Page 1

“Practice of Banking in NCC Bank Ltd.”

CHAPTER-1

1.2. Problems and purpose: Main task of this Topic is to find out the Practice banking of NCCBL which is related with work Experience. In order to complete the above topic tried to understand the core functions of the commercial banks and how NCC Bank Ltd applies the Practices Banking in their organization with their clients. The general functions and operations of a commercial bank are given below:01. To offer several Deposit schemes beside general accounts. 02. To offer a number of Loan schemes. 03. Accelerate and Promote Local and Foreign Trades. 04. Provide money transfer system to clients and customers. 05. Prevents Money Laundering. And also another important purpose of this study is to find out the advantage and disadvantage of NCC Bank Ltd by practicing those systems. 1.3. Scope: In order to do this report I have collected several relevant reference books having relations with “Practices of Banking in Bangladesh. As I was working in the NCC bank, Banani Branch, I got the opportunity to work in the different divisions of the bank. The officers helped me to work and understand various activities of different departments of the overall banking such general banking, loan & advance, foreign exchange, etc. I have also collected some recent informations from Bank’s Annual Report, brushiers and other articles, and NCCBL Web page.


1.4. Limitations: At the time of doing this study we have faced a lot of problems. If we could overcome these problems this study could be more resourceful and could show more clear and specific paths for “Practice of Banking in NCC Bank Ltd.” Some of the limitations of this study have been pointed bellow. 1. Limited time 2. Limitation of resources 3. Absence of a database system 4. Interview of experts 5. Emplyees are too busy. 1.4.1. Limited time: Three month time is not enough to prepare this kind of research based report, at list six months should be given to do this report. 1.4.2. Limitation of resources: Limited resource is one of the biggest problems that we face. We could not find any article or reports done on this problem before in our university library we also could not find enough books in the library from which we could take some important point or could build our concepts to create new ideas. 1.4.3. Absence of a database system: Not only in our university but also in anywhere of our country, we don’t have a resourceful database system, or limited access to those database system, from which we could collect important information to do any research or to rich our knowledge of information. 1.4.4. Interview of experts: I could not arrange any interview with any expert from whom some important ideas or direction could be arranged to complete this study. 1.4.5. Employees are too busy: Though the employees of the branch were so much helpful, they had a little scope to describe us every mechanism in a detailed way, as they are too much busy. 1.5. Sources and methods of collecting information: In this study we used secondary sources of data to know about the NCC Bank Ltd Mission, Vision, Forward, and Services through browsing internet. And different books have also been used to give definitions and other short notes. 1.5.1. Primary Sources of data: •

Face to face conversation with the bank officers & staffs.

Informal conversation with the clients.


1.5.2. Secondary Sources of data: •

Annual report of NCCBL (2005-2006).

Different papers, brushiers, and articles of NCCBL.

Website of NCCBL (www.nccbank-bd.com).

Auditor's Report of NCCBL (www.nccbank-bd.com).

Bank's record.

1.6. Methodology of the study 

Analysis technique: All statistical analysis was done by using MS Excel and MS Access.

Data tabulation, reporting and findings: After collecting information MS Excel and MS Access were used to analyze information, Graphical tools were used to get clear picture of the situation. Different problems and prospects were sorted and recommendations were made to improve the situation. A report is prepared and submitted to the authority for evaluation.

1.7. Report preview: In the following pages, first of all a brief discussion about the overall position and structer of this bank. Then the core functions, Products & Services, the bank is providing have been added. Immediate after, the brief discussion on operations and functions practicing by the NCC bank ltd appears. Then comes the limitations of banking sector in Bangladesh those we have find out through our study and last of all a contribution has made to find out the ways to achieve a sound banking industry in order to have a strong economic base. CHAPTER-2

2.1 Historical Background of the organization National Credit and Commerce bank Ltd, formerly the National Credit Limited was primarily established as an investment company in November 1985 to further the business activity and industrialization in Bangladesh to create new employment opportunities, by acting as a catalyst for the attraction of new entrepreneurs, capital, skills, and technology. It has been converted to schedule commercial bank in May 1993.


The initial authorized capital of the Bank was Tk. 75.00 crore and, paid–up capital Tk. 19.50, crore at the time of conversion which is now raised, to Tk. 39.00 crore paid–up. The sponsors of the new bank consisted of 26 (Twenty six) Members, who comprised the first Board of Directors. The share price of the bank is currently being quoted at both Dhaka and Chittagong Bourses at an average price of Tk. 165/- against per value of Tk. 100/-. NCC Bank based upon its commendable business performance for the year ended 2000, has meanwhile declared dividend at the rate of 20% (cash 105 plus Bonus 10%). The Bank which started with 16 branches in 1993, has at present 27 (twenty seven) branches and 03 (three) Booths located in prime commercial areas of Dhaka, Chittagong, Sylhet, Feni, Khulna, Jessore and Rangpur District Headquarters, out of which as many as 15 (fifteen) are Authorized Dealer Branches, fully equipped for dealing in direct foreign exchange businesses. NCC Bank is now positioned to best suit the financial needs of its customers and make them partners of progress. 2.2 Mission of the NCCBL: A bank is a financial institution which accepts depositors money for safe-keeping and contracts with the depositors to lend this money at interest to individuals who are in need of it’s use and who can give ample security that the loans will be paid. From the profits made from the lending at interest the banker agrees to pay the legitimate depositors a fixed sum of interest besides safe guarding the deposits. We shall be at the front position of national economic development by; •

Anticipating business solutions required by all our customers everywhere and innovatively supplying them beyond expectation

Setting industry benchmarks of world class standard in delivering customer value through our comprehensive product range, customer service and all our activities

Building an exciting team-based working environment that will attract, develop and retain employees of exceptional ability who help celebrate the success of our business, of our customers and of national development

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

Continuously improving productivity and profitability, and thereby enhancing shareholder value


2.3 Vision of the NCCBL To be in the front position of national development by providing all the customers inspirational strength, dependable support and the most comprehensive range of business solutions, through our team of professionals who work passionately to be outstanding in everything we do. 2.4 Values of the NCCBL •

To have a strong customer focus and build relationship based on integrity, superior service and manual benefit.

To work as a team to serve the best interests of the group

To work for business innovation and improvements.

To value and respect the people and make decision based on the merit.

To provide recognition and reward on performance.

To be responsible, trustworthy and law-abiding in every sphere.

2.5 Goals of the NCCBL To share a significant portion of the banking sectors by utilizing available manpower and state of the art technology for maximization of the shareholders wealth. 2.5.1 Long Term Goal: To maximize the wealth of the shareholders. 2.5.2 Short term Goal: To earn satisfactory rate of return on investment by providing wide range services. NCC Bank Limited is a progressive commercial bank in private sector in Bangladesh. It’s creates new for its clients. It gives customized services and maintains harmonious banker client relationship. It contributes towards formation of national capital, growth of savings and investment in trade, commerce and industrial sectors. It’s provides different types of commercial banking services to the customers of all strata in the society with in the stipulation laid down in the bank companies Act 1999, rules and regulations by the Bangladesh Bank from time to time.

2.6 Objective of the NCC Bank Limited •

To create new opportunities for its clients.

To give customized services and maintains harmonious banker-client relationship.

To contribute towards formation capital, growth of savings & investment in trade, commerce & industrial sectors.


Dividend forecast for next five years: As per Section 9 (1) (i) of the right issue rules, 1988 the Dividend forecast for next five years is as follows: Dec

2010 Jan – Dec

Cash dividend Per Share 12% Stock dividend Per Share 15%

2005 Jan – Dec 7% 8%

2006 Jan – Dec

2007 Jan – Dec

2008 Jan – Dec

2009 Jan –

8% 8%

8% 10%

10% 10%

10% 12%

2.7 Business Philosophy The Philosophy of NCCBL is to develop the bank into an unique banking institution. The sponsor perception is that NCCBL should be quite different from other privately owned and managed commercial bank operating in Bangladesh. The management has turned the bank onto new Business Philosophy. The business of the bank was concentrated on the 64 branches divided into zones. The management of NCCBL leaded by the Mr. Md. Nurul Amin has changed the business philosophy into business matrix. The three main Businesses are: •

Corporate

Consumer

Treasury

2.8 Human Resources: The driving force behind NCCBL has always its employees. The bank recognizes that professional development of its people is vital to establishing workers as a provider of quality service. In this regard, the bank has expanded its training facilities. The number of executives and officers as on 31 st December 2005 was 778 against 660 as on 31th December 2004 2.9 Main Share Holders Main shareholders comprise leading industrialist and business of the country. The board of directors consists of 26 members. Most of the directors are owners of large of business group having high net worth. 2.10 Main Customers Due to the predecessor company’s involvement investment financing sector of the country the bank inherited its top corporate customers. Moreover the bank is involved in import trade financing. Bulk importers of consumer durable, food grains industrial raw materials are its customers. The bank has financed in textile and apparels sectors. The bank has a trend of choosing customers from diversified groups. The bank has first class customers in the construction sectors involved in high rise building, heavy construction and roads and high way construction. 2.11 Net work of Branches:


NCC Bank Ltd. always considers client service the most vital factor to face ever-increasing competition and challenge in the Banking sector and as such places on it utmost importance. NCCBL has 58 (Fifty three) branches all over the country. Of them 21 have been already brought under On-line Banking facility and others are under completion of IT Network. The numbers of authorized dealer branches are 17. Moreover worldwide international correspondent’s network of the Bank has been continuously expanding covering the important countries in all the countries of the world. To cope with modern banking requirement ATM. SWIFT has already been introduced to speed up international transactions and passing of L/Cs at HEAD OFFICE. SWIFT will soon be introduced at all the A.D branches of the Bank. The name of the branches, their addresses are given in the appendix-1. 2.12 Divisions of NCCBL 2.12.1 Credit Division: The Credit Division is one of the most essential and valuable divisions of every commercial banks. The Credit Division of the bank deals with issues regarding corporate finance, general credit, special schemes such as House Building Loan (HBL) and Consumer Credit Scheme (CGS) etc. 2.12.2 Audit, Inspection, Recovery Distribution: Although the loan Administration Division is not at per with the Credit Division of the bank in terms of human resource, the performance of the bank relies heavily on this division. It is responsible for credit monitoring, documentation, distribution L.D.O's (Loans, Discounts and Overdrafts), preparing MSOCF (Monthly statement of outstanding credit facilities) and dealing with TR (Trust Receipt) etc.\ 2.12.3 Central Account Division: This division monitors several important functions of banking operations performed in different branches across the country. It deals with accounts, financial planning, budget and monitoring, preparation of returns and statement, reconciliation, maintenance of PF (provident Fund), gratuity and superannuating fund, local treasury etc. 2.12.4 Human Resource Division: The necessary of having an efficient Human Resource Division is one of the unique requirements for the success of any business organization. National Credit and Commerce Bank Limited unlike other commercial banks has a proficient Human Resource Division that deals with recruitment and manpower planning, performance evaluation, disciplinary actions, promotion, cadre charge, employee service rules and benefits, training and development. An Executive Vice President leads this division


with the assistance of a Vice President. 2.12.5 Establishment Division: Logistic and General Services Division is considered as the centre for providing necessary supporting services to other department as will as the employee. The function of this division includes providing utility services, maintenance of premises, and purchase of printing and general stationery, dispatch and transport pool. A Senior Vice President monitors this division. 2.12.6 International Division: The role of the International Division is very vital to providing various banking service to the clients. This division also maintains the mutual relationship with many corresponding banks on several issues such as agency and credit line arrangement, reconciliation, authorized signature control, TKC (Test key control), issuance of power of attorney, fund management and treasury operations (foreign) etc. 2.12.7 Information Technology Division : It is very significant to adapt with the ongoing information technology revaluation to provide faster services to the clients. The Information Technology Division supervises the overall computerization of the banking operations and networking, provides system support, deals with data processing and data entry, procures and maintain hardware, maintain and develop software required by the bank to facilitate and support the day to day operations. 2.12.8 Card Division: The core functions of the Card Division include dealing with issues regarding debit card, ATM card, and customer and vendors management. A first Vice President heads this division. 2.12.9 Marketing and Branch Division: This division is expected to deal with issues regarding marketing of asset and liability products, branch expansion etc. this division involves introducing new financial products. It also deals with renovation of new branches and location of new branches. 2.12.10 Training Division: The main objective of this division is to make the employees efficient. Usually this division offers training to their employee time to time. This is helpful to the employee to do their job efficiently and effectively.


2.12.11 Public Relation Division: The main objective of the public relation department is to make a bridge within the organization and outsiders. This division directly deals with general public. 2.13 ORGANIZATIONAL STRUCTURE: The Organizational Flow Chart of NCC BANK LTD:

Chairman Vice Chairman Board of Directors

Managing Director (MD) Additional Managing Director (AMD)

Executives

Senior Executive Vice President (SEVP)

Executive Vice President (EVP)

SVP (Board of Secretary)

SVP (HRD)

SVP (Credit Dev.)

SVP (Corporate Banking Structure)

VP (Small Loan Scheme & Advance) SAVP (International Division) Assistant Vice President (AVP) Senior Priencipal Officer (SPO)

Principal Officer Officer Probationary Officer Junior Officer Assistant Officer Trainee Officer

Non-Executives

SVP (Establishment)


2.14 Findings 2.14.1 Deposit of NCCBL As on December31, 2007 banks total deposit stood at Tk. 34901.77 million. Deposit growth over last 05 years appended in the chart below De posit (2003-2007) 40000 35000 30000 25000 20000

Depos it

15000 10000 5000 0 2003

2004

2005

2006

2007

Table Deposit of NCCBL 2003 15,153.90

2004 16,069.23

2005 21,478.22

2006 28,147.34

2007 34901.77

2.14.2. Loan and advance of NCCBL During the year total advance stood at tk32687.75 million deposit advance ratio was 94% in 2007 Loans & Advance (2003-2007) 35000 TK in Million

30000 25000 20000

Loans & Advance

15000 10000 5000 0 2003

2005

2007

Table Loan and advance condition


2003

2004

2005

2006

2007

13,089.94

13,274.08

16,296.30

17,646.80

28,779.21

2003 12,850.85

2004 15,211.15

2005 20,533.13

2006 24,678.36

2007 32,687.75

2.14.3

Investment of NCCBL Investment figure of the bank as on 31st December, 2007 stood at Tk.6,266.62 million as against Tk. 3,552.08 million of the previous year I.e. 2006 Increase being 76.42% .

Investment (2003-2007)

8,000.00 6266.62

6,000.00 4,000.00

4,385.23 3,204.01

3,010.45

3552.08

2,000.00 0.00 2003

2004

2005

2006

2007

2.14.4 Foreign exchange business of NCCBL During 2007, the bank Handled export & import business to the tune of tk. 9,577.92 million & Tk. 28,779.21 million respectively. Import (2003-2007)

30,000.00

28,779.21

25,000.00 20,000.00 15,000.00

16,296.30 13,089.94

13,274.08

2003

2004

17,646.80

10,000.00 5,000.00 0.00 2005

2006

2007


Export (2003-2007) 10,000.00

9577.92 8557 7776.3

8,000.00 6,000.00

5771.65 4,967.33

4,000.00 2,000.00 0.00

2003

2004

2005

2006

2007

Figure in Million 2003 4,967.33

2004 5,771.65

2005 7,776.30

2006 8,557.00

2007 9,577.92

2.14.5 Remittance Business of NCCBL The NCC bank has been trying to motivate expatriates to send their hard earned money to their family in Bangladesh. In 2006 remittance was 3,856.00 million and 2007 Increase 7,443.50 million. Remittance (2003-2007)

8,000.00

7,443.50

6,000.00 3,856

4,000.00 2,000.00

1,961.60

2,492.30

1,162.10

0.00 2003

2004

2005

2006

2007

Figure in Million 2003 1,162.10

2004 1,961.60

2005 2,492.30

2006 3,856.00

2007 7,443.50


2.14.6 Operational Profit of NCCBL Operational Profit (2003-2007)

2000

1780.25

1500

1267.57 1018.34

1000

720.49

624.94 500 0 2003

2004

2005

2006

2007

2.14.7 Present Situation: The following table shows the balance sheet as at December31, 2007

PROPERTY & ASSETS Cash

December31, 2007 1,288,728,759

Cash in Hand (including foreign currency) Balance with Bangladesh Bank & Sonali bank (including

467,251,137 1,825,530,019

Foreign currency) Balance with Other Bank and Other Financial Institution

455,514,787

In Bangladesh

348,402,749

Out Bangladesh

107,112,038

Money at Call and Short Notice Investments Government Others Loans & Advances

560,000,000 6,266,615,209 6,104,515,246 162,099,963 32,687,753,165

Loans, Cash Credit, Over Draft etc.

30,616,557,011

Bills Discounted & Purchased

2,071,196,154

Premises & Fixed Assets

521,995,601

(Less Depreciation) Other Assets

298,194,075

Total Assets

42,522,853,993


CHAPTER-3


3.1 General banking department General section is considered as the direct customer service center. It is the starting point of all the banking operation. It opens new accounts, remits funds, honor cheques, takes deposits, issues bank draft and pay order etc. General banking is also known as retail banking. Following are the major section in General banking. •

Account opening section.

Remittance section.

FDR section.

Cash section.

Clearing & Bills Section

Dispatch Section

3.2 Account opening section According to the law and practice the banker – customer relation arises only from contract between the two. And opening of account is the contract that establishes the relationship between a banker and a customer. So this section plays a very important role in attracting customer and therefore should be handled with extra care. Individual or firm intended to open account in the branch applies for opening account in a prescribed form. The form is duly filled in by the applicant himself. The applicant is also required to fill the specimen signature sheet. Applicant must submit required documents with application form. Different kinds of document are needed for different kinds of account. For individual only introduction by another account holder of the bank is sufficient. But for firm and others, relevant documents must be submitted. Then the authorized officer scrutinizes the introduction and examines the documents submitted. If everything appears satisfactory then he opens account. Types of Account Following types of account are generally opened by the NCC Bank: •

Savings Deposits Account.

Current Account.

Short Term Deposit.

Fixed Deposit (FDR/SSS/SDS).

Money Double Program.

Foreign Currency Account (Resident/non-resident).

Premium/Instant Earning Term Deposit.


Others.

3.2.1 Savings Deposits Account. NCC bank ltd. Offers interest on every day’s balance in savings account @ 06.00%. Requirements for opening Savings Deposits Account •

Photocopy of valid passport or personal ID issued by ward commissioner/union perished chairmen.

2 copies of account holder’s recent photo duly attested by the introducer.

1 copy of nominee’s photo duly attested account holder.

Introducer who have account in NCCBL, Uttara branch.

Nominee form signed by nominee and duly attested by account holder.

Minimum cash deposit Tk. 1,000 at the time of opening account.

To open a saving account customer will have to fill up an application from supplied by the bank. The form contains following particulars: a. Name of the applicant. b. Name of father/husband of the applicant. c. Profession of the applicant. d. Two Photographs. e. Present address. f.

Permanent Address.

g. Introduction by any account holder or by a person acceptable to the bank. h. Verification by the concerned officer of the branch. i.

Signature of the applicant.

After filling the form applicant will have to sign thrice on the specimen signature card. Most important thing is that these signatures must match with the signature on application form. These documents are then checked by the concerned officer and sent to the manager of the branch. Manager rechecks all the information and talk with the applicant to know more about him/her. When he is fully satisfied he put his signature on the form and verifies the signature. If any special instructions are required manager write it down at the end of the specimen signature card. The form and the specimen signature card then sent to the officer who put an account number on the form and on the card. After completion of the above mentioned formalities a new account is opened with the bank for the new customer. Account can be open in joint name by to or more parties but who will operate the account it should be mentioned in the application. To obtain a cheque book the new account holder must deposit at least Tk. 1000/= in the account. This amount may vary depending on nature of the relationship of the person with the bank.


3.2.2 Current Account NCC bank ltd. facilitates customers with different types of current account. There are current accounts for individuals, joint, proprietorship firms, partnership firms, limited company, educational institution, club, society, association etc. Account opening forms for these categories are different. Some terms and documents may differ but the overall process of account opening is similar to that of the saving account. Here I like to state what kinds of information to be furnished in the form and which documents customer should provide. Requirement of CD account may vary upon individual, legal status of company and clubs, societies and associates. 3.2.2a. Individual CD A/C •

2 copies passport photos of the A/C holder.

Valid passport must be renewed/commissioner certificate of the A/C holder.

Introducer.

Photos of A/C holder must be attested by the introducer

Transaction declaration and KYC form should be fully filled up.

Minimum amount of taka 5000 is required to open CD A/C.

3.2.2.b. Joint CD A/C •

2 copies passport photos of the A/C holder.

Valid passport must be renewed/commissioner certificate of the A/C holder.

Introducer.

Photos of A/C holder must be attested by the introducer.

Transaction declaration and KYC form should be fully filled up.

Minimum amount of taka 5000 is required to open CD A/C.

3.2.2.c. Sole Proprietorship •

2 copies passport photos of the A/C holder.

Valid passport must be renewed/commissioner certificate of the A/C holder.

Introducer.

Photos of A/C holder must be attested by the introducer.

Transaction declaration and KYC form should be fully filled up.

Minimum amount of taka 5000 is required to open CD A/C.


Valid Trade license.

Valid Seal.

3.2.2.d. Partnership •

If two members formed partnership (2+2)=4, 4 copies passport photos are required.

Valid passport must be renewed/commissioner certificate of the A/C holder.

Introducer.

Photos of A/C holder must be attested by the introducer

Resolution, memorandum and article of association of particular company man-dad who is going to operate the A/C Tk 1000, registration form registry office.

Certificate of incorporation and partnership Deed.

Transaction declaration and KYC form should be fully filled up.

Minimum amount of taka 5000 is required to open CD A/C.

Valid Trade license.

Valid Seal.

TIN Tax Identification Number.

3.2.2.e. Limited Company •

2 copies passport size photos of account.

Photocopy of valid passport.

Photocopy of Valid Trade license.

Certified copy of certificate of incorporation.

Photocopy of TIN certificate.

Certificate of memorandum and article of association.

Certificate of commencement of business (if public limited company)

Seal of account operating directors.

Introducer with CD account holder.

Minutes of board meeting with clear instruction of operating the account of company’s pad.

Minimum deposit of taka 5000/=

3.2.3 Short Term Deposit Accounts (STD) Short term deposit or STD account opening procedure is similar to that of the saving account. The rate of interest on this type of account is 06.00% per annum. The deposits held in STD A/C are payable on short notice. Requirements for opening STD A/C


Account opening agreement form.

Specimen signature card.

Approval of authority.

3.3 Remittance Section Customers of a bank need to transfer his fund or money to anywhere within the country they can do it through the remittance section of the bank. Remittance section of general banking deals with only local remittances. During my internship I have observed branch deals with 3 types of local remittances. These are: •

Demand Draft (DD)

Pay Order (PO)

Telegraphic Transfer (TT)

3.3.1 draft Demand This is an order to pay money, drawn by one office of a bank upon another office of the same bank for a sum of money in any place, which is outside of the clearing house area of issuing branch. It is a negotiable instrument. It can be crossed or not. For payment of DD bank checks the ‘Test Code’ first mentioned on the draft. If test code agrees, then the bank makes payment. The issuing bank sends an advice about the DD to the paying branch, for further confirmation. Demand Draft is an instrument containing an order by the issuing branch upon another branch known as drawee branch, to pay a certain sum of money to the payee or to his/her order on demand. 3.3.1.a.Demand draft issue •

Customer is supplied width DD form.

Customer fill up the form which includes the name of the drawer, name of the payee, amount of money to be sent, exchange, name of the drawee branch, signature and address of the drawer.

The customer may pay in cash or by transferring the amount from his/her account (if any).

After the money is paid and the form is sealed and signed accordingly it is given to the DD issuing desk.

Upon receiving the form concerned officer issue a DD on a particular block.

DD block has two parts, one for bank and another for customer.


Bank’s part contains issuing date, drawer’s name, payee’s name, sum of the money and name of the drawee branch. Customer’s part contains issuing date, name of the payee, sum of the money and name of the drawee branch.

After furnishing all the required information entry of the DD is given in the DD issue register and at same time bank issue a DD confirmation slip addressing the drawee branch. This confirmation slip is entered into the DD advice issue register and a number is put on the confirmation slip from the same register. Later on the bank mails this slip to the drawee branch.

The number of DD is put on the DD form. Next the customer signs on the back of the DD and is supplied with his/her part of DD. 3.3.1.b.Demand Draft Payment When a DD is brought for payment, the branch check out the following matters: 1. Whether the DD is drawn on them 2. Whether it is crossed or not 3. Whether it is properly signed by authorized officers of the issuing branch 4. The branch then checks out whether the confirmation slip has arrived or not 5. If the confirmation has not arrived, the DD is given entry in the Ex-advice register. 3.3.2.Pay Order (PO) It is like cash but not exactly cash. It is an instrument which is issued from a certain branch of a bank and must be enchased from the same branch. Unlike cheque, there is no possibility of dishonoring pay order because before issuing pay order bank takes out money of the pay order in advance. It is not a negotiable instrument because it can not be endorsed or crossed. Payment order or PO gives payee the right to claim payment from the issuing branch. In other words it is an undertaking by the issuing bank to pay a certain sum of money to the payee or to order on demand. 3.3.2.a. Pay order (Issue) Following procedure is maintained for the issuance of PO: a. Customer is supplied with PO form. b. After filling the form the customer pays the money in cash or by cheque. c. The concerned officer then issues PO on its specific block. This block has three parts, one for bank and other two for the customer. A/C Payee crossing is sealed on all pay orders issued by the bank. d. The officer then writes down the number of the PO block on the PO form. e. Two authorized officers sign the block.


f.

At the end customer is provided with the two parts of the block after signing on the back of the banks part.

3.3.2.b Pay Order (Payment) As the PO issued by the bank is crossed one it is not paid over the counter. On the contrary the amount is transferred to the payees’ account. To transfer the amount the payee must duly stamp the PO. 3.3.3 Telegraphic Transfer (TT) In case of TT the issuing branch sends a telegraphic message to another branch to pay a certain some of money to a named payee account. Test code is furnished on the TT message for the protection of it. Generally for such kind of transfer, payee should have account with the paying bank; otherwise it is very difficult for the paying bank to recognize the exact payee. At customer’s request branch transfers fund to another branch through telex and it is known as the TT, in short. TT facility is available only in that branch having telex facility. The procedure of issuing and paying TTS are stated below: 3.3.3.a. TT (Issue) a. Customer fills up the TT form and pays the amount along with commission in cash or by cheque. b. The respected officer issues a cost memo after receiving the TT form with payment seal, then signs it and at last give it to the customer. c. Next a TT confirmation slip is issued and its entry is given in the TT issues register. d. A test number is also put on the face of the slip. Two authorized officer signs this slip. e. Telex operator then transfers the message to the drawee branch mentioning the amount, name of the payee, and name of the issuing branch, date and test number. f.

The confirmation slip is send by post.

3.3.3.b. TT (Payment) a. When a TT arrives through telex it is sent to the respected officer for the verification of the test number. If the test number is OK, the officer writes down ‘Test Agreed’ on it and signs it. Otherwise a message is sent back to the issuing branch for the correction of the test number. b. After agreeing the test the branch issues a debit voucher and accredit voucher – debiting the issuing branch and crediting the payees account. Branch also issues a credit advice slip addressing the payee informing him/her about the arrival of the money. c. Later, when the confirmation slip arrives the contra date, on which the payment was made, is put on it and the officer sign it.


3.4 Fixed Deposit Receipt (FDR) Section Fixed Deposit Receipt Account deposit is taken for some maturity period: Requirements for opening FDR A/C •

Account agreement form.

Amount and period of deposit must be mentioned clearly.

Specimen signature card.

Approval of the authority.

Photograph.

Fixed deposit is the amount deposited by the customer for a fixed period of time. In NCC bank ltd this time period is one month, three months, six months and one year etc. The duration and the rate of interest on different time period FDR is shown in the table below: Duration 1 month 3 months 6 months 12 months Table- Duration and Rate of interest

Rate of Interest 08.00% 11.50% 11.75% 12.00%

3.4.1Opening procedure of FDR Account •

Bank provides the interested customer a fixed deposit form.

Customer fills the form, which contains name of the customer, amount of money, duration, rate of interest etc.

After filling the form customer pay the money in cash or by cheque.

After receiving the form from the customer the respected office look for the cash seal or transfer seal. If any of these are present and the form is properly singed the officer provides a specimen signature card to the customer.

Customer signs thrice on the specimen signature card along with his/her full name.

At the same time respected officer issue a fixed deposit receipt on the specific FDR block.

This block has two parts, one for customer and another for the bank, containing same information on both parts. These are: •

Name of the customer.

Amount of money deposited.

Date on which the money is deposited.


Due date – on which the FDR will be matured.

Duration for which FDR has been made.

Rate of interest to be paid.

When all required information is written on the block it is signed by at least officers and the manager verifies the specimen signature and put his sign on it. Before taking his/her part of the FDR block the customer must sign on the back of the part to be kept in the bank and the signature must match the signatures on the specimen signature card. An FDR is renewed automatically for three months if the customer does not come to cash if after the maturity period. It can also be renewed upon the direction of the customer. 3.5 Cash Section Cash is the most liquid asset and it should be dealt very carefully. So this department is really handed with intensive care. This department starts the day with cash in vault. All cash receipts and payments are made through this department. Cash section is a very sensitive organ of the branch and handle with extra care. I was not authorized to deal in this section because of its sensitivity. But I was fortunate enough to know the procedures of this section. Operation of this section begins at the start of the banking hour. Cash officer beings his/her transaction with taking money from the vault, known as the opening cash balance. Vault is kept in a much secured room. Keys to the room are kept under control of cash officer and branch in charge. The amount of opening cash balance is entered into a register. After whole day’s transaction, the surplus money remains in the cash counter is put back in the vault and known as the closing balance. Money is received and paid in this section. 3.5.1 Cash Receipt Depositors deposit money in their account through this section by deposit slip. This section also receives cash from customer for opening pay order, bank draft, telex transfer etc. This is bank’s all cash receipts are taken by this department. •

At first depositor fill up the deposit in slip. There are two types of deposit in slip in this branch. One for saving account and another for current account.

After filling the required deposit in slip, depositor deposits the money.

Officers at the cash counter receives the money, count it, enter the amount of money in the scroll register kept at the counter, seal the deposit in slip and sign on it with date.

Then this slip is passed to another officer who enters the scroll number given by the cash counter in his/her register along with the amount of the money, sign the slip and keep the bank’s part of the slip. Other part is given to the depositor.


In this branch, two different officers maintain two different scroll books for entering such entries. But cash counter maintains one scroll book.

All deposits of saving account are maintained by one officer and other accounts by another officer.

All the end of the day entries of both of these registers are cross checked with the register kept at the cash counter to see whether the transactions are correct or not.

3.5.2 Cash Payment This section accepts the cheques from the depositors for payment in cash. After receiving cheque, first the cheque is scrutinized whether it is a valid one. Cash officer judges the amount both in figure and the word, date of the cheque and signature etc. Then finally authorized officer compares the signature on the cheque with the specimen signature, and check whether the balance in the account is sufficient. If a very thing is satisfactory, then payment is made against the cheque. This department is also make payment against various debit vouchers for various miscellaneous expenses of the branch. •

When a person comes to the bank to cash a cheque, s/he first gives it to the computer desk to know the position of the check and posting of the cheque. If the account has sufficient fund the computer in charge will post it into the computer, will sign it and seal it.

This cheque is then sent to the concerned officer. There are two officers who verify the cheques – one for savings and similar types of account and another for current and similar types of account.

After receiving the cheque respected officer first checks it very carefully for any kind of fraudulent activity. S/he also checks the date of the cheque, amount in word, amount in figure and signature of the drawer.

If the instrument is free of all kind of error the respected officer will ask the bearer to sign on the back of it.

S/he will then put his/her initial beside the bearers’ signature. S/he will also sign it on its fact, will write down the amount by red pen and will put on a scroll number from his/her scroll register.

Then the cheque will be sent to the cash counter. At the cash counter bearer will be asked again to sign on the back of the instrument.

The cash officer will then enter the scroll number in his/her register and will pay the money to the bearer.

At the end of the day these scroll numbers of the registers will be compared to ensure the correctness of the entries.


3.6 Clearing & Bills Section NCC bank receives different types of instruments, such as cheque, PO, DD etc from its customers for collection. It also pays on behalf of its customers for those instruments that come to it through clearing house. When instruments of NCC are sent for collection or received for payment through clearing house it is called Inter Bank Clearance or IBC. These are: When the cheques are presented to a bank by the other banks for collection of fund then a receiving officer, receiver check by a deposit slips. 3.6.1 Inward Clearing When instruments are sent to the bank vie clearinghouse, it entered into the clearing in register. The officer checks the instruments thoroughly before it is sent to the computer section for posting. If any kind of error is found in any instrument it is dishonored and sent back with appropriate reason for doing so. Instruments are also dishonored for insufficiency of fund. 3.6.2 Outward Clearing After filling the deposit in slip bearer of the instrument deposits the instrument to the respected officer. Upon receiving the instrument the respected officer checks the essential features of the instrument and whether the deposit in slip is filled accordingly or not. Then (s) he crosses the instrument with a sea containing banks and branch’s name, signs the deposit in slip and provides the customer with counter foil of the slip. It is then given entry in the clearing out register mentioning the name of the bank and branch of it, amount of money in deposit in slip, amount of money in the instrument, number of the instrument and date of then it. In case IBC only name of the bank is omitted. Then the officer separates the instrument from the deposit in slip. Deposit in slip is kept in the bank and the instrument is sent for clearing. 3.7 Dispatch Section Dispatch section plays a great role in banking business. Because all documents coming in the branch or going out of the branch must pass this section. This section maintains all records of the documents send to other branches or banks and makes best effort to send these documents safely and correctly. This section also receives documents come through different medium, such as postal service, courier service, via messenger etc. After receiving the document the officer inters them in a register kept in his/her desk and distribute them to the appropriate sections. When papers or documents are sent for official purpose the officer


enters them in another register, write down the address on the envelope and send them through proper channel. Dispatch section of local office branch performs another duty. It enters the transfer instruments in the scroll book and then sends those to the computer section. CHAPTER-4

4.1 Types of Loan and Advance NCCBL provide the following loan and advance 1. Small business loan scheme. 2. House renovation loan scheme. 3. Personal loan scheme. 4. Staff Car loan. 5. Loan against provident fund. 6. Staff house building loan 7. Secured over draft (Financial obligation.) 8. Cash credit (Hypothecation) 9. Festival Small business loan. 10. House building loan. 11. Loan against trust receipt. 12. Agricultural loan.

4.1.1Small business loan scheme •

Target group:

Business/Cottage industries.

Interest:

17%

Amount:

1-5 lac.

Maturity period: 1-5 years.


Essential Document: •

Parties Application.

Trade license.

Income statement(Business)

Bank proposal.

Security: land, property.

2 Guarantor

Calculation of monthly installment under SBLS @17.00% including one month grace period: Amount

One year

Two years

loan One lac 9,250 5,014 Two lac 18,499 10,029 Three lac 27,749 15,043 Four lac 36,999 20,057 Five lac 46,248 25,071 Table: Monthly installment of SBLS

Three years

Four years

Five years

3,616 7,232 10,847 14,463 18,079

2,926 5,853 8,779 11,706 14,632

2,520 5,041 7,561 10,082 12,602

4.1.2 House Renovation/Reconstruction Loan scheme •

Target group:

Salary person.

Interest:

17%

Amount:

1-5 lac.

Maturity period: 1-10 years. Essential Document: •

Parties Application.

Applicant Salary Certificate.

All the papers of security.

Bank proposal.

Security:

2 Guarantor

land, property


Calculation of monthly installment under HRRLS @17.00% including three month grace period: Amount

One

Two

Three

Four

Five

Six

Seven

Eight

Nine

Ten

loan One lac

year 9,508

years 5,154

years 3,717

years 3,008

years 2,591

years 2,319

years 2,130

years 1,99

years 1,89

years 1,812

Two lac

19,016

10,309

7,434

6,016

5,182

4,638

4,261

3 3,98

1 3,78

3,624

Three

28,524

15,463

11,150

9,024

7,773

6,957

6,391

7 5,98

1 5,67

5,436

8,522

0 7,97

2 7,56

7,247

10,652

4 9,96

3 9453

9,059

lac Four lac Five lac

38,032 47,540

20,617 25,772

14,867 18,584

12,033 15,041

10,364 12,945

9,277 11,596

7 Table: Monthly installment of HRRLS 4.1.3

Personal loan scheme.

NCC bank giving loan for purchasing Television, Refrigerator, VCR, Computer, washing machine, Furniture and other item. •

Target group:

Salary person.

Interest:

17%

Amount:

20,000-1,00,0000 .

Maturity period: 6 month to three years. Essential Document: •

Parties Application.

Applicant Salary Certificate.

Bank proposal.

2 Guarantor

Calculation of monthly installment under PLS @17% Amount

of Six months

loan 20,000 25,000 30,000

3,501 4,376 5,251

One year

One

and Two years

1,824 2,280 2,736

half years 1267 1583 1900

989 1,236 1,483

Two

and Three

half years 823 1029 1234

years 713 891 1,070


35,000 6,126 3,192 40,000 7,001 3,648 50,000 8,751 4,560 60,000 10,502 5,472 70,000 12,252 6,384 75,000 13,127 6,840 80,000 14,002 7,296 90,000 15,752 8,208 1,00,000 17,503 9,120 Table Monthly installment of PLS

2217 2533 3167 3800 4433 4750 5066 5700 6333

4.1.4 Staff car loan •

Target group:

Interest:

5.00%

Amount:

300,000-12,00,0000 .

Maturity period: No limit.

Staff of NCC bank

Essential Document: •

Staff Application.

Applicant Salary Certificate.

4.1.5 Loan against provident Fund •

Target group:

Staff of NCC bank

Interest:

6.00%

Amount:

80% of PF.

Maturity period: No limit. Essential Document: •

Staff Application.

Provident fund amount

Applicant Salary Certificate

1,730 1,978 2,472 2,967 3,461 3,708 3,955 4,450 4,944

1440 1646 2057 2469 2880 3086 3292 3703 4115

1,248 1,426 1,783 2,139 1,486 2,674 2,852 3,209 3,565


4.1.6 Staff House building Loan •

Target group:

Staff of NCC bank

Interest:

7.00%

Amount:

3.00-16.00 lac.

Maturity period: 12 years. Essential Document: •

Staff Application

Applicant Salary Certificate

Two Guarantor

Deed

Two Guarantor

4.1.7 Cash Credit (Hypothecation) •

Target group:

Manufacture, Service, Traders.

Interest:

16%

Amount:

Depends on applicant demand.

Maturity period: 1 years. Essential Document: •

Parties Application.

Trade license.

Income statement(Business)

Bank proposal.

Security: land, property

TIN Certificate.

4.1.8 Secured over draft (financial obligation) •

Target group:

FDR, SSS holder of NCC bank

Interest:

above of 3% of Security


Amount:

Maturity period: Maturity of Security.

80% of Security.

Essential Document: •

FDR or SSS Document.

Party Application.

4.1.9 Festival small business Loan NCC bank giving loan small business person for following Festival 1.

Eid-Ul-Azha.

2.

Eid-Ul-Fitre.

3.

Durga-Puja.

4.

Buddha-Purnima.

5.

Boro-Din.

Target group:

Retailer, whole seller.

Interest:

17%

Amount:

Maximum 5 lac.

Maturity period: Short time. Essential Document: •

Parties Application.

Trade license.

Bank proposal.

Security: land, property

Two Guarantors.

4.1.10 Loan against House building loan (SBL) NCC bank giving SBL loan two group a. Resident


b. Commercial 4.1.10. a. Resident NCC bank giving SBL loan to Residential purpose] •

Target group: Salary person.

Interest:

16%

Amount:

5.00-50.00 lac

Maturity period: 3-15 years. Essential Document: •

Parties Application.

Salary certificate of applicant.

Bank proposal.

Security: land, property

Two Guarantors.

4.1.10. b. Commercial NCC bank giving SBL loan to Residential purpose] •

Target group:

Housing builders.

Interest:

16%

Amount:

Applicant Demand

Maturity period: 3-15 years.

Essential Document: •

Parties Application.

Income statement of Builders.

Bank proposal.

Security: land, property

Legal Document of proposed property which will be mortgage.


4.1.11. Loan against trust receipt (LTR) By executing the standard letter of trust (or trust receipt) the customer acknowledges receipt of the documents of title to the goods, as the case may be and agrees to hold them and the relative goods, when delivery thereof is taken by him, in trust as agents for the bank until the goods are sold or used for the express purpose for which they were released to him. The customer also undertakes to keep the transaction separate and assign and deposit with the bank the sale proceeds immediately realization but in any case not later than time period stipulated in the letter. Further, the customer undertakes to keep the goods insured and in the event the goods or may part thereof cannot be used by him for the declared purpose or on demand being made by the bank for the return of the documents / goods, he promised to restore the goods or documents to the bank's custody. The trust receipt, thus, enables the importer customer to take re-delivery of the documents pledged to the pledge bank. •

Target group:

Importer.

Interest:

16%

Amount:

Applicant Demand

Maturity period: 30 to 120 days.

Essential Document: •

Parties Application.

Trade license

Bank statement.

Bank proposal.

TIN certificate.

Invoice certificate

4.1.15 Agricultural Loan •

Target group:

Farmer

Interest:

11%

Amount:

Applicant Demand

Maturity period: 1-5 years.


4.2 Procedure of Sanction Loan 4.2.1 First information Sheet filled up Filled up the information Sheet, provide by the bank which include the following point •

Address

Telephone no

Education qualification

Designation

Guarantor name

Security

4.2.2 CIB report & other confidential report CIB report is known as known about of the borrower, he or she has taken any loan facility from bank or financial institution. It is helpful judge the borrower for approved the loan. It can know through: •

Confidential report from other bank.

Credit information bureau from Bangladesh bank.

Personal investigation

4.2.3 Credit proposal In this stage banker fill up the information about applicant, it contains following particulars •

Date

Proposal authority

Borrower name

C/D account number

Security

Two borrowers name with photo.

Business type

Salary amount or monthly income the business


4.2.4 Head office approval Branch officer send the loan proposal to the Head office credit division. If it is viable one, Ho sends it to the Credit Committee for approval and take decision whether approve the loan or not. If any query about the loan proposal head office take help from the branch credit officer 4.2.5 Sanction Letter After getting approval letter of Ho the branch issue the sanction letter to the borrower. A sanction letter contain following parts •

Name the borrower

Purpose

Rate of interest

Margin

Period of loan

Loan account number

Security

Date of applicant proposal

Other term and condition

4.2.6 Documentation If the borrower accepts the sanction letter, Documetation procedures are start docuamentation is a written statement of fact evidence certain transaction covering legal aspect duly signed by the authorized persons having the legal status. Document should obtain •

Promissory Note.

Certificate copy of memorandum & articles of association.

Letter of arrangement.

Letter of disbursement.

Letter of continuity.

Counter guarantee.

Letter of guarantee.


Document relating mortgage.

4.2.7 Disbursement After verify the all the documents the bank disburse the loan to the borrower. A repayment schedule prepared by the bank and given to the borrower. 4.2.8 Follow up After disburse the loan the bank follows the borrower to following manner •

Constant supervision

Break even analysis, reschedule of repayment

Continue contact to borrower if failure repayment of installment.

4.2.9 Recovery This measures the ability of a financial system to take the steps necessary to recover loans, both in the ordinary course of business and when a loan has gone into default. There are various opportunities to ensure that the ultimate recovery of a loan will be successful. Those opportunities exist in the selection process, disbursement procedures, and proper monitoring of the business to which the loan was made throughout the life of the loan. Financial system can differ on these various points, which will ultimately decide the effectiveness of a particular system in recovering the loan. While measuring comparative productivity of the two financing mechanisms in loan recovery, the question of cost effectiveness should be duly considered. CHAPTER-5

5.1 DEFINITION OF L/C


On behalf of the importer if the Bank undertakes to make payment to the foreign bank is known as documentary credit or letter of credit. A letter of credit is an instrument issued by a bank to a customer placing at the letters disposal such agreed sums in foreign currency as stipulated. An importer is a country requests his bank to open a credit in foreign currency in favour of his exporter at a bank in the letters country. The letter of credit is issued against payment of amount by the importer or against satisfactory security. The L/C authorizes the exporter to draw a draft under is terms and sell to a specified bank in his country. He has to hand over to the bank, will the Bill of exchange, shipping documents and such other papers as may be agree upon between the exporter and the importer. The exporter is assured of his payment because of the credit while the importer is protected because documents in respect of export of goods have to be delivered by the exporter to the paying bank before the payment is made. 5.2 Form of letter of credit A letter of credit (L/C) may be two forms. These as below: i) Revocable letter of credit. ii) Irrevocable letter of credit. 5.2.1 Revocable L/C : If any letter of credit can be amendment or change of any clause or canceled by consent of the exporter and importer is known as revocable letter of credit. A revocable letter of credit can be amended or canceled by the issuing bank at any time without prior notice to the beneficiary. It does not constitute a legally binding undertaking by the bank to make payment. Revocation is possible only until the documents have been honored by the issuing bank or its correspondent. Thus a revocable credit does not usually provide adequate security for the beneficiary. 5.2.2 Irrevocable L/C : If any letter of credit can not be changed or amendment without the consent of the importer and exporter is known as irrevocable letter of credit. Irrevocable credit constitutions a firm undertaking by the issuing bank to make payment. It therefore, gives the beneficiary a high degree of assurance that he will paid to his goods or services provide he complies with terms of the credit. 5.3 TYPES OF LETTER OF CREDIT


Letter of Credit is classified into various types according to the method of settlement employed. All credits must clearly indicate in major categories. i) Sight payment credit.

ii) Deferred payment credit. iii) Acceptance credit. iv) Negotiation credit. v) Red close credit. vi) Revolving credit. vii) Standby credit. viii) Transferable credit. 5.3 Documents required for Importing: An importer is required to submit the following documents in order to get a license to import through Foreign Exchange Branch of NCCBL Bank•

A bank account with the branch

Import Registration Certificate (IRC)

Tax Payer’s Identification Number (TIN)

Performa Invoice or Indent

Membership Certificate from a recognized Chamber of Commerce & Industry or Town Association or registered Trade Association

Letter of Credit Authorization (LCA) Form properly filled in duplicate signed by the importer

L/C Application duly signed by the importer One set of IMP Form

Insurance Cover Note with money receipt

V A T Registration Certificate

In case of Public Sector, attested photocopy of allocation letter issued by the allocation authority, Administrative Ministry or Division specifying the source, amount, purpose, validity and other terms and conditions against the imports;

Any such documents as may be required as per instruction issued/to be issued by the Chief


Controller of Imports & Exports (CCI&E) from time to time. On receipt of the LCA Form and the other documents, the branch officials carefully scrutinize the documents and lodge the same in their respective registration books and duly verify the signature of the importer put on the LCA Form. To import, a person should be competent to be an 'importer'. According to the "Import & Export Control Act, 1950", the office of the Chief Controller of Imports & Exports (CCI&E) provides the registration (IRC) to the importer. After obtaining the IRC, the person has to secure a "Letter of Credit Authorization" (LCA) registration from the Registration Unit of Bangladesh Bank. After getting the LCA registration, a person becomes a qualified importer. He is the person who requests or instructs the opening bank to open an L/C is also called the "Opener" or "Applicant" of the credit. 5.4 Procedure involved in L/C Opening: There are few steps involved in L/C opening process that are as follows: 5.4.1 Application: At first, the L/C opener is required to fill the prescribed application form for requesting °to open a L/C for him. L/C Application Form is a sort of an agreement between customer and bank based on which letter of credit is opened. Foreign Exchange Branch provides a printed form for opening of L/C to the importer. A special adhesive stamp of value of Tk.150 is affixed on the form in accordance with Stamp Act in force. While opening, the stamp is cancelled. Usually the importer expresses his decision to open the L/C quoting the amount of margin in percentage. Usually the importer gives the following information•

Full name and address of the importer;

Date and place of expiry of the credit;

The mode of the transmission of document (mail/courier/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 board);

Brief description of the goods to be imported;

Availability of the credit by sight payment acceptance Inegotiation! deferred payment;

The time bar within which the document should be presented;


Sales terms (FOB/C &F/CIF):

Account number;

L/C amount;

Shipping mark;

IRC Number;

LCA Number;

Insurance cover note;

Country of origin.

5.4.2 Presentation of the Documents: As soon as the seller exporter receives the L/C and is satisfied that he can deliver the goods mentioning in the L/C he is going to make shipment of the required goods to the buyer and after that, he presents the documents evidencing dispatching of goods to the negotiating bank on or before the stipulated expiry date of the credit. 5.4.3 Examination of Documents: The documents generally include the following and the basic points of Checking by NCCBL is: •

Letter of Credit:  The documents should have been negotiated or presented before expiry of the credit.  The amount which drawn should not exceed the amount available under the credit.

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 LlC is opened.  The description of merchandise and the unit price correspond with that given in the Lie.  The import license or IRC number of the importer, indenter's registration number and Letter of Credit Authorization number are incorporated in the Invoice.

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 amount mentioned in the invoice.


The amount drawn does hot 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.

The Bill of Lading: •

First, 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 BIL should include the description of the merchandise according to invoice.

The port of shipment and destination, date of shipment and the name of consignee are in agreement with those mentioned in the L/C.

The shipping company or their authorized agents properly sign the BIL.

The date on the BIL is not 'stale' which means it is not dated in unreasonably long time prior to negotiation.

The Insurance Cover Note: •

Is the insurance documents specified in the credit submitted?

Does the insurance cover the risks mentioned in the credit in the currency of the credit and for the prescribed amount but not less than CIF value?

Is the insurance documents dated not later than the shipping documents?

Does the insurance policy/Certificate agree with other documents as regards description, weight & marks of the goods, mode of transport & the route?

Does the insurance company attached and as far as necessary, endorsed issue all the copies?

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 amount mentioned in the invoice.

The amount drawn does hot 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.


The Bill of Lading: •

First, 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 BIL should include the description of the merchandise according to invoice.

The port of shipment and destination, date of shipment and the name of consignee are in agreement with those mentioned in the L/C.

The shipping company or their authorized agents properly sign the BIL.

The date on the BIL is not 'stale' which means it is not dated in unreasonably long time prior to negotiation.

The Insurance Cover Note: •

Is the insurance documents specified in the credit submitted?

Does the insurance cover the risks mentioned in the credit in the currency of the credit and for the prescribed amount but not less than CIF value?

Is the insurance documents dated not later than the shipping documents?

Does the insurance policy/Certificate agree with other documents as regards description, weight & marks of the goods, mode of transport & the route?

Does the insurance company attached and as far as necessary, endorsed issue all the copies?

5.4.4 Securitization: After receiving the application form with other required documents submitted by the opener, they are to be thoroughly scrutinized. The NCCBL Official scrutinizes the application in the Following manner according NCCBL's L/C manual: •

The terms and conditions of the L/C must be complied with UCPDC 500 and

Exchange Control & Import Trade Regulation.

Eligibility of the goods to import

The L/C must not be opened in favor of the importer.

Radioactivity report in case of food item.


Survey report or certificate in case of old machinery

If all the documents along with the application are in order, the financial position and credit worthiness of the importer, market demand of the good will be assessed. Margin for letter of credit will also be determined. The rate of margin depends on the financial condition of the banker, importers previous performance, status of relationship with the importer, nature of goods etc. This margin is to be retained from the importer either in cash or in debiting the importer current account with the bank. The importer is also required to pay the other concerning charge like foreign corresponding charge, telex charge if any, handling charge, and commission etc. 5.4.5 Adding Confirmation: The confirming bank does adding confirmation. Confirming bank is a bank, which adds its confirmation to the credit, and it is done at the request of the issuing bank. The confirming bank mayor may not be the advising bank. The advising bank usually does not do it if there is not a prior arrangement with the issuing bank. By being involved as a confirming agent the advising bank undertakes to negotiate beneficiary's bill without recourse to him. 5.4.6 Transmitting: Letter of credit can be transmitted to the advising bank through SWIFT (Society for Worldwide Interbank Financial Telecommunication). After verifying all that the respective officer opens an L/C.

L/C Opening/Issuing Bank

Is ending message by SWIFT/HO ID

Advising Bank/ Negotiating Bank In the SWIFT following information are provided: •

Address of the LIC issuing bank;

Input message type (700 for the new LIC, 702 for amendment and some other message number)

Name of the advising bank


Form of documentary credit (Revocable irrevocable)

LIC no:

Date and place of expiry

Applicant/Importer

Beneficiary /Exporter

USD

Draft at (sight/usance)

Partial shipment allowed or not

Trans-shipment

Ships on board or deck

Description of goods and services.

After giving the message to the advising bank, the bank keeps Margin on total LIC value. Normally the margin is kept 25% or it is based on banker customer relationship, or based on goods imported.

5.4.7 Negotiating: The beneficiary (exporter) receives the letter of credit from advising bank. After proper shipment of goods as per terms and conditions of the L/C, required documents like Commercial Invoice, Bill of Lading, and bill of exchange are presented to the negotiating bank by the beneficiary for negotiation. If the documents are in order as per L/C then the negotiating bank negotiates the drafts making payment to the beneficiary. Then-the negotiating bank forwards the drafts along with the shipping documents to the L/C opening bank. The negotiating bank reimburses the amount paid against the draft from reimbursement bank (authorized by opening bank) by debiting Nostro NC of the opening bank. Negotiating banks have the option to send the drafts and documents to the opening bank for collection. . 5.4.8 Amendment: After opening of L/C sometime alteration to the original terms and conditions become necessary. These amendments involve changes in (1) Unit price (2) Extension of validity the L/C Such amendments can be affected only if all the concerned parties agree i.e.: the beneficiary, the


importer, the issuing bank and the advising bank. For any amendment the importer must request the issuing bank in writing duly supported by revised Indent Proforma invoice. The issuing bank then advises the required amendment to the advising bank. L/C amendment commission including postage is charged to the clients NC. 5.4.9 Making the payment through the reimbursing bank/Retirement L/C: The L/C issuing bank after getting the document and check the document and if the terms and condition meet the requirement, the issuing bank take initiative to make payment to the exporter through reimbursing bank. Reimbursing Bank

L/C Opening Bank

Negotiating Bank

The issuing bank then inform the importer that his document has come to the Bank and by giving the payment he can release the document and unloading his good from the ship or any other place as per L/C terms and conditions. CHAPTER-6

6.1Problems regarding the practice banking: 6.1.1. Complexity in issuing loans: Issuing loan in any commercial bank follows very complex procedures. Some times it takes years to get a loan from bank. Since there is provision for granting loan without security but no bank allow allocating fund without security, for this reason our country is loosing good potential businesses from our new generation. 6.1.2. Inefficient manpower: Most of the times it is experienced that, banks run their activities without well trained and effective personals. Most of the times we experience the rude behave of bankers with their clients. This is


happening because of absence of corporate culture in our country. We think central bank and GOB should give a close look into this matter. 6.1.3. High cost for services: In Bangladesh charge for any kind of services provided by commercial banks is too high. Private Banks are leading in this section. Some services whose are free in other countries, costs high in our country. 6.1.4. Years old management system: Most of the commercial Banks in Bangladesh run by the decades old management system. As world is moving fast it is required to introduce new management policies and trained employees to cop up with the new economic world. 6.1.5. Too high interest rate against loan: Rate of interest against loan in Bangladesh is one of the highest in the world. Spread in commercial banks is from 16% to 21% in Bangladesh. This is not only creating an imbalance situation in our economy but also keeping us behind in the race of development. High interest rate is leading a too slow investment growth, low production, and increasing unemployment in our country. 6.1.6. Small range of services: Services provided by commercial banks in our country have a small range. Banks should increase their verity of services. In other developed and developing countries banks provides not only loans to their clients but also provide consultancy services to their clients. They also provide fund for any kind of household need of consumers. Commercial banks of our country also should take it in concern. 6.1.7. Absence of high tech technologies: One of the biggest barriers for quality service by our banks is the absence of high tech technologies. Some of the commercial banks provide services using new technologies but it’s not enough for our vastly growing economy. It is a shame that in this 21 st centaury people need to stand in line to deposit their money in our country. But in the developed countries people are getting services staying in their houses. Using technologies not only saves time but also reduces cost of banks and clients. 6.2 Recommendations 6.2.1. Need to increase control of Bangladesh bank on schedule banks: Bangladesh bank should increase its control over schedule banks, so that schedule banks can not do things whatever they want. All commercial banks take decisions based on making profits rather than


thinking the betterment of the overall economy, and this is the situation when the question of dilemma comes and in this position interference of central bank is very important. But without increasing the controlling over commercial banks central bank cannot do this. 6.2.2. Need to develop strong monitoring of Central Bank: Weak monitoring of Bangladesh bank has allowed the schedule banks to do illegal acts. Bangladesh bank should built strong monitoring over the schedule banks time to time basis. 6.2.3. Reducing complexity in issuing loans: Issuing loan in any commercial bank follows very complex procedures. Procedures of issuing loans should be free of any complexity so that real business people can take loan from banks without any hassles.

6.2.4. Recruiting efficient manpower: Having efficient manpower is a must for having a sound banking system. But in most of the banks it’s seen lack of efficient and effective personals. GOB and central bank should try to improve this situation. 6.2.5. Lowering cost for services: Commercial banks should reduce their service charges for the sake of betterment of the economy. Most of the times banks are taking unusual service charges from their clients. Bangladesh bank should build pressure on the schedule banks regarding this. 6.2.6. Introducing new management system: Banks in Bangladesh run by the decades old management system. As world is moving fast it is recommended to introduce new management policies and train employees to cop up with the new economic world. 6.2.7. Reducing interest rate against loan: Rate of interest against loan in Bangladesh is one of the highest in the world. This is not only creating an imbalance situation in our economy but also keeping us behind in the race of development. GOB and Bangladesh bank should work on this matter so that commercial banks come forward to reduce interest rate on lending.


6.2.8. Introducing a wide range of services: Services provided by commercial banks in our country have a small range. Banks should increase their verity of services. Commercial banks can give consultancy services to their clients, they should introduce a variety in consumer lending where our banks are well behind than other countries. 6.2.9. Introducing new technologies: One of the biggest barriers for quality service by our banks is the absence of high tech technologies. Banks should introduce new technologies in order to give quality services to public. Using technologies not only saves time but also reduces cost of banks and clients. 6.2.10. Giving license to new banks: Government should give more licenses to new banks which will increase competition in the market and will force banks to give better services. Here I will suggest recommendations given by Mr. S. M. Abu Zaker, Assistant Vice President of EXIM Bank Limited, in his essay on Ethics in Banking, which won third prize in the year of 2003, 1. Any union or political activities in the bank should not be allowed. 2. Bank officials should be involved in any kind of political activities or associated with organization except those engaged in humanitarian activities. 3. In appointment of chairman and directors of NCBs political interference should be eradicated. 4. To compel the banks for rural and agro-based financing, a code of ethics can be set-up, which may be as follows: bank’s rural and agro-based financing should not be less than 25% of total loans and advances. 5. Under the present rules a shareholder of any amount is eligible to take part in banks’ Annual General Meeting (AGM). Whereas a depositor of crores is not eligible through banks do business with depositor’s money. As such, participation of selective depositors in the AGM should be ensured. 6. Bad borrowers are being scolded by every corner of the society. But good borrowers are contributing the nation in the process of development. As such, some best borrowers should be awarded by the state every year. 7. A code of conduct for bank officials and the directors should be published by every bank.


8. Every bank must have published Credit Policy Guide, Credit Operation Manual and Foreign Exchange Manual. 9. Audit and inspection team may be empowered to find out ethical violations and suggest taking punitive measures. 10. Bangladesh Institute of Bank Management may launch training programme on Ethics in Banking for all level of bankers, participation in which may be mandatory.

CHAPTER-7

Ending Summary: After doing study on this assignment it is found that, the banking industry has developed well from the past periods in Bangladesh but the service of banks to the public and businesspeople could not reached to the international level. Bangladesh has all the rules and regulations to boost the banking sector but there is lacking of implementation and monitoring by the central bank. Bangladesh bank also doesn’t have strong control over the schedule banks. We also see that since Bangladesh has all the rules to protect the interest of the banks but there are no strong rules and regulations in order to protect the public interest, which has allowed to happen the Oriental bank scam. Clients of this bank are the ultimate victims. In order to facilitate the economy of Bangladesh we think central bank should increase its control over the schedule banks and strong monitoring is required. Government should formulate rules increasing


the power of Bangladesh bank. Bangladesh also needs to introduce rules which will protect the public’s interest in a wide range. Following some specific problems about law and practice banking in Bangladesh are pointed out, 1. Minimum control of Bangladesh bank on the schedule banks. 2. Lack of strong monitoring. 3. Complexity in issuing loans. 4. Inefficient manpower. 5. High cost for services. 6. Years old management system. 7. Too high interest rate. 8. Small range of services. 9. Absence of high-tech technologies. 10. No representative from depositors in the board of directors. Recommendations: In order to make the banking industry of Bangladesh a vibrant one we should follow the following recommendations, 1. Increase control of Bangladesh bank on the schedule banks. 2. Developing strong monitoring of Central Bank. 3. Reducing complexity in issuing loans. 4. Recruiting efficient manpower. 5. Lowering cost for services. 6. Introducing new management system to cop up with modern word economy. 7. Introducing a wide range of services. 8. Introducing new technologies. 9. Giving license to new banks. 10. There should have representatives from depositors in the board of directors of bank. Conclusion: For any economy an effective banking system is badly necessary. Without help and support of banks no economy can march toward development. Banking industry of Bangladesh is also contributing a lot for the development of Bangladesh and its economy. But, we have to walk with other developing countries of the world and to compete with the rest of the world and to secure a good position in the


world economy we have to built a strong, effective and efficient banking sector which can lead us not only to a developed economy but also a golden future of our country. Appendix 1 List of the Branches & Booth

SL.No

Name of the Branch

01.

Motijheel Main Branch

02. 03.

04.

Agrabad Branch Khatungonj Branch Khulna Branch

05.

07. 08. 09. 10. 11. 12.

6, Motijheel C/ A,Dhaka. Nur Chamber 34,Agrabad C/ A (Ground Floor) Agrabad, Chittagong.. 601, Ramjoy Mahajan Lane, Khatungonj, Chittagong. 3, K.D. Ghosh Road, Khulna.

Date Opening :25.11.1985 06.01.1986 27.01.1986 14.05.1986

Reaz Medicine Market Babubazar Branch

06.

Address

Jubilee Road Branch

57,Mitford Road, Babubazar, Dhaka. Dominion Plaza (1 st floor) 5, Jubilee Road, Chittagong.

O.R. Nizam Road

659, O.R. Nizam Road,

Branch

. Central Plaza, Chittagong.

Chowhatta Branch Dhanmondi Branch Moghbazar Branch Gulshan Branch

Malibagho Branch

Sayed Complex, Airport Road, Ambar Khana,Sylhet. Quality Centre,744 Shat Mosjid Road,Dhanmondi R/ A,Dhaka. 382,Moghbazar, Tongi Diversion Road, Dhaka. 85,Gulshan Avenue, Gulshan ,Dhaka. B-61, Malibagh Chowdhury Para, DIT Road, Dhaka.

20.10.1986

11.12.1986 22.12.1986 22.12.1986 28.12.1986 29.12.1986 10.06.1987

28.06.1987

13.

Cox's Bazar Branch

Main Road, Bazar Ghata,Coz's Bazar.

29.06.1987

14.

Laldighirpar Branch

Idrish Bhaban, . Mohaj an Pattay,

15.07.1987

Laldighirpar, Svlhet. 15. 16.

Jatrabari Branch Mirpur Branch

123/1-A,South Jatrabari, Dhaka-1204. Fahad Complex, Plot #1/1, Main Road1, Section #10,

20.07.1987 21.07.1987

of


17. 18. 19. 20.

Feni Branch Kadamtali Branch Laxmipur Branh Mitford Branch

Senpara,Parbata,Mirpur,Dhaka. Hazi Ibrahim Hossain Market,

11.12.1993

10, Trank Road, Feni. Rafique Plaza, 1151, Dhaka Trank

27.12.1993

Road, Kadamtali, Chittagong. Chowdhury Super Market, College Road, Laxmipur. Paradise Bhaban, 34, Mitford Road floor), Dhaka.

04.06. 1994 (1st

18.06.1994

21.

Bangshal Branch

216, Bangshal Road, Dhaka

28.08.1994

22.

Maihirghat Branch

15, Strand Road, Chittagong.

25.09.1994

23.

Moulvibazar Branch

Yakub Mansion, Sylhet Road,

11.12.1994

24. 25.

Jessore Branch

Moulvibazar. Jess Tower, M.K. Road, Jesssore. Rainbow Plaza, 9, G.L. Roy Road,

25.10.1995

26.

27. 28. 29.

Rangpur Branch Kawran Bazar

Rangpur. Hasney Plaza, 31 A Kawran Bazar CIA,

Branch

Dhaka

Dilkusha Branch Islampur Branch Halishahar Branch

Hossain Tower, 43, Dilkusha CIA, Dhaka Latif Tower, 2/3, Ahsanullah Road (2nd floor), Islampur, Dhaka. Plot No.9, Block-L, Port Conncting

30.

Foreign Exchange

Road, Halishahar, Chittagong. 291 A, Toyenbee Circular Road,

31.

Branch Madhunaghat

Motiiheel CIA, Dhaka. P.D: Madhunaghat Bazar, Rashid Bari,

Branch

Hathazari, Chittagong. House # 6, Road # 12, Sector # 6,

32. 33.

Dttara Branch Baralekha Branch

34. Sayedpur Branch 35.

Patgram Branch

Dttara Model Town, Dttara, Dhaka. Dhakhhinbazar, Main Road, Baralekha, Moulvibazar-3250 Kohinoor Mansion (1 st floor), Shaheed Dr. Zikrul Haque Road, Sayedpur, Nilphamari. Alam Mansion, Station Road, Patgram, Llmonirhat.

23.11.1995 02.12.1996

24.07.1997 26.06.2001 13.07.2001 12.01.2002 25.04.2002 27.02.2003 12.10.2004

28.11.2004

23.12.2004

36.

Baraiyarhat Branch

Baraiyarhat, P.S:Mirsarai, Chittagong.

28.12.2004

37.

Nababgoni Branch

P.S: Nababgoni, Dhaka.

26.09.2005


38. 39.

40.

Rajshahi Branch Madhabdi Branch

133, Saheb Bazar, Boalia, Raishahi. School Super Market Complex,

Elephant Road

Madhabdi Bazar, Narsingdi. SEL Siddique Plaza, 173, Elephant

Branch

41.

Anderkilla Branch

42.

Bogra Branch

43.

Hajigonj Branch

44.

45.

Nawabppur Road

48.

ChaumuhaniBranch

49.

Jagannathur Branch

50

CEPZ Branch

51.

Comilla Branch

52.

Shyamoli Branch

53.

Savar Branch

29.08.2006

Hajigoni, Chandpur. 140-141, N awabpur Road, (1st floor),

488, Main Road, Puran Bazar,

Banani Branch

03.08.2006

Nazrul Islam Road, Zhawtola, Bogra. Ahmed Plaza (151 floor), 79/64,

Madaripur Branch

47.

22.12.2005

Chittagong. Bashiran Market (1st floor), Kabi

Dhaka. Madaripur New Market, (1st floor),

Chakaria Branch

14.12.2005

Road, Dhaka. A.N. Tower, 23, Anderkilla,

Branch

46.

25.10.2005 30.11.2005

12.09.2006

21.09.2006

Madaripur. Al-Aksha Shoping Tower, 57, Chringa Bus Station, Chakaria, Cox's Bazar. House # 1, Road # 11, Block-F, Banani, Dhaka. Poura Bipani Bitan (18t floor), 227, DB Road, Chaumuhani, Noakhali. Abu Taher Complex, Ranigonj road, Ali plaza, CEPZ Gate, Airport Road,South Halishahar, Chitagong Samobaya Bank Bhaban(1st floor) 385, Kandir para, Commilla BBTOS Bhaban. 9, Kallyan Pur, Mirpur Road, Dhaka New

market(

Pourashava, Dhaka

1st

floor)

19.11.2006 17.12.2006 06.06.2006

Jagannathpur Sunamgonj.

Savar

12.11.2006

Savar

30.10.2007 28.11.2007 18.12.2007 30.12.2007


SL.

Name of the Booth

NO. 01.

Address

Date of opening

33/11, K.B. Upo Kendro, Sector#6, Uttara Model Town

Shahjalal Avenue, Uttara Model Town,Dhaka.

Glossary: •

DD

Demand Draft

LIM

Loan Against Imported Merchandise

PAD

Payment Against Document

LTR

Loan Against Trust Receipts

TT

Telegraphic

PO

Pay Order

IBCA

Inter Branch Credit Advice

IBDA

Inter Branch Debit Advice

BE

Bills of Exchange

L/C

Letter of Credit

ID

International Division

B/L

Bill of Lading

FDBP

Foreign Documentary Bills Purchased

ERC

Export Registration Certificate

CCI&E Chief Controller of Import and Export

IRC

Import Registration Certificate

LCA

Letter of Credit Authorized

NCCBL

National Credit & Commerce Bank Limited

7C’s

Character, Capacity, Credit Analysis, Capital, Collateral, Conditions, Compliance

RMG

Ready-made Garments

SME

Short and Medium Enterprise.

24.02.1998


Bibliography: •

Annual report of NCCBL (2006-2007).

Auditor's Report of NCCBL (www.nccbank-bd.com).

Bank's record.

Peter S Rose, “Commercial Bank Management”. Richard D. Irwin INC 1991. 5th Edition.

Website of NCCBL (www.nccbank-bd.com).

Abu Zaker, S.M., Ethics in Banking, Essay wining third prize in the year of 2003

Practice of banking in ncc bank ltd ”  

National Credit and Commerce bank Ltd, formerly the National Credit Limited was primarily established as an investment company in November 1...

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