Internship Report on Overview of Uttara Bank Limited

Introduction

Uttara Bank Limited is one of the largest and oldest private-sector commercial Bank of Bangladesh. The Bank was formally known as the Eastern Banking Corporation Limited which started journey on & from 28/ 1/1965. From that period of time, it has been expanding its operation with years of experience to serve the clients as well as the country. Now with 207 fully computerized branches worldwide created a strong network in Bangladesh. Besides, to create a strong connection with the globe 600 affiliates worldwide create efficient networking and reach capability are active to support the Bank. Uttara is a bank that serves both clients and country.

1.2: Formation of UBL:
Eastern Banking Corporation was formed in the year of 1965 that is after a long history known as Uttara Bank Limited. Under the Bangladesh Bank (Nationalization) order 1972, UBL had been a nationalized Bank in the name of Uttara Bank but it was converted as a public limited company named “Uttara Bank limited” in the year of 1983 upon the amendment of Bangladesh bank (Nationalization) order. The Bank was incorporated as a banking company on 29/06/1983 and obtained business commencement certificate on 21/ 08/ 1983. Only within one year the Bank floated its share & now the Bank is listed in the DSE & CSE for trading share.

1.3: UBL at Glance:
1. Business name: Uttara Bank Limited (UBL)
2. .It is one of the oldest private commercial Bank in Bangladesh.
3. It was formally known as Eastern Banking Corporation.
4. It has been working as private commercial Bank from the year of 1983.
5. Currently it is operating with 207 branches in home & 600 international correspondents.
6. All the branches of UBL are fully computerized with changing environment.
7. About 3,562 employees are in the winning team of UBL.
8. The Head Office is located at Bank’s own 18-storied building at Motijheel, the commercial center of the capital, Dhaka.

Registered Office:
90, Motijheel Commercial Area, Dhaka-1000, Bangladesh
GPO Box- 217 & 818
Corporate Offices : 02 (Corporate Branch & Local Office)
Regional Office : 13
Authorized Branches : 38 ( Dealer Branches)
Treasury & Dealing Room : 01
Training Institute : 01
Paid-up capital : 399.3 million (2007), 99.8 million (2003)
Total Assets : 52,860.3 million (2007), 36,671.0 million (2003)
Income Per Share : 102.56 (2007), 197.41 (2003)
Telephone : PABX 9551162
Telefax : 88-02-7168376, 88-02-9572102
E-mail :uttara@citecho.net, ublmis@citcho.net
Web : www.uttarabank-bd.com
Chairman :Mr. Azaharul Islam
Vice Chairman : Mr. Md. Asaduzzaman.
Managing Director : Mr. Md. Shamsuddin Ahmed.
Auditors : M/S Ata Khan & Co.
Chartered Accountants
Legal Adviser : Mr. M. Moniruzzaman Khan
Barrister at law
Secretary : Mr. Md. Fazlur Rahman.

1.5: Human Resources:
The Bank gives preference for the development of its employees. For that reason, the bank undertakes different training program & ‘Research & Development (R&D)’ time to time. Development of human resources is going on in the following ways-
Bank’s own training institute has been striving to bring about a qualitative change and improvement in human resources of the bank by imparting continuous different training throughout the whole year.
Guest speakers specialized in banking participate in each training program of the Bank in addition to highly educated faculty members of the staff of the Bank participated.
A member of executives and officials are sent to various training institutions including “Bangladesh Institute of Bank Management (BIBM) and abroad for higher training.
• Total Human resource of the Bank as on 31 December, 2008 was as follows-

1.5.2: Board of Directors:
• Chairman Azaharul Islam
• Vice Chairman Md. Asaduzzaman
• Directors Badrunnesa (Sharmin) Islam
Md. Mahfuzus Subhan
Abul Barq Alvi
Faruque Alamgir
Col. Engineer M.S. Kamal (Retd.) Independent Director
Prof. Mirza Mazharul Islam
Prof. Sharif Md. Shahjahan
Sayes A. N. Wahed
Shah Habibul Haque
Sk. Amanullah
Major General Prof. M.A. Mohaiemen (Retd.)
• Managing Director Shamsuddin Ahmed
• Secretary Md. Fazlur Rahman

1.6: Development of Branches:
UBL opened six new branches to expand its network in the year of 2008. As a result it has 207 branches all over the country. New six branches are-
Mohakhali Branch;
BKSP branch & Panthopath branch, Dhaka;
Chakbazar & Lohagara branch, Chittagong;
Chatak branch, Sunamgonj.
At present international division of head office and 38 branches is under SWIFT operation & for that reason the Bank has been able to transmit letter of credit, fund and message instantly throughout the world at low cost. Now all the branches of the Bank are well decorated & operations run by computer technology.
1.7: Transportation:
In the year of 2008, total vehicles of the Bank were 107. The vehicles are being used to transport the Bank’s employees & to transfer money from feeding branches to other branches.

1.8: Location of Bank:
UBL has its own building of 18 stored that is using as head office located at Motijheel Commercial Area of Dhaka city. Bank has also its own building in the following locations-
• Local office,
• Eastern Plaza branch,
• Hotel Isakha branch,
• Dar-us-salam road branch,
• Lease financing unit in Eastern Tower Building,
• Training institute of the Bank at Eastern plus (145, shantinagar), Dhaka,
• Nabagram branch in Manikgonj,
• Zonal office and KDA branch in Khulna and Shaheb Bazar branch in Rajshahi.

1.9: UBL in the Competitive Marketplace:
Uttara Bank Limited successfully completed the year of 2008 with the position where rivalry among competitors was very high. At the same time the overall macroeconomic scenario of the country was destructive because of political & natural calamities. There is the existence of substitute products of such private commercial Bank like different finance companies, micro credit by NGOs (Non Government Organizations) & money market existing in the country. Bargaining power of customers is very high as customers have the opportunity to switch into other financial organization easily. In the mentioned year of 2008, the Bank achieved excellent performance in connection with deposit & credit expansion, compliance on corporate Governance, tremendous success on foreign trade & in managing of risk. Considering the overall perspective of the market & the performance of overall banking activities of UBL, it can be proved that the performance of the Bank was quite satisfactory.

1.9.1: Capital & Reserve Fund:
Authorized capital of the bank remained at taka 1,000.0 million during the year of 2008where paid-up-capital has been raised to taka 399.3 million from taka 199.7 million in the year of 2007. The reserve fund of the Bank also increased to taka 2,054.2 million during the year.

1.9.2: Capital Adequacy:
Bangladesh Bank sets the capital adequacy ratio of a private commercial Bank as 10% where UBL has 10.5 %. Capital adequacy of the bank is measured by the ratio of Bank’s capital to risk weighted assets. So, it is indicating sound capital adequacy of the Bank.

1.9.3: Improvement of Assets:
In the year of 2008, total assets of the Bank raised at 52,860.3 million that was 16.9% more than previous year. The achievement was because of the sector wise improvement of loans & advances, investment, cash & reserve balance kept with Bangladesh Bank.

1.9.4: Collection of Deposits:
In the financial year of 2008, deposit of UBL increased by 10.74 percent. With the incremental rate of deposit collection, the Bank was very strict to abide by the Money Laundering Prevention Act 2002.

1.9.5: Sector Wise Position of Loans & Advances:
UBL achieved tremendous success to provide loans & advances in 2008 that had the growth rate of 13.17 percent. The Bank had the loans & advances in the sector of agriculture, industrial lending as term basis & as working capital, commercial lending in export, import & internal trade, special loan in the sector of consumer credit scheme (Uttaran), personal loan scheme, small business loan scheme, & Uttaran House Repairing and Renovation scheme, housing loan as general house building loan & staff house building loan, lease financing & bills discounted and purchased in Bangladesh & outside Bangladesh. Considering these entire mentioned sector, total loans & advances in the financial year of 2007 28,477.4 taka in million in both public & private sector.

1.9.6: Special Loan Scheme:
UBL provides special loan scheme only in the private sector. Special loan scheme includes the following heads-
Personal Loan Scheme;
Uttaran House Building repairing and Renovation Scheme.
Consumer Credit Scheme (Uttaran);
Small Business Loan Scheme;

1.9.6.1: Personal Loan Scheme:
UBL offers special loan scheme for the service holder for the purpose of marriage, medical services, education for their children etc. who find it difficult to meet all of these expenses properly. The Bank provides this special loan only to the salaried officials in the head of “Personal Loan Scheme of Salaried Officials”.

• Purpose of the loan:
The main purpose of the loan is to give support to the limited wage earner officials to run their life properly.

• Scope:
Under this head, the Bank provides loan to the salaried officials for the following aspects:
To meet own or dependent expenses for marriage ;
To provide emergency medical & operation expenses;
To pay educational expenses for admission, books, tuition fees etc. for their children;
Other expenses recognized & accepted by the Bank.

• Things to remember:
Maximum amount of BDT 1, 00,000 is paid under this scheme with the interest rate of 16.5% compounded quarterly;
Repayment must be under the Bank’s specific period but not more than 3 years;
Documents related to applicant’s job to prove him, two copies passport size photographs & photograph of nominee (if any) duly attested by the account holder is required to get the loan.

1.9.6.2: Uttaran House Building Repairing and Renovation Scheme:
UBL provides loan for repairing & renovation of building for the period of one to eight years. Special features of this scheme are:

The loan is for one to eight years;
Minimum amount of loan is BDT 1,00,000 & not more than BDT 25,00,000;
Loans repayment are collected as monthly installment;
Installment must be paid between 1 to 10th day of the month;
Bank charges 14% interest rate on this scheme;
Two percent interest rate is applicable for any late payment as penalty;
Installment must be paid in cheque.

1.9.6.3: Consumer Credit Scheme (Uttaran):
UBL has been providing ‘Uttaran Consumer Credit Scheme’ from the year of 1996.
Following heads are included under this scheme-

Baby Taxi, Tempo/Microbus (For self employed persons)
Cellular Telephone.
Motor cycle/car- New or re-conditioned.
Refrigerator/ Deep Freeze.
Personal Computer/ UPS/ Printer/ Type writer
Sewing Machine.
House hold furniture- Wooden & Steel.
Television/ VCR /VCP/VCD
Radio/ Two-in-one/ Three – in – one
Air-Conditioner/ Water Cooler/ Water Pump
Washing Machine.
Bi-Cycle
Dish Antenna.
Fax
Photocopier.
Electric Fan- Ceiling/ Pedestal/ Table.
Kitchen articles such as Oven, Micro-oven, Toaster, Pressure Cooker etc.

1.10: Risk Management of UBL:
The main goal of any financial institution is to maximize its return. This often comes, however, at the cost of increased risk. Bangladesh Bank has identified five core risks of management of Banks and has provided necessary guidelines for prevention thereof.

The five core risks are:
Credit Risk Management;
Asset Liability management;
Foreign Risk management;
Prevention of Money Laundering;
Internal control & Compliance.

1.10.1: Credit Risk Management:
Credit risk arises because of the possibility that promised cash flows on financial claims held by any financial institution, such as loans or bonds, will not be paid in full or more specifically, it is the risk that the promised cash flows from loans and securities held by financial institutions may not be paid in full. To minimize the credit risk, UBL follows the lending policy as directed from the Bangladesh Bank & the Government. The assessment process of loan application commences from the branch level by Relationship Managers (RM) through zonal office and ends at the “Credit risk management approval unit”. In line with lending policy of the Bank, CRM unit examines the proposal from different perspectives. Then if the proposal is found business worthy, CRM unit places it to the credit committee.

1.10.2: Asset Liability Management:
For the purpose of asset liability management, UBL formed “Assets Liability Management Committee (ALCOM) with the combination of following members-

Managing Director & CEO;
Additional Managing Director;
Deputy Managing Director;
Head of treasury;
Head of MIS & computer division;
Head of marketing division;
Head of credit & Head of central accounts.

Asset Liability Committee (ALCO) get together at least once in a month to review mainly about the aspects of economic & money market status, different risks like transfer pricing risk, risks related to interest rate on deposits and advances, liquidity risk relating to the balance sheet and various important issues.

1.10.3: Foreign Exchange Risk Management:
Foreign exchange risk is the risk that exchange rate changes can affect the value of a financial institution’s assets and liabilities located abroad. To reduce this category of risk, a strong management system control is required. The front office of the Bank’s treasury department continues to determine foreign exchange rate & tries to reduce the associated risk while the back office settles all foreign exchange transactions & reconciliation.

1.11: Accounts offered by UBL:
1.11.1: Savings Account
Any Bangladeshi National residing home or abroad may open savings account with UBL.
The account may be opened in single/joint name.
The account holder may nominate his nominee in this account.
The nominee can get the balance amount without submitting succession certificate after the death of account holder.

• Things to Concentrate :
Minimum amount to be kept in account : BDT 1,000.00
Cheque-book facility at negligible cost.
Opportunity to apply for – safe deposit locker facility
Collect foreign remittance in both T.C. & Taka draft.
Transfer of fund from one branch to another by
o Demand Draft
o Mail Transfer
o Telegraphic Transfer
Transfer of fund on standing instruction arrangement
Collection of cheques through clearing house.
Issuance of Payment Order / Call Deposit.

• Things to be Carried on & Special Guidelines to Open SB Account:
Account opening form delivered by UBL.
The account opening form and signature card are to be filled in and duly signed.
Two copies passport size photographs of the account holder.
Photograph of nominee (if any) duly attested by the account holder.
Photocopy of the 1st 7 pages of the passport for non-resident Bangladeshi national.
Signature in the account opening form/card must be same with the signature of the passport.
Details have been discussed in chapter three.

1.11.2: STD Account:
Government, semi government, autonomous organizations and an individual may open STD Account with UBL. The Bank offers attractive & competitive rate of interest in STD Account. But, 7 days notice is required to withdraw large amount from the STD Account.

1.11.3: FDR Account
Any Bangladeshi national residing home or abroad may open FDR with UBL.
FDR may be opened single/joint name for a period of 3, 6, 12, 24 and 36 months.
UBL offers attractive/competitive rate of interest in FDR.
Details have been discussed in chapter three.

1.12: International Banking:

1.12.1: Foreign Currency Account:

• For Private Individual/Firm/Organization:
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 BDT 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.
The account opening form and signature card are to be filled in and duly signed.
Two copies passport size photographs of the account holder duly attested by remitter’s Bank/Embassies
Photo copies of the first 7 pages of the passport duly attested by the remitters bank/exchange

• For Bangladeshi Nationals Working and Earning Abroad:

No initial deposit is required.
A/c holder may nominate his nominee to operate the account.
The account holder can freely transfer entire amount in foreign currency anywhere he chooses or can convert into Bangladesh Taka currency.
Funds from this account may also be issued to the account holder up to his entitlement for the purpose of his foreign travels in usual manner.
The account opening form and signature card to be filled in and duly signed.
Two copies passport size photographs of the account holder are required to carry.
Copies of employer’s certificate/work permit are also required.
One copy of the passport size photograph of the nominee if any to be attested by the account holder.
Photocopies of the first 7 pages of the passport of the account holder to be carried.

1.12.2: Non-Resident Foreign Currency Deposit Account (NFCD):
All non-resident Bangladesh nationals and persons of Bangladesh origin including those having dual nationality ordinarily residing abroad may open this account with any ‘Authorized Dealer (AD)’ branches of Uttara Bank Ltd.
The NFCD account may be opened in single/joint name for a period of 1, 3, 6, 12 months.
This account may be maintained as long as account holder desires.
On maturity the account holder can encase it in local currency or can transfer the amount including accrued interest anywhere he likes.
Initial deposit US$ 1000 or GBP 500 sterling or equivalent currency.
The account offers attractive interest Payable in foreign and tax free.
The account with accrued interest can be renewed either of the instruction of the account holder or be renewed automatically if there is no instruction otherwise.
No interest is given o n premature encashment.
The account opening form and signature card to be filled in and duly signed.
Two copies passport size photographs of the account holder to be carried.
Photocopies of the first 7 pages of the passport duly attested by the remitters bank/exchange companies having drawing arrangement with UBL or by Bangladesh Mission
1.12.3: Resident Foreign Currency Deposit Account (RFCD):
Persons ordinarily resident in Bangladesh may open and maintain RFCD Account with foreign exchange brought in at the time of his return from travel abroad.
Any amount brought in with declaration to customs authorities in the form FMJ and up to US$ 5000 brought in without any declaration can be deposited in this account.
Balance in this account can be freely transferred abroad.
Funds from this account may also be issued to the account holder for the purpose of his foreign travels in the usual manner.
Interest in foreign currency is paid in this account if the deposits are for a term of not less than one month and the balance is not less than US$ 1000 or GBP 500 or its equivalent.
The account opening form and signature card to be filled in and duly signed.
Two copies of passport size photograph of the account holder are the must.
Photocopies of the passport and the relevant pages showing evidences of traveling abroad are compulsory.
1.13: Implementation of BASEL-2: Bangladesh bank is going to implement BASEL-2 by the year of 2009 & already the Bank has taken various steps on the ground of international banking settlement guideline on risk weighted capital & made it compulsory to get themselves credit rated by a ‘Credit Rating Agency (CRA)’ approved by Bangladesh Bank. This credit rating will have to be updated in each & every year. UBL has its own training institute where with the help of “Credit Rating Information & Service Ltd. (CRISL)” the Bank made a workshop in the last financial year on this important issue.

Part-2
Chapter Two
Introduction to the Project

2.1: Introduction to the project:
Now a day, banking organization has become essential for almost every person to deal with banks somehow in their bread & better life. As a result, bank has become essential for every person to have some idea on the bank and banking procedure. The necessity of foreign exchange activities cannot be ignored in any ways because of its dependency in the banking sector. It provides the opportunity to its foreign & local clients and at the same time attractive services are ensured as per the customer needs, wants & demands with the changing environment and competition.

At present time, the banking procedure is becoming faster, easier and the banking arena is becoming wider. As the competitive field of the banking sector, the banking organizations are coming with innovative ideas. Foreign exchange activities of a bank deals with the letter of credit, procedures & document to open an import & export L/C, issue foreign demand draft (FDD), traveler’s cheques (TC), endorsement of cash, opening a foreign accounts, endorsement of foreign currencies in the passport. Sale of foreign currencies, FDD & TC payable, purchase foreign currencies, telegraphic transfer, mail transfer, receive cheques for clearing etc. The bank also offers the customer to deposit money for FDR (Fixed Deposit Receipts) with attractive interest rate at maturity. Though all the operations are started from the general banking but all of these are based on the monetary transaction. As a result, recording of all monetary transaction has become compulsory in the modern business sector. Not only recording, but also it includes the process of communicating, summarizing and explaining the economic events of a bank within a specific period of time.

So a part of this report has been developed concentration this matter. I have chosen the “A study on foreign exchange businesses of Uttara bank limited” as my internship topic. I strongly believe that any business graduate ought to have the basic understanding about foreign exchange as it can show the ways for economic development in business world because of its strong relation with all of the financial activities. In all of my internship report I will try of my best to provide almost all of the basic idea of foreign exchange activities in all of the branches of UBL. I will also concern about the performance evaluation from different perspective.
2.2: Objectives of the Report:
2.2.1: Broad Objective:
To identify the pattern of Foreign Trade in terms of quantitative and qualitative in relation to the categories like Import, Export and Remittance and the earnings from these three categories of Foreign exchange businesses.

2.2.2: Specific Objectives:
To determine and how a Bank deals international trade and the trade mechanism.
Trend analysis of the earnings from Foreign Trade of UTTARA Bank Limited.
To learn about the benefits and incentives provides to the export proceeds.
Some recommendations and suggestions to improve both the pattern of Foreign Trade and the trend of earnings from Foreign Trade.

2.3: Scope and Limitation of the Report:
Uttara Bank Limited is one of the traditional banks of Bangladesh. The scope of the report covers the organizational overview & structure, background, basic functions, transaction procedure, customer dealings & performance of the bank. With a view to completing the whole report, it is required to concentrate on the overall banking process. However, in this report I have been trying to present the basic functions & process of foreign exchange with the basic financial practice that the bank is following and also to show different analysis & comparison to evaluate the performance of the bank. But to complete all of these mentioned above, I have the following limitations:

Time was not enough to concentrate on all of the investigations was required.
All sufficient data & information were not enough for the purpose of study & assumptions were made in some cases.
The website of the Bank was not that much rich to collect data.
This report has been prepared on the activities of all branches, but visiting all the branches to collect data & information was not possible.
Sometimes such kinds of tasks were given in the Bank that was no way related to my topic & really it was responsible to break my concentration in my major area of investigation.

2.4: Methodology: Data Sources:
For teaming up the data & information collected through primary & secondary sources I have used both qualitative & quantitative method. During my study I followed some methodology to find out the fact & feature of the Bank which are given as follows:

2.4.1: Area of Study:
My project is the operational mechanism in Foreign Exchange Business through Import, Export & Foreign Remittance of UTTARA Bank Limited.

2.4.2: Sources of Data/Information:
I have collected my information/data from the following sources, which helped me to make this report. The source has divided by two parts. Such as,

2.4.3: Primary Sources:
Primary sources of information are face-to-face conversation and interview with high officials of data from Central Accounts Division, Board Division and International Division of, Computer generated database etc. And also I will prepare the questionnaire for my survey.

2.4.4: Secondary Sources:
Secondary sources of information have also been used for the research study that can be presented like the following:

Internal Sources
Annual Report and brochures of UBL.
Various publication of the bank.
Various type of Journals
Various circulars issued by head office
Any information regarding the Banking sector
Various types of banking websites.

External Sources
Different books and periodicals related to the banking sector
AIUB library
Magazines & newspapers

Chapter Three
Topic Analysis
Foreign Exchange Business of Uttara Bank Limited

3.0: Foreign Exchange:
Today’s world market is globalizing. For these reason import and export plays vital role for the control of economy of any country. No country is self-dependent thus every country ahs to depend on other country due to geographical, environmental and some other reasons. As Bangladesh is a developing country; she has to import so many things for the development of its economic structure and to meet up basic needs. Again Bangladesh is not export oriented country but every year it exports so many things and earn a lot of foreign currency. Day by day it increases its export volume and helps its economy. These transactions are the basis upon which international trade is made.

Foreign Exchange means the rate of exchange at which one currency is changed against another. It means foreign currency and includes all departs and balances payable in foreign currencies as well as drafts, travelers checks, letter of credit, bill of exchange drawn in local currency but payable in foreign currency. The term ‘Foreign Exchange’ has three principal meanings. Firstly it is a term used referring to the currencies of other countries in terms of any single one currency. To a Bangladeshi, Dollar, Euro, Pound Sterling, etc. are foreign currencies and as such foreign exchanges. Secondly, the term also commonly refer to some instruments used in international trade, such as Bill of Exchange, drafts, travelers cheque and other means of international remittance. Thirdly the term foreign exchange is also quite often referred to the balance in foreign currencies held by a country.

Foreign Exchange Regulation Act 47 Sec 22 (d) states that foreign exchange means foreign currency and including any instrument drawn, accepted, made or issued under clause 13 of section 16 of Bangladesh Bank order 1972 all deposits, credits and balances payable in any foreign currency, and any drafts traveler Cheques, letter of credit and bills of exchange express or drawn in Bangladesh currency but payable in foreign currency.

In exercise of the powers conferred by sec. 3 of the Foreign Exchange Regulations-1947, Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These banks are known as Authorized Dealers (AD). Licenses are also issued by Bangladesh Bank to persons or firms to exchange foreign currency instruments such as T.C., Currency notes and coins. They are known as Authorized Money Changers.

3.1: Sections

Foreign exchange department of UBL, Main Branch is divided into two sections:
• L/C Operation
• Foreign Remittance

3.2: L/C Operation:

Letter of Credit (L/C) can be defined as a “Credit Contract” whereby the buyer’s bank is committed (on behalf of the buyers) to place an agreed amount of money at the seller’s disposal under some agreed conditions. Since the agreed conditions include amongst other things, the presentation of some specified documents, the letter of credit is called Documentary letter of credit. The Uniform Customs And Practices for Documentary Credit (UCPDC) published by International Chamber of Commerce (1993) publication no 500 defines Documentary Credit:
a) Any arrangement however named or described whereby a bank (the issuing bank) acting at the request and on the instructions of a customs (the Applicant) or on its own behalf,
b) Is to make a payment to or to the order of a third party(the beneficiary) or is to accept and pay bills of exchange(Drafts)drawn by the beneficiary or
c) Authorize another bank to effect such payment or to accept and pay such bills of exchange (Drafts).
d) Authorize another bank to negotiate against stipulated documents provide that terms and conditions are complied with.

3.3: Types of Documentary Letter of Credit:

Types of letter of credit:
There are various types of documentary Letter of Credit:

• Revolving L/C
• Irrevocable L/C
• Confirmed Irrevocable L/C
• Revolving L/C
• Back to Back L/C
• Transferable L/C
• Red Clause L/C
• Green Clause L/C
• Stand by L/C
• Performance L/C

There are various types of documentary letter of credit.

1. Revocable Credit:
This type of credit can be revoked or cancel at any time without the consent of, or notice of the beneficiary. As per Article 8 (a) of UCPDC 500 “A revocable credit may be amended or cancelled by the Issuing Bank at any moment and without prior notice to the Beneficiary”.

2. Irrevocable Credit:
The Irrevocable Credit is a commonly used type of documentary credit. The Credit which cannot be revoked, varied or changed/amended without the consent of all parties – buyer (Applicant), seller (Beneficiary), Issuing Bank and Confirming Bank (in case of confirmed LC).

3. Confirmed Irrevocable Credit:
It is a credit of issuing Bank, which is opened at the request of buyer/importer upon a seller/exporter abroad through an advising Bank with a request to add confirmation. Advising Bank, the agent/correspondent of issuing Bank add their confirmation under credit line arrangement already existing between issuing Bank and advising Bank, i.e. in addition to the commitment of the issuing Bank the advising Bank makes its own, independent payment commitment when it add its confirmation. (Article 9 b, UCPDC 500).
4. Revolving Credit:
A Revolving Credit is one where, under the terms and conditions thereof, the amount of the Credit is renewed or reinstated without specific amendment to the Credit being needed. Revolving Credit may be revocable or irrevocable. It can revolve in relation to time or value. But credit that revolves in relation to value is not in common use.

5. Back to Back Credit:
One credit backs another. It may so happen that the beneficiary/seller of an L/C is unable to supply the goods direct as specified in the Credit as a result of which he need to purchase the same and make payment to another supplier by opening a second Letter of Credit. In this case, the second Credit called a “Back to Back Credit”. These concepts involve opening of second Credit on the strength of first Credit i.e., mother L/C opened by foreign importers.

6. Transferable Credit:
A transferable Credit is one, which can be transferred by the original Beneficiary to one or more parties. In transferable Credit, the original beneficiary becomes the middleman and transferee becomes the actual supplier of the goods. It is normally used when the first beneficiary does not supply the merchandise himself, but is a middleman and thus wishes to transfer part, or all, of his rights and obligations to the actual supplier(s) as second beneficiary(s). This type of Credit can only be transferred once, i.e., the second beneficiary(s) cannot transfer to a third beneficiary. (Article 48, UCPDC 500).

7. Red Clause Credit:
A re clause Credit is a credit with a special clause incorporated into it that authorizes the advising Bank or confirming Bank to make advances to the beneficiary before presentation of documents. The clause is incorporated at the specific request of the applicant, and the wording is dependent upon his requirements. It is so called because the clause was originally written in red ink to draw attention to the unique nature of this credit. It specifies the amount of the advance that is authorized, in some instances it may be for the full amount of the credit.

8. Green Clause Credit:
A Green Clause Credit is a credit with a special clause incorporated into it that which not only authorizes the advising Bank to grant pre-shipment advances but also storage cost for storing the goods prior to shipment. It is useful in situations where shipping space is not ready available, i.e., some African countries. It is so called because the clause was originally written in green ink to draw attention to the unique nature of this Credit.

We can understand the total procedure of a Letter of Credit by the following Flow Chart:

Offer

Contract
Acceptance

3.4: Documents Used in L/C Operation:

The most commonly used documents in foreign exchange are
1. Bill of Exchange
2. Bill of Lading
3. Commercial invoice
4. Certificate of origin
5. Inspection certificate
6. Packing list
7. Insurance document
8. Pro Forma Invoice (PI)/Indent

1. Bill of Exchange:
Bill of exchange is one of the important negotiable instruments in the mercantile world and used as a vital document facilitating settlement of payments between buyer/importer and seller/exporter at home and abroad. A bill when accepted by the drawee, gives evidence of the claim as made by the drawer as well as testimony to the acceptance of the debt by the drawee. The payment is done either in accordance with the terms of sale contract or under a L/C opened by the buyer/importer in favor of the seller/exporter.

2. Bill of Lading:
A bill of lading is a document that is usually stipulated in a credit when the goods are dispatched by sea. It is evidence of a contract of carriage, is a receipt for the goods, and is a document of title to the goods. It also constitutes a document that is, or may be, needed to support an insurance claim.
The details on the bill of lading should include
• A description of the goods in general terms not inconsistent with that in the credit.
• Identifying marks and numbers.
• The name of the carrying vessel.
• Evidence that the goods have been loaded on board.
• The ports of shipment and discharge.
• The names of shipper, consignee and name and address of notifying party.
• Whether freight has been paid or is payable at destination.
• The number of original bills of lading issued.
• The date of issuance a bill of lading specifically stating that goods are loaded for ultimate destination specifically mentioned in the credit.

3. Commercial Invoice:
A commercial invoice is the accounting document by which the seller charges the goods to the buyer. A commercial invoice normally includes the following information:
i. Date
ii. Name and address of buyer and seller
iii. Order or contract number, quantity and description of the goods, unit price and the total
iv. Price
v. Weight of the goods, number of packages, and shipping marks and numbers
vi. Terms of delivery and payment
vii. Shipment details

4. Certificate of Origin:
A certificate of origin is a signed statement providing evidence of the origin of the goods.

5. Inspection of Certificate:
This is usually issued by an independent inspection company located in the exporting country certifying or describing the quality, specification or other aspects of the goods, as called for in the contract and/or the L/C. The buyer who also indicates the type of inspection he wishes the company to undertake usually nominates the inspection company.

6. Packing List:
This is a unique document and not combined with other document. This is a listing of the contents of each package, cartoon etc. and other relevant information.
7. Insurance Document:
Insurance is a contract whereby the insurer is undertaking to indemnify the assured to the agreed manner and extent against fortuitous losses. Insurance document generally contains the following information:
• The name of the insurer or his agent
• The name of the ship/carrier
• The name of assured
• The subject matter of insurance
• The time and/or voyage insured
• The peril(s) insured against
• The date and subscription
• The valuation
• The stamp etc.

8. Pro forma Invoice (PI) /Indent:
Pro Forma Invoice/indent is the sale contract between seller and buyer in import- export business. There is slight difference between indent and Proforma invoice. The sales contract, which is direct correspondence between importer and exporter, is called Proforma invoice. There is no intermediary between them. On the other hand, there may be an agent of exporter in importer’s country. In this regard, if the sale contract is occurred between the agent of exporter and importer then it is called indent.
Pro Forma Invoice is a form of quotation to a potential buyer, inviting him to buy the goods on stated terms. It should be clearly stated that it is pro forma and if it is accepted the details are normally transferred to a commercial invoice.

3.5: Different Accounts Related to Foreign Exchange Transaction:

In L/C operation different accounts are maintained which are needed for foreign exchange transaction. These are:

Nostro Account:
Nostro account means “our account with you”. A Nostro account is a foreign currency account of a bank maintained its foreign correspondents abroad. For example, US Dollar Account of UBL maintained with Citibank, N.A, New York, USA is a Nostro account of UBL.
Vostro Account:
Vostro account means “your account with us”. The account maintained with foreign correspondent in a bank of a particular country is known as Vostro account.
What is the nostro account for a bank in a particular country is a vostro account for the bank abroad maintaining the account thus the account of UBL with Citi Bank N.A, New York is regarded as it’s nostro account held with Citi Bank, while Citi Bank N.A, New York regards it as a it’s vostro account held for UBL.

Loro Account:
Loro account means “their account with you”. Account maintained by third party is known as loro account; suppose UBL is maintaining an account with Citi Bank N.A, New York and at the same time Prime Bank is also maintaining a nostro account with Citi Bank N.A, New York. From the point of view of UBL, Prime Bank’s account maintained with Citi Bank N.A New York is the loro account.

3.6: Parties Involved in L/C Operation:

The documentary credit is an essential implement for conducting world trade today. With the third party assurance the whole process is covered. Documentary credit substantially reduces payment related risks for both exporter and importer. So in the whole L/C operation there are many parties involved. They are:
1. Importer/Applicant
2. Issuing Bank/Opening Bank
3. Advising Bank
4. Beneficiary/Exporter/Seller
5. Negotiating Bank
6. Reimbursing Bank
7. Confirming Bank

1. Importer / Applicant:
An importer is one who wants to import goods from other country. In terms of the Importers (Registration) Order-1981 no person can import goods into Bangladesh unless he is with the Chief Controller of Import and Export (CCI&E). He is also called applicant. The bank opened L/C on the importer’s application. Who request his Bank to issue of Credit (L/C) in terms of the arrangement with the seller?

2. Issuing Bank/Opening Bank:
The Bank agrees to the request of the applicant and issues its Letter of Credit in terms of the instructions of the Applicant is called issuing bank. Issuing bank’s obligation is to make payment against presentation of documents drawn strictly as per terms of L/C.

3. Advising Bank:
The Bank, usually situated in the Seller’s/Beneficiary’s country (most of the time with which there exists corresponding relationship with the Buyer’s/Issuing Bank)

4. Beneficiary/Exporter/Seller:
Beneficiary is the party in whose favor the L/C is issued. Usually he is the seller or exporter.

5. Negotiating Bank:
The UBL which make payment to the Exporter after scrutiny the documents submitted by the exporter with the Original L/C then it is called Negotiating Bank, If the advising bank is also authorized to negotiate the bill drawn by the exporter, he becomes the negotiating bank.

6. Reimbursing Bank:
This is the Bank that is nominated by the Issuing Bank to Pay ( it is also known as Paying Bank ) or to accept drafts. It can be situated in another country. In this connection it is to say that American Express Bank and Nat West Bank act as Reimbursing Bank in the case of EX1M Bank. The account which maintain Uttara Bank Limited with Nat West and American Express bank is Called ‘Nostro Account’ and in rivers the account which is maintained by Nat West and American Express Bank with Uttara Bank Limited is Called Vostro Account’. And the account maintained by American Express and Nat West with each other in the context of Uttara Bank Limited is Called Loro Account’.

7. Confirming Bank:
Sometimes, Issuing bank request Advising Bank or another Bank to add confirmation to the letter of credit. When Bank do this then such Bank is called Confirming bank. So, Advising Bank can be act as Confirming Bank. It provides the credit report of the exporter of his country. If the advising bank also adds its own undertaking to honor the credit while advising the same to the beneficiary, he becomes the confirming bank, in addition, becomes liable to pay for documents in conformity with the L/C’s terms and condition.

Foreign exchange department of Standard Bank is one of the most important departments of all departments. This department handles various types of activities by three separate sections:
a) Import section
b) Export section.
c) Foreign remittance section.

Chapter Four
Import L/C Opening System

4.1: About Import:

Import means purchase of goods and services from the foreign countries into Bangladesh. Normally consumers, firms, industries and Government of Bangladesh import foreign goods materials to meet their various necessities. So, in brief, we can say that import is the flow of goods and services purchased by economic agent staying in the country from economic agent staying abroad.

4.2: Regulation of Import:
Import of goods into Bangladesh is regulated by the Ministry of Commerce in terms of the Import and Export (Control) Act-1950 with Import Policy Order issued periodically and public notices issued time to time by the office of the Chief Controller of Import and Export (CCI&E). At present, it is regulated by the Import Policy (1997-2002), which was come into effect on June14, 1998. And Import Policy directs certain Import Procedure, which administers the whole activity.

4.3: Import Procedure Followed by UBL:
Whole world has become a global village due to the dynamic change taken place in the field of finance. Foreign trade involves more than one country. It occurs between two countries or between the organizations of two different countries. Such trade normally benefits both the importer and the exporter. UBL provides Letter of Credit (L/C) facility for smooth functioning of foreign trade. These branches are called Authorized Dealer (A/D). As an Authorized Dealer, UBL, Main Branch is always committed to facilitate import of different goods into Bangladesh from the foreign countries. Import Section, which is under Foreign Exchange Department of the branch, is assigned to perform this job. And to serve its client’s demand to import goods, it always maintains required formalities that are collectively termed as The Import Procedure.

1. The importer must submit the following papers along with L/C application before opening a Letter of Credit (L/C):

i) Valid Import Registration Certificate (IRC) (commercial/industrial)
ii) Taxpayers Identification Number (TIN)/ Membership Certificate
iii) VAT Registration Certificate
iv) Proforma/Indent Invoice duly accepted by the importer.
v) Insurance Cover Note with Money Receipt covering value of goods to be imported plus 10 (Ten) percent above.
vi) IMP forms duly signed by the importer.
vii) LCA forms duly signed by the importer and incorporating New ITC number of at least 6 (six) digits under the Harmonized System as given in the Import Trade Control Schedule 1988.
viii) Credit report of the supplier / country of supplier.
ix) Poet import finance (required or not)
x) Margin for opening L/C
xi) Authority /sanction
xii) Other documents/ papers etc.

Bank will supply the following papers:
i) L/C application form (Printed format)
ii) LCA Form
iii) IMP Form
iv) Charge documents

2. Then the importer has to contact with the seller outside the country to obtain the Pro forma Invoice. Usually an indenter, local agent of the seller or foreign agent of the buyer makes this communication. Other sources are:
• Trade fair.
• Chamber of Commerce.
• Foreign Missions in Bangladesh.
• Journals etc.

3. When the importer accepts the Pro forma Invoice, he/she makes a purchase contract with the exporter detailing the terms and conditions of the import.

4. After making the purchase contract, importer settles the means of payment with the seller. And import procedure differs with different means of payment. The possible means are Cash in Advance, Open Account, Collection Method and Documentary Letter of Credit. In most cases, the Documentary Letter of Credit in our country makes import payment. Purchase Contract contains which payment procedure has to be applied.

Different Means of Payment:
a) Cash in advance: Importer pays full, partial or progressive payment by a foreign DD, MT or TT. After receiving payment, exporter will send the goods and the transport receipt to the importer. Importer will take delivery of the goods from the transport company.

b) Open Account: Exporter ships the goods and sends transport receipt to the importer. Importer will take delivery of the goods and makes payment by foreign DD, MT, or TT at some specified date.

c) Collection Method: Collection methods are either clean collection or documentary collection. Again, Documentary Collection may be Document against Payment (D/P) or Document against Acceptance(D/A). The collection procedure is that the exporter ships the goods and draws a draft/ bill on the buyer. The exporter submits the draft/bill (only or with documents) to the remitting bank for collection and the bank acknowledges this. Then the remitting bank sends the draft/bill (with or without documents) and a collection instruction letter to the collecting bank. Acting as an agent of the remitting bank, the collecting bank notifies the importer upon receipt of the draft. The title of goods is released to the importer upon full payment or acceptance of the draft/bill.

d) Letter of credit: Letter of credit is the well accepted and most commonly used means of payment. It is an undertaking for payment by the issuing bank to the beneficiary, upon submission of some stipulated documents and fulfilling the terms and conditions mentioned in the letter of credit.

Import section deals with L/C opening and post import financing i.e. LIM & LTR. Now the procedure from opening L/C to disbursement against L/C is given below:

4.4: Application for Opening L/C:
At first, an importer will request banker to open L/C along with the following documents.
• An application
• Indent or Pro forma Invoice
• Import Registration Certificate (IRC)
• Taxpayer’s Identification Number (TIN)
• Insurance cover note with money receipt
• A bank account in UBL, Main Branch
• Membership of chamber of commerce

4.5: Delivers Forms by Banker to Importer:
After scrutinizing above-mentioned documents carefully, officer delivers the following forms to be filled up by importer and the banker should check:
1. Whether the goods to be imported is permissible or not.
2. Whether the goods to be imported is demanding or not.

The forms are:
1. L/C Application Form (LCAF):
L/C Application Form is a sort of an agreement between customer and bank on the basis of which letter of credit is opened. UBL, Main Branch provides a printed form for opening of L/C to the importer. Special adhesive stamp of value Tk.150.00 is affixed on the form in accordance with Stamp Act. While opening, the stamp is cancelled. Usually the importer expresses his decision to open the L/C quoting the amount of margin in percentage

2. L/C Authorization Form (LCAF):
The Letter of Credit Authorization Form (LCAF) is the form prescribed for the authorization of opening letter of credit/payment against import and used in lieu of import license. The authorized dealers are empowered to issue LCA Forms to the importers as per basis of licensing of the Import Policy Order in force to allow import into Bangladesh. If foreign exchange is intended to be bought from the Bangladesh Bank against an LCAF, it has to be registered with Bangladesh Bank’s Registration Unit located in the concerned area office of the CCI&E. The LCA Forms available with authorized dealers are issued in set of five (05) copies each. First Copy is exchange control copy, which is used for opening of L/C and effecting remittance. Second Copy is the custom purpose copy, which is used for clearance of imported goods from custom authority. Triplicate and Quadruplicate Copy of LCAF are to be sent to concerned area of CCI&E office by authorized dealer/Registration Unit of Bangladesh Bank. Quadruplicate Copy is kept as office copy by authorized dealer/Registration Unit. The Letter of Credit Authorization Form (LCAF) contains the followings –

• Name and address of the importer
• IRC number and year of renewal
• Amount of L/C applied for (both in figure and in word)
• Description of item(s) to be imported
• HS Code number
• Signature of the importer with seal
• List of goods to be imported
Import Permit Form (IMP):
• L/C authorization form number
• Date
• Value in Taka
• Registration of LCAF
• Quantity of goods
• Invoice value
• Country of origin
• Port of shipment
• Name of the steamer
• Indentor’s adder

4.6: Preparation of L/C by Banker:

Bank’s officer prepares L/C when above-mentioned forms are to be submitted by customer or importer. Before preparing L/C, UBL officer scrutinizes the application in the following manner.
1. The terms and conditions of the L/C must be complied with UCPDC 500 and Exchange Control & Import Trade Regulation.
2. Eligibility of the goods to be imported.
3. The L/C must not be opened in favor of the importer.
4. Radioactivity report in case of food item.
Survey reports or certificate in case of old machinery is required. Bank of the importer is called ‘L/C Issuing Bank’. Then issuing bank inform its corresponding bank, called “Advising Bank’ or ‘Confirming Bank” located in exporter’s country to advise and credit forward to the exporter and simultaneously officer makes L/C opening vouchers.

4.7: The L/C Confirming Process:

1. Forwarding Documentary Credit by Advising or Confirming Bank:
There are usually two banks involved in a documentary credit operation. The issuing bank and the advising bank which is usually a bank in the seller’s country. The issuing bank asks another bank to advise or confirm the credit.
If the 2nd bank is simply “advising the credit”, it will mention that when it forwards the credit to seller, such a bank is under no commitment or obligation to pay the seller.
If the advising bank is also “confirming the credit”, this mention that the confirming bank, regardless of any other consideration, must pay accept or negotiate without recourse to seller. Then the bank is called confirming bank also.

2. Submission of Necessary Documents by Exporter to the Negotiating Bank:
As soon as the seller/exporter receives the credit and is satisfied that he can meet its terms and conditions, he is in position to load the goods and dispatch them. The seller then sends the documents evidencing the shipment to the bank
Exporter will submit those documents in accordance with the terms and conditions as mentioned in L/C. Generally the documents observed in the foreign exchange department are
• Bill of exchange
• Commercial invoice
• Bill of lading
• Certificate of origin
• Packing list
• Clean Report of Finding (CRF)
• Weight list
• Insurance cover note
• Pre-shipment certificate

3. Clean Report of Findings (CRF):
This certificate is provided by the Pre Shipment Inspection (PSI) Concerns. The entire world has been brought under the three supervision and three pre shipment inspection concerns based on different territory.

4. The Documents Sent to the Issuing Bank Through the Negotiating Bank:
The negotiating bank carefully checks the documents provided by the exporter against the credit, and if the documents meet all the requirement of the credit, the bank will pay, accept, or negotiate in accordance with the terms and conditions of the credit. Then the bank sends the documents to the L/C opening bank.

5. Making the Payment of Foreign Bill through the Reimbursing Bank:
The L/C issuing bank getting the documents checks immediately and if they are in order and meet the credit requirements; it will arrange to make payment against L/C through reimbursement bank and will send the importer the document arrival notice.
6. Scrutiny of the Documents:
First of all it must be ensured that full set of documents as mentioned in the L/C has been received.
• Documents have been negotiated within the negotiation period.
• The Bill of Lading/Air-Way Bill/By Road/ Railway receipt is not dated later than the last date of shipment mentioned in the L/C.
• The L/C has not been amended or subjected to any special instructions, which might alter the value of L/C.
• Import bills include following documents, which are to be scrutinized.
• Bill of Exchange
• Commercial Invoice
• Bill of Lading
• Certificate of Origin
• Others

Bill of Exchange:
It has to be verified that the bill of exchange has been properly drawn and signed by the beneficiary according to the terms and conditions of L/C.
The amount in the bill is identical with that mentioned in the invoice.
The amount drawn does not exceed the amount mentioned in the L/C.
The amount in words and figures should be same.
The bill of exchange should be properly endorsed.

Commercial Invoice:
It has to be verified that the commercial invoice has been properly drawn and signed by the beneficiary according to the terms and conditions of L/C.
The beneficiary should properly invoice the merchandise.
The merchandise is invoiced to the importer on whose account the L/C is opened.
The description of merchandise and the unit price correspond with that given in the L/C.
The import license or IRC number of the importer, indenter’s registration number and number of Letter of Credit Authorization number are incorporated in the Invoice.

Bill of Lading:
First of all it has to be cleared that the Bill of Lading is showing “Shipped on Board” and it has to be properly endorsed to the bank.
The B/L should include the description of the merchandise according to invoice.
The port of shipment and destination, date of shipment and the name of the consignee are in agreement with those mentioned in the L/C.
The shipping company or their authorized agents properly sign the B/L.
The date on the B/L is not ‘stale’ which means it is not dated in unreasonably long time prior to negotiation.

Certificate of Origin:
The Merchandise described in the Certificate is in accordance with the L/C.
Others:
There are some other documents, which are also attached, with the shipping documents like packing list, pre-shipment inspection certificate etc. These documents are also verified carefully before lodgment.
Documents Sent to PSI Company:
Importer sends following documents along with application to PSI Company.
• L/C copy
• Photocopy of insurance cover note
• Copy of indent/pro-forma invoice
• PSI information and other relevant papers.

Shipment of Consignment and Lodgment of Documents:
There may be two types of exporter:
i) Merchant/Trade exporter
ii) Manufacturer Exporter
If the supplier is a merchant exporter, he will immediately start packing and shipping the goods. If he is a manufacturer exporter, he will start manufacturing the item. In either case, he will ship the goods when ready and obtain full set of bill of lading etc. from the carrier company and submit the same to the negotiating Bank along with other documents that is called for in the credit.

The shipping documents usually obtained are:
i) Bill of Lading or Air Consignment Note or Post Parcel Receipt or Truck receipt.
ii) Bill of Exchange
iii) Commercial Invoice
iv) Certificate of origin
v) Packing list
vi) Weight certificate
vii) Consular Invoice where necessary
viii) A copy of declaration of shipment made to the Insurance Company (to be
submitted with original shipping documents)
ix) Pre-shipment inspection certificate from internationally reputed surveyor.
x) Analysis certificate where specification of commodity is given.

Discrepancies in Shipping Documents:
The discrepancies found in the shipping documents presented under L/C vary from document to document and from shipment to shipment.

The discrepancies usually found in shipping documents are listed below, but this is not an exhaustive or even complete list, as the discrepancies vary from document to document, though apparently discrepancies do look alike. Their impact may not be the same keeping in view the relationship and importance of each shipping document with other documents asked for by the L/C opening Bank.

Checking of Import Documents:

Import documents are checked thoroughly and some specific points receive crucial attention that delineated below:
• The Letter of Transmittal
• The Documentary Credit
• Bill of Exchange
• Commercial Invoice.
• Marine Bill of Lading
• Airway Bill
• Certificate of Origin
• Packing List
• Pre-shipment inspection

Retirement of Import Documents:

I/D branch shall issue and intimation letter to the customer to retire the documents on payment of Bank’s dues in full. Receiving Bank’s dues the branch shall pass the following entry:
a) For application of up to date interest
Debit: PAD Account
Credit: Income A/C (Interest on PAD)
b) Retirement Voucher

Debit: Importer’s Current A/C
Credit: PAD A/C along with up to date interest

The documents will be delivered to the import of his authorized representative with due endorsement on the back of the bill of Exchange.

Import Finance of Uttara Bank Limited:
Uttara Bank Limited possesses Trade Finance like import, Export and foreign remittances. UBL’s broad international customer base, professional insight and knowledge of the risks and rewards of international trade earned the bank a unique position in the industry. The bank offers world-class support across the worldwide buyer chain to minimize overall cost, maximize buyer base, and shorten administrative processes.

To enable customers to capture global opportunities, it has the extensive network of overseas banking partners and correspondents.
Uttara Bank Limited has a wide array of financing tools to ease your cash flow burden and help you grow your business.

Creation of LIM:
LIM stand for Loan against imported merchandise and LIM account is created on the same day of storage of the goods in the Bank’s go down. The branch’s authorized representative shall take delivery of goods from the representative of the C&F Agent/transport Company strictly as per invoice for storage of goods in the Bank’s go down. Goods received from C&F Agent must be good condition and in original packing without any tampering in the box/ packing is found tampered or broken, the delivery of goods be held up and the C&F agent/importer and the transport company be contacted at once and joint survey with the representative of the importer, Bank official and transport/ C&F agent shall be made before storage of the good. After storage of the goods in the Bank’s go down the branch shall create LIM in the name of customer.
At the time of creation of LIM the branch shall pass the following vouchers.

Debit: LIM A/C
Credit: PAD A/C (with up to date interest)
After creating LIM A/C, the branch shall inform the importer to take delivery of the imported goods from the Bank against full payment. The LIM Accounts shall be properly maintained by the branches and to be balanced at the end of each month with the figure of General Ledge of the branch.

Necessary Document for LIM:

Following documents are sent to CDA branch for LIM
• Bill or exchange
• Invoice Bill of lading
• Packing list
• Customer purpose copy of import license number
• Letter of credit Copy
• Insurance cover note
• Indent
• Certificate of origin
• Others

Creation of LATR:
LATR stands for Loan Against Trust Receipt in such arrangements. The import documents are delivered to importer by signing a Trust Receipt. Bank does not clear the goods from the port and does not take control of goods. Importer cleat the goods from the port and takes possession of goods under this control. On the stipulated date, importer pays the Bank’s dues and LATR is liquidated for creation of LATR the branch is to pass following entry.

Debit: LATR Account
Credit: PAD Account with up to date interest

Chapter Five
Export L/C Opening System

5.1: Export:
Creation of wealth in any country depends on the expansion of production and increasing participation in international trade. By increasing production in the export sector we can improve the employment level of such a highly populated country like Bangladesh. Bangladesh exports a large quantity of goods and services to foreign households. Readymade textile garments (both knitted and woven), Jute, Jute-made products, frozen shrimps, tea are the main goods that Bangladeshi exporters export to foreign countries. Garments sector is the largest sector that exports the lion share of the country’s export. Bangladesh exports most of its readymade garments products to U.S.A and European Community (EC) countries. Bangladesh exports about 40% of its readymade garments products to U.S.A. Most of the exporters who export through UBL are readymade garments exporters. They open export L/Cs here to export their goods, which they open against the import L/Cs opened by their foreign importers.
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 banks and collecting bank (negotiable bank) for the exporter.

5.2: Export Policy:
Export policies formulated by the Ministry of Commerce, which provide the overall guideline and incentives for promotion of exports in Bangladesh. Export policies also set out commodity-wise annual target.
It has been decided to formulate these policies to cover a five-year period to make them contemporaneous with the five-year plans and to provide the policy regime.
The export-oriented private sector, through their representative bodies and chambers are consulted in the formulation of export policies and are also represented in the various export promotion bodies set up by the government.

5.3: Export Incentives:
Different incentives are:
Financial Incentives:
• Restructuring of Export Credit Guarantee Scheme;
• Convertibility of Taka in current account;
• Exporters can deposit 40% of FOB value of their export earnings in own accounts in dollar and pound sterling;
• Export Development Fund;
• Expansion of export credit period from 180 days to 270 days;
• 50% tax rebate on export earnings;
• Duty draw back;
• Bonded warehouse facilities to 100% export oriented firms;
• Duty free import of capital equipment for 100% export oriented firms.

General Incentives:
• National Export Trophy to successful exporters;
• Training course on external trade;
• Arrangement of international trade fairs, commodity-based exhibitions in the country and participation in foreign trade fairs.

Other Incentives:
• Assistance in improvement of quality and packaging of exportable items;
• Simplification of export procedures.

5.4: Export Procedures:
The import and export trade in our country are regulated by the Import and Export (Control) Act, 1950.
Under the export policy of Bangladesh the exporter has to get valid Export registration Certificate (ERC) from Chief Controller of Import & Export (CCI&E). The ERC is required to renew every year. The ERC number is to incorporate on EXP forms and other papers connected with exports.

1. Registration of Exporters:
Like any other business it needs registration. Export registration is made by the Chief Controller of Import and Export (CCI&E). For registration, prospective Exporters required to apply through Q.E.X..P from the CC1&E along with the following documents:

a) Trade License.
b) Income Tax Clearance.
c) Nationality Certificate.
d) Bank’s Solvency Certificate.
e) Asset Certificate.
f) Registered partnership deed.
g) Memorandum & Association of Articles/Certificate of incorporation.

2. Securing the Order:
After getting ERC Certificate the exporter may proceed to secure the export order. He can do this by contacting the buyers directly or through agent.
In this purpose the exporter may get help from:
• License Officer;
• Buyer’s Local Agent;
• Export Promoting Organization;
• Bangladesh Mission Abroad;
• Chamber of Commerce (local & foreign)
• Trade Fair etc.

3. Signing the Contract:
After communicating buyer, exporter has to get contracted (writing or oral) for exporting exportable items from Bangladesh detailing commodity, quantity, price, shipment, insurance and marks, inspection and arbitration etc.

4. Receiving Letter of Credit:
After getting contract for sale, exporter should ask the buyer for Letter of Credit (L/C) clearly stating terms and conditions of export and payment.
The following are the main points to be looked into for receiving/ collecting export proceeds by means of Documentary Credit:
(1) The terms of the L/C are in conformity with those of the contract;
(2) The L/C is an irrevocable one, preferably confirmed by the advising bank;
(3) The L/C allows sufficient time for shipment and negotiation.
(Here the regulatory framework is UCPDC-500, ICC publication)
Terms and conditions should be stated in the contract clearly in case of other mode of payment:
• Cash in advance;
• Open account;
• Collection basis (Documentary/ Clean)
(Here the regulatory framework is URC-525, ICC publication)

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

6. Shipment of Goods:
Then the exporter should take the preparation for export arrangement for delivery of goods as per L/C and incoterms, prepare and submit shipping documents for Payment/ Acceptance/ Negotiation in due time.
Documents for shipment:
• EXP form,
• ERC (valid),
• L/C copy,
• Customer Duty Certificate,
• Shipping Instruction,
• Transport Documents,
• Insurance Documents,
• Invoice,
• Other Documents,
• Bills of Exchange (if required)
• Certificate of Origin,
• Inspection Certificate,
• Quality Control Certificate,
• G.S.P. Certificate,

7. Final Step:
Submission the documents Bank are negotiation.

5.5: Export Financing:
Financing exports constitutes an important part of a bank’s activities. Exporters require financial services at four different stages of their export operation. During each of these phases exporters need different types of financial assistance depending on the nature of the export contract.
a) Pre-shipment credit
b) Post-shipment credit

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

An exporter can obtain credit facilities against lien on the irrevocable, confirmed and unrestricted export letter of credit in form of the followings:
i. Export cash credit (Hypothecation)
ii. Export cash credit against trust receipt.
iii. Packing credit.
iv. Back to back letter of credit.
v. Payment of back to back L/C.

i. Export Cash Credit (Hypothecation):
Under this arrangement, a credit is sanctioned against hypothecation of the raw materials or finished goods intended for export. Such facility is allowed to the first class exporters. As the bank has got no security in this case, except charge documents and lien on exports L/C or contract, bank normally insists on the exporter in furnishing collateral security. The letter of hypothecation creates a charge against merchandise in favor of the bank. But neither the ownership nor the possession is passed to it.

ii. Export Cash Credit Against Trust Receipt:
In this case, credit limit is sanctioned against trust receipt (TR). Here also unlike pledge, the exportable goods remain in the custody of the exporter. He is required to execute a stamped export trust receipt in favor of the bank, he holds wherein a declaration is made that goods purchased with financial assistance of bank in trust for the bank. This type of credit is granted when the exporter wants to utilize the credit for processing, packing and rendering the goods in exportable condition and when it seems that exportable goods cannot be taken into bank’s custody. This facility is allowed only to the first class party and collateral security is generally obtained in this case.

iii. Packing Credit:
Packing Credit is essentially a short-term advance granted by a Bank to an exporter for assisting him to buy, process, manufacture, pack and ship the goods. Generally for movement of goods from the hinterland areas to the ports of shipment the Banks provide interim facilities by way of Packing Credit. This type of credit is sanctioned for the transitional period starting from dispatch of goods till the negotiation of the export documents. Practically except for single transaction, most of the pre-shipment credits are allowed in the form of limits duly sanctioned by Bank in favor of regular exporters for a particular period. The drawings are required to be adjusted fully once within a period of 3 to 6 months. Suiting to the breed and nature of export, sometimes an exporter may also be allowed to avail a combined Cash Credit and Packing Credit limit with fixed ceiling on revolving basis. But in no case the borrower would be allowed to exceed individual credit limit fixed for the purpose. The drawings under Export Cash Credit limits are generally adjusted by the drawing in packing credit limit, which is, in turn liquidated by the negotiation of export documents.
Charge Documents for P.C:
Banker should obtain the following charge documents duly stamped prior to disbursement:
I) Demand Promissory Note
ii) Letter of Arrangement
iii) Letter of Lien of Packing Credit (On special adhesive stamp)
iv) Letter of Disbursement
v) Packing Credit Letter

Additional Documents for P.C:
a) Letter of Partnership along with Registered Partnership Deed in case of Partnership Accounts.
b) Resolution of the Board of Directors along with Memorandum & Articles of association in case of Accounts of Limited Companies. In case of Corporation, Resolution is the Board Meeting with Charter.
c) Personal Guarantee of all the Partners in case of Partnership Accounts and of all the Directors in case of Limited Companies.
e) An undertaking from the Directors of the Public Limited Company to obtain prior clearance from the Bank before declaring any interim/final dividend.

iv. Back to Back Letter of Credit:
Bangladesh is a developing country. After receiving order from the importer, very frequently exporters face problems of scarcity of raw material. Because some raw materials are not available in the country. These have to be collected from abroad. In that case, exporter gives lien of export L/C to bank as security and opens an L/C against it for importing raw materials. This L/C is called Back To Back L/C. In back to back L/C, UBL keeps no margin.
Sometimes there is provision in the export L/C that the importer can use the certain portion of the export L/C amount for importing accessories that are necessary for the making of the product. Only in that case, BTB is opened.

v. Payment of Back to Back L/C:
Client gives the payment of the BTB L/C after receiving the payment from the importers. But in some cases, client sells the bills to the UBL. But if there is discrepancy, the UBL sends it for collection.
In case of BTB L/C, UBL gives the payment to the beneficiary after receiving the payment from the L/C of the finished product (i.e. exporter). Bank gives the payment from DFC Account (Deposit Foreign Currency Account) where Dollar is deposited in national rate.
For BTB L/C, opener has to pay interest at LIBOR rate (London Inter Bank Offering Rate). Generally LIBOR rate fluctuates from 5% to 7%.

A schedule named Payment Order; Forwarding Schedule is prepared while making the payment. This schedule is prepared when the payment of L/C is made. This schedule contains the followings:
i. Reference number of the beneficiary’s bank and date.
ii. Beneficiary’s name.
iii. Bill value.
iv. Payment order number and date.
v. Equivalent amount in Taka.

5.5.2: Post Shipment credit:
This type of credit refers to the credit facilities extended to the exporters by the banks after shipment of the goods against export documents. Necessity for such credit arises as the exporter cannot afford to wait for a long time for without paying manufacturers/suppliers. Before extending such credit, it is necessary on the part of banks to look into carefully the financial soundness of exporters and buyers as well as other relevant documents connected with the export in accordance with the rules and regulations in force. Banks in our country extend post shipment credit to the exporters through:
1. Negotiation of documents under L/C;
2. Foreign Documentary Bill Purchase (FDBP):
3. Advances against Export Bills surrendered for collection.

1. Negotiation of Documents Under L/C:
The exporter presents the relative documents to the negotiating bank after the shipment of the goods. A slight deviation of the documents from those specified in the L/C may rise an excuse to the issuing bank to refuse the reimbursement of the payment already made by the negotiating bank. So the negotiating bank must be careful, prompt, systematic and indifferent while scrutinizing the documents relating to the export.

2. Foreign Documentary Bill Purchase (FDBP):
Sometimes the client submits the bill of export to bank for collection and payment of the BTB L/C. In that case, bank purchases the bill and collects the money from the exporter. UBL subtracts the amount of bill from BTB and gives the rest amount to the client in cash or by crediting his account or by the pay order.
For this purpose, UBL maintains a separate register named FDBP Register. This register contains the following information:
• Date
• Reference number (FDBP)
• Name of the drawee
• Name of the collecting bank
• Conversion rate
• Bill amount both in figure & in Taka.
• Export form number
• Export L/C number

3. Advances Against Export Bills Surrendered for Collection:
Banks generally accept bills for collection of proceeds when they are not drawn under an L/C or when the documents, even though drawn against an L/C contain some discrepancies. Bills drawn under L/C, without any discrepancy in the documents, are generally negotiated by the bank and the exporter gets the money from the bank immediately. However, if the bill is not eligible for negotiation, the exporter may obtain advance from the bank against the security of export bill. In addition to the export bill, banks may ask for collateral security like a guarantee by a third party and equitable/registered mortgage of property.

5.6: Export Documents Checking:

1. General verification:
a) L/C restricted or not.
b) Exporter submitted documents before expiry date of the credit.
c) Shortage of documents etc.
2. Particular verification:
a) Each and every document should be verified with the L/C.
3. Cross verification
a) Verified one documents to another.

5.7: Discrepancies:

After proper examination or checking of a described Export document banker may find following discrepancies:
GENERAL:
1. Late shipment
2. Late presentation
3. L/C expired
4. L/C over-drawn
5. Partial shipment or transshipment beyond L/C terms.

Bill of Exchange (B/E):
1. Amount of B/E differ with Invoice.
2. Not drawn on L/C issuing Bank.
3. Not signed
4. Tenor of B/E not identical with L/C.
5. Full set not submitted.

Commercial Invoice (C/I):
1. Not issued by the Beneficiary.
2. Not signed by the Beneficiary.
3. Not made out in the name of the Applicant
4. Description, Price, quantity, sales terms of the goods not corresponds to the Credit. Not marked one fold as Original.
5. Shipping Mark differs with B/L & Packing List.
Packing List:
1. Gross Wt., Net Wt. & Measurement, Number of Cartoons/Packages differs with B/L.
2. Not market one fold as Original.
3. Not signed by the Beneficiary.
4. Shipping marks differ with B/L.

Bill of Lading/Airway Bill Etc (Transport Documents):
1. Full set of B/L not submitted.
2. B/L is not drawn or endorsed to the Order of Prime Bank Ltd.
3. “Shipped on Board”, “Freight Prepaid” or “Freight Collect” etc. notations are not marked on the B/L.
4. B/L not indicate the name and the capacity of the party i.e. carrier or master, on whose behalf the agent is signing the B/L.
5. Shipped on Board Notation not showing name of Pre-carriage vessel/intended vessel.
6. Shipped on Board Notation not showing port of loading and vessel name ( In case B/L indicates a place of receipt or taking in charge different from the port of loading).
7. Short Form B/L
8. Charter party B/L
9. Description of goods in B/L not agree with that of Invoice, B/E & P/L
10. Alterations in B/L not authenticated.
11. Loaded on Deck.
12. B/L bearing clauses or notations expressly declaring defective condition of the goods and/or the packages.
OTHERS:
Needed documents not forwarded to buyers or forwarded beyond L/C terms.
1. Inadequate number of Invoice, Packing List, B/L & Others submitted.

Chapter Six
Foreign Remittance

6.1: Foreign Remittance:
Foreign remittance section of UBL, Main Branch is an integral part of Foreign Exchange Department. And this section of Foreign Exchange Department deals with incoming and outgoing foreign currencies. Therefore on the basis of its function, foreign remittance is divided into two types. These are:
1. Outward Foreign Remittance and
2. Inward Foreign Remittance

6.2: Outward Foreign Remittance:
Remittances issued by UBL, Main Branch to foreign correspondents to fulfill its customers’ needs are considered to be the Outward Foreign Remittances. It comprises the followings:
• FDD Issued
• FTT Issued
• TC Issued
• Endorsement of foreign currencies in the passport.
• Sale of foreign currencies.

6.2.1: Foreign Demand Draft (FDD) Issued:
People have to send money to abroad for various purposes. UBL issues most of the FDD for the purpose of payment of the application fees to the foreign universities. For the issuance of FDD, FORM T/M has to be filled-in duly. This form is filled up under the Foreign Exchange Regulation Act, 1947. This form contains:
• The purpose of travel,
• Name of the country where the applicant will go,
• Name of the air or shipping company,
• Passport number,
• Date and place of issue of the passport are given.
This form has to be duly signed by the applicant. In case of application fee, the applicant has to mention the name of the university in whose favor the FDD is issued. UBL charges TK. 500 for each FDD.
6.2.2: Foreign TT Payable (FTT) Issued:
Foreign remittance section also pays the claim of the foreign TT. After receiving TT payable, UBL performs the following functions:–
1) Customer has to fill up a “C Form” if the amount exceeds $2000.00. “C Form” describes the purpose of sending the TT.
2) The dollar amount comes to the Head office of UBL through American Express, New York.
3) UBL, Motijheel branch sells the dollar to Head Office @ Tk. 56.50 and collects the money in local currency. In ward Remittance Running month and Growth rate (Jan-Aug’08)

6.2.3: Traveler’s Cheque (TC) Issued:
UBL issues only American Express Traveler’s Cheque (TC). For TC, customer has to fill up T/M form. He has to fill up the purchase form also. Purchase form has four copies. One copy for American Express Bank, one copy for UBL, and two copy for the customer. For TC UBL charges 1.50% as commission.

Requirements for Purchasing TC:
There are some requirements that are to be fulfilled by the Traveler’s Cheque purchaser. The requirements are:
i) Passport holder himself has to be present while issuing Traveler’s Cheque.
ii) The passport must be a valid one.
iii) Air ticket has to be confirmed.
Steps Involved in Issue of Traveler’s Cheque:
1. After verifying all these documents the customer is asked to fill up prescribed application form.
2. In the application the customer states the amount he is willing to endorse and it is being verified that his required amount is within the stipulated.
3. Then the customer pays cash or by debiting his account the Traveler’s Cheque is issued.
4. Endorsement is given on the passport and on the ticket. Customer fills up the T/M Form.
5. Purchased application form has to be filled up by the purchaser.
6. Entry has to be given in the Foreign Currency Register and in the Traveler’s Cheque Register.

6.2.4: Endorsement of Foreign Currencies in Passport:
Cash foreign currency can also be remitted through the cash endorsement in the passport. In case of endorsing cash in the passport, the requirements are similar to those of Traveler’s Cheque. But according to the foreign exchange Regulation Act, 1947 an individual cannot take more than $1000.00 in cash in a year. That’s why; the concerned officer checks the last voyage of the purchaser. If he/she made any voyage and if he/she purchase dollar at that time, then the officer will deduct the amount and will give the rest to the purchaser.
UBL cannot endorse more than $600.00 as cash at a time. For more than $600.00, the customer has to purchase TC. For cash endorsement UBL maintains a separate register. For giving cash foreign currency, UBL charges Tk. 100.00 as service charge.

6.2.5: Opening of Foreign Currencies:
UBL opens foreign currency account. Foreign currency account is used for receiving foreign currency from abroad or for sending the currency to abroad. It can be used in favor of a person or in favor of exporters.

Following papers are required to open a foreign currency account:
i) Exporters’ foreign currency account opening form (application form, two signature cards duly filled-in and signed by the potential account-holder with authenticated seal and introduction by a valued customer the bank).
ii) Two copies of passport size photographs of each operator attested by Chairman of the company.
iii) Export registration certificate.
iv) Attested photocopy of the membership certificate of the concerned association (BGMEA/ Others).
v) Export proceeds realization certificate— declaration / undertaking regarding the utilization of foreign currency.
vi) Incase of Limited Company:
a) Memorandum & Articles of Association of the Company.
b) Power of Attorney.
c) Resolution of the Board of Directors.
d) Certificate of Incorporation.
e) Certificate of Commencement of Business.
f) List of Directors.
g) Trade License.

6.3: Inward Foreign Remittance:
Normally, Inward Foreign Remittance comprises of all incoming foreign currencies. Remittances issued by the correspondent banks situated in the foreign countries and thereby drawn on UBL, Main branch are considered to be its Inward Foreign Remittances. Followings are the Inward Foreign Remittances of UBL, Main branch.
a. FDD Payable
b. FTT Payable
c. TC Payable
d. Encashment of foreign currencies endorsed in the passport.
e. Purchase of foreign currencies.

Chapter Seven
Role of marketing

7.1: Role of Marketing:
Most of the banks did not have a major marketing program in their operation prior to the 1980s.Deregulation and rising competition for financial services has motivated banks to market themselves better than in the past. For most bankers, this change in the competitive environment means longer working hours, more interpersonal contact with customers and greater risks in profitably selling products. However, there are increased opportunities to expand business activities for different products, create new products, produce a more diversified set of financial services, and increase profits. In this regard, marketing strategy can contribute significantly to coping successfully with the economic realities of today’s financial marketplace. UBL have already developed and used marketing strategy to attract and retain clients from its establishing period, though the management of the bank has not enough academic knowledge in marketing.

7.2: Relationship Banking:
Relationship banking means the overall process of building and marinating profitable customer relationship, by delivering superior customer value and satisfaction. Relationship banking is oriented toward the long term relationship with the clients. Today’s smart bank not only want create clients, they want to “own” them for life, capture their customer life time value, and build overall customer equity. (Customer equity means the total combined customer life time values of all its customers).

7.3: Strategic Planning:
Strategic planning helps to guide the UBL’s management take action for the future. The first step in strategic planning is an assessment of the bank’s strengths and weakness. Some common criteria are used to assess strengths and weakness. They are as follows:

It has branches in all the big cities of the country;
It is well decorated;
UBL has latest technology.

Weakness:
UBL has no credit card division;
It has no research division.

Opportunities:
Opportunity to provide services by resetting the rate of interest.

Threat:
Competitors are developing a superior technology.
Major economic depression.

After evaluating strengths and weaknesses, opportunities, and threat UBL’s management can consider alternative marketing strategies. Berry and Pararasuraman point out that marketing strategy must be consistent with the type of institution. They identify some basic categories of institutions:
Underdog;
Dominant;
Losing institutions.
An underdog institution seeks to increase its market share and market power.
A dominant institution strategy normally seeks to retain its market position.
A losing institution strategy may occur in periods of rapid change, causing the institution to take on excessive risk.

7.4: Marketing Planning:
With a strategic plan in hand; bank managers can proceed with the development of a marketing plan. The marketing plan should be compatible with and contribute to tile strategic plan. From this perspective, two aspects of marketing planning are product portfolio analysis and intangible services.
Product Portfolio Analysis:
Product portfolio analysis is a process of evaluating the role of each product on both sides of the balance sheet. By doing so, products can be classified by their contribution to the bank’s objectives and a cohesive marketing plan for the products can be drifted. To assess the role of a product, the competitive strength of the bank can be compared to other banks in the market. The market attractiveness of the product in terms of growth and the ability to cross-sell with other bank products are considered. Products that are not rated highly on these dimensions would likely cause miss-allocations of resources to the extent that they are produced. At times, however, it is feasible to produce a marginally rated financial service.

Intangible Services:
Intangible services relate to the fact that financial products are services rather than goods. The intangible nature of services presents difficulties in their promotion and sale. One way to overcome this dilemma is to associate the service with a tangible object. Another approach is to divert attention away from the intangible service and toward the “relationship” between the bank’s employees and the customer. The bank personnel are tangible and customers become their personal clients. You are not receiving a nameless, faceless service but a friendly, helpful salesperson. Thus, intangible services can be more easily promoted and sold by transforming them into physical goods as perceived by customers.

7.5: Market Segmentation:
Suzanne Donner, a management consultant, recently commented, to remain competitive and maximize profitability, every bank of every size in every size in every area of the United States will have to more actively segment its customer bases. The small independent banks will need to respond to newer, bigger players in their markets, theoretical by offering greater numbers of cheaper products. The super regional will need to leverage their size and control the profitability of each market and branch. Clearly, market segmentation is an essential part of bank marketing strategy. Customer demands in retail markets usually vary with demographics e.g.:
 Age; Sex, family size; Occupation; Education, race and
 Religion and income
But other characteristics such as social class, lifestyle, and attitudes can also be important. In a corporate market, company size, products, location, extent of credit needed. And other financial service support requirements will affect customer demands.

7.6: Positioning:
Another important set of decisions, related to market segmentation is market positioning. One might want to be an international, national, regional, or community bank. Other questions arise with regard to pricing personnel distribution or delivery, and profitability. Market positioning is a pluralistic concept that encompasses a variety of issues. Donnelly, Berry and Thomson propose the following minimal level of institutional positioning.
Relationship Bank; Investment Bank;
Everywhere Bank;
Selling Bank;
UBL wants to be a relationship bank. Ultimately, market segmentation helps to improve profitability.

7.7: Positioning Strategy:

UBL is trying to take position in the mind of the target market through using marketing tools appropriately.

7.8: Target Market of UBL:

UBL has to sell both liabilities (such as various deposits) and assets (credit and advance). So it has two sided target market these are given below:

• Liabilities Market
• Asset Market

Chapter Eight
Findings

8.0: Findings:
This study is focused on the various schemes of UTTARA Bank, some of which are not now in force and others are carrying on well. We will now discuss in brief, what we have found after this research under the strength, weakness and success status of various schemes.

In foreign exchange department it is required to communicate with foreign banks frequently and quickly. To make the process easily modern communication media for example e-mail, fax and win fax, Internet etc. should be used. But the bank has not much practice of using these media.
Modern technical equipment such as computer is not sufficient in foreign exchange department. As a result the exchange process makes delay and it is also complicated.
Some of the Uttara Bank Branches are using traditional technologies. So face problems to get themselves adapt with the modern technological environment.
The operation of UTTARA Bank is decentralized and the authority for loan sanctioning is delegated in order to make its operations more flexible and responsive to the growing needs of the economy.
HR practice of the Bank allows recruiting some of the employees who are not sometimes fit for the organization. Employees are not properly trained to speak in formal language & hence some of them forget that they are in the office while speaking. Some employees in each of the branches are employed in the accounting department but they have not the background of accounting. As a result, their basic knowledge is not that much strong in the relevant areas though they can solve all of their problems because of training.
UTTARA Bank’s management information system and financial information system have been restructured over the recent years to keep pace with the process of development.
Continuous group training facilities are there for the area managers to delve into the different scheme.
UBL has not yet provided modern and advanced banking service all over the country. While competitors are expanding their operations with a wide range of technology, UBL is providing the banking service on a traditional basis. Even the Bank has not yet introduced the Online Banking Services. Customers are not getting the opportunity of using ATM to deposit & withdraw money. As a result, the services like 24 hours banking stands out of reach.
Employee behavior with the customers sometimes reaches out of acceptance. In every week, it is obvious that some customers are raising their voice loudly for misunderstanding with some employees or such event occurs because of making delay to provide services.
The applicants for loans must be prospective and prone his or her eligibility according to the requirements of the bank and the process of facilities test.
The rate of interest and the terms and conditions are pointed out clearly in the agreement between the creditor and the debtor.
The projects must be productive so as to maintain the streams of the yield that would ascertain the effectiveness and the velocity of the credit.
Before the sanction of the loans, eligible borrowers are to undergo an intensive training regarding the roles, philosophies, procedures and regulations of UTTARA Bank, which takes them to a test of recognition. During this test, the borrower must satisfy the authority of the bank about their integrity, sincerity an understanding to the principles of the bank.
The repayment record of the area, represented by the borrower, will be considered to be basis for the disbursement of loans.

Chapter Nine
Recommendation

9.0: Recommendation:
Being a third generation bank, UBL is expected to compete in a dynamic environment participated by much Government and non- Government local and foreign banks. On the basis of my own observation responds of bank officers and customers, the following steps may be taken to overcome the problem procedure. Two months are not enough time to suggest anything about a huge organization like UBL .But from my point of view if UBL takes the following steps then their performance will definitely increase.

Expansion the Base of Foreign Trade:
In UTTARA Bank Limited, foreign exchange transactions are still limited to traditional items of Import, Export and Remittance. Nearly all AD Branches are involved with the export of ready-made garments. But in order to reduce the risk of fluctuations in export business, we should look for other items like jute products, leather products, frozen foods, agro processed products etc. If we can ensure that, a diversified basket of export items in our foreign trade portfolio, it will necessitate a long-term sustainability in foreign trade business.

Adding New Ventures:
UBL may be introduced with modernize new era like Merchant Banking, Treasury operations, SWAP, Dealing Room operations or foreign currency dealings. Though it is difficult to transact so such operations and it requires adequate manpower, but by introducing with the transactions and maintaining properly the UBL, International Division can increase the business volume of foreign exchange & earn more and can play an important role to the total earnings of UBL. UBL should develop the modern & advanced banking all over the country that can impress its clients. If the Bank cannot implement the modern banking system, it would not be possible for the bank to make competition with other banks in the most competitive marketplace.

Provide More Services to the Customers|:
Introduce bank own sales center to sanction loan under consumer credit scheme. UBL should expand its business policy. For example: UBL should start the import and export of perishable items such as vegetables, fruits and so on. If they can do it more customers are interested to make business with deal with UBL. UBL should go aggressive advertising and promotional activities to get a broad geographic coverage.

Provide More Training Program to Increase the Efficiency of the Employees:
Introduce continuous training program so that the performance of the employees will increase. Most staff should be employed in Foreign exchange Division to offload the pressure upon the existing staff and to provide better service to the exporters.

Besides the above, it may conclude the following Recommendations:

• Customers want the facilities of online banking. But the bank has not yet introduced the online banking & that’s why the service ought to be introduced as early as possible to ensure customer satisfaction.

• Behaviors with the clients made by the employees are not enough to satisfy the clients & hence the Bank should increase the customer satisfaction level with smiling face. The employees ought to be careful that if the customers are behaved well, they will come again to take services.

• Accounting procedure of the bank is based on traditional system though accounting software has been introduced in all of the branches. It takes time to write & to prepare different vouchers & to give entry in different registers by hand. So, bank should develop the accounting process from the manual to computerize in all aspects. Bank should also focus on more analyses of its financial statements.

• Customers want to get the money of their clearing cheques quickly. But if the Bank makes delay of several days, it will create a bad impression against the Bank. So, Clearing cheques ought to be sent to the local office to collection in proper time without making any delay.

Chapter Ten
Conclusion

10.0: Conclusion:
UTTARA Bank is one of the newest banks in Bangladesh. For that point of view, this bank is not highly experienced about the banking industry in this country. The more aggressive the bank will become the more intense the competition will be. In coming days they are to face various key challenges such as to satisfy the existing customers, to continue increasing penetration in the target market, to face the more aggressively net bank, to turn satisfied customer into fully satisfied customer.
From the practical implementation of customer dealing procedures during the whole period of my practical orientation in UTTARA Bank Bangladesh Limited I have reached a firm and concrete conclusion in a confident way. I believe that my realization will be in harmony with most of the banking thinkers.
During this time I got the chance to observe the overall activities of a branch commencing from foreign exchange & account opening to account closing. I also got the scope to act together with high officials and was informed about their prospects & perceptions about the Bank’s services. During my interaction with the employees & customers, I understood that there is the existence of customer dissatisfaction in some cases. The Bank is developing its general banking & foreign exchange activities day by day with changing industry situation but the rate of change of such speed needs to be increased. The Bank has the opportunity to develop a leadership position in the industry but new significant strategy ought to be made.
But quite regretful to mention that most our bank face decreasing profit trend due to switch over of their presents customers to those foreign with higher customer service facilities.
Success in the banking business largely depends on effective lending and Advance foreign exchange facilities. Less the amount of loan losses, the more the income will be from Credit operations. Beside this successful foreign exchange activities can provide more profit to the Bank and also create a positive image of the country in the international trade.