara Bank Limited is not a “debt shop” the term being used by many to call the present say banks. It is now been called a modern bank that undertakes all its operation at international standard.

Although Uttara Bank Limited faces some primary difficulties in past, it has now emerged as a major player in the financial sector. It is listed in both Dhaka and Chittagong bourses IPO that raised the paid-up capital of the bank to Tk.10 core. In 31 March 2006 reserve fund was Tk178.4 core.

Banks are the pillars of the financial system. Specially, in Bangladesh, the health of the banking system is very vital because the capital market is little developed here. As the banks are still the major sources of credit and exercise great influence on the financial system, it is extremely important that the country’s banking systems should be in good health in the interest of investment activities, meeting the needs of all kinds of finance and related matters.

Over the years, Uttara Bank Limited   has built itself as one of the pillars of Bangladesh’s financial sector and is playing a pivotal role in the extending the role of the private sector of the economy. The bank has a strong branch network nation wide with 202 branches.

Vision

To be in the front of national development by providing all the customers inspirational strength, dependable support and the most comprehensive range of business solution through our team of professional that work passionately to be outstanding in everything we do.

Mission

We shall be the forefront of national economic development by:

• Anticipating business solutions required by all our customers everywhere and innovative supplying them beyond expectation.

• Setting industry benchmarks of world class standard delivering customer value through our comprehensive product range, customer service and all our activities building an exciting team-based working environment that will attract, develop and retain employees of exceptional ability who help celebrate the success of our business, of our customer and of national development.

• Maintaining the highest ethical standards and a community responsibility worthy of a leading corporate citizen.

• Continuously improving productivity and profitability, and thereby enhancing shareholder value.

 Goal

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

• Long Term Goal : Is   maximize  the  wealth of the shareholders.

• Short Term Goal : To earn satisfactory rate of return on investment by providing wide range of banking service.

Features of Uttara Bank Limited

Bank is an intermediary institute. Like other commercial bank Uttara Bank Limited also has some special features. They are as follows:

• Legal Entity: It is compulsory matter for a bank to achieve legal entity. The stronger legal entity leads to effective banking program. Uttara Bank Limited has a strong legal entity.
• Organizational Structure: Uttara Bank Limited has a well-set organizational structure. Organizational structure is a precondition of effective banking activities.
• Financial Solvency: Uttara Bank Limited is an old bank; its ratio of liquidity is well and strong. So, the clients get greater confidence in the bank.
• Location of The Bank: Location is very useful for bank. The Head Office and the branches of Uttara Bank Limited are located in the central point of the capital and the other district towns. It has branches also in the big town for rural people.
• Relation with the Central Bank: As the Uttara Bank Limited is the government-registered bank, so it maintains a friendly behavior with the Bangladesh Bank.
• Security: the Uttara Bank Limited is totally a secured bank. The clients of the bank get a heavy security on their deposit.
• Management of the Bank: The executives and the officers Uttara Bank Limited are very experienced. Maximum executives are well educated and experience about the banking system.
• Foreign Exchange: Uttara Bank Limited operates foreign exchange business promptly. There 47 branch deals with foreign exchange.

Marketing mix ( 7 p’s)

Products:

Financial products and services products that a bank offers to its customers are mainly classified as under:

1. Deposit Products to generate funds.
2. Lending products for financial gains
3. Money Transmission products
4. International business products
5. Special fee earning services
6. Social services products

Products that are offered by Uttara Bank are as under

 Deposit Products

Deposit is the lifeblood of a bank. From the history and origin of the banking system we know that deposit collection is the main function of a bank.

-Accepting deposits

Procedures of collecting deposit procedure are almost same in the entire bank and the branches as well. The deposits that are accepted by Uttara Bank slake other banks may be classified into:

• Current Deposit
• Short term deposit
• Saving Deposit
• Fixed deposit
• Special Saving Scheme Deposit (SSS)

Lending Products

Bank has its own principle about the credit sanctioned or loan to the customers, but lending product of a bank or of a branch is equal important to verify the outstanding at the end of any fiscal year. Every bank pays special attention about their lending products, because these products are handed over on a regular basis.

Continuous Loan

A) Secured Overdraft against Financial Obligation {SOD (FO)}

Advances allowed to individual /firms against financial obligation (i.e lien of FDR/PSP/BSP/Insurance Policy etc.) and against assignment of works order for execution of contractual works fall under this head.  It is a continuous advance facility. By this agreement, the banker allows his customer to overdraft his current account up to his credit limits sanctioned by the bank. The interest is charged on the amount, which he withdraws, not on the sanctioned amount. Uttara Bank sanctions SOD against different security.

B) Secured Overdraft against Work order/ Real Estate etc [SOD (G)}

Advances allowed against assignment of work order or execution of contractual works falls under this head. This advance is generally allowed for a definite period and specific purpose i.e. it is not a continuous credit. It falls under the category “Others”

C) Cash Credit (Hypothecation)

Advances allowed to individual /firm for trading as well as wholesale purpose or to industries to meet up the working capital requirements against hypothecation of goods as primary security fall under this type of lending. It is a continuous credit. It is allowed under the category

• “Commercial Lending” when the customer is other than a industry and
• Working Capital when the customer is an industry.

D) Cash Credit (Pledge)

Financial accommodations to individual/firm for trading as well as sole-sale purpose or to industries as working capital against pledge of goods as primary security fall under this head of advance. It is also a continuous credit and like the above allowed under the categories

(i)”Commercial Lending” and

(ii) “Working Capital”.

SWOT Analysis on General Banking of Uttara Bank Limited

In the further studies of overview of Uttara Bank we have identified the Strength, Weakness, Opportunities and Threats of Uttara Bank, but identifying the SWOT analysis of General Banking relates to the activities of General Banking Section. They are as Following: 

Strength

1. They use up to date software, which reduce time and labor of employee.
2. Introduced different types of schemes and services that are available in multinational banks to compete in market and clients satisfactions as well.
3. Skilled manpower and efficient employees are being involved in busy subsection of this section to meet the client’s satisfaction.
4. Promotional activities of (such as advertising) of different schemes and services are being encouraged to stay in the competition.
5. Good customer oriented services are being provided as per recent informal meeting with customer those who are receiving day to day services.
6. Dynamic approach and efficient Management.
7. The bank carries out all type of commercial banking activities.

Weakness

1. Using of Data Base networking in information Technology from one branch to another is a major problem of general banking section, resulting time consuming, manual work and delay in day to day execution.
2. Being not fully computerized it follows traditional system while executing day to day operations.
3. According to some clients, variety of services not practiced and this is the reason of falling behind in competition.
4. According to some clients, introducer in account opening procedures are very much emphasized due to those who does not have the reference may not be part of this bank.
5. Banking procedure of Uttara Bank is time consuming.
6. Lack of innovative and differentiated services in proportion to their competitive.

Opportunities

1. To advertise in present schemes and services, clients are likely to enjoy the competition and this section of the bank has the opportunity to be more competitive in near future.
2. New ideas have to find out from experts or from fresher towards the effective execution of the daily general banking activities for taking this more competitive.
3. Opportunity to expend geographically with in Bangladesh.

Threats

1. Providing different new schemes and services compared to other banks, it has not attracting its clients by providing fast and fully customized way, it’ll become a threat for this section to retain customers.
2. Rising internet banking is a threat for this bank.
3. New restriction or law enforce by the nation.

Customer satisfaction:

The extent to which a product’s perceived performance matches a buyer’s expectations.

Customer Satisfaction depends on the service perceived performance relative to a buyer’s expectation. If the services performance falls short of expectations, the customer is dissatisfied. If the performance matches expectations, the customer is satisfied. If the performance exceeds expectations, the customer the customer highly satisfied or delighted. The extent to which a product’s perceived performance matches a buyer’s expectations.

Customer Development Process

The main steps in the process of attracting and keeping customer are shown beside the chart. The start point is everyone who might perhaps buy the service or product (suspects).From these company or bank determines the most likely prospects, which it hopes to convert into first time customers, and then into repeat customers, and then to clients- people to whom the company or bank gives very special and knowledgeable treatment. The next challenge is to turn clients into members by starting a membership program that offers benefits to customers who join, and then into advocates, customers who enthusiastically recommend the company or bank and its product or services to others. The ultimate challenge is to turn advocates into partners.

Customer- Centered Marketing strategy

To succeed in today’s competitive market place, companies or banks need to be customer centered. They must win customers form competitors, then keep and grow them by delivering greater value, but before it satisfy customer, a company or bank must first understand their needs and wants. Thus, sound marketing requires a careful customer analysis. Companies or banks know that they can not profitably several all customers in a giving market-at least not all customers in the same way. There are too many different kinds of customers with too many different kinds of needs. Moreover, most companies or banks are in position to serve some segments better than others are. Thus, each company must divide up the total market, choose the best segments and design strategies for profitably serving chosen segments. This process involves three steps:

• Market segmentation
• Target marketing
• Market positioning.

Market segmentation:

Dividing a market into distinct groups of buyers who have distinct needs, characteristics, or behavior and who might require separate services or marketing programs is called market segmentation. A market segment consists of customers who respond in a similar way to given set or marketing efforts.

Target Marketing:

The process of evaluating each market segments attractiveness and selecting one or more segments to enter. A company should target segments in which it can profitability generate the greatest customer value and sustain it over time.

Market positioning:

Arranging for product or service to occupy a clear, distinctive, and desirable place relative to competing products or service in the minds of target customer. Thus marketers plan positions that distinguish their products or services form or competing brands and give them the greatest strategic advantage in their target markets.

Capturing value form Customers

The first four steps in the marketing process involve building customer relationship by creating and delivering superior customer value. The final step involves capturing value in return, in the form of current and future sales, market share, and profits. By creating superior customer value, the firm creates highly satisfied customers who stay loyal and bye more. This, in turn, means greater long-run returns for firm. Here, we discuss the outcomes of creating customer value: customer loyalty and retention, share of customer, and customer equity.

Creating Customer loyalty and Retention

Good customer relationship management creates customer delight. In turn, delighted customers remain loyal and talk favorably to others about the bank and its services. Studies show big differences in the loyalty of customers who are less satisfied, somewhat satisfied, and completely satisfied. Even a slight drop from complete satisfaction can create an enormous drop in loyalty.

Companies are realizing that losing a customer means losing more than a single sale. It means losing the entire stream of purchase that the customer would make over a lifetime of patronage. For example- here is a dramatic illustration of Customer Lifetime value.

Growing Share of Customer

Beyond simply retaining good capture customer lifetime value, good customer relationship management can help marketers to increase their share of customer- The share they get of the customers purchasing in their service categories. Many marketers are now spending less time figuring out how to increase share of market and more time trying to grow share the customer.

Customer Equity

• The combined customer lifetime values of all current and potential customers.
• Measures a firm’s performance, but in a manner that looks to the future.
• Choosing the “best” customers is key.

Customer Needs, Behaviors, and Values Clarified

• Banks achieve better prospect and customer management by combining profitability, behavioral segmentation, and analysis
• Banks deliver information to customer touch points (e.g., branches or call centers) to influence customer activity and workflow management
• Stage Two banks manage and influence the workflow of their branches and call centers, and generate more effective customer acquisition and management activities.

General  Banking

General banking department is the heart of all banking activities. This is the busiest and important department of a branch, because funds are mobilized, cash transactions are made; clearing, remittance and accounting activities are done here.

Since bank is confined to provide the services everyday, general banking is also known as ‘retail banking’. In Uttara Bank Limited Principal Branch, the following departments are under general banking section:

• Account opening section
• Cash Section
• Local Remittances                             
• Clearing section
• Accounts section

1. Account opening section

Account opening is the gateway for clients to enter into business with bank. It is the foundation of banker customer relationship. This is one of the most important sections of a branch, because by opening accounts bank mobilizes funds for investment. Various rules and regulations are maintained and various documents are taken while opening an account. A customer can open different types of accounts through this department. Such as:

• Current Deposit.
• Savings account.
• Short notice deposit (SND)
• Fixed Deposit Receipt Account/ FDR Account
• Short Tram Deposit / STD Account 

Current Deposit

Current account is purely a demand deposit account. There is no restriction on withdrawing money from the account. It is basically justified when funds are to be collected and money is to be paid at frequent interval. Some important points have been discussed in the project part.

Savings Bank Account

This deposit is primarily for small-scale savers. Hence, there is a restriction on withdrawals in a month. Heavy withdrawals are permitted only against prior notice. Some Important Points have been discussed in project part.

SND (Short Notice Deposit) Account

Normally various big companies, organizations, Government Departments keep money in STD account. Frequent withdrawal is discouraged and requires prior notice.  The deposit should be kept for at least seven days to get interest. The interest offered for STD is less than that of savings deposit. Interest is calculated based on daily minimum product and paid two times in a year. Interest rate is 6.00%.

Fixed Deposit Receipt Account/ FDR Account 

Any Bangladeshi national residing home or abroad may open FDR with Uttara Bank Limited. FDR may be opened single/joint name for a period of 3, 6, 12, 24 and 36 months. Uttara Bank Limited offers attractive/competitive rate of interest in FDR.

Short Tram Deposit / STD Account 

Govt. Semi-Govt. Autonomous organization and an individual may open STD Account with Uttara Bank Limited. Uttara Bank Limited offers attractive/competitive rate of interest in STD Account. 7 days notice required to withdraw big amount.

Head office provides the attractive and competitive interest rate for customers

Number of the accounts:

Table-01

Account Opening procedure

Documents required for opening account

Individual / Joint Account

1. Introduction of the account.
2. Two photographs of the signatories duly attested by the introducer.
3. Identity (copy of passport).
4. Joint Declaration Form (For joint a/c only).
5. Employee’s Certificate (in case of service holder).

Partnership account

1. Introduction of the account.
2. Two photographs of the signatories duly attested by the introducer.
3. Partnership letter duly signed by all partners (Sign should be similar as stated in Partnership Deed).
4. Partnership Deed duly certified by Notary public.
5. Registration (If any).
6. Updated Trade license.

Proprietorship account

Introduction of the account.

1. Two    photographs of the signatories duly attested by the introducer.
2. Valid copy of Trade License.
3. Rubber stamp.
4. TIN number certificate.
5. Identity (Copy of passport).
6. Permission letter from DC/ Magistrate (in case of newspaper)

Limited company

1. Introduction of the account.
2. Two photographs of the signatories duly attested by the Introducer.
3. Valid copy of Trade License.
4. Board resolution of opening A/C duly certified by the Chairman/Managing Director.
5. Certificate of Incorporation.
6. Certificate of Commencement (In case of Public limited company).
7. Certified (joint stock) true copy of the Memorandum and Article of Association of the Company duly attested by Chairman or Managing Director.
8. List of directors along with designation & specimen signature.
9. Latest certified copy of Form – xii (to be certified by register of joint stock companies) (In case of Directorship change).

10. Rubber Stamp (Seal with designation of each person)
11. Certificate of registration (In case of Insurance Company

12.Obtained from department of Insurance from the Peoples Republic of BD).

Club/societies account

1. Introduction of the account.
2. Two photographs of the Signatories duly attested by the introducer.
3. Board Resolution for Opening A/C duly certified by President/ Secretary.
4. List of Existing Managing Committee.
5. Registration (if any).
6. Rubber Stamp.
7. Permission letter from Bureau of N.G.O. (In case of N.G.O. A/C).

 Closing of an account

The closing of an account may happen,

• If the customer is desirous to close the account,
• If the Uttara Bank finds that the account is inoperative for a long duration.
• If the court of Uttara Bank issues garnishee order.

A customer may close his/her account any time by submitting an application to the branch. The customer should be asked to draw the final check for the amount standing to the credit of his/her account less the amount of closing an other incidental charge and surrender the unused check leaves. The account should be debited for the account closing charge etc. and the authorized officer of the bank should destroy unused check. In case of joint account the application for closing the account should be signed by the joint account holder. The fee for closing of an account is Tk.50.

2. Cash  Section

Major activities of this section are­

• Receipt of Cash.
• Payment of cash.
• Balancing, Checking and Safe Custody of Cash.
• Receiving of cheque deposited for clearing.

Cash Receiving

It is one of the major functions of this section. Cash deposited by the clients to be received by this section. The concerned person shall take care of the following things:

• Deposit slip is billed up properly and Scholl the deposit slip
• Date, Account no., Account name, Amount in figure and in words, Denomination are properly written.
• Physical count of the cash.
• Writing the amount in figure on the counter part.
• Obtaining signature of authorized persons.
• Deliver the counter part to the client.
• Balance the physical rash with total receipt of cash through vouchers.

Cash Payment

• Another major function of the section steps of making a payment:
• Receive the cheque and token the cheque.
• Verily that the cheque is of’ our branch and date. Amount in figure and write works, signatures are correct.
• Make entry in
• If transaction is successful, make payment.
• Take two signature of the receiver on backside of the cheque and write denomination.

Receiving of Cheque Deposited For Clearing

In this case the concerned person will take care that the particulars of the cheque deposited for clearing are properly written in the deposit slip. Then write the amount in figure on the counter part, obtain signature of the authorized poisons, return the counter part of the deposit slip to the client and the cheque to the clearing section. The in-charge of’ this section holds the responsibility to maintain the following registers.

• Vault register: In this roister withdrawal of cash, Deposit of Cash and Balance of cash arc written with denominations.

• Cash register: In this register Opening Balance. Total Receipts, Total Payments anal Closing Balance with denominations are recorded.

3. Local Remittance

Carrying cash money is troublesome and risky. That’s why money can be transferred from one place to another through banking channel. This is called remittance. Remittances of funds are one of the most important aspects of the Commercial Banks in rendering services to its customers.

Types of remittance:

• Between banks and non banks customer
• Between banks in the same country
• Between banks in the different centers.
• Between banks and central bank in the same country
• Between central bank of different customers.

The main instruments used by the Uttara Bank of remittance of funds are

• Payment order (PO)
• Demand Draft (DD)
• Telegraphic Transfer (TT)

So the basic three types of local remittances are discussed below:

Table-

Term Deposit Receipt

The Local Remittance section of Uttara Bank Motijheel Branch also issues TDR. They are also known as time deposit or time liabilities. These are deposits, which are made with the bank for a fixed period, specified in advance. The bank need not maintain cash reserves against these deposits and therefore, the bank offers higher of interest on such deposits.

• Term Deposits: These rates are not negotiable. In this table we can find out the percentage that is given by the bank for specific period of time to the customer.

4. Clearing Section

The amount of Cheques, Pay Order (P.O), and Demand Draft (D.D) Collection from other banks on behalf of its customer is a basic function of a Clearing Department.

• Clearing: Clearing is a system by which a bank can collect customers fund from one bank to another through clearing house.
• Clearing House: Clearing House is a place where the representatives of different banks get together to receive and deliver Cheques with another banks.
• Normally, Bangladesh Bank performs the Clearing House in Dhaka, Chittagong, Rajshahi, Khulna & Bogra. Where there is no branch of Bangladesh Bank, Sonali bank arranges this function.
• Member of Clearing House: Uttara Bank limited is a scheduled Bank. According to the Article 37(2) of Bangladesh Bank Order, 1972, the banks which are the member of the clearinghouse are called as Scheduled Banks. The scheduled banks clear the cheque drawn upon one another through the clearinghouse.

Types of Clearing

• Outward Clearing: When the Branches of a Bank receive cheque from its customers drawn on the other Banks within the local clearing zone for collection through Clearing House, it is Outward Clearing.
• Inward Clearing : When the Banks receive cheque drawn on them from other Banks in the Clearing House, it is Inward Clearing.

Accounts Section

Accounts Department is called as the nerve Centre of the bank. In banking business, transactions are done every day and these transactions are to be recorded properly and systematically as the banks deal with the depositors’ money.  Improper recording of transactions will lead to the mismatch in the debit side and in the credit side. To avoid these mishaps, the bank provides a separate department, whose function is to check the mistakes in passing vouchers or wrong entries or fraud or forgery. This department is called as Accounts Department. If any discrepancy arises regarding any transaction this department report to the concerned department.

Besides these, the branch has to prepare some internal statements as well as some statutory statements, which are to be submitted to the Central Bank and the Head Office. This department prepares all these statements.

Workings of this department:

• Packing of the correct vouchers according to the debit voucher and the credit voucher
• Recording the transactions in the cashbook.
• Recording the transactions in general and subsidiary ledger.
• Preparing the daily position of the branch comprising of deposit and cash.
• Preparing the daily Statement of Affairs showing all the assets and liability of the branch as per General Ledger and Subsidiary Ledger separately.
• Making payment of all the expenses of the branch
• Recording inters branch fund transfer and providing accounting treatment in this regard.
• Preparing the monthly salary statements for the employees
• Preparing the weekly position for the branch which is sent to the Head Office to maintain Cash Reserve Requirement (C.R.R)
• Preparing the monthly position for the branch which is sent to the Head Office to maintain Statutory Liquidity Requirement (S.L.R)
• Make charges for different types of duties
• Preparing the budget for the branch by fixing the target regarding profit and deposit so as to take necessary steps to generate and mobilize deposit.
• Checking of Transaction List.
• Recording of the vouchers in the Voucher Register.

 Other department of Uttara Bank Limited

 Foreign exchange

Foreign exchange is the means and methods by which rights to wealth in a country’s currency are converted into rights to wealth in another country’s currency. In banks when we talk of foreign exchange, we refer to the general mechanism by which a bank converts currency of one country into that of another. Foreign Exchange Department (FED) is the international department Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These banks are known as Authorized Dealers.  If the branch is authorized dealer in foreign exchange market, it can remit foreign exchange from local country to foreign countries.  So Uttara Bank, Principal branch is an authorized dealer.

There are three kinds of foreign exchange transaction:

1. Import
2. Export
3. Foreign

A) Import

To import, a person should be competent to be an importer’. According to Import and Export Control Act, 1950, the Office of Chief Controller of Import and Export provides the registration (IRC) to the importer. In an international business environment, buyers and sellers are generally unknown to each other. So seller of goods always seeks security for the payment of his exported goods. Bank gives export guarantee that it will pay for the goods on behalf of the buyer if the buyer does not pay. This guarantee is called Letter of Credit. Thus the contract between importer and exporter is given a legal shape by the banker by ‘Letter of Credit’.

• Letter of Credit
• Definition

A letter of credit is a letter issued by a bank (know as the opening or the issuing bank) at the instance of its customer (known as the opener) addressed to a person (beneficiary) undertaking that the bills drawn by the beneficiary will be duly honored by it (opening bank) provided certain conditions mentioned in the letter gave been complied with.

Parties to the L/C

Steps for import L/C Operation – 8 steps operation

Step 1 – Registration with CCI&E

• For engaging in international trade, every trader must be first registered with the Chief Controller of Import and Export.

• By paying specified registration fees to the CCI&E. the trader will get IRC/ERC (Import/Export Registration Certificate), to open L/C with bank, this IRC is must.

Step 2 – Determination terms of credit

• The terms of the letter of credit are depending upon the contract between the importer and exporter. The terms of the credit specify the amount of credit, name and address of the beneficiary and opener, tenor of the bill of exchange, period and mode of shipment and of destination, nature of credit, expiry date, name and number of sets of shipping documents etc.

Step 3 – Proposal for Opening of L/C

To have an import LC limit an importer submits an application to department to Uttara Bank. The proposal contains the following particulars:

• Full particulars of the bank account
• Nature of business
• Required amount of limit
• Payment terms and conditions
• Goods to be imported
• Offered security
• Repayment schedule

Step 4 – Application by importer to the banker to open letter of credit

• For opening L/C, the importer is required to fill up a prescribed application form provided by the banker along with the following documents:

 Table-

Step 5 – Opening of L/C by the bank for the opener:

• Taking filled up application form from the importer.
• Collects credit report of exporter from exporter’s country through his foreign correspondence there.
• Opening bank then issues credit by air mail/TELEX/SWIFT followed by L/C advice as asked by the opener through his foreign correspondent or branch as the case may be, at the place of beneficiary. The advising bank advises the L/C to the beneficiary on his own form where it is addressed to him or merely hand over the original L/C to the beneficiary if it is so addressed.

Step 6 – Shipment of goods and lodgment of documents by exporter:

• Then exporter ships the goods to the destination of the importer country.
• Sends the documents to the L/C opening bank through his negotiating bank. Generally the following documents are sent to the Opening Banker with L/C:

Table-

Step 7 – Lodgment of Documents by the opening Bank from the negotiating bank:

After receiving the documents, the opening banker scrutinizes the documents. If any discrepancy found, it informs the importer. If importer accepts the fault, then opening bankers call importer retiring the document. At this time many thing can happen. These are indicated in the following:

• Discrepancy found but the importer accepts – no problem occurs in lodgment.

• Discrepancy found and importer not agreed to accept – In this case, importer protest and send back all the documents to the exporter and request his to make in the specified manner. Here banker is not bound to pay because the documents send by exporter is not in accordance with the terms of L/C.

• Documents are OK but importer is willing to retire the documents – In this case bank is obligated to pay the price of exported goods. Since importer did not pay for bill of exchange, this payment by bank is one kind of credit to the importer and this credit in banking is known as PAD.

• Everything is O.K. but importer fails to clear goods from the port and request bank to clear – In this case banks clear the goods and takes delivery of the same by paying customs duty and sales tax etc. So, this expenditure is debited to the importer’s account and in banking it is called LIM.

 Step 8 – Retirement

The importer receives the intimation and gives necessary instruction to the bank for retirement of the import bills or for the disposal of the shipping document to clear the imported goods from the customs authority. The importer may instruct the bank to retire the documents by debiting his account with the bank or may ask for LTR (Loan against Trust Receipt).

Export

Understanding

The goods and services sold by Bangladesh to foreign households, businessmen and Government are called export. The export trade of the country is regulated by the Imports and Exports (control) Act, 1950. There are a number of formalities, which an exporter has to fulfill before and after shipment of goods. The exports from Bangladesh are subject to export trade control exercised by the Ministry Of Commerce through Chief Controller of Imports and Exports (CCI & E). No exporter is allowed to export any commodity permissible for export from Bangladesh unless he is registered with CCI & E and holds valid Export Registration Certificate (ERC). The ERC is required to be renewed every year. The ERC number is to be incorporated on EXP forms and other documents connected with exports.

Formalities and procedure of Export L/C

1. Obtaining exports LC: To get export LC form exporter issued by the importer.

2. Submission of export documents: Exporter has to submit all necessary documents to the collecting bank after shipping of goods.

3. Checking of export documents: After getting the documents banker used to check the documents as per LC terms.

4. Negotiation of export documents: If the bank accepts the document and pays the value draft to the exporter and forward the document to issuing bank that is called a negotiating bank. If the bank does buy the LC then the bank normally acts as collecting bank.

5. Realization of proceeds: This is the period when the issuing bank has realized the payment.

6. Reporting to the Bangladesh bank: As per instruction by Bangladesh bank the bank has to report to respective department of Bangladesh bank by mentioning latest payment.

7. Issue to proceeds realization certificate (PRC): Bank has to issue proceed realization certificate of export LC to the supplier / exporter for getting cash assistance.

Back-To-Back L/C

It is simply issued to the clients against an import L/C. Back-to-Back mechanism involves two separate L/C. One is master Export L/C and another is Back-to-Back L/C. On the strength of Master Export L/C bank issues bank to Back L/C. Back-to-Back L/C is commonly known as Buying L/C. On the   contrary, Master Export L/C is known as Selling L/C.

Features of Back to Back L/C

• An Import L/C to procure goods /raw materials for further processing.
• It is opened based on Export L/C.
• It is a kind of Export Finance.
• Export L/C is at Sight but back to Back L/C is at insurance.
• No margin is required to open Back to back L/C
• Application is registered with CCI&E
• Applicant has bonded warehouse license.
• L/C value shall not exceed the admissible percentage of net FOB value of relative Master L/C.
• Insurance period will be up to 180 days.
• The import L/C is opened for 75% of the value of Export L/C.
• Here L/C issued against the lien of export L/C.
• Arrangements are such that export L/C matures first then out of this export profit, import L/C is paid out.

Documents Required for Opening a Back-to-back L/C

In Uttara Bank Principal Branch, following papers/ documents are required for opening a back-to-back L/C-

1. Master L/C
2. Valid Import Registration Certificate (IRC) and Export Registration Certificate (ERC)
3. L/C Application and LCAF duly filled in and signed
4. Proforma Invoice or Indent.
5. Insurance Cover Note with money receipt.
6. IMP Form duly signed.

In addition to the above documents, the followings are also required to export oriented garment industries while requesting for opening a back-to-back L/C –

1. Textile Permission.
2. Valid Bonded Warehouse License.
3. Quota Allocation Letter issued by the Export Promotion. Bureau (EPB) in favor of the applicant for quota items.

Payment of back to back l/c:

In case back to back as 60-90-120-180 days of maturity period, deferred payment is made. Payment is given after realizing export proceeds from the L/C issuing bank.

Foreign Remittance

Uttara Bank Limited is the members of MoneyGram and SWIFT networks. Using the services of these global network, non resident Bangladesh nationals can send money from abroad to their home country within a few minutes without any risk, Besides Money Gram, they have also arrangement with foreign money exchange companies like U.S.E. Exchange Co. Redha-al-Ansari Co. etc. through which Bangladeshi expatriates can remit these money to their relatives in home country very easily and safely using SWIFT network. MoneyGram and SWIFT mechanism ensure 100% secured and quickest possible mode of money transfers from abroad tour country and Bangladeshi money receivers are enjoying these facilities through us. Uttara Bank Limited is rendering exceptional services to its clients by arranging such private remittance of money from foreign countries to Bangladesh.

MoneyGram

Uttara Bank Limited is very happy to announce to have joined hands with MoneyGram Payment Systems Inc to serve expatriates to send money back home quickly from anywhere in the word. Moreover, money can also be sent quickly through MoneyGram from Bangladesh to other parts of the World as is done through the banking channel. At the moment we are concentrating on home remittances being sent by the expatriates.

MoneyGram Payment system Inc is a non-back provider of electronic money transfer service. MoneyGram is providing its customers a service of an unsurpassed quality and superior value. MoneyGram has over 25,000 Agent locations throughout the world. Persons anywhere require transferring cash quickly, reliably, conveniently and at attractive prices to more than 115 countries can depend MoneyGram agents for the service.

SWIFT Networks

Uttara Bank Limited is a member of the Society for Worldwide Inter-bank Financial Telecommunication (in abbreviation SWIFT). Through this fast, reliable and secure global communication, UBL has gained 24 hours connectivity with over 7000 financial institutions in 200 countries for transmission of LCs, Guarantees, funds transfers and payment etc.

Foreign Currency Accounts

Any person/firm/organization who earns foreign currency can open Foreign Currency Account with UBL. Payments in foreign currency may be made freely abroad from this account and local payment in Taka may also be made from this account. Bank pay interest provided the accounts are maintained in the form of term deposit for minimum period of 90 days.

Major Findings

In general banking department they follow the traditional banking system. The entire general banking procedure is not fully computerized.

• Service personnel are working under pressure because they have to deal with large number of customer every day.
• Customers need to wait for long time.
• Logistic supports are not sufficient
• Branch premises is not large enough for the customer
• Less importance in customer care which is very much potential now a day.
• Lack of sitting arrangement in the branch is a trouble for the customer
• Interest rates on different loan items are not that comparative for customer satisfaction.
• Uttara Bank Limited HRD is not so efficiently works for the personnel and for the organization.
• High paying Interest expense which is not good for a Bank or company.
• Uttara Bank Limited has less amount of foreign exchange business compare to other Banks.

Recommendation Regarding General Banking Section

• Nearly every bank follow traditional system in general banking activities but bank should introduce computerized system it will reduce time, labor and cost also.
• Cash payment section and cash received sectioned should be separated by using data based software.
• They should use Data Base Networking in Information Technology (DBNITD) Department so that they transfer data from one branch to another and branch to head office.
• Uttara Bank Limited should give more emphasis on their marketing effort and try to increase their sales force.
• To ensure best service for their customer.
• They should reduce their interest rate on different credit scheme.
• The Bank should give more emphasis on industrial loan.
• They should try to attend different type of target customer.
• The Bank should reduce services charge of money transfer.
• To give full concentration to their customer.
• To increase their logistics support.
• The Bank should increase profit rate on different scheme.
• The existing setup can be improved by adding a few more employees.
• Lack of openness often drives customers away. All kinds of rules and instructions must be disclosed to the customers so a to make it convenient for him to take a decision. Customers are always afraid of charges.

Conclusion

From the practical implementation of customer dealing procedure during the whole period of my practical orientation in Uttara Bank limited. I have reached a firm and concrete conclusion in a very confident way. I believe that my realization will be in harmony with most of the banking thinkers. It is quite evident that to build up an effective and efficient banking system to the highest desire level computerized transaction is a must.

Success in the banking business largely depends on effective customer services. Less the amount of loan losses, the more the income will be from Credit operations. The more the income from Credit operations the more will be the profit of the Uttara Bank Limited and here plays the success of Credit Financing.

Though there are some drawbacks in implementing Credit facilities in Uttara Bank Limited as per manual, it can be further developed in light of the recommendations being discussed above. Finally it can be argued that though the results achieved so far are not satisfactory, Credit Financing is a modern scientific technique for enhancing Uttara Bank strength and there lies the opportunities to make it more effective in the future for our own benefit.