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1.0 Introduction No country in the world produces all the commodities it requires.

On the contrary, a country may produce more of those commodities in the production of which it has a greater or comparative advantage, and may or may not produce smaller quantities of those in the production of which it has a greater or comparative disadvantage. The commodities which a country can economically produce it exports, while those in producing which it have greater disadvantages it imports. The foreign trade of a country those refers to its imports and exports of merchandise from and to other countries under contract of sale and it constitutes a sizeable portion of international transaction of a country. All foreign exchange transactions invariably involve two or more parties and two or more currencies. The banks are the only dealers authorized by the Central Banking Authorities to act as intermediaries for setting payments between parties located in different countries. Commercial bank dealing in foreign exchange has a specialized department known as Foreign Exchange Department, manned by one or more specialists senior officials. The function of this department is primarily to convert foreign currency into local currency and vice versa for customers and for other banks with which the bank concerned may enter into deals for certain business purposes. National Bank Limited, one of the leading local banks in Bangladesh plays an important role in this export import and foreign exchange transaction sector. Internship program gives student an opportunity to work on different organization. It is the systematic process for gathering, recording and analyzing data about the subject that a student goes to learn on the program. It gives student an opportunity to connect their theoretical knowledge with practical experience. As an internee at National Bank I have mainly chosen the Foreign exchange department for my internship program.

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1.1 Origin of the Report:


As a mandatory part the BBA Program, all the students of the Department of Business Administration, International Islamic University Chittagong, have to undergo a three months long internship program with an objective of gaining practical knowledge about current Banking Affairs. After this internship program each and every students have to submit an internship report mentioning their activities during the internship program.

1.2 Objectives of the Study:


1.2.1 Broad Objective: The broad objective of this study is to know the function of the Bank, especially the Foreign Exchange Mechanism. 1.2.2 Specific Objectives: To know about Foreign Exchange Mechanism and some issues relating to Foreign Exchange. To know Letter of Credit (L/C) and different stages of L/C processing To analyze the entire process of L/C issuing in National Bank To identify the sources of income from L/C operations in National Bank To recognize the general behavior of the L/C issuance in National Bank To know about Foreign Remittance and its performance in National Bank. To find out Problems and give some suggestions to overcome those problems.

1.3 Scope:
A comprehensive knowledge on the organization and a thorough knowledge on the ExportImport operation of the organization and Foreign remittance sector have come under the scope of the report. The report is limited only to L/C operations and inward and outward foreign remittance of the National Bank during January 2009 to November 2009 and the overall performance of the Bank.

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1.4 Methodology:
The word, Methodology means A set or combination of methods or techniques which is used to perform a particular task. What type of methodology would be used depends on the type of the assigned tasks or research. Through methodology, we try to reach our intended goals. In the following sections the methodology of the research has been described on the basis of research design, data collection methods, sample design, fieldwork and analysis. 1.4.1 Research Type: From the view point of objective, it is a descriptive research. The main intention of this research to see the Foreign Exchange Method and different types of problem related to foreign exchange. From the view point of nature of data, the research is mainly conducted on the basis of primary as well as secondary sources but emphasis is put on primary sources. From the view point of research place, this research is done sometimes from the reference and sometimes from foreign exchange department of the bank. So it is a desk as well as field research which is known as combination of both places as it conducted during the internship in the bank. 1.4.2 Data collection: Both primary and secondary data is used for this report writing. Primary Data: Most of the information was collected from primary sources. This includes the interviews with the managers and officials of the bank. Secondary Data: This includes a number of books, journals, handbooks, annual report and websites. 1.4.3 Research Approach and Instrument: In this research informal questionnaire was used to interview the bank officials instead of structured questionnaire. Observation and experience of month long internship served as a major source of information.

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1.4.4 Data Analysis: Statistical tools are used during data analysis. Various graphs and tables also make this report more informative, useful and purposeful.

1.5 Limitations:
It should be certainly mentioned that the time constraints was the first limitation of the study. Only three month is not sufficient to gather perfect knowledge on the vast area of the banking activities. The organization maintains confidentiality in providing some relevant information, so the author could not incorporate those. Information regarding L/C is not fully disclosed to all, so some information was tough to gather. The project, in some cases, covers only 11 months data gathered from the National Bank, which may not represent the overall scenario.

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2.0 Background of National Bank Limited


National Bank Limited has established as the first private sector bank fully owned by Bangladeshi entrepreneurs, leading private sector bank in Bangladesh offering full range of Personal, Corporate, International Trade, Foreign Exchange, Lease Finance and Capital Market Services. National Bank Limited is the preferred choice in banking for friendly and personalized services, cutting edge technology, tailored solutions for business needs, global reach in trade and commerce and high yield on investments, assuring Excellence in Banking Services. National bank limited has its prosperous post, glorious present, prospective future & under processing projects & activities. NBL has been flourishing as the largest private sector bank with the passage of time after facing many stress & strain. The member of the board of directors is creative businessman and leading industrialist of the country. The emergence of National bank limited in the private sector is an important event in the banking arena of Bangladesh. When the nation was in the grip of severe recession, Govt. took the farsighted decision to allow in the private sector to revive the economy of the country. Several dynamic entrepreneurs came forward for establishing a bank with a motto to revitalize the economy of the country. National bank limited was born as the first hundred percent Bangladeshi owned Bank in the private sector. From the very inception it is the firm determination of National Bank Limited to play a vital role in the national economy. The then president of the Peoples Republic of Bangladesh Justice Ahsanuddin Chowdhury inaugurated the bank formally on March 28, 1983 but the first branch at 48, Dilkusha Commercial area, Dhaka started functioning on March 23, 1983. The 2nd Branch was opened on 11th May 1983 at Khatungonj, Ctg. Today the bank has a total number of around 110 Branches all over Bangladesh. A representative office was established in Yangon, Myanmar in October 1996 by NBL & obtained permission from the Govt. of Bangladesh to handle border trade with Myanmar. Page 5 of 52

As a result NBL will be able to build a strong root in international Banking horizon. Bank has been drawing arrangement with well conversant money transfer service agency Western Union. It has a full time arrangement for speedy transfer of money all over the world. 2.1 Mission With a view to achieving commercial objectives of the bank, NBLs sincere and all efforts stay put unabated. Respected clients and shareholders are attracted to NBL for their transparency, accountability, social commitments & high quality of clientele services. 2.2 Vision Ensuring highest standard of clientele services through best application of latest information technology, making due contribution to the national economy and establishing firmly at home and abroad as a front ranking of the country are the core vision of NBL. 2.3 Capital Base Authorized Capital : BDT 2,450 million. Paid up Capital 2.4 Slogan A Bank for Performance with potential 2.5 Motto The Bank will be a confluence of the following three interests: Of the Bank Of the Customer Of the Society : Profit Maximization and Sustained Growth. : Maximum Benefit and Satisfaction. : Maximization of Welfare. : BDT 1,872.72 million (as on 31.12.2008)

2.6 Objectives:

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Bringing modern banking facilities to the doorstep of general public through


diversification of banking services, thereby arousing saving propensity among the people.

To build up strong pillar of capital. To discover strategies for achieving systematic growth. To improve & broaden the range of product and services. To develop human resources by increasing employment opportunities. To create congenial atmosphere so that the client becomes interested to deal
with the National Bank Limited.
2.7 Values Integrity Open Communication Performance driven Continuous Self Improvement Quality Team Work 2.8 Management Information System Since its journey as commercial Bank in 1983 National Bank Limited has been laying great emphasis on the use of improved technology. It has gone to online operation system from 2008. And the Bank is using the Software named AtoZ. As a result, the bank is able to give the services of international standards.

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2.9 Organizational Structure of NBL:


The Organizational hierarchy of National Bank limited is almost horizontal, which can be shown by the following:

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2.10 Departments of National Bank Limited: Agrabad Branch, Chittagong If the jobs are not organized considering their interrelationship and are not allocated in a particular department it would be very difficult to control the system effectively. If the departments are not fitted for the particular works there would be haphazard situation and the performance of a particular department would not be measured. National Bank Limited has does this work very well. Different departments of NBL are as follows: General Banking Department Deposit Department Accounts Department Advance Department Foreign Exchange Department

2.11 Product and Services:The product and services that are currently available are given
below:

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2.12 Import- Export Businesses at National Bank Limited: National Bank has already established a world wide network and relationship in international Banking through its 406 foreign correspondents. The Bank has earned an excellent business reputation in handling and funding international trade particularly in boosting export & import of the country. The Bank finances exports within the frame-work of the export policy of the country. It is one of the pioneers in promoting back to back Letter of Credit for the RMG (Ready Made Garments) sector. National Bank always aims to increase its foreign exchange business. The Bank has been doing international banking with all major Banks of the world. It has been, however, handling bulk of the international businesses with the following multinational Banks: JP Morgham Chaes Bank The Mashreq Bank American Express Bank Ltd.

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Standard Chartered Bank Bank of Tokyo Hong Kong Shanghai Banking Corporation

The Bank is maintaining foreign exchange accounts in New York, Tokyo, Calcutta, and London. The bank has set up letter of credit on behalf of its valued customers using its correspondents as advising and reimbursing Banks. The Bank maintains a need based correspondent relationship policy, which is gradually expanding. The number of Foreign Correspondents is 406. To boost up country's Export, National Bank has been providing different kinds of assistance to exporters. Some of which are as under: Providing Pre-Shipment and Post-Shipment Finance, Export Guarantee and bonding facility etc. Considerable rate of interest for exports Finance. Back to Back L/C under bonded Warehouse facility Exporter's Retention Quota A/C Export incentive Program. Banking at Export Processing Zone Providing services to the exporter by utilizing most modernized technology like Swift, Internet, and Fax etc. Any latest business information will be available at their website; http://www. nblbd.com/ Consultancy and advisory services by an expert group of officials. Special export financing program towards computer software, data entry and service. Facilities Offered: Opening of L/C at competitive / reasonable margin and commission. Considerable rate of interests on import finance to the prime customers Import Items: Capital Machineries (scrap vessel, hot rolled non alloy steel etc) and Industrial raw materials.

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Fuel & Lubricants. Intermediate goods (raw cotton, fabrics, accessories etc). Consumer durable, spare parts and equipments. Consumer goods: Baby food, Petroleum, CDSO (Crude Degummed Soya bean Oil), Oilseeds, Cement, Construction Materials, Fertilizer, Chemicals, etc. Salient Features: A Firm or Company having valid ERC, necessary infrastructural and technical facilities and sufficient skilled man power related computer. Having Computer Literacy or related professional background. Preference to the firm/company having prior experience Satisfactory performance Certificate/Acceptance Letter from Counterpart abroad. Valid Export Orders are in hand.

2.13 National Bank at a Glance: 2004-2008


Financial Highlights. (Figures in million Taka)

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2004 Authorized Capital 1,000.00 Paid up Capital 516.33 Shareholders' Equity 1,862.31 (Capital & Reserve) Advances 23,129.65 Investments 4,374.17 Import Business 22,028.30 Export Business 17,105.30 Profit after Tax 269 Fixed Assets 895.35

2005 1,000.00 619.59 2,734.61 27,020.21 3,564.82 31,648.20 21,344.10 358 1,431.23

2006 2,450.00 805.47 3,274.25 32,709.68 6,239.83 42,458.50 28,109.20 463 1,627.29

2007 2,450.00 1,208.20 4,568.39 36,475.74 7,760.38 62,759.00 31,824.00 580 1,842.28

2008 2,450.00 1,872.72 6,126.27 49,665.07 10,162.81 78,226.32 36,284.44 703 1,981.60

Total Assets (excl. contra) 35,127.30 38,400.37 6,796.04 EPS DPS (Stock) 27.44 20% 43.85 30% 63.01 50%

56,526.96 72,212.86 66.11 55% 81.03 52%

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3.0 Foreign Exchange


According to foreign Exchange Regulation Act 1947, Foreign exchange means foreign currency and includes all deposits, credits and balances payable in foreign currency as well as foreign currency instruments, such as Drafts, Travellers Cheques, Bills of Exchange, Hundi and Promissory Notes payable in any foreign country. 3.1 Authorized Dealers (AD): In exercise of the power conferred by the Foreign Exchange Regulation Act 1947, Bangladesh bank issues license to schedule banks to deal with foreign exchange. These banks are known as Authorized Dealers. 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. 3.2 Activities of Foreign Exchange:

Foreign Exchange

Foreign Trade

Foreign Remittance

Import

Export

3.3 Some Contemporary Issues Relating Foreign Exchange: 3.3.1 Balance of Payment (BOP): The balance of payment of a country for a period of time is a complete and systematic statement of all economic and business transactions made by its residents, government or agencies with rest of the world. BOP records are kept by Bangladesh Bank. The BOP recording system takes the form of a double entry accounting statement, in which each transaction is reflected both in a credit and debit entry.

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Source of document: Record of the authorized dealers (Bank). Bangladesh Bank. Ministry of food (import of food grains from govt. account). Economic Relation Division of Ministry of Finance. Customs records. Current account. Capital and financial account.

Components of BOP:

3.3.2 Balance of Trade (BOT): Exports of commodities to foreign countries add to our foreign exchange earnings, while importers add to the payments that we have to make to the foreigners. Balance of trade refers to the net difference between the value of exports and imports of commodities from/ into a country. If exports exceeds exceed imports the BOT is said the, be favorable and if imports exceed exports the BOT will be unfavorable. 3.3.3 Convertibility of taka: Convertibility is the ability of the owner of the asset (foreign exchange) to exchange it from one currency into another currency. It ensures the every holder of the currency is able to obtain at the margin, an equal satisfaction from it as he could be obtained from other currencies. Objectives of convertibility: To make the economy internationally competitive. To integrate the economy with global monetary and financial system. To increase investment and economic growth.

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3.3.4 Dealing Room Operation in Trade: Dealing room plays a vital role in international trade payment and foreign exchange. The dealer purchase required foreign currencies for payments ensuring no exchange loss but some profit margins or sell export or other proceeds to determine the payable amount to the customers. It will allow banks to quote better rates to the customers. 3.4 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: A Nostro account means our account with you. A Nostro account is a foreign currency account of a bank maintained its foreign currency abroad. 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. Loro account: Loro account means their account with you. Loro accounts are current accounts which the banks maintain with banks abroad on behalf of their clients. 3.5 Foreign Currency Account: Resident Foreign Currency Deposit (RFDC): Residents of Bangladesh may open the resident foreign currency deposit account with the foreign currency brought in, at the time of their return from abroad. Non Resident Foreign Currency Deposit Account (NFCD): This account is opened by the non residents. Generally non resident Bangladeshis or foreign citizen can open this type of account.

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4.1Letter of Credit:
Trade between countries is mainly financed through letter of credit. The international chamber of commerce has defined a letter of credit as: Any arrangement however named or prescribed whereby a bank (the issuing bank) acting at the request and in accordance with the instructions of a customer (the applicant of the credit), is to make payment to or to the order of a third party (the beneficiary ) or is to pay, accept or negotiate bills of exchange (drafts) drawn by the beneficiary, or authorize such payments to be made or such drafts to be paid, accepted or negotiated, by another bank, against stipulated terms and conditions. Letter of Credit is quite literally a letter that extends a line of credit to an individual or business entity. A bank on behalf of one of its customers writes it. A letter of credit is a banking mechanism that allows importers to offer secure terms to exporters. Every Letters of Credit contain these elements: A payment undertaking given by the bank (issuing bank)on behalf of the buyer (applicant i.e.; importer). To pay a seller (beneficiary i.e.; exporter) a given amount of money On presentation of specified documents representing the supply of goods within specific time limit These documents conforming to terms and conditions set out in the letter of credit Documents to be presented at a specified place. Thus when a stipulation is incorporated in the sale contract that the goods shall be paid by a bankers letter of credit , the seller need not to worry whether the goods will be cleared by the buyer on arrival at the destination and the buyer need not block up his funds by making payment in advance. As a matter of fact, a commercial letter of credit substitutes the creditworthiness of the banker issuing the letter of credit since it is a promise by the bank to pay or accept the bill, provided the exporter (the beneficiary) fulfills the terms and conditions set out in the credit.

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4.1.1 Advantages of Letter of Credit: L/C as a means of finance international trade provides benefits to both the exporter and the importer. Advantages of L/C to the exporter: Eliminates credit risk Reduces ambiguity regarding transaction because terms are specified in the L/C Facilitates pre-shipments financing through packing cash credit or Back to Back L/C Advantages of L/C to the importer: Local Rules: Guidelines for foreign exchange transaction regulation on import (guideline-chapter-XV) The Import/Export Act 1950 Import policy for the concerned year Customs duty, VAT, SRO, Tariff Rate of exchange and its application Fe Circular, IBD Circular Public notice issued by CCI&E Office UCUDC-ICC Publication No. 500 URC-ICC Publication No.522 URR-ICC Publication No.525 INCOTERM-ICC Publication No.560 Harmonized Commodity Description & Coding System (H.S. Code) Page 18 of 52 Ensures that the goods sent by the exporter comply with the specifications Facilitates financing. 4.2 Regulatory Provisions Regarding L/C:

Uniform Rules:

4.3 Parties of L/C: The buyer, the seller, the issuing bank, the notifying bank, the negotiating bank, the confirming bank and the paying bank are the parties to a letter of credit. Buyer/importer: the buyer/importer, who is applies to the bank for the opening of a letter of credit Seller/exporter: the seller/exporter is the beneficiary of the letter of credit Issuing Bank/opening bank: the bank, which issues the letter if credit at the request of the buyer, is the issuing bank. The buyer gives instructions regarding the terms and conditions of the credit. Issuing banks obligation is to make payment against presentation of documents drawn strictly as per terms of L/C. Advising/Notifying Bank: the correspondent bank situated in the same place as that of the seller, which advices the credit to the beneficiary. But the notifying bank does not commit itself to any liability under the credit. Generally, the services of a notifying bank are utilized when the credit is advised to the seller the most important function of this bank is to make sure the beneficiary about the authenticity of the document. Negotiating Bank: the bank which negotiates the bills or drafts of exporter under the letter of credit. Generally, the same bank acts as the notifying and the negotiating bank. Confirming Bank: usually, the seller insists that a bank in his own country must confirm the credit. Such a bank is known as the confirming bank. The advantage of this confirmation from the sellers point of view lies in the fact that he is assured of payment as soon as the shipment documents are presented his own centre. It may be noted that, the primary liability lies with the confirming bank, once the credit is confirmed by it, provided the seller fulfills the terms and conditions of the credit. Reimbursing bank/Paying Bank: the bank on which the bill or draft is drawn. It can be the issuing bank, the notifying bank or the confirming bank.

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A Letter of Credit, simply defined, is a written instrument issued by a bank at the request of its customer, the Importer (Applicant), whereby the bank promises to pay the Exporter (Beneficiary) for goods or services, provided that the Exporter presents all documents called for, exactly as stipulated in the Letter of Credit, and meets all other terms and conditions set out in the Letter of Credit 4.4 Operational Flow of the Process: The complete Import and Export process in includes the following stages. Both the importer and exporter are involved in this flow.

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Description of the Flow: 1. Establish a buying and selling contract between the buyer and the seller. 2. Submission of application with necessary documents to the bank to issue an L/C 3. L/C issue and advise it to the advising bank 4. Issue reimbursing instruction to the reimbursing bank 5. Advise the L/C to the exporter by the advising bank after verification of the L/C 6. Asking for the confirmation of the L/C to the importer 7. Issuing request letter by the issuing bank to the confirming bank (as per exporters requirement) toe confirm the L/C 8. Issuing confirmation by confirming bank 9. Shipment of the goods 10. Submit required document to the negotiating bank for negotiation 11. Negotiate the bill by the negotiating bank and make payment to the exporter 12. Claim to the issuing bank or reimbursing bank for payment 13. Payment reimbursed by the issuing bank or reimbursing bank 14. Ask the importer to collect the documents from the bank 15. Collect documents from the issuing bank by paying the banks dues. 4.5 Considered Factors of the L/C Applicant: Account holder of the bank: first of all, L/C applicant must be a client of the bank. If a new client comes in for opening L/C, he/she has to open an account with National Bank first. Trustworthiness: this is the vital issue while considering about opening the L/C. the past experience of dealings with that person is considered. For a new applicant, his/her previous dealings with other banks are considered. Volume of business: the volume of business is also a major factor to be considered. Post-import retirement: Post-import retirement is another factor that will have to be considered for opening L/C. Detailed analysis of financial condition: Detailed analysis of financial condition of the applicant is required for the process, especially for a new applicant.

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And finally the personal relationship of the applicant with the bank or its high officials plays a vital role in opening L/C.

4.6 Documents required while applying for L/C: In credit operation, all parties deal with documents, and not with goods, services and/or other performance to which documents may relate. Thus documentation has foremost important in all types of L/C processing and operations. The following documents are required for opening L/C with National Bank for a new applicant. Trade License (up to date) Import Registration Certificate (IRC) (up to date) Tax Identification Number (TIN) (up to date) VAT Registration Certificate (up to date) Membership Certificate of a bona fide trade body (up to date) Chamber Membership Certificate L/C Application (in letterhead pad of the client) LCA (L/C Application) form-duly filled in and signed by the importer IMP Form- duly filled in and signed by the importer Charge documents Suppliers Credit Report Applicants Credit Report Other necessary papers depending on the nature of import. 4.7 Forms provided by National Bank: After scrutinizing the above mentioned documents carefully, the authorized officer delivers the following forms to be filled in by the applicant of L/C. 4.7.1 L/C Application Form: L/C Application Form is a sort of an agreement between the customer and the bank on the basis of which letter of credit is opened. National Bank provides a printed form for opening of L/C to the importer. A special adhesive stamp of value TK. 150 is affixed on the form in accordance with the stamp act currently in force. Usually, the importer expresses his

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decision to open the L/C quoting the amount of margin in percentage. In filling up the form, the importer has to provide the following information: Full name and address of the importer Full name and address of the beneficiary Draft amount Time bar within which the documents should be presented Sales type (CIF/FOB/C&F) Brief specification of commodities, price, quantity, indent No. etc. Country of origin Import license No. IRC No. Account No. Documents No. Insurance Cover Note/Policy No., date, amount Name and address of insurance company Whether the partial shipment is allowed or not Whether the transshipment is allowed or not Last date of shipment Last date of negotiation Other terms and conditions (it any) Whether the confirmation of the credit is requested by the beneficiary or not The L/C application must be completed / filled in properly and signed by the authorized person of the importer before it is submitted the issuing bank. 4.7.2 Letter of Credit Authorization Form (LACF): The Letter of Credit Authorization Form (LACF) is the form prescribed for the authorization of opening L/C / payment against import and used in lieu of import license. The ADs are empowered to issue LCA Forms to the importers on the basis of licensing of the Import Policy Order in force to allow import into Bangladesh. The LCA Forms available with AD are issued in set of five (5) copies each. First copy is exchange control Page 23 of 52

copy, which is used for opening of LC and effecting remittance. Second copy is the custom purpose copy, which is used for clearance of imported goods from custom authority. Third and fourth copies of LCAF are to be sent to concerned area of CCI&E office by AD. Fifth copy is kept as office copy by AD. The Letter of Credit Authorization Form (LCAF) contains the following Name and address of the importer IRC No. and the year of renewal Amount of L/C applied for (both in figure and in word) Description of item(s) to be imported ITC number / HS Code number Signature of the importer with seal List of goods to be imported 4.7.3 Import Permit Form: Import Permit Form contains the following L/C authorization form no. date value in taka registration of LCAF quantity of goods invoice value country of origin port of shipment name of the steamer indenters address 4.7.4 Communication media: Communication between the parties and bank involved in the process is very important for the efficiency of L/C operation. National Bank has the facility to use the following communication media: postage for mailing Page 24 of 52

courier cable / telex

4.8 L/C Issuing Process: The generalized process of L/C issuing in National Bank is explained below. For a business customer approached for the first time, the process will start with opening an account with the bank. Step 1: Application in companys letterhead pad: First of all, the person shall have to submit an application written or printed in the companys letterhead pad. In the application he/she will have to mention the name of the products to be imported, margin and so on. The applicant shall have to apply for the required forms of the bank. Step 2: Discussion between National Bank and the party: After receiving the application form, the Bank pays attention to the issues mentioned below. The products that are going to be imported are considered. Because there are restrictions by the government on some products. The quoted rates are specially analyzed as there also some restrictions by the government. Step 3: Collecting forms and depositing those with necessary documents: In this step, the applicant collects the L/C application form, LCA Form and IMP Form from the bank. These forms are to be filled up by the client. The forms and all other necessary documents are then deposited at the desk of the dealing officer. Step 4: Checking Documents: All the documents are checked out by the dealing officer. He/she checks specially the quoted rates, the terms and conditions of the indent or pro forma invoice and the validity of the documents. Generally the person from whom the forms are collected is engaged in checking out the documents. Step 5: Putting L/C No:

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After checking the documents and L/C No. is given. Generally the officer who checks the documents puts the L/C No. Step 6: Preparing offering sheet: The offering sheet is prepared by the dealing officer. Usually the officer who checks the documents prepares the offering sheet. Step 7: Signing offering sheet: The offering sheet is then signed by the officer having the authority to open the L/C of the specified amount. If it is within the maximum limit of the amount (for which the L/C is applied) of the SVP or branch manager, he can sign it. But if it is beyond his/her limit proposal must be sent to the head office, either for case-to-case sanction or for credit limit. Generally, in National Bank, SVP or branch managers are empowered to open an L/C without communicating with the head office, if the L/C amount is within his / her limit. Step 8: Typing the L/C: After the approval of opening L/C is given, the L/C is typed in a structured format. Step 9: Checking the L/C: A final check is done to find out any discrepancies after the typing is completed. This is done by the dealing officer who is generally in charge of the whole process. Step 10: Crediting the account of the customer: On the basis of credit arrangement with the bank of import financing, the customers account is affected with certain credit. Step 11: Dispatching L/C: At the final stage, the L/C is dispatched through postage mail or telex or SWIFT or so forth. Although this is the generalized process for issuing L/C, for the speed of the process sometimes the typing and checking of documents are done before the offering sheet is signed. Then after signing the L/C it is dispatched.

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Chart-2:Flow Chart mentioning Steps in issuing an L/C in National Bank

4.9 Letter of Credit in Import Financing: One of the important functions of the commercial banks in the world is to undertake the import of merchandise into the country and payment of foreign exchange towards the cost of the merchandise to foreign suppliers. Bangladeshs import policy requires letters of credit (L/C) for all imports of goods. However, in certain condition goods can be imported without L/C but within a limit of US $25,000 annually per importer. L/C, as a tool of financing, provides benefits to both the importer and the exporter. Import financing by National Bank can be shown by the diagram below:

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Import Finance National Bank

Pre Import Finance 1. L/C (Letter of Credit)

Post Import Finance PAD LTR

4.9.1 PAD (Payment against document): When issuing bank gets the original documents from negotiating bank against a L/C, then it goes through that shipping documents scrutiny. If it finds that the shipping documents is in order i.e., as per L/C terms and conditions, then the issuing bank opens a loan account of importer. This total process is known as Payment against Document. 4.9.2 LTR (Loan against trust receipt): This is a special type of loan arrangement by the commercial bank to facilitate its client to retire L/C and clean goods. Here the client takes the loan by execution of trust receipt and make the payment on maturity usually from sales proceeds of the imported goods. In this process the goods remain under the possession of the client. For giving this type of loan officer make loan proposal and sends it to head office (H/O) for approval. After getting approval from H/O the bank grants loan in the form of LTR. Importer can also take loan from the available investment mode of National Bank, up to 90% of total import. 4.10 Import L/C -the process: The whole process of L/C in National Bank completes in three stages: L/C issuance Lodgment and Retirement Collect Bill of Entry and close the file.

L/C Issuance: This is the step where the importer opens an L/C and transmits the L/C to the advising bank or confirming bank to advice the seller and its bank regarding the

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issuance of this L/C. This transaction procedure takes place by SWIFT or TELEX or EMAIL format. Then upon receipt of the L/C, the supplier, first, put his promise on all the terms and conditions and if required, undertakes necessary steps to put in the amendments and upon satisfaction, arrange for the necessary shipment as per the agreed conditions of the L/C.

Receive and scrutinize Shipping Documents: Upon shipment of goods, the suppliers prepare documents as per the direction of the L/C and ask their bank to negotiate with them for payment. These documents are as follows: 1) Commercial invoice 2) Transport document: Bill of lading Airway Bill (AWB) Courier Receipt Railway/ Truck Receipt (TCR)

3) Insurance Document. 4) Bill of exchange. 5) Packing List. 6) Pre- shipment Inspection (PSI) certificate. 7) Certificate of Origin. 8) Suppliers compliance certificate. 9) Other certificates as per the L/C terms and conditions. Then the suppliers bank/ exporters bank negotiate the documents to the confirming bank to proceed the payment. The confirming bank makes the payment of the document to the negotiating bank and sends the documents to the issuing bank for reimbursement. In case of non involvement of any confirming bank, the negotiating negotiates the document to the issuing bank for further procedure. The issuing bank must inquire any discrepancy of the Page 29 of 52

documents. Upon satisfaction, the issuing bank asks its client (importer) to make necessary payments and upon receipt of the due amount, the issuing bank reimburse the proceeds to the confirming bank as negotiating bank under the concurrent consequences. In case of sight L/C, payment made by 100% cash or by the arrangement of LTR. But incase of deferred L/C, acceptance is given duly on maturity and payment is made accordingly. Lodgment and Retirement: At this step, the issuing bank makes payment to the negotiating bank by creating temporary loan A/C termed as PAD. When it collects payment from the customer, PAD is washed out. Usually the bank is to wash out PAD within 30 days of its opening. Generally, within 5 to 10 days of negotiation, the client (importer) makes the payment and clear documents from the bank and goods from warehouse storage. In case of any discrepancy, the bank asks the supplier (exporter) to come up with necessary amendment or alternatives. Collect Bill of Entry and close the file: Issuing bank must collect the copy of bill of entry from importer who collects it from custom authority upon the clearance of goods. When bill of entry satisfied itself in connection with invoice value, then international trade is deemed to be successful. Issuing bank must report to Bangladesh Bank regarding it and L/C and close this file. The bill of entry is mandatory for closing the file. 4.10.1 Check list for Import L/C: National Bank uses a checklist to verify the overall issuing process of import L/C. The check list contains the following: Written request of importer for issuing L/C is obtained L/C application form duly filled in, signature of importer / guarantor is taken and verified, affixing adhesive stamp with proper value & defaced. IMP form obtained LCAF duly filled in, signed by the importer & verified by Banks official with proper seal Copy of indent / pro forma invoice is duly signed & accepted Insurance cover note obtained covering minimum B category risk

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Evidence of payment of VAT registration fee through Form-Ga (VAT registration certificate) IRC / pass book is valid Opening of L/C is duly approved by competent authority, as per designated power Margin, commission, and other charges are realized as per prescribed rates properly and timely Proof regarding obtainment of TIN (Tax identification No.) Valid membership certificate issued by member organization of FBCCI Contra liability entries are passed on the same day of opening of L/C Margin is realized on the same day of the opening of L/C Commission and other charges are realized on the same day of the opening of L/C L/Cs is advised promptly within 24 hours time Amendments of L/C in respect of time, value or items are effected in accordance with written request of L/C openers and charges thereof realized L/C copy along with LCAF is sent to the office of the CCI&E within fifth of every month covering the entire previous month Registration of indenter is valid. Indenter must incorporate Bangladesh Bank permission no. in indent VAT is being deducted on L/C commission and sent to competent authority of National Bank Balancing of liabilities and margin is done periodically.

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Importer: Submission of IRC, TIN, Indent/ Proforma Invoice, Insurance Cover note & Application to the Bank

Bank: Provide LCA, IMP Form & Application Agreement for confirmed L/C

Bank: Check Sanctioning approval, Creditability of Importer.

Opening L/C by Issuing Bank

Import Procedures

Collect CIB Report Collect Credit Report

Transfer L/C to the Beneficiarys Bank Receive Import/ Shipping documents from Nominated/Collecting Bank of Beneficiary. Scrutinize the Shipping Documents Yes

Arrangement of Margin &Settlement Mode

Instruct Reimbursing Bank not to honor the payment Inform the Nominated Bank about discrepancy Ask Applicant/Importer to remove discrepancies Does the importer agree to accept the documents?
No

Are the documents discrepant? No

Yes

Lodgement of Import Bills: Cash/PAD/LTR A/C------Dr, H/O A/C (Nostro A/C) ------Cr

Ask the Nominated bank to remove discrepancies Ask exporter to remove discrepancies

Release Import documents to the importer

Discrepancies Removed Page 32 of 52 Collect the proceeds from importer. Collect the bill of entry and close the file

4.11 Export L/C- the process: In case of export, bank function as advising bank or nominated bank or collecting bank. It ensures the proper export proceeds to the exporter. Usually the exporter may ask his importer or buyer to make payment by advance TT or L/C. Generally the proceeds come by L/C form. The major activities of export department is involved with the procedure of sending goods to the local or foreign purchaser with the assurance of receiving proceeds and collection of export proceeds in favor of the exporter. In short, export procedure is just the vice versa of the import procedure. In addition to it, export department of a bank also process for Backto-Back L/C under the lien of master L/C. Example- Assume that Mr. X is the client (exporter/ supplier) of National Bank and his business RMG manufacturing and export. Recently he has received a buying order from one of his foreign buyer and a purchase agreement has taken place between those two. The process is illustrated below: Mr. X has agreed to accept the payment for export via L/C. Then he would ask the importer/ buyer to open L/C for aforesaid amount. Then the buyer would request his bank for issuing L/C accordingly. The buyers bank will open L/C upon the purchase agreement and send the L/C copy to advising bank to advise National Bank on this L/C. The advising bank will Page 33 of 52

advise on L/C to National Bank and it may also derive a copy of the L/C directly from the importer/buyer. Upon receipt of L/C, National Bank will clarify each and every point of L/C and advise the exporter regarding this L/C. Then the exporter will go through the L/C and arrange for necessary amendments. Upon receipt of L/C, Mr. X will start production and for that purpose he would be in need of raw materials and other supplies that put him in necessity of working capital and National Bank will come to facilitate necessary finance. The bank allows the exporter to open BTB L/C by lien of the master L/C and supply required cash to the supplier. By this BTB L/C the exporter will purchase required supplies and will start production and on completion of the production will go for the shipment to the importer. Upon shipment of the goods, Mr. X will prepare all the L/C documents and place all this documents to National Bank to negotiate with the issuing bank for export proceeds. Export L/C requires the following documents: Forwarding letter by the exporter. Bill of exchange. Shipping documents (packing list, commercial invoice, weight list, Bill of lading/AWB). Certificate of origin from Chamber of Commerce. Shipment advice. Beneficiary certificate. Export form dully filled up. Purchase agreement or contract.

Then National Bank will check all the documents and send them to confirming bank and seek the proceeds accordingly. Otherwise the document would go directly to the issuing bank for L/C proceeds. Then the confirming bank/ issuing bank will check all the documents and if there is no discrepancy, it would clear the payment.

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Otherwise the bank negotiates with the exporter and undertakes the necessary arrangements for the rectification and then the proceeds will take place. When the exporters bank receive the proceeds, it would immediately adjust the BTB L/C payments or other debit figure of this L/C and then credit the remaining amount to the clients account. 4.11.1 Documents used in Export: When the exporter ships the goods he is required to furnish evidence to show that the terms and conditions of the L/C have been fulfilled. This evidence is provided in the form of document such as: Commercial Invoice Transport Documents. Insurance Documents Other Documents: Bill of Exchange Certificate of origin. Certificate of Manufacture Weight Certificate. Packing List. Quality Certificate. Short Shipment Certificate. Inspection Certificate. Clean Report of Finding (CRF) etc. It is not necessary that each set of documents should contain all above the documents. It depends on the agreement in the L/C between two parties.

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Export Procedure
Exporter: Obtaining Export Registration Certificate (ERC) from CCI &E.

Exporter: Securing Export Order from foreign buyer directly or through agent.

Bank: Receive L/C from the Issuing bank through an Advising bank or through agent.

Certification of EXP Form by Exporters bank Will the exporter be allowed for preshipment facilities? Shipment of commodities by Exporter Yes Marks Banks Lien on Original L/C Provide credit facility and obtain necessary securities: Packing CreditDr Exporters A/C---Cr

Receive the export/shipping documents from exporter Scrutiny of Export Documents Are the documents discrepant? Negotiation the documents through FDBC/FDBP: FDBC/FDBP A/C-------Dr Exporter A/C----------------Cr Forward the documents to L/C Issuing bank with reimbursement Yes

Ask Exporter to remove discrepancies

Yes

Discrepancies removed? remove discrepancies Yes

No

Inform Issuing bank about Discrepancies Does it allow negotiation?

Send Reminder to paying bank

No

Check whether the Nostro A/C has been credited or not Page 36 of 52 Yes Retire FDBC/FDBP and reverse liability

4.12 Letter of Credit in Export Financing: Export business creates inward remittance. For that reason, government encourages investing in export business and offers incentive like tax and duty free entrance of raw materials in RMG business in our country. As import of one party is an export to the other, L/C also plays a vital role in financing exports. Following diagram shows means of export financing that National Bank deals with. Export Finance National Bank

Pre Shipment Finance 1. Packing Cash Credit (PCC) 2. Back to Back L/C

Post Shipment Finance Negotiation of Export Bills DP/DA Collection of Export Bills

Post shipment finance has not been included for discussion in this report. Thus the following few sections deal with the means that National Bank uses for pre shipment finance, i.e. PCC and BTB L/C. Page 37 of 52

PCC is a short term credit with a fixed repayment date granted by the bank to an eligible exporter. This loan is generally given on the basis of irrevocable L/C, but sometimes it can be given without L/C on the basis of agreement which is given to valued constituents or exporters. 4.12.1 Packing Cash Credit (PCC): PCC is given for the following purpose: To buy raw materials To process raw materials To pay freight To pay insurance To pay inspection fees To pay packing charge

Documents verified for granting PCC: After the L/C is submitted to the bank counter, the bank starts to process all the documents as per the L/C terms and conditions. Before sanctioning the PCC, the following points are verified in National Bank: Check whether the L/C is issued by the reputed bank (1st class bank). Obtain the credit report of importer, especially when the applied loan amount is large. L/C expiry date is checked and PCC is not allowed after that date. Stock report must be submitted regularly to the bank Loans are given for the period from the time of purchasing raw materials up to shipment of goods. 4.12.2 Back-to-Back L/C: Back to Back L/C may be defined as an L/C which is backed by another. In Bangladesh, this type of L/C is being used in the form of pre-shipment finance especially against export order of ready-made garments. BTB L/C is the highest processed L/C in National Bank.

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Due to extensive use of BTBL/C, Bangladesh Bank has introduced a special chapter in its Guidelines for Foreign Exchange Transaction. BTB L/C is opened against lien of another credit. It is an L/C where the beneficiary is procuring goods from suppliers and like the suppliers to get the benefit under the credit. Beneficiary may need to purchase the raw materials and accessories and make the payment by opening a second L/C favoring the ultimate supplier. To do this, the beneficiary requires National Bank to open another L/C in favor of the supplier on the original credit. Such an ancillary L/C is known as Back to Back L/C. The original or master L/C forms the security based on which the bank undertakes the risk under BTB L/C. BTB L/C is issued in conformity of the terms and conditions as stipulated in master L/C. In our country, BTB L/C is generally opened for reprocessing purpose to manufacture exportable merchandise. The value of BTB L/C is restricted up to a maximum amount of FOB value of the master Export L/C.

Documents required opening BTB L/C: Master L/C Valid Import Registration Certificate (IRC) and Export Registration Certificate (ERC) issued by CCI &E. L/C application form and LCA form duly filed in and signed. Proforma Invoice and Indent Insurance cover note with money receipt. Duly signed IMP form.

4.13 Check List for Export L/C: Like import L/C, National Bank officials use a checklist to make the L/C operation flawless also for Export L/C. The points of the Export L/C checklist are as follows: Authenticity of Export L/C established If advised by another local bank bona fide of L/C established through paper communication which is documented

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In case of 2nd beneficiary L/C, KYC of both beneficiary established and documented BTB L/C pro forma invoice apparent legitimacy established by connected papers Possible in-house L/C or BTB L/C transaction eliminated Exporter or BTB L/C opener is not a first time client L/C opener has established adequate collateral security with the bank Present L/C value is not disproportionate to past business record of the client CIB report is clean Market report is good BTB L/C is within the production capacity of the RMG unit/exporters unit Quota availability and validity Sufficient lead time is available to ensure export in time No track record of forced payment of BTB L/C due to shortage of funds Value addition requirement as per IPO in force.

4.14 Amendment of Letter of Credit: An amendment to L/C means to make a change to the terms of the credit. After opening a L/C either beneficiary or applicant sometimes observes that the terms and conditions laid down in the credit are not complete to serve their purpose. They need some changes or alteration to the credit to make it workable. This is done by the way of issuance of amendment to the L/C. At the request of the applicant, as the issuing bank National Bank only can issue amendment to the L/C. there can be more than one amendment to a credit. All the amendments form an integral part of the original credit. L/C amendments are to be communicated by authenticated telex, SWIFT or mail. If there is more than one amendment to a credit, the amendments must bear the consecutive serial number so that the missing of any amendment can be identified by the advising bank or the beneficiary. If the L/C is an irrevocable one, the amendment can not be done without the consent of both the partied; i.e. he beneficiary and the applicant. National Bank as the issuing bank Page 40 of 52

can make amendments but if the beneficiary does not accept the amendment, it will not be effective. If the L/C is revocable, the applicant can make any amendment to the L/C at any time he desires and such amendment will be effective if the credit is not executed. National Bank generally asks for amendment on the following points: Extension of shipping date Extension of expiry date Increase or decrease of L/C value Increase or decrease of quantity of goods Change in description of merchandise Name and address of the beneficiary Inserting of new clause Change the mode of transport Change of the loading port or destination Change of certain terms and conditions of L/C Terms of delivery; i.e. FOB, CFR, CIB Inspection clause

4.15 Required time duration in L/C Processing: In most cases the L/C clients of the banks are regular and old. For that reason, the bank generally has all the required documents for opening L/C of the clients. When a regular client applies to open another L/C, they just provide photocopies of most documents and the bank officials do not take much long time to check those documents. Even often a regular client first informs his intention to open another by phone and Banks officials start the process; although this highly depends on nature of personal relationship of the client with the back. For a regular client it generally lakes less than an hour to open another L/C. however, in case of new client banks officials engaged in L/C issuing process check the documents thoroughly and often it takes time to make the client understand the banks requirements. However, it generally does not take more than two days even for a new client applying to open an L/C. Table-3: Average Time requirement for the basic activities of L/C issuing process Page 41 of 52

Activity Average Required Time (in minutes) Checking Documents 5 Putting L/C No. 1 Preparing Offering Sheet 10 Signing Offering Sheet 5 Typing the L/C 15 Checking the L/C 5 Crediting the account of the 8 customer Total Time* 40-50

Source: Primary Data (Method of Collection: Observation)


Total time mentioned here is not simple addition of the time required for basic activities. Rather it is provided from the interview with the bank officials. 4.15.1 Relevant activities that affect the time structure: Application for forms in company letterhead pad Discussion between bank and the applicant Filling in the forms Dispatching the L/C

5.0 Analysis of Income from L/C: In processing L/C, National Bank earns income through charging various activities relating to it such as L/C opening charge, postage charge including Telex and SWIFT, amendment charge, and miscellaneous charges which include issuance of Bank Certificate, advice etc. as the amount of income of any party is considered as confidential information and the author committed not to disclose the figures, the following section provides only an idea of comparison of income from L/C related activities. In case of Export L/C processing, all most all the Export L/C are BTB L/C. 5.1 Comparison of Sources of Income from Import L/C: The following chart exhibits a comparison of income at National Bank, from different activities relating L/C processing without mentioning the confidential income amounts, during the period of January to December, 2008.

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Comparison of Sources of Income from Import L/C


Opening Charge

Postage
Income

Amendments

Miscellaneous

The diagram shows that L/C opening charge acts as the major source of income from import L/C as it provides more than half of the total. Earnings form miscellaneous charges constitutes just below one fifth of the banks total income whereas income from amendment and postage charges are just more than one tenth of the banks total income. 5.2 Comparison of Sources of Income from BTB L/C: The following chart exhibits a comparison of income at National Bank, from different activities relating L/C processing without mentioning the confidential income amounts, during the period of January to December, 2008.

Chart-4: Comparison of Sources of Income from BTB L/C

Opening Charge

Postage
Income

Amendments

Miscellaneous

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The diagram shows that L/C opening charge acts as the major source of income from BTB Export L/C as it provides more than half of the total. Earnings form amendment charges constitutes just below one fifth of the banks total income whereas income from miscellaneous and postage charges are just more than one tenth of the banks total income. 5.3 Yearly Earnings from Import L/C:

The chart shows that earnings from import L/C is increasing gradually and in 2008 the earning is highest. 5.4 Yearly Earnings from Export L/C: The following chart exhibits a comparison of Yearly earnings of National Bank, Export L/C with mentioning the confidential earning amounts, during the period of 2004 to 2008.

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The chart shows that earnings from export L/C is increasing gradually but not as like as the Import earnings. 5.5 Number of Import L/C Issued each year at NBL, Agrabad: The following table shows the number of import L/C issued per year at National Bank, during the period from2007 to 2009.

The chart shows that, the highest no. of BTB L/C opened in the year of 2009 and most of the Cash L/C is opened during year of 2009. And the lowest no. of L/C is opened on 2007, which depicts an increase in opening L/C per year. 5.6 Comparison between Export- Import Earnings: Page 45 of 52

The above data shows that, the Import amount is much more than the Export, which incurs a loss in our GDP and GNP. Export should be increase more to reduce the budget deficit and increase the overall earning of the country.

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6.0 Definition: Remittance refers to the send or receipt of money from one place to another place. Foreign remittance refers that the exchange of money between two countries or among several countries. This is mainly occurred through banking institution. Foreign remittance plays a significant role in contributing to the growth of overall foreign exchange business. It is of two types: Inward foreign remittance Outward foreign remittance. 6.1 Inward foreign remittance: Inward remittance refers to the extent whereby bank makes payment to the client against a SWIFT letter. All the terms and conditions are mentioned in the SWIFT letter. After checking the SWIFT letter the bank pays to the client. Before the implementation of SWIFT system, demand draft was used in this purpose. 6.1.1 Sources of Inward foreign remittance: Export proceeds. Remittance by Expatriate Bangladeshi/ Bangladesh nationals working abroad. Commissions/ Fees etc. earned by local business people (indenting commission, recruiting agents commission, export brokers commission). Foreign loans and grants, donation and gift. 6.2 Outward foreign remittance: Foreign currency send abroad can be termed as outward remittance. 6.2.1 Sources of Outward foreign remittance: Payment of import liabilities. Payment of consular fees and commissions etc. Foreign travel quota through travelers cheque/ foreign currency Educational expenses for students abroad/ medical expenses and other purposes. All other payments sent abroad in foreign currency.

6.3 Modes of foreign remittance: Modes can be classified into two categories: 6.3.1 Modern mode: SWIFT.

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6.3.2 Old Mode: T.T (Telegraphic transfer). M.T (Mail Transfer). F.D.D (Foreign Demand Draft). T.C (Travelers cheque).

Beside this, remittance received against export bills are the main sources of inward remittance. SWIFT: SWIFT stands for Society for Worldwide Inter-bank Financial Telecommunication. It is created to meet the need of banks to settle the growing number of cross border payments and settlements. Today nine million messages per day representing payments value of more then ten trillion US dollar are transferred through the SWIFT. T.T: Telex instruction of payment are called as telegraphic transfer, where a foreign bank issue a T.T in favor of someone in Bangladesh, it credits the amount received from the sending bank to the Nostro account of its correspondence bank. On receipt of the T.T the paying bank in Bangladesh will make payment of the proceeds of the T.T in foreign currency or in equivalent Bangladeshi taka to the beneficiary. M.T: M.T is an instrument issued by the remitting bank to the paying bank advising in writing to make payment of certain amount to specific beneficiary. F.D.D: A foreign demand draft is an order for payment of money, drawn by a bank on another bank or a branch of the same bank in a foreign centre on presentation of the draft. T.C: It is an instrument issued by the banks payable to the purchaser on presentation. Mode used by National Bank Limited: SWIFT.

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F.D.D.

6.4 Collection of foreign currency instrument: To collect proceeds of foreign instrument following procedures need to be maintained: Receive instrument with deposit slip. Affix crossing stamp of the bank. Entry in the register by putting the IBCA number. Affix endorsement pay to the order of any bank, prior endorsement guaranteed. Instrument to be send to adjacent correspondents.

6.5 Number of foreign remittance issued per Year: The following table shows the number of Foreign Remittance issued per year at National Bank, during the period of 2004 to 2008.

Year after year, the Foreign Remittance is increasing gradually, which reflects the healthy reserve of Foreign Currency in the Country. Percentage of Increase each year:
Year 2004 2005 2006 2007 2008 Percentage Increase (%) -18.30 50.71 56.80 29.66

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FINDINGS
The whole process of Letter of Credit is highly dependable on the personal skills of the officers engaged in the process. In processing Letter of Credit almost all activities charges are competitive with the national commercial banks. Competitive service charge attracts customer to take services from National Bank limited. For regular and old client, Letter of Credit issuance does not take more than an hour. But for new clients, it generally takes around one to two hours, provided no discrepancy found in documents deposited. Relationship and introduction with the client plays a vital role in processing Letter of Credit, especially the time factor. National Bank takes less time in issuing Letter of Credit in comparison with the NCBs. More than half of the total Foreign Trades income is coming from opening charges of Letter of Credit. Other sources of income from Letter of Credit includes: postage charges, amendments charges, advise charges etc. Most of the L/Cs is opened for accessories in NBL. NBL mainly focus readymade garments sector as export item. It does not focus non-traditional export items. The trend shows that, in the month of March highest amount of foreign remittance (inward) is received by National Bank. The trend shows that, the highest amount of fund transfer from NBL to abroad in the month of March and the lowest amount of fund transfer from NBL to abroad in the month of July. Inward foreign remittance is the lifeblood of the economy. In National Bank the volume of Inward remittance is sufficient enough and it is always in a stable condition. Shortage of foreign currency in the FC market creates obstacles in export-import business in Bangladesh. Page 50 of 52

Government regulations, political unrest, unfavorable balance of trade and global financial crisis hamper the export- import business and inward foreign remittance in Bangladesh.

RECOMMENDATIONS
From the analysis and observation of the author, following recommendations have been formulated in order to smooth operation of Import-Export Business and to make the L/C processing more efficient: And the author also focus on the performance of Inward and Outward foreign remittance. Since the import-export business have the highest contribution to the profitability of the bank, it should take most attention. More manpower is needed to be employed at Foreign Exchange Department, through proper training, remuneration and job satisfaction. Latest development of technology in the business should be introduced accordingly. Since the whole process is largely depend on human skill, properly planned training program should be arranged and implemented for the improvement of technical and conceptual skills of the dealing officers. The time requirements in the processing of L/C have to be at minimum level. Because, foreign banks gain competitive advantage for their time management and efficiency. NBL need to concentrate on searching new clients in export- import sector through extra-ordinary marketing effort. It may use market penetration strategy. Periodic Performance measurement programs can be introduced to measure the performance of the officers involved in the process. The sources of cost especially on communication purposes should be measured and tried to be minimized. Delegation power at branch level should need to implement fully. L/C information should be highly automated. Most of the functions are still done manually. Integrated software can be introduced for this purpose. Page 51 of 52

NBL can make portfolio investment other than garments sectors by choosing lucrative non-traditional export item. Such as animal bone, animal skin, human hair, gill (of a fish), frozen fish, dry and dehydrated fish, pet bottle flex, leather goods etc.

Political stability, favorable government policy and fully infrastructural support for government help to boost up import-export business and also inward remittance in Bangladesh.

CONCLUSION
Banking sector plays vital role for the economic development of a country. It is required to ensure quality-banking service for flourishing the economic sector and enhancing the overall business and manufacturing environment of the country that will ultimately accelerate the national growth wheel. In recent times in Bangladesh banking industry has been considered the most prospective, compared to the other service sectors, for their quality service and transparency. Now a days bank is not just selling services but may define it as selling of solution to the business community as a whole to the society basically solution for the finance. So it is very important to ensure most efficient workforce with innovative ideals and proper technological back up to render such an important solution to the society that will ensure sustainable growth of the economy. Todays business world is dynamic and ever changing. To cope up with all these changes and adopt with new scenario a group of skilled and talented work force is the first requirement. National Bank Limited has rightly focused on skill development of employee and at the same time introducing technology in almost every step of its day-to-day activities to ensure prompt and quality service. National Bank limited, started its journey in 1983 as A Bank for performance with Potential. Its friendly and congenial environment, dedication to service and ability to prove quality with high efficiency has been able to develop a reputation in market.

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