Report on Overall Banking Practice of National credit and commerce bank [Part-2]

FOREIGN EXCHANGE BUSINESSES

 Definition of Foreign Exchange:

It is a process of system of conversion of one nation currency to another and of transforming money from one country to another.

Foreign Exchange Business means-1) Import Business    2) Export Business 3) Foreign Remittance.

Importance of Foreign Exchange Business In Our Economy:

• International trade gives exchange opportunity of goods.
• Consumers get privilege through international trade.
• International trade helps to produce domestic production as well as

Global production.

• Natural assets of a country are to be utilized property.

Import Procedure

Definition of Import:

Import means goods and services purchased from foreign sources. These imports may be used for consumption, investment or government. Whatever their use, imports represents purchase of goods and services that not even produced or purchased but insufficient in a country.

Procedure for obtaining IRC:

As per Import & Export control Act, 1950 no person can indent, import or export any goods in to Bangladesh except incase of exemption issued by the government of the Peoples Republic of Bangladesh. So for doing import business at first every importer should obtain Import Registration Certificate. Through public notice or import policy the chief controller of import and exports invites application usually for registration of importers. The following papers / documents are required for submission to CCI & E for Import Registration Certificate.

• Application form.
• Nationality Certificate.
• Income tax registration certificate with GM.
• Trade license.
• Membership Certificate.
• Partnership Deed (For partnership firm)
• Certificate of Registration with the Register of Joint Co. & Articles and memorandum of Association in case of Limited Company.
• Bank Certificate.

The nominated of the applicant will examine the papers/documents and verify the signature of the applicant and forward the same to the concerned office of the CCI & E with a ford wing schedule in duplicate though bank representative. The duplicate copy of the same bearing the acknowledgement of CCI & E office of the receipt of the document is received by the bank and is preserved.

Import: Basis of

• Performa invoice
• Indent.
• Special trade agreement,
• Sales Contract,
• Barter system.

Definition of L/C:

Letter of credit is an undertaking giving by the issuing Bank on behalf of its customers to pay a certain some of money to a certain person (beneficiary) on the fulfillment of certain terms of conditions as laid down in the letter.

 Classification of L/C:

Revocable L/C,              Red clause L/C     Irrevocable L/C,

Confirmed L/C,              Transferable L/C, Devisable L/C,

Revolving L/C                Restricted L/C,     Green clause L/C,

Back-to-Back L/C,         Stand by L/C,       Circular L/C,

Straight L/C.

The Clauses Contained In a L/C:

• A clause authorizes the beneficiary to draw bills of exchange up to certain on the opener.
• List of shipping document, which are to accompany the bills.
• Description of the goods to be shipped
• An undertaking by the issuing bank that bills drawn in accordance with the conditions will be duly honored.
• Instructions to the negotiating bank for obtaining reimbursement of payments under the credit.

Importer/Buyer

Importer/Buyer is the party who opens L/C on behalf of exporter by issuing bank.

Opening/Issuing Bank

The opening/issuing bank is the bank which opens/issues a L/C on behalf of the importer. It is also called the importer’s /buyer’s bank.

Exporter/Beneficiary

Exporter/Beneficiary is the party in whose favor the L/C is established. Advising /Notifying Bank The advising/Notifying bank is the bank through which the L/C is advised to the exporting country & it may be a branch of the opening bank or a correspondent bank. It may also assume the role of confirming and /or negotiating bank depending upon the conditions of the credit.

Negotiating Bank

Negotiating bank is the bank that negotiates the bill & pays the amount to the beneficiary. It has to carefully scrutinize the documentary credit before negotiation in order to see whether the documents apparently are in order or not. The advising bank & the negotiating bank may or may not be one & the same,

Reimbursing:

Bank reimbursing bank is the bank, which would reimburse the negotiating bank. It is to be nominated by the issuing bank.

 L/C Application:

NCCBL provides a painted form for opening of L/C to the importer. A special stamp is attached on the form. While opening, the stamp is cancelled. The importer gives the following information is that form:

• Full name & address of importer.
• Date & place of expiry of the credit.
• The mode of transmission of document (courier/mail/telex)
• Whether the confirmation of the credit is requested by the beneficiary or not.
• Whether the partial shipment is allowed or not.
• The type of loading (loading on boarding).
• Brief description of the goods to be imported.
• Availability of the credit by sight payment acceptance/deferred payment.
• The time bar within which the document should be presented.
• Sales terms (FOB/CIF/C & F).
• Account number.
• L/C amount.
• Shipping mark.
• H.S. code number of the goods to be imported.
• IRC number.
• LCA number
• Insurance cover note.
• Country of origin.

The above information is given along with the following documents.

• Performa Invoice, which gives description of the goods including quantity, Unit price etc.
• Four set of IMP form.
• The insurance cover note, Issuing company & the insurance number.

 Transmission of L/C:

The ways of transmission of L/C are as follows

i) Through SWIFT

ii) Through Telex

iii) Through DHL or FEDEX

iv) Through Emergency Mail Service (EMS)

5.11 Amendment of Letter of Credit

Parties involved in a L/C cannot always satisfy the terms & conditions in full as expected due to some unexpected reason. In such a situation, the credit should be amended. NCCBL transmits the amendment by tested telex to the advising bank. In case of revocable credit, it can be amended or cancelled by the issuing bank at any moment & without prior notice to the beneficiary. But in case of irrevocable L/C, it can neither be amended nor cancelled without the agreement of the issuing bank, the advising bank & the beneficiary. If the L/C is amended, service & telex charge is debited from the party account.

Presentation of the Documents

After the exporter /seller is being satisfied with the terms & conditions of the credit, he/she then proceeds to dispatch the required goods to the importer. Then he/she has to present the documents evidencing dispatching of goods to the negotiating bank within the stipulated expiry date of the credit. After receiving the documents, the negotiating bank checks them against the credit. If the documents are found in order, the bank will negotiate to the issuing bank, in our case with NCCBL. NCCBL also checks the documents. The usual documents in a Letter of Credit are the following:

• Bill of exchange.
• Commercial Invoice.
• Packing List.
• Bill of Lading.
• Certificate of Origin.
• Pre-shipment Inspection report.
• Insurance Cover Note.
• Shipment Certificate.

Export Procedure of NCCBL

Export is one of the most important activities that can increase economic and social well being through transaction of goods and services from domestic economic agent to foreign economic agent for which domestic economic agents receive payments, preferably in valuable foreign currency. The import and export trade in our country is regulated by the Imports & Exports (Control) Act, 1950. There are some formalities, which an exporter has to fulfill before & after shipment of goods. The export procedure follows the following steps:

Registration of Exporters

Under the export policy of Bangladesh, the exporters have to get valid export registration certificate (ERC). For obtaining Export Registration Certificate Bangladeshi exporters are required to apply to die controller of Import & Export in the prescribed from along with the following documents:

• Nationality and assets Certificates,
• Memorandum and Articles of Associates and Certificate of incorporation in case of Limited company;
• Bank Certificate;
• Income Tax  Clearance Certificate;
• Trade License issued by the Municipal Authority.
• Payment of Registration fees and renewal fees in a Treasury Chalan.

Obtaining EXP

After getting ERC the export applies to NCCBL (or any other commercial Bank) with trade license & if the bank is satisfied, an EXP issued to the exporter.

Securing of Order

After getting the ERC the exporter may proceed to secure the export order. He can do this by contacting the buyers directly through correspondence. In this purpose exporter can get help from:

• Liaison Offices;
• Buyer’s Local Agent;
• Export Promoting Organization’
• BangladeshMission Abroad;
• Chamber of Commerce (Local & Foreign);
• Trade Fair etc.

Signing the Contract

While making a contract, the following points are to be motioned:

•  Price of the goods
• Describe of the goods
• Quantity of the goods

Export Letter of Credit

After getting the 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 die main points to be looked into for receiving/ collecting export proceeds by means of Documentary Credit:

• The L/C is an irrevocable one, preferably confirmed by the bank,
• The L/C allows sufficient time for shipment and negotiation,

Procuring the materials

After making the deal and on having the L/C opened in his favor, the next s for the exporters is to set about the task of procuring or manufacturing contracted merchandise.

Shipment of goods

The following are the documents normally involved at the stage of shipment.

• EXP Form
• ERC (valid)
• L/C copy
• Customs duty certificate
• Shipping instruction
• Transport Documents
• Insurance Documents
• Invoice
• Bill of Exchange (if required)
• Certificate of origin
• Inspection Certificate
• Quality Control Certificate

Now exporter submits all these documents along with a Letter of Indemnity NCCBL for negotiation. An officer scrutinizes all the documents. If documents are clean, NCCBL purchase the documents on the basis of bad customer relationship. This is known as Foreign Documentary Bill Purchase (FDBP).

Forwarding Foreign Bills for Collection

• If the documents have discrepancies.
• If the banker is in doubt.
• If the exporter is a new customer.
• Foreign Documentary Bills of collection signifies that the exporter will receive payment only when the issuing bank gives payment.

 SWOT Analysis of the NCCBL

In the competitive area of marketing are SWOT analysis is based on product, price, place and promotion of a financial institution like private Bank. By doing the SWOT analysis it is possible to find out the strengths, Weaknesses, opportunities, and threats of the NCCBL. From the SWOT analysis we can figure out on going scenario of the Bank.

SWOT Analysis

In SWOT analysis two factors act as prime movers

 Internal factors which are prevailing inside the concern which include Strength and Weakness.

 On the other hand another factor is external factors which act as opportunity and threat.

Strength:

• Competitive Salary: NCCBL provides satisfactory salary to their employees. This is the reason why the switching rate is very low among the employees of NCCBL.
• Wide network coverage: NCCBL has more than 50 branches throughout the country. At present NCCBL has 53 branches operating the banking services around the country efficiently.
• Proactive in nature: NCCBL experienced huge ups and downs in the banking arena so that they are confident enough to be proactive rather than reactive.
• Training institute: NCCBL has its own training institute through which their employees get trained and gather knowledge. This is to train their employees throughout the year.
• Strong Financial Position: NCCBL is a sound company backed by the enormous resource base of the mother concern Rangs group. As a result customers feel comfortable in dealing with the company.

• Good banker-customer relationship: NCCBL has good relation with their customers. They give service to their regular customers after 3 PM, though the bank is closed after 3 PM.
• Efficient management: All the levels of the management of NCCBL ,are solely directed to maintain a culture of the betterment of the quality of the service and development of a corporate brand image in the market through organization wide term approach and open communication system
•  State of the art technology: NCCBL utilizes state of the art technology to ensure consistent quality and operation. The corporate office is equipped with SWIFT (SWIFT is a banking software used by NCCBL). All other branches are also equipped with SWIFT system.

Weakness:

• Limited workforce: NCCBL human resources compared to its financial activities. There are not many people to perform most of the tasks.
• Reluctance to advertisement campaign: NCCBL is avoiding the marketing campaign for their new services. This is why the customers do not know about them fully what they are offering.
• Lack of modern technology: NCCBL is in the backward position because they are not adapting modern technology. They do not yet adapt online services towards their customers while most of the local banks are giving services through online. Since they have lacking of pc based services, officers have to make manual vouchers which take hours after hours.
•  So many areas in the country are still out of their network like whole Barishal Division as well as Greater Mymensingh.

Opportunities:

• Huge business area: NCCBL has large scope of banking operation throughout the country and it is widening day by day. NCCBL is still to cover huge business area including SME sector.
• Evaluation of E-Banking: Emergence of E-banking will open more scope for NCCBL to reach the clients not only in Bangladesh in Bangladesh but also in global banking arena. Introducing any branch banking through online is great opportunity to them.
• Launching Credit Card Division: since NCCBL deals mostly with credit commerce related business, Credit card division would allow them to make a huge profit in near future.

Threats:

• Political unrest: the country faces lot of unrests and turmoil in the recent times, so the banking operation is in the trouble position.

• Emergence of competitors: Due to high customer demand, more and more financial institutions are being introduced in the country. There are already 52 banks of various types are operating in the country. Many banks are entering the market with new and lucrative products.
• Poor telecommunication infrastructure: As previously mentioned world is advancing e-technology very rapidly. Through NCCBL has taken effort to join the stream of information technology, it is not possible to complete the mission due to poor technology and infrastructure of our country.
• Merger and acquisition: The worldwide trend of merging & acquisition in financial institution is causing concentration. The industry and competitors are increasing in power their respective areas.

Future Prospect of NCCBL:

 The world economy is trying to recover from the trauma of the 9/11 Twin tower attack in 2001. In such situation economic condition of the country does not seem very bright and will take some time for recovery. Moreover with the opening of the branch of newly opened private bank and foreign banks, the competition will be intensified. The bank will go for immediate automation of all branches through computer network and a tight control of cost so as to minimize the overall operational cost. The bank will hope to achieve a satisfactory level of progress in all areas of its operation.

Special Services:

ATM service:

The bank has joined the shared ATM network Bangladesh with a pool of 7 banks. The client of any member bank will have access to any ATM situated at different location of Dhaka city. This banks client will get 24 hours cash withdrawal and utility bills payment facility. 16 ATMs will be installed gradually in Dhaka city and the network will be extended to other cities if the country in the near future.

Credit Card:

To provide best possible customer services to its clients, the bank is going to launch Master Credit card shortly.

Swift:

The bank has become a member of SWIFT and is providing a fast and accurate communication network for financial transactions to their valued clients through uninterrupted connectivity with thousands of users institutions in 150 countries around the world. Money Gram is one of the innovative products of the bank. This has been functioning satisfactory and rendering prompt and efficient services to the wage earners.

PROBLEMS & Recommendations

 PROBLEMS IDENTIFIED:

This branch is not in the online network.

Lack of human resources and inadequate human resources are one of the major problems of that particular branch.

 There is no separate team for the marketing of the services who might inform the customer about their different services.

They do not have extensive advertisement for their product or overall banking.

Bank does not provide adequate interest for introducing innovative banking product or banking service.

 Lack of investment in new and potential market.

Interest rates of the various deposits are lower than the other bank.

 RECOMMENDATIONS:

After a complete analysis and implementation of the NCCBL performance appraisal some facts and recommendations can be taken into account for a relatively meaning full and precise application of the NCCBL performance development.

• The bank has less than required employees therefore additional new human resources are required to improve the overall performance of that particular branch.
• Interest rate of some deposits should increase.
• Marketing policy: Marketing policy about services of the branch should improve for increasing its customer.
• Borrower’s Awareness: Measures should be taken for the NCCBL to create more awareness among the borrowers regarding the importance of credit facilities.
• Make investment small and cottage industry: The NCCBL can encourage investment in small and cottage industry in rural area. In this sector city bank can be play an important role in our country.
• On-line Banking: The NCCBL might take to go for on-line banking system. Among the private banks the NCCBL might take the step to introduce on-line banking to its client.
• Proper Training: More training program need to be arranged for the bankers of the NCCBL so that they can improve their analytical ability.
• Influence for agricultural investment: The NCCBL also need to encourage investment in agricultural sector to stay in competition with other private banks.

CONCLUSION

National Credit and Commerce Bank Limited has started their journey as a full-fledged commercial bank in 1993. They have already passed fourteen long years of their banking life. This bank constantly looks for ways & means to improve productivity by rendering to its customers in order to remain competitive in the market.

NCC Bank Limited plays a significant role in various fields in the economy such as industry, trade & commerce, transportation, deposit mobilization etc. It is playing a crucial role in human resource development and in creating new employment opportunities.

Despite the decline in interest spread and fee earnings the bank have achieved significant progress in many areas of business in 2006. The operating profit figure at the end of the year stood at BDT 127.00 core recording an increase of 24.50% over the previous year’s figures of BDT 102.00 core. And the paid up capital has increased to BDT 1201.80 million against BDT 975.04 million of 2005.

NCCBL has to change their marketing strategy according to market situation. They have to increase their branch network so that they can reach their potential customer. Technology is one of the most important aspects of banking sector. NCCBL should expand their online banking service at least for key business areas. This would give NCCBL huge competitive edge over their competitors & customers will be more satisfied with their service.

See more Part:

Report on Overall Banking Practice of National credit and commerce bank [Part-1]

Report on Overall Banking Practice of National credit and commerce bank [Part-2]