Overall banking system of United Commercial Bank Limited by lawjuris

Overall banking system of United Commercial Bank Limited (UCBL)

Chapter – 1 Introduction

CHAPTER ONE: INTRODUCTION 1.1 Origin & Background of the study Internship is the part of BBA. Its gives us the practical idea of office environment as well as activities. That is why I have made decision to prepare a report on Overall Banking System which is a requirement of B.B.A. program. Bachelor of Business Administration (BBA) Course requires an attachment with an organization followed by a report assigned by the supervisor in the organization and endorsed by the faculty advisor. United commercial Bank Limited is a financial institute that started its operation in mid 1983, has been effectively playing its important role not only for its growth but also for the economic development of the country. As I am already working with United Commercial Limited (UCBL), Md. Tofael Haider (First Assistant Vice President),K. M. Shafiqur Rahman(SEO) of United Commercial Bank, Limited, Barisal Branch, Barisal helped me to conduct a study on Overall Banking System. My faculty supervisor, Enayet Ullah, Coordinator of BBA Program, Faculty of Business Administration, Uttara University, approved the topic and authorized me to prepare a report on “Overall Banking System: The case of UCBL (Barisal Branch), as part of the fulfillment of BBA requirement. The report included organizational overview and analysis the performance of foreign exchange. Finally, the report has been conducted with same recommendations. It is expected that the report with high light the task performed and experienced gained during the practical work.

1.2 Objectives The objectives of the study may be spelled out as follows: 

To fulfill the partial requirements of BBA program



To know the trend of the organization for performance analysis.



To identify the financial condition of an organization.



To provide a brief picture on the procedure & performance of the Foreign Exchange.



To highlight on the export and import procedure



To recommend various strategies & techniques to solve the problems.

1.3 Scope Banking system occupies an important place in a Nation’s economy. A banking institution is indispensable in a modern society. It plays a pivotal role in the economic development of a country and forms the core of the money market in an advanced country. In recent times the banking sector over the world has been undergoing a lot of changes due to deregulation, technological innovation, globalization etc. Bangladesh banking sector is lagging for behind in adopting these changes. To thrive well in these changing environments, not only development of appropriate infrastructure is necessary but also infusion of professionalism in to banking service is essential. It also helped me to acquire a firsthand perspective of a leading private bank in Bangladesh. In this report, the major area of commercial banking has been covered is financial performance of the organization.

1.4 Limitations From the beginning to end, the study has been conducted with the intention of making it as a complete and truthful one. However, many problems appeared in the way of conducting the study mainly time. During the study it was not possible to visit the whole area covered by the bank although the financial statements and other information regarding the study have been considered. The study considers following limitations:

1.4.1 Time limit The time is not sufficient for gather whole knowledge on the vast area of the Banking like general banking, credit analysis and foreign exchange. On the other hand, I have to engage very much with my daily office work.

1.4.2 Confidentiality of data Every organization has their own secrecy that is not revealed to others. The Bank can not disclose enough information for the sake of secrecy of the organization.

1.4.3 Others 

There is no annual report in published form after 2005. Because after 2005 no AGM was held in this limited company.



This report suffers from a narrow data range for analysis.



Inadequacy and lack of availability of required Current data.



The documentation part of the Letter of Credit with regard to export and import is quite complicated and huge formalities are maintained.

Chapter –2 Methodology

CHAPTER TWO: METHODOLOGY OF THE STUDY The program generally starts with visit and observation. However, in respective areas of the study different methods can be used where necessary. In preparing this report some methods were followed. As preparing a report about the activities of any financial organization is a difficult and complicated task, no single method is appropriate for preparing the report. Effective research involves six basic steps. These are: Research objective

Define the Problem

Findings & Recommendation

Develop research plan

Data analysis

Data collection

Diagram: Effective Research

2.1 Population Barisal Branch is one of the productive branches of UCBL. The branch is doing well in the General Banking, Advanced Section, Cash and Remittance Section. For convenience of the study Barisal Branch has been taken into consideration as population.

2.2 Data collection Source of data of this report can be divided into two categories:

2.2.1 Primary sources    

Face to Face conversation with the respective officers and staffs Sharing practical knowledge of officials. Interviewing officers and staffs. In-depth study of selected cases.



Interview with the Clients.



My Practical Banking Knowledge.

2.2.2 Secondary sources 

Annual Report of UCBL

     

Audit Reports Website Relevant books, Research papers, newspapers and Journals Internet and various study selected reports. My present Banking Knowledge. Different textbooks

Chapter –3

Overview of the Banking Sector

CHAPTER THREE: OVERVIEW ON BANKING SECTOR Banking Company is defined as a company which transacts the business of banking, an individual firm, company or corporation generally deals in the business of money and credit is called bank. In our country, any institution, which collects money as deposit from people, lending or investing money of its own as well as deposit as credit/advance can be treated as a Bank. Modern banks play an important part in promoting economic development of a country. Banks provide necessary funds for executing various programs underway in the process of economic development. Banks in all countries works as the depositor of money. The surplus units/ depositors look for safety of money and extra earning like interest of their surplus money by the Bank.

3.1 Bangladesh Bank Bangladesh Bank (BB) has been working as the central bank since the country's independence. Its prime jobs include issuing of currency, maintaining foreign exchange reserve and providing transaction facilities of all public monetary matters. BB is also responsible for planning the government's monetary policy and implementing it thereby. The Banking Companies Ordinance was promulgated on the 7th June 1962. This has been adopted in Bangladesh and is applicable to the banking companies only. 1912. Bangladesh has a mixed banking system comprises of nationalized, private and foreign commercial banks. Bangladesh Bank (BB) has working as the central bank of the country since the independence of the country. Its prime jobs include issuing currencies, maintaining foreign exchange reserve and providing transaction facilities of all public monetary mattes. BB is responsible for planning and implementing the governmentâ&#x20AC;&#x2122;s monetary policy. The BB has a governing body comprising of nine members with the Governor as its chief. Apart from the head office in Dhaka, it has nine more branches, of which two in Dhaka and one each in Chittagong, Rajshahi, Khulna, Bogra, Sylhet, Rangpur and Barisal.

3.2 Brief picture of banking sector Bank Company Act, 1991, empowers BB to issue licenses to carry out banking business in Bangladesh. Pursuant to section 31 of the Act, before granting a license, BB needs to be satisfied that the following conditions are fulfilled: "that the company is or will be in a position to pay its present or future depositors in full as their claims accrue; that the affairs of the company are not being or are not likely to be conducted in a manner detrimental to the interest of its present and future depositors; that, in the case of a company incorporated outside Bangladesh, the Government or law of the country in which it is incorporated Bangladesh as the Government or law of Bangladesh grants to banking companies incorporated outside Bangladesh and that the company complies with all applicable provisions of Bank Companies Act, 1991."

Licenses may be cancelled if the bank fails to comply with above provisions or ceases to carry on banking business in Bangladesh. The banking sector of Bangladesh comprises of four categories of scheduled banks. These are nationalized commercial banks (NCBs), government owned development finance institutions (DFIs), private commercial banks (PCBs) and foreign commercial banks (FCBs). Commercial Banks The commercial banking system dominates the financial sector with limited role of NonBank Financial Institutions and the capital market. The Banking sector alone accounts for a substantial share of assets of the financial system. The banking system is dominated by the 4 State Owned Commercial Banks, which together controlle more than 30% of deposits and operates 3383 branches (50% of the total) as of June 30, 2008. Specialized Banks Out of the 5 specialized banks, 2(Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank) were created to meet the credit need of the agricultural sector while the other two (Bangladesh Shilpa Bank (BSB) & Bangladesh Shilpa Rin Sangtha (BSRS) are for extending term loans to the industrial sector of Bangladesh. At present, there are four NCBs operating in Bangladesh. The second type is the DFIs which derive their funds mainly from the governments, other financial institutions, and supranational organizations.

Table-1: Banks in Bangladesh Bank Types No. of Banks NCBs DFIs PCBs FCBs Total

4 5 30 9 48

2007 No. of Total % of No. of Branches Deposits Deposits Banks

(Taka in billion) 2008 No. of Total % of Branches Deposits Deposits

3384 654.1 35.2 4 3383 699.7 1354 100.2 5.4 5 1359 115.6 1776 955.5 51.3 30 1922 1150.2 48 150.8 8.1 09 53 183.4 6582 1860.6 100.00 48 6717 2148.9 Source: Bangladesh Bank, Annual report 2007-2008

32.6 5.4 53.5 8.5 100.00

Table1 shows that the number of banks at the end of the year 2008 was 48. These banks had a total number of 6717 branches as of December 2007. The number of bank branches increased from 6582 to 6717 due to opening of new branches by the PCBs mainly during the year.

3.3 Deposits

Table-2: Deposit of Banks (Taka in Millions) Percentage Changes of August, 2009 over August, August, Items July, 2009 2009 2008 August, July, 2009 2008 Demand Deposits* 286141 281666 253997 1.59 12.66 Time Deposits* 2376208 2327358 1960678 2.1 21.19 Total 2662349 2609024 2214675 2.04 20.21 * Excludes Inter bank and Government Deposits. Source: Statistics Department, Bangladesh Bank. Table-2 indicates that the total number of Deposit both Demand Deposit & Time Deposit is 2662349 in the August 2009. In the same month it was 2214675 in the previous year 2008. So there is an increase of 447674 Deposits.

3.4 Advances Table-3: Advance of Banks

Items

August, 2009 July, 2009

Advances Bills Investments Total

2196665 113651 506305 2816621

2166078 115284 508705 2790067

(Taka in Millions) Percentage Changes of August, 2008 August, 2009 over July, 2009 August, 2008 1889815 1.41 16.24 135703 -1.42 -16.25 395109 -0.47 28.14 2420627 0.95 16.36

Source: Statistics Department, Bangladesh Bank. Table-3 shows that the total credit of the banks is 2816621in the August 2009. In the same month it was 2420627 in the previous year 2008. So there is an increase of 395994.

3.5 Conclusion The banking sector of Bangladesh comprises of four categories of scheduled banks. These are nationalized commercial banks (NCBs-04), government owned development finance institutions (DFIs-05), private commercial banks (PCBs-30) and foreign commercial banks (FCBs-09). All the banks are registered & operate under the Banking Companies Act 1991. The commercial banking system dominates the financial sector with limited role of NonBank Financial Institutions and the capital market. The controller of the banking sector of Bangladesh is Bangladesh Bank. It has working as the central bank of the country since the independence of the country. Its prime jobs include issuing currencies, maintaining foreign exchange reserve. So, it can be strongly said that Bangladesh has a strong & efficient banking

sector. That is why; banking sector of Bangladesh has become an attractive place for investment. Now, more & more foreign banks are becoming interested to make investment. Chapter –4 An Overview of UCBL

CHAPTER FOUR: AN OVERVIEW OF UCBL 4.1 Brief picture of UCBL Sponsored by some dynamic and reputed entrepreneurs and eminent industrialists of the country and also participated by the Government, UCB started its operation in mid 1983 and has since been able to establish one of the largest networks of 107 branches as on 2011 among the first generation banks in the private sector. With its firm commitment to the economic development of the country, the Bank has already made a distinct mark in the realm of Private Sector Banking through personalized service, innovative practices, dynamic approach and efficient Management. The Bank, aiming to play a leading role in the economic activities of the country, is firmly engaged in the development of trade, commerce and industry thorough a creative credit policy. Incorporated on

26th June, 1983.

Started operation on

13th November, 1983.

Contact Address

UCBL, Corporate Head Office House # CWS(A)1, Gulshan Avenue,Dhaka-1212 Bangladesh

PABX

8852500

SWIFT

UCBLBDDH

info@ucbl.com

Web

www.ucbl.com

4.2 Mission, Vision & Values To assist high quality service to customer and to participate in the growth and expansion of our national economy and to satisfy clients, share holders and employees. TO BE THE BANK OF THE

1st choice through maximizing value of clients shareholder & employees and contributing to the national economy with social commitments. The values of UCBL are: •

Put customer first

•

Emphasize on professional ethics.

•

Maintain quality at all levels

•

Believe in being a responsible corporate citizen

•

Say on the believes

â&#x20AC;˘

Foster participative management.

4.3 Management The Bank has in its Management a combination of highly skilled and eminent bankers of the country of varied experience and expertise successfully led by Mr. M. Shahjahan Bhuiyan, a dynamic banker, as its Managing Director and well educated, energetic and dedicated person working with missionary zeal for the growth and progress of the institution. Managing Director Board of Directors Chairman Mr. M.A. Hashem

Secretary Mr. Mirza Mahmud Rafiqur Rahman

Vice-Chairperson Mr. Kazi Enamul Hoque Chairman, EC Hajee Yunus Ahmed Directors Alhaj Akhtaruzzaman Chowdhury,MP Mr. M. A. Sabur Hajee M. A. Kalam Mr. Saifuzzaman Chowdhury Mr. Shabbir Ahmed Mr. Showkat Aziz Russel Mr. Nur Uddin Javed Mrs. Sultana Razia Begum Mr.Sharif Zahir Mr. Riyadh Zafar Chowdhury Mr.Tanvir Khan Mr. Ahmed Arif Billah Mr. Emran Ahmed Mr. Nasim Kalam Mr. Bazal Ahmed Mrs. Qamrun Nahar Mrs. Setara Begum Mr. Md. Nurul Islam Chowdhury Audit Committee Chairman Mr. Md. Jahangir Alam Khan Member Mr. M. A. Sabur Mrs.Qamrun Nahar Executive Committee of the Board

4.4 Organizational structure Chairman Hajee Yunus Ahmed

Members Hajee M. A.Kalam Mr. M.A. Sabur Mr. Saifuzzaman Chowdhury Deputy Deputy Managing Managing Director Director Mr. Showkat Aziz Russell

SENIOR MANAGEMENT Managing Director Mr. M. Shahjahan Bhuiyan Deputy Managing Director Mr. M. Shahidul Islam Mr. Mamun-Ur-Rashid Mr. Md. Shahed Jalal Chowdhury Mr. Mirza Mahmud Rafiqur Rahman Senior Executive Vice President Mr. Md. Tariqul Azam Mr. Md. Zahirul Alam Mr. Md. Sohrab Mustafa Executive Vice President Mr. Muhammad H. Kafi Senior Vice President Mr. Md. Quamrul Hassan Abu Sadeque Miah Mr. Mahmudul Bashar Khan Mr.Md. Ekram Ullah Mr.Md.Delwar Hossain Mazumder Mr. Mian Quamrul Hasan Chowdhury Mr. Md. Shahadat Hossain Shohag

Sr. Sr. Executive Executive Vice Vice President President

Executive Executive Vice Vice President President

Sr. Sr. Vice Vice President President

First First Vice President

Vice Vice President President

First First Asstt. Asstt. Vice Vice President President

Asst. Asst. Vice Vice President President

Senior Senior Executive Executive Officer Officer

Executive Executive Officer Officer

Senior Senior Officer Officer

Officer Officer

Junior Junior Officer Officer

4.5 Products & Departments Products UCB Multi Millionaire UCB DPS Plus Western Union Money Transfer SMS Banking Service Online Service

Credit Card Monthly Savings Scheme Deposit Insurance Scheme Inward & Outward Remittances Travelers Cheques Import Finance Export Finance Underwriting and Bridge Financing Trade Finance Industrial Finance Foreign Currency Deposit A/C Consumer Credit Scheme Locker Service Departments 

Clients Accounts Department



Remittance Department (Inland)



General Services Department



Cash Department



Accounts Department



Credit Administration Department.



Marketing, Business & Development Department



Import Department



Export Department



Remittance Department (Foreign)

General Banking Department

General Banking department is considered as the direct customer service center. The clients and customers build their impression whether they are going for further dealings with the bank or not on the basis of their service. Moreover this is the first impression about the bank. So general section must be taken carefully. Functions of General Banking Department is discussed below: Functions: 

Establishing Banker Customer relationship,



Remitting customer’s money from one place to another,



Collecting bills for customers,



Taking deposit and honoring Cheque drawn over Principal Branch.

ORGANIZATIONAL SET UP OF GENERAL BANKING DEPARTMENT: General Banking Department

Account Opening

Cash & Computer

Remittance

Bills

Clearing

BSP

General Banking Department constitutes with the following sections:

Account Opening Section

Banking business is very much correlated with banker customer relationship. To be a customer one person must have some sort of with the banker. Account Opening section establishes this relationship by opening new accounts. NATURE OF ACCOUNTS (OWNERSHIP STATUS): UCBL open following types of accounts: 1. Individual Accounts 2. Joint Accounts 3. Proprietorship Firm Accounts 4. Partnership Concerns Accounts 5. Private Limited Companies Account 6. Public Limited Companies Account 7. Accounts of Societies, Clubs, Association etc. 8. Trust Accounts 9. Accounts of Local Authorities CLOSING OF AN ACCOUNT:

* To close an account, party may be requested to send an application along with the unused leaves of the Cheque Book issued to him. *After receiving the application the signature of the account holder shall be verified and the number of unused Cheque Leaves should be noted. *Before the account is closed the manager will approve the application and closing charge being the incidental charge should be debited to the account. Accounting Entries: Debit Party’s Account Credit: Income Account Incidental charge. CHEQUES: A cheque is a very important document. Cheque is an instrument in printed form containing an unconditional order, signed by the account holder directing a certain person to pay a certain some of money only to or to the order of a certain person or to the barer of the instrument. A cheque is always supposed to be drawn against the funds in the party’s account in the bank. It may be crossed for safety.

Types of Cheques in a flow chart:

CHEQUE

BARRIER CHEQUE

ORDER CHEQUE

OTHER CHEQUES

Cash & Computer Section

CHEQUES Cash is one of the most important sections of MARKET General Banking Department. It deals with TRAVELLER’S CHEQUES cash, the most liquid asset. The value of banking is insured for a certain some of money. CROSS STALE CHEQUE CHEQUE ANTI DATED CHEQUE When money exceeds the limit it must be sent to the Central bank vault. So Cash In charge POST DATED CHEQUE should always be concerned about his custody. Functions of this Section: •

Receiving cash

•

Paying cash

•

Issuing vouchers

•

Making Proper entries in the ledgers

Remittance Section

There is some frequent situation; customer of a bank needs to transfer his fund or money to somewhere within the country boundary. It is really a risky thing to carry the money and is costly a well. What they do, just purchase an instrument so that his/her fund can be transferred through his/her own bank. This short of activities is cubed under the Inland Remittance:



Demand Draft. (D.D.)



Telegraphic Transfer (T.T.)



Pay Order (P.O.)

Now I shall discuss briefly about these instruments and their issuing procedure. Demand Draft (DD): This is an order to pay money, drawn by one branch of a bank upon another branch of the same bank for a sum of money payable to order on demand.

Telegraphic Transfer (T.T.) In Telegraphic Transfer (T.T.) the issuing branch sends a telegraphic message to the branch at the other end, to pay a certain amount of money to a named payee’s account maintained with the drawee branch or through a pay order if no account is maintained with the drawee branch. In UCBL, Principal Branch the charge for Telegraphic transfer is Tk. 1.5 per thousand. Telegraphic charge is Tk. 40.

Pay Order: Pay Order is an instrument, which is issued from a certain branch of a bank and must be encased from the same branch. It is like the cash but not the exactly cash. One who is

maintaining an account with UCBL, Principal Branch can purchase a pay order. It is more liquid than cash. It is used for remittance purpose within the clearing area covered by Principal Branch.

Bills Section

Customers of UCBL submit many instruments in the related branch bills section for collection. Bills section plays a vital role in collecting these bills. The bills submitted for collection can be divided into two categories. CATEGORIES: OUTWARD BILLS FOR COLLECTION: ♦ The instruments are received duly entered in the Pay-in-slip. ♦ The instruments are checked for any apparent discrepancy and are compared with the particulars noted in the Pay-in-Slip and its counterfoil. ♦ The counterfoil is stamped and signed by the officer. ♦ The instruments and the Pay-in-Slip detached from the counterfoil, which is handed over to the customer. ♦ The instruments are stamped ♦ The instruments are suitable endorsed. ♦ The details of the instruments and special instructions are entered in the Outward Bills Collection Register. And a collection number is allotted in serial order which is also noted on the on the instruments and the pay-in – slip. ♦ The instruments are enlisted in the forwarding schedule and any special instructions are noted therein. ♦ The instruments drawn on other banks are sent to the clearing section and instruments drawn on other branches of UCBL are sent direct to the branch concerned. ♦ Following entries are passed on contra voucher Dr: Outward Bills Lodged Cr : Outward Bills For Collection.

♦ The instruments, schedules along with the schedule and voucher are sent to the in charge for checking and signatures. ♦ The instruments are attached with the forwarding schedule and are handed over to Dispatch Department against acknowledgement on the office copy. ♦ The pay in slip is attached to the office copy of the schedule and filled in the “O.B.C. Outstanding File” ♦ The Voucher is sent to the accounts department ♦ .In case the instrument drawn on other bank branch which is not covered by the clearing area of Bangladesh Bank ,forwarding letter are sent direct to that branch for collection and asked them to draw a pay order in favor of Principal Branch on any of the other bank’s office situated in Dhaka. Realization through Advice: When the advice is received the following entries are passed. I.

Dr: Bills For Collection (OBC) Cr: Bills Lodged

II.

Dr: HO account (branch concerned) Cr: Party’s Account C: Income Account-Postage Received Cr: Income Account Commission on Bills

Realization through Demand Draft: When the proceeds are received through draft, following vouchers are prepared and attached with the draft and are sent to the clearing department. a) Cr: Party’s account Cr: Income Account Postage Recovered Cr: Income account Commission on Bills b) Dr: HO account branch concerned Cr: Party’s Account Cr; income account-Postage Receiver Cr: Income account Commission on Bills

INWARD BILLS FOR COLLECTION: Procedure: ♦ When instruments are received from our branches or other banks they are checked for any apparent discrepancy and are compared with the particulars in the schedule ♦ The instruments are stamped and the schedule is attempted. ♦ The instruments are suitably discharged, ♦ The details of the schedule and special instruction are entered in Inward bills for collection Register. IBC numbers in serial order are allotted and noted on the schedule and the instruments, ♦ The following entries are passed on the contra voucher, Dr: Bills Lodged Cr: Inward Bills Collection ♦ Following vouchers are prepared and attached with the instruments: 1. When bills are received from our branches Cr: Head Office Account (Branch Concerned) 2.When bills are received from other banks: Cr: Head Office Account (Branch on Which Demand Draft is to be drawn) Cr: Income Account Postage Recovered Cr: Income Account Commission on Bills ♦ The vouchers, schedules and instruments along with the register are sent to the In charge for checking and signatures ♦ The instrument along with the relative vouchers are sent to the clearing department ♦ The contra voucher is sent to the accounts department. ♦ The schedule is filled in the “IBC Outstanding File”

Realization: When the vouchers are received back from the clearing Department following entries are passed on contra voucher: Dr: Bills for Collection (IBC)

Cr: Bills Lodged (IBC) ♦ The date of payment is marked on the IBC register. ♦ The RR/SR/TR/BL is stamped and endorsed in favor of the drawee and the bill of exchange is stamped and discharged. ♦ The vouchers and documents along with the register are sent to the in charge for checking and signatures ♦ The documents are delivered to the party against acknowledgement on the reverse of the intimation advice ♦ The schedule and the intimation advice are filed in “L.B.C. paid File” BALANCING: Outward Bills For Collection: The account is balanced on fortnightly basis in the following manner: ♦ Jotting of Outstanding bills is taken from O.B.C. register on the balance book ♦ The balance is agreed with the figures of Outward Bills for collection in the Subsidiary Ledger Inward Bills For Collection: The account is balanced on fortnightly basis in the following manner: ♦ Jotting of outstanding bills is taken from O.B.C. register in the Balance Book. ♦ The balance is agreed with the figures of Inward Bills for collection in the subsidiary Ledger.

Clearing Section

When a customer of UCBL presents an instrument drawn on other bank for collection, the instrument is collected through clearing house of Bangladesh Bank. UCBL, Principal Branch takes part in the clearing function on behalf of fifteen branches of UCBL; functioning inside or outside of Dhaka city. The instruments are sent to those banks through clearing arrangement. Every day two houses are arranged; one in the morning and another in the evening.

The evening house is known as return house. Everyday instruments drawn on different banks are sent to the clearing section of Principal Branch from those fifteen branches. The officers of the clearing section enter bank name, branch name, number, and amount through NIKASH 22 software in the main schedule of Banks. They transfer the particulars of those instruments in a Floppy Disc. At 9.30 am the concerned officers of Clearing section go to the Clearing House of Bangladesh Bank to take part in clearing function. He gives the floppy disk containing those entries to Bangladesh Bank officials. They insert the floppy in the computer and set off the claims of UCBL on other banks. Every bank has an account with Bangladesh Bank. Now I want to represent the clearing function through an example: Suppose UCBL has a claim of 15 lacs on Sonali bank. Bangladesh Bank set of this claim through debiting Sonali Bankâ&#x20AC;&#x2122;s Account by 15 lacs Taka and crediting UCBL account by 15 lacs Taka. The officials of UCBL give the instruments of other banks to respective officials of those banks. They also receive the instruments drawn on their bank and come back to UCBL, Principal Branch. They send the instruments of other branches through messengers of those branches. If any Cheque is not passed the messengers bring back the instruments. The officials of clearing section again enter those instruments to the NIKASH22 software. After that they take those return instruments and the floppy disk containing the particulars of those return instruments to the Second House, which take place in the evening. Again the same procedure that took place in first house is done. UCBL officials receive the returned instruments drawn on UCBL and come back to Principal Branch and in the next morning send those return instruments to respective branches. FUNCTIONS: The function of the clearing department can be divided into two parts. 1) Inward Clearing 2) Outward Clearing These functions are discussed below: Outward Clearing: â&#x20AC;˘

Messengers of different branches bring instruments drawn on other Banks to the clearing section of Principal Branch.

•

Bills Section of UCBL Principal Branch also send the instruments drawn on other Banks to the clearing section for collection.

•

The clearing stamps are affixed on the instruments and endorsed

•

The particulars of these instruments are entered in the main schedule of banks through NIKASH22 software and inserted in floppy disc.

•

The diskettes along with the instruments are carried to the clearinghouse. After going there the concerned officials of UCBL gives the instruments to the representative of respective banks.

•

Claims of UABL on other banks are set off by Bangladesh Bank through debiting other bank’s account and crediting UCBL’s account.

•

This function is done in the first house.

Inward Clearing: •

The instruments drawn on UCBL are received from other banks in the clearinghouse.

•

The amount and numbers of instruments are entered in the house from the main schedule of respective banks.

•

The instruments with schedules are arranged branch wise

•

The instruments are sent to branches concerned for clearance and IBCAs are collected from them for honored cheques.

•

The dishonored instruments are sent back to respective banks through the second house.

FDR & BCD section

Fixed Deposit Account: Fixed deposit accounts are opened for a fixed period varying from three months to three years or above and are payable at a fixed date of maturity. Interest on this deposit is paid at the rate fixed by H.O. from time to time depending on the period of maturity. Interest is payable only at the maturity of the deposit. The following table shows different FDR rates: Periods For 1 month & above but below 3 months From 3 months & above but below 6 months

FDR rate 9.00% 9.50%

From 6 months & above but below 1 year 9.00% From 1 year 9.00% (Source: FDR section of Principal Branch) Account opening form (SF-16) and specimen signature card shall be given to the customer and get them filled in and signed by him. Voucher no SF-12 crediting “Fixed Deposit Account” with the amount of deposit with full narration viz. The name of the party, period of deposit, and rate of interest etc. shall be prepared and be given to the depositor to deposit cash with cash officer after recoding the particulars in the scroll book. In case of payment by cheque it shall be attached to the credit voucher and sent to the deposit department for posting and cancellation. On receipt of the vouchers from the cash department a Fixed Deposit Receipt shall be prepared and entered in the Fixed Deposit Ledger. To admit the signature of the account holder the stamp ‘Signature Admitted’ shall be affixed near the specimen signature in the account opening form and specimen signature card. The AOF, SSC, the ledger and the voucher shall be sent to the officer in charge for signature. The in charge shall sign the receipt and initial the ledger. At the time of signing the receipt, he shall verify the authenticity of the voucher. Then the documents shall be sent to the Manager /Authorized Official for his signature on the receipt and across the stamp ‘Signature admitted’ on the account opening form, Specimen Signature Card, and the related voucher. The branch manager shall ensure that the printed number on the deposit receipt forms and in deposit receipt books in use are invariably noted in the respective ledger in advance. At the close of each business day the officer in charge shall verify the total amount for which the Deposit receipt have been used during the day both from the credit vouchers and the counter foils of the various deposit receipts. Barer Certificate of Deposit (BCD): In this type of deposits interest is pre paid while the instrument is purchased. It is barer document and negotiable. This type of deposit is now totally stopped under instruction of Bangladesh Bank to reduce money launderings.

7. BSP SAVINGS CERTIFICATE OR SANCHAYA PATRA: This section deals with buying and selling of Sanchaya Patra. A grade 3A level officer is entrusted with this duty. The National Savings Bureau controls the savings certificate or Sanchaya Patra.

TYPES OF SANCHAYA PATRA: There are four types of Sanchaya Patra in which all are made for a certain time period. The following types of Sanchaya Patra are made available to buyers for sale at UCBL. Five Years Bangladesh Sanchaya Patra: The tenure of BSP is five years. It may be encashed before time of maturity but if it is encased before one year no profit will be given. 14.5% profit is given which is fully out of cash. One person can purchase this sort of BSP up to Fifteen Lac individually and Thirty Lac Jointly. It is not transferable. At the time of encashment, the signature is checked and payment is made in cash or Cheque or by debiting the clientâ&#x20AC;&#x2122;s account. Banks receive BSP from BB through requisition. No payment is made to BB at the time of requisition but a register is maintained by BB, which includes the name of the banks, members of BSP received and the amount in Taka. Each bank has to submit a monthly statement, which contains total number sale over the month, date, and the name of the purchaser and amount in Taka. When a customer buyâ&#x20AC;&#x2122;s a Sanchaya Patra paying cash the following entries are made: Dr: Cash Cr: BB Account

4.6 Branch information UCBL has 107 Branches in Bangladesh Year

2005

2006

2007

2008

2009

2010

No. of Branches

107

Total Branch: 09

Total Branch: 13

Total Branch: 43

Total Branch: 34

Total Branch: 07 Total Branch: 01 Work force At present almost 3000 employees are working at UCBL.

4.7 Highlights on the overall performance of UCBL

Table-4: Overall performance PARTICULARS 2008 2009

1. 2. 3. 4. 5. 6.

Capital Deposit Advance Operating Profit Number of Branches Foreign Correspond

478.04 5451.65 4444.73 245.00 84 185

Source: Draft copy of Annual Report 2009-2010

4.8 SWOT analysis on UCBL

545.00 7754.71 6169.22 325.00 98 185

(Term in Crore) 2010 Growth Rate 900.00 11319.28 9346.03 505.26 107 200

65% 46% 51% 55% -

From the SWOT Analysis we can figure out the ongoing scenario of the UCBL. That is by doing the SWOT Analysis; it is possible to find out the strengths, weaknesses, opportunities and threats of UCBL. So, to a better view of the present business practices of UCBL, I have done the SWOT Analysis.

In SWOT Analysis, two factors act as prime movers: Internal factors: which are prevailing inside the concern, which include strength and weakness External factors: which act as opportunities & threats all over the country?

Strengths         

The Relationship between employer & employee is very much appreciable, which increased the productivity of employee. Management team is very strong. Highly geographic area. Very good profit margin achieved by the last few years. Strong capital back to bring available liquidity. Efficient and experienced management team. Sound Import and Export operation. Executives are highly qualified and experienced. Staffs are swift in their Activities.

Weaknesses 

Lack of proper information in due time.



There is no customer complain desk for this reason it sometime creates irritation.



Customer service is not up to the standard and sufficient.



Though the bank has launched online banking system, the employees are not coped with this system.



Unavailability of high- tech electronic facilities.

Opportunities 

Client reliability on UCBL is growing day by day on the bank



UCBL offers many popular schemes for trade service and these schemes of UCBL promote the traders of the country.



Branches are increasing day by day since people are interested to do the business.



Foreign remittance is greatly increased.



Import and export are increasing gradually, so bank can properly exploit this opportunity.



Online, SMS Banking Services now available in the bank.



Credit card & ATM Booth facility also available now.

Threats 

Very competitive market.



Entry of new commercial bank, leasing companies, and merchant bank etc, they all are competitors.



Competitors are offering innovative new products and services regularly.



Political crisis and lack of trust to the foreign investors.



Government imposes tax and VAT on profit.



Central Bank’s policies some times are not in favor of the private bank’s policies.



Frequent fluctuation of domestic currency with US dollar.

4.9 Conclusion United Commercial Bank Limited (UCBL) is one of the leading private commercial Bank. As a commercial bank, UCBL Bank provides all traditional banking services including a wide range of savings and investment scheme products, foreign exchange and ancillary services with the support of modern technology and professional management. The Bank maintain the highest ethical standards and community responsibility worthy of leading corporate citizen and now searching for continuous improvement in productivity, operational efficiency and thereby enhancing local customer value and strengthen foreign syndicate relationship. Now, UCBL is one of the largest banks operating in Bangladesh having 89 branches throughout the country, the bank provides excellent banking services & has a warm relationship with its clients. Moreover, it has efficient management team. The bank concentrates on continuous improvement is banking services. So as a private bank, UCBL is running steadily and within a very near future, it would take a vital responsibility for the national economy. Chapter –5 A Brief Profile of Barisa

CHAPTER FIVE: A BRIEF PROFILE OF BARISAL BRANCH 5.1 Introduction Barisal Branch started its journey since 31-03-1987 as the 32 th branch of UCBL. The bank is now in the top position among the competitor private banks in the area. The branch is always achieving better and better in respect of increasing number of deposits, loan sanctioned, number of accounts etc. Almost every day huge number of customers is gathering in this branch for doing banking satisfactorily. It is an authorized dealer of foreign exchange. The total manpower of this branch is 20. The branch is headed by an FAVP (First Assistant Vice

President).The branch is just beside the BIBIR PUKUR, Barisal. As it is in the busy area of the city, the customer appearance in the bank is very high. In this branch, the people are mostly courteous, friendly in nature and eager to help despite the tremendous workload. So as a private bank, UCBL is running steadily and within a very near future, it would take a vital responsibility for the national economy. Products of UCBL Barisal Branch: UCB Multi Millionaire UCB DPS Plus Western Union Money Transfer SMS Banking Service Online Service Credit Card Monthly Savings Scheme Deposit Insurance Scheme Inward & Outward Remittances Travelers Cheques Trade Finance Industrial Finance Consumer Credit Scheme Locker Service Departments 

Client Accounts Department



Remittance Department



General Services Department



Cash Department



Accounts Department



Credit Administration Department.



Marketing, Business & Development Department

5.2 Organizational structure:

Branch Manager Md. Tofael Haider (F.A.V.P)

Manager Operation K.M.Shafiqur Rahman (S.E.O)

Client Accounts Department Israt Jahan Sammi (O)

Cash Department Md.Abdul Hay Nazrul Islam Md.asaduzzaman Md.Farid khan

Inland Remitence , Accounts, General Services & Clearing Department Md.Reaz Ahmed (S.O)

Pallavi Mukharjee

Credit Admin Department Md. Jakir Hossain Rari(S.O)

Marketing &Business Dev. Department

K.M.Shafiqur Rahman (S.E.O)

Account Opening Section: I work Account Opening Section. UCB Bank open the following types of accounts and may receive the deposits in those accounts.

Liabilities Products: # Current Deposit # Savings Bank Deposit # Fixed Deposit # Short Term Deposit # Monthly Savings Deposits

Cash & Computer Section: Cash is one of the most important sections of General Banking Department. It deals with cash, the most liquid asset. The value of banking is insured for a certain some of money. When money exceeds the limit it must be sent to the Central bank vault. So Cash In charge should always be concerned about his custody. Functions of this Section: •

Receiving cash

•

Paying cash

•

Issuing vouchers

•

Making Proper entries in the ledgers

Remittance Section There is some frequent situation; customer of a bank needs to transfer his fund or money to somewhere within the country boundary. It is really a risky thing to carry the money and is costly a well. What they do, just purchase an instrument so that his/her fund can be transferred through his/her own bank. This short of activities is cubed under the Inland Remittance: 

Demand Draft. (D.D.)



Telegraphic Transfer (T.T.)



Pay Order (P.O.)

Transaction through online.

Bills Section Customers of UCBL, Principal Branch submit many instruments in the bills section for collection. Bills section plays a vital role in collecting these bills. The bills submitted for collection can be divided into two categories. # Outward Bills #Inward Bills

Clearing Section When a customer of UCBL presents an instrument drawn on other bank for collection, the instrument is collected through clearing house of Bangladesh Bank. Every day two houses are arranged; one in the morning and another in the evening. The evening house is known as return house. Everyday instruments drawn on different banks are sent to the clearing section of Barisal Branch. The officers of the clearing section entry bank name, branch name, number, and amount in their register. Every bank has an account with Bangladesh Bank. .The function of the clearing department can be divided into two parts. 3) Inward Clearing 4) Outward Clearing

FDR & BCD section Fixed Deposit Account: Fixed deposit accounts are opened for a fixed period varying from One months to three years or above and are payable at a fixed date of maturity. Interest on this deposit is paid at the rate fixed by H.O. from time to time depending on the period of maturity. Interest is payable only at the maturity of the deposit. The following table shows different FDR rates:

Periods For 1 month & above but below 3 months

FDR rate 9.00%

From 3 months & above but below 6 months 9.50% From 6 months & above but below 1 year 9.00% From 1 year 9.00% (Source: FDR section of Barisal Branch) The branch manager shall ensure that the printed number on the deposit receipt forms and in deposit receipt books in use are invariably noted in the respective ledger in advance. At the close of each business day the officer in charge shall verify the total amount for which the Deposit receipt have been used during the day both from the credit vouchers and the counter foils of the various deposit receipts. Barer Certificate of Deposit (BCD): In this type of deposits interest is pre paid while the instrument is purchased. It is barer document and negotiable. This type of deposit is now totally stopped under instruction of Bangladesh Bank to reduce money launderings. Advanced Section: There are many types of Loan in UCBL Barisal Branch. This Types of Loan are given below:-

Assets Products: •

CC(Hypo) Loan

•

Home Loan

•

House Building Loan

•

Staff Loan(PCS)

•

Any Purpose Loan

•

Auto Loan

•

Transport Loan

•

BG (Bank Guarantee) Loan

•

Overdraft *Secured Overdraft(FDR/MSS/DPS) *OD (em) Pay order *OD (work order)

Foreign Exchange Department:

No Foreign Exchange transactions are routings through Barisal Branch. But I Learn about Foreign Exchange and Foreign Trade from practical and theoretical knowledge from present head of branch who is highly experienced in this line. Foreign Exchange is the exchange of currency of two different countries as for ex: US Dollar vs. Bangladesh Taka. Currency has two types: •

Foreign Currency

•

Local Currency

Foreign Currency is the currency other than local currency. Local Currency means native currency. Functions of Foreign Exchange: •

Rate of exchange

•

How the Rate of exchange works

•

Forward & Spot rate

•

Methods of quoting exchange rate

•

Premium & Discount

•

Risk of exchange rate

•

Causes of exchange rate Fluctuation

•

Exchange Control

•

Convertibility

•

Exchange Position

•

Intervention Money

•

Foreign Exchange Trading

•

Export & Import Letter Of Credit

•

Non Commercial Letter Of Credit

•

Rules & Regulation used in Foreign Trade

Importer: The Person or entity who possesses required documents papers, as per foreign exchange regulation and has got import registration certificate to import goods and accessories from abroad may be defined as Importer.

Exporter: The Person or entity who possesses required documents papers, as per foreign exchange Regulation and has got export registration certificate to export goods and accessories to Abroad may be defined as exporter. Indentor: Is the person or entity to operate business in importer country as nominated by the buyer certified by central bank. Invoice: It is financial document which is contained of value of imported goods,quantity,quality, Unit price and specification goods. Invoice must be signed both buyers and sellers. Any Invoice not valid signature of buyer and seller. Invoice are of three types.Such as:•

Proforma invoice

•

Commercial invoice

•

Consular invoice

Important Features of an LIC: LIC: Letter of Credit is an undertaking of issuing bank to the beneficiary to pay a certain amount as per terms and condition stipulated Letter Of Credit. Two types of LIC: 1) Sight LIC  Price Paid on presentation 2) Deferred LIC After Certain time period Cash LIC Opening Procedure: •

IRC

•

Margin

•

Collateral Security

•

Invoice / Indent

•

Insurance Policy

•

Credit Report of Supplier

•

Maintain a CD Account

•

Party Cash Flow Statement

•

CIB Report from central bank

•

CRG Credit Risk Grading

•

Proposal

Issuing Bank sends a proposal to permission from Head Office. Any AD Branch can open LIC. After getting permission from HO, Branch will obtained all charge documents as advised by head office in the sanctioned letter and obtained margin against the value of LIC and keep it in margin account. Then Bank management search unit price of the imported goods from competent market and take initiative to open LIC through their foreign correspondence. Export Financing: Financing exports constitutes an important part of a bank’s activities. a) Pre-shipment credit Pre-shipment credit, as the name suggests, is given to finance the activities of an exporter prior to the actual shipment of the goods for export. The purpose of such credit is to meet working capital needs starting from the point of purchasing of raw materials to final shipment of goods for export to foreign country. An exporter can obtain credit facilities against lien on the irrevocable, confirmed and unrestricted export letter of credit in form of the followings: i)

Export cash credit (hypothecation):

Under this arrangement, a credit is sanctioned against hypothecation of the raw materials or finished goods intended for export. Such facility is allowed to the first class exporters. As the bank has got no security in this case, except charge documents and lien on exports L/C or contract, bank normally insists on the exporter in furnishing collateral security. ii) Export cash credit against trust receipt: In this case, credit limit is sanctioned against trust receipt (TR). This type of credit is granted when the exporter wants to utilize the credit for processing, packing and rendering the goods in exportable condition and when it seems that exportable goods cannot be taken into bank’s custody. This facility is allowed only to the first class party and collateral security is generally obtained in this case. iii) Packing credit: Packing Credit is essentially a short-term advance granted by a Bank to an exporter for assisting him to buy, process, manufacture, pack and ships the goods. This type of credit is sanctioned for the transitional period starting from dispatch of goods till the negotiation of the export documents. Lending rate fixed at 10% as export rate.

iv) Back to Back Letter of Credit (BTB): It is an undertaking of issuing bank to the beneficiary to pay a certain amount as per terms and condition contain in the letter of credit by lien of an export LIC for procurement of raw materials against execution of export. It is open on sight basis or deferred basis. Usually deferred back to vacancy is open against lien of export LIC for execution of export. As Bangladesh is a developing country exporters face problems of scarcity of raw material. Because raw materials are not available in the country. These have to be collected from abroad. In that case, exporter gives lien of export L/C to bank as security and opens an L/C against it for importing raw materials. This L/C is called Back To Back L/C. In back to back L/C, MBL keeps no margin. Sometimes there is provision in the export L/C that the importer can use the certain portion of the export L/C amount for importing accessories that are necessary for the making of the product. Only in that case, BTB is opened. Payment of Back to Back L/C: Various vouchers use at the time of opening of LIC: Dr. Bankers liabilities on BBLC Cr. Customer liabilities on BBLC

Insurance documents: Insurance Documents are ones, issued by the issuer, certifying that the insurer and the insured have signed an insurance contract covering the goods to be transported. If the goods under the contract do incur damages or even losses in transit, the insured can lodge a claim against the insurance documents.

Transport documents: Transport documents are

Airway bill



Mate’s Receipt



Bill of lading



Railway consignment Note



Roadway bill(CMR)

Custom documents & procedures: Custom Documents include

Shipping Bill



Bill of entry



Custom Duties



Warehousing



Free port etc.

Lodgment of Export Document and related vouchers:  Charge document to be obtained  Document to be send to Issuing bank for payment  Lodgment of claim to Reimbursing Bank Post shipment credit: This type of credit refers to the credit facilities extended to the exporters by the banks after shipment of the goods against export documents. Necessity for such credit arises as the exporter cannot afford to wait for a long time for without paying manufacturers/suppliers. LIM Loan against imported Merchandise. LATR Loan again trust received

Contract of sale (1) The international trade can be illustrated by the following diagram:

Exporter London (Beneficiary)

Forwards L/C to (4)

Ships Goods to (5) Presents documents and obtains payment from (6)

Midland Bank London/ advising negotiating Bank

Recovers Amount from (8)

Obtains reimbursement from (7)

Opens L/C and send it to (3)

Importer Dhaka (Applicant) Applies for opening of L/C (2)

Mercantile Bank Ltd., Dhaka (Issuing Bank)

Foreign remittances Foreign remittance refers to the transfer of fund from one country to another either through the office channel i.e. banking channel, Post office or the informal channel. In Bangladesh still informal market is playing a significant role. Foreign remittance has two wings i.e. inward and outward remittance. This can be shown below: Foreign Remittance

Foreign Inward

Foreign Outward

Remittance

Inward remittance covers purchase of foreign currency in the form of foreign T.T., DL, and bills T.C. etc. sent from abroad favoring a beneficiary in Bangladesh. Purchase of foreign exchange is to be reported to Exchange control Department of Bangladesh bank on Form -C. Outward remittance covers sales of foreign currency through issuing foreign T.T. Drafts, Travelers Check etc. as well as sell of foreign exchange under L/C and against import bills retired.

Requirement to deal with foreign remittance:

 Authorized dealer branches of the bank are those who are permitted by the Bangladesh Bank to deal in foreign exchange business subject to the fulfillment of foreign exchange rules & regulations of the country.  Agency arrangement, to facilitate foreign exchange business throughout the world, may be made between local bank and foreign bank. However, in case of agency arrangement accounting relationship may or may not be made.  Drawing arrangement is made to facilitate remittances through concluding accounting relationship between a bank & corresponding bank or exchange house.  The foreign currency account maintained by the authorized dealers in foreign exchange with the foreign banks /correspondents are called Nostro Accounts. All foreign exchange transactions are routed through nostro accounts. Nostro Account means my account with you.  Current accounts of foreign banks with their correspondents in the latter’s currency is called Vostro Accounts. Vostro account means your account with me. Loro accounts means your account with them.

Modes of foreign inward & outward remittance: 

Telegraphic Transfer(TT) refers to the payment instruction by tested telex/cable or authentically faxes in foreign bank on local bank.. MT is an instrument issued by a remitting to the paying bank advising in writing to make payment of certain amount to specific beneficiary. A demand draft(DD) is a negotiable instrument issued by a bank drawn on bank with the instruction to pay a certain amount to beneficiary on demand. Authorized dealers are permitted to purchase foreign currency notes. Issued travelers Cheques (TC) may be purchased by local bank.

   

Modes of foreign outward remittance    

Local banks can draw telegraphic transfer. Any authorized dealer branches can issue foreign drafts & currency draw on the bank. AD branches can sale Travelers Cheques as per the ceiling fixed by Bangladesh Bank. Foreign Remittance, MT & DD may be cancelled and payment against therein may be executed to the applicant only after observing all the existing formalities.

Types of Foreign Currency: There are many types of foreign currency. Such as:• • • •

FC Foreign Currency NFCD Non-Resident Foreign Currency RFCD Resident Foreign Currency ERQ Exporter retention quota

Foreign currency account is used for the person of foreign country Non-Resident foreign currency is used for the person who do not reside in abroad but travel many time and after arrival of within six months and carry foreign currency can open NFCD account. Resident foreign currency account can be open who reside in abroad and they can open RFCD accounts in foreign currency. Exporter retention account is open for exporters of the country who export home and abroad.

Problems faced by foreign exchange department: 

Modern technical equipment such as all transactions are not thoroughly well computerized in foreign exchange department. As a result the exchange process makes delay and it is also complicated.



Employees of foreign exchange department are not as much as skilled along with modern equipment.



Customer of the bank tries to dominate the employee over their work.



In some cases, this branch takes different Margin and commission on L/Cs from different customer. The bank should review the customer’s behavior for a period and certain policy in this regard.



In many cases, the foreign banks want confirmations from other foreign banks with which this bank has correspondence. This proves the poor financial condition of our country



Lack of space in the office, which is not well decorated.



Lack of advertising to inform the customer should develop a about various types of products to make huge amount of deposits and making profit.  Unholy intervention of the superior members of various sectors.

Branch Performance: As on 31-03-09

Deposit Target 3916

Deposit Achvmt 3914

Advance Target 584

Advance Achvmt 566

Profit Target 13

Profit achvmt 7.02

30-06-09

4273

4053

737

572

11.05

30-09-09

4573

4100

867

658

31-12-09

5000

5132

1050

1053

31-03-10

5474

4650

1165

958

28.51

30-06-10

5816

6489

1276

1118

31-12-10

6200

6396

1500

1991

100

139

Business Growth during the Incumbency of present HOB: Particular

(Fig. in lac) Position at the time Position as on 30-06- 30-12-2010 of joining as HOB as 2010 (i.e. Reporting

on 07-12-09 4330.62 823.96 43

Deposit Advance Profit

date) 6489.00 1118.00 60

6396.00 1991 139

Net Profit Last 3 Months in Barisal Branch: Net Profit Table-8

October’10-December’10 Month

Taka

31 October’10

11400000

30th November’10

12400000

31 December’10

13900000

Source: Affairs statement of Barisal Branch Table-8 shows that the Net Profit of Barisal Branch is continuously increasing. It was 1,14,00000 in October,2010 & it increased to 1,24,00000 in November and 1,39,00000 in December,2010.

5.2 Deposits UCBL BARISAL BRANCH On December 31, 2010 Table-09: No. of Different types of Deposits A/C Name

No. of Deposits

Current Account

507

Savings Account

2355

FDR

530

Others(Staff Account, SOD Loan A/C 914 Etc) Total Account

4306

Source: Affairs statement of Barisal Branch Table-09 shows that the total account in the Barisal Branch is 4306. Savings Account occupies the major portion in total account with 2355 Deposits. There are 530 FDR & 507 Current Account in this Branch on 31st December, 2010. The rest of the Deposits are comprised of MSS, DPS, Staff Account, SOD etc.

5.3 Conclusion Barisal Branch is one of the most productive branches of UCBL As a branch of commercial bank it provides all general banking services including a wide range of savings and investment scheme products, with the support of modern technology and professional management. The bank has a warm relation with its clients. The branch is always achieving better and better in respect of increasing number of deposits, loan sanctioned, number of accounts etc. The bank is now in the top position among the competitor private banks in the area. In last 6 months the branch achieved a remarkable result. In this couple of months the output from this branch in terms of productivity, profit & efficiency has improved tremendously. The output from this branch is increasing day by day. That is why; the branch is concentrating on the continuous improvement so that it can serve better service to the clients. Moreover, the branch has got an efficient team of manpower. So, it is sure that the Barisal Branch of UCBL has a brighter prospect in future.

Chapter –6 Procedure & Performance of Foreign Exchange Department

CHAPTER SIX: PROCEDURE & PERFORMANCE OF FOREIGN EXCHANGE 6.1 Introduction No country is self-sufficient in this world. Everyone is, more or less, dependent on another, for goods or services. That is why exchange of foreign currency is must to meet the needs.. In terms of section 2(d) of the Foreign Exchange Regulations-1947, as adopted in Bangladesh foreign exchange - means foreign currency and includes any instrument drawn, accepted, made or issued under clause 13 of article 16 of the Bangladesh Bank Order, 1972, all deposits, credits and balances payable in any foreign currency and draft, travelers Cheques, letter of credit and bill of exchange expressed or drawn in Bangladesh currency but payable in any foreign currencies. Foreign Exchange means exchange of foreign currency between two countries. If we consider ‘Foreign Exchange’ as a subject, then it means all kinds of transaction related to foreign currency. In other words, foreign exchange deals with foreign financial transactions. There are 3 fundamental aspects of the general mechanism of foreign exchange: 

Every currency has its own currency-legal tender/ distinctive units of account.



Banks effects the conversion of one currency into another by book-keeping entry carried out in two centers concerned.



These exchanges are effected by means of credit instruments viz, Draft, Mail Transfer, Telegraphic Transfer etc.

In exercise of the powers conferred by of the Foreign exchange regulation act 1947 certain schedule banks authorized by the Bangladesh bank to deal in Foreign exchange; the selected branches of the bank can transact such business. They are known as an Authorized dealers. Authorized dealers are required to bring the Foreign exchange regulation to the notice to their customers and ensure compliance with the regulations by the customer in their day-to-day dealing. Bank branch should be authorized dealer, with due approval from Bangladesh Bank to run foreign exchange transactions. According to the Bangladesh Law, the payment must be received within 120 days.

6.2 Functions of foreign exchange department  Exchange of Foreign Currencies.  To make arrangement with Foreign Correspondent.  Buying & Selling Foreign currencies.  Handling of Inward & Outward Remittance  Opening of L/C & Settlement of Payment.  Investment in Foreign Trade.  Opening & Maintenance of Accounts with Foreign Banks under intimation to BB  Export Documents handling.

This department is playing an important role in enhancing export earning, which aids economic growth and in turn it helps for the economic development. On the other hand, it also helps to meet those goods and service which are more demandable and not adequate in our country. Foreign Exchange Department

Import

Export S

Foreign Remittance

Figure: Departments of Foreign Exchange of UCBL

6.3 Foreign trade The Foreign trade of a country refers to its imports & exports of merchandise from and to other countries under contract of sale. There are various reasons for conducting business on an international scale. Trade between countries arises because it is to their mutual advantage. If a country is enjoying a monopoly is the production of a certain commodity, it will have an absolute advantage in the production of that commodity over other countries. The other nations have to import that commodity. International trade arises because some countries have a comparative advantage in the production of some goods over other goods. . When two countries adopt a direct import & export relationship bilateral trade occurs & when countries deal worldwide, there is multilateral trade. In international trade, the values in terms of money are never equal. It is the relationship between a nation's imports and exports. A favourable balance of trade is known as a trade surplus and consists of exporting more than is imported; an unfavourable balance of trade is known as a trade deficit or, informally, a trade gap. The composition of imports & exports is an important aspect of a countryâ&#x20AC;&#x2122;s foreign trade. The gain from trade depends on both its total value & commodity structure. Imports of Bangladesh may be classified into three categories: Capital goods, industrial raw materials & consumer goods. The terms of trade are the rate at which a country obtains its imports in exchange for its exports. It is the volume of imports that can be bought with a given volume of exports. In short it is the ratio of export prices into import prices.

6.3.1 Legal basis of foreign exchange transactions Foreign exchange transactions are performed under some legal regulations, as follows:        

Foreign Exchange Regulation Act – 1947 Import and Export Control Act- 1950 Customs Act-1969 The uniform customs and practices for documentary Credit (UCPDC) – 1993 revision & International Chamber of Commerce Publication (600), is an important law for settlement of terms and conditions between exporter & importer in international trade. Import Policy Issued by Ministry of Commerce Export Policy Issued By Ministry of Commerce International Rules Issued by International Chamber of Commerce (ICC)/ Uniform Rules and Practices Different Foreign Exchange Circulars issued by Bangladesh Bank

6.3.2 Sale term & payment term in foreign trade Every Foreign trade transactions are the result of a sale contract between the seller & buyer. In a sale contract, seller agrees to sell & buyer agrees to buy a specified quantity of goods on terms of mutually agreed upon. A sale contract incorporates a number of terms & conditions relating to the various aspects of the deal, the most important among them being the terms relating to the place & the mode of delivery, the terms of payment of freight & insurance charges, the mode of payment for the goods, prices, quality, quantity and the period of supply of the goods to be bought & sold. The Payment Term shows where & how payment will be effected. It has five Principal: 1. Cash in advance 2. Letter of Credit 3. Drafts 4. Consignment 5. Open Account Cash in Advance involves maximum risk to exporter used where there are political unrest goods made to order new unfamiliar customer. Letter of Credit (L/C) is a letter addressed to seller written and signed by buyer’s bank promising to honor seller’s drafts. Bank substitutes its own commitment & seller must conform to terms. Drafts are unconditional order in writing showing exporter’s order for importer to pay at once (sight draft) or in future (time draft) including three functions are clear evidence of financial obligation, reduced financing costs & provides negotiable and unconditional financial instrument (i.e. May be converted to a banker’s acceptance)

Drafts are four types: a. Sight b. Time c. Clean (no documents needed) d. Documentary On the basis of consignment: Exporter = the consignor Importer = the consignee Here, consignee attempts to sell goods to a third party & keeps some profit & remits rest to consignor by using between affiliates.

6.3.3 Means & methods for settlement of international payments There are five basic methods of obtaining payment for export orders, and according to the order of the exporter's preference they are: 

Cash in advance



Documentary letter of credit



Documentary collection



Open account



Payment against goods on consignment

6.3.4 Foreign exchange control in Bangladesh Foreign exchange controls are various forms of controls imposed by a government on the /sale purchase of foreign currencies by residents or on the sale/purchase of local currency by nonresidents. Bangladesh Bank, the central bank of the country, is the legal authority for exchange control system. Commercial banks deal in foreign exchange as per guidelines given by the central bank from time to time. A good number of commercial banks, both in public and in private sectors, are operating in Bangladesh.

Common foreign exchange controls include: 

Banning the use of foreign currency within the country



Banning locals from possessing foreign currency



Restricting currency exchange to government-approved exchangers



Fixed exchange rates



Restrictions on the amount of currency that may be imported or exported Methods of foreign exchange control system in Bangladesh

Methods of Exchange Control

Direct

Exchange Intervention Or Pegging

Clearing And Payment Agreements

Exchange Restriction Or Rationing

Blocked Accounts

Indirect

Transfer Moratorium

Export Subsidy

Interest Rate Change

Import Duty

Multiple Currency rates

Exchange Intervention or Pegging refers to the buying & selling of Foreign Exchange in the market by the Government or its Agency (Central Bank) with a view to influencing the exchange rate. Exchange Restriction or Rationing refers to the policy of the Government whereby the supply of domestic currency in the exchange market is restricted. Blocked Account is an account held in a bank by a non-resident that is subject to restrictions regarding withdrawals from the account & transfer of funds.

Multiple Currency Rates refers to the policy of employing different rates of exchange for transactions involving different commodities & also for different currencies. Clearing & Payment Agreement is an agreement between two countries of relatively equal strength by which each country undertakes to make payment to its own currency out of the payment that it receives from its own importers. Transfer Moratorium is a temporary device of solving payments problem when payments to foreign creditors or exporters remain suspended. Once the foreign exchange problem is solved, the payment is made to exporter & creditors. The Interest Rate Change is the outcome of the forces of demand & supply relating to each other’s currencies. Import Duties are imposed to encourage the domestic industries & serving as protection to home industries against foreign competition. Export Subsidy indicates the system under which Government contributes a part of the cost of production of the export-oriented goods. The objectives of foreign exchange control are 

Protection of balance of payment



Stability of exchange rate



Prevention of the flight of capital



To protect home industry



Overvaluation or Under-valuation of currency



Economic planning

6.4 UCPDC600 For many years, the International Chamber of Commerce has been providing rules for the use of letters of credit. These rules affect all parties involved in transactions covered by documentary credits including: * Banks and other institutions that issue confirm or otherwise process them * Buyers (applicants) who cause them to be issued * Sellers (beneficiaries) who look to them for payment * Service providers such as forwarders, carriers, customs brokers who provide or use the documents that the credits stipulate UCP rules are regularly reviewed and updated when necessary to reflect current banking and trade practice. The current revision process started when the ICC Banking Commission

authorized work to begin in 2003. A nine-person drafting group and a forty-one personconsulting group were formed to develop proposed revisions for the ICC national committees worldwide. Based on national committee feedback, successive meetings provided revised drafts, repeating the cycle over a three-year period. Bankers and commercial parties in more than 175 countries utilize the UCP. Some 11-15% of international trade utilizes letters of credit, totaling more than a trillion dollars (US) per annum. Historically, the commercial parties, particularly banks, have developed the techniques and methods for handling letters of credit in international trade finance. This practice has been standardized by the ICC (International Chamber of Commerce) by publishing the UCP in 1933 and subsequently updating it throughout the years. The ICC has developed and molded the UCP by regular revisions. The result is the most successful international attempt at unifying rules ever, as the UCP has substantially universal effect. The latest revision was approved by the Banking Commission of the ICC at its meeting in Paris on 25 October 2006. This latest version, called the UCP600, will have a commencement date of 1 July 2007.

6.5 L/C operation Letter of Credit (L/C) can be defined as a “Credit Contract” whereby the buyer’s bank is committed (on behalf of the buyers) to place an agreed amount of money at the seller’s disposal under some agreed conditions. The Uniform Customs and Practices for Documentary Credit (UCPDC) published by International Chamber of Commerce (1993) publication no 500 define Documentary Credit: a) b) c) d)

Any arrangement however named or described whereby a bank (the issuing bank) acting at the request and on the instructions of a customs (the Applicant) or on it’s own behalf, Is to make a payment to or to the order of a third party(the beneficiary) or is to accept and pay bills of exchange(Drafts)drawn by the beneficiary or Authorize another bank to effect such payment or to accept and pay such bills of exchange (Drafts) Authorize another bank to negotiate against stipulated documents provide that terms and conditions are complied with.

6.5.1 Forms & Types of documentary letter of credit a) Revocable Letter of Credit This type of letter of credit can be revoked or cancelled at any time without consent of, or notice to the beneficiary. As per article 8 (a) of UCPDC-500 “A revocable credit may be amended or cancelled by the issuing bank at any moment and without prior notice to the beneficiary” b) Irrevocable Letter of Credit An irrevocable credit is a documentary credit, which cannot be revoked, varied or changed/amended or cancelled without the consent of all parties- buyer (Applicant), seller (Beneficiary), Issuing Bank, and Confirming Bank (in case of confirmed L/C). As per Article 9(a) of UCPDC 500, an irrevocable credit constitutes a definite undertaking of the Issuing Bank, provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and that the terms and conditions of the credit are complied with. Irrevocable

Credit gives the seller greater assurance of payments, but he/she remains dependent on an undertaking of a foreign bank.

Types of documentary letter of credit Letters of credit can be classified into different types: 

Revocable L/C and Irrevocable L/C



Confirmed and Unconfirmed L/C



Sight L/C and Usance L/C



Transferable and Non-transferable L/C



Revolving L/C



Back-to-Back Credit



Red Clause & Green Clause Credit



Standby L/C

Revocable L/C, as the name suggests, means that it can be canceled or modified by the issuing bank usually at the will of the buyer without prior approval of the exporter at any time before the documents have been paid or accepted. Irrevocable L/C is the one that cannot be modified or rescinded by the opening bank without express permission of all parties, including the exporter, importer and intermediary banks. In case of seller (beneficiary), revocable credit involves risk, as the credit may be amended or cancelled while the goods are in transit and before the documents are presented, or although presented before payments has been made. The seller would then face the problem of obtaining payment on the other hand revocable credit gives the buyer maximum flexibility, as it can be amended or cancelled without prior notice to the seller up to the moment of payment buy the issuing bank at which the issuing bank has made the credit available. In the modern banking the use of revocable credit is not widespread.

Confirmed L/C represents the obligation of the confirming bank in the exporter's locality, usually the advising bank. It means a seller who has little confidence in or does not know the financial strength of the foreign opening bank often requests the confirming bank guarantees payment if the issuing bank in exporter’s country is often. Unconfirmed L/C means that the L/C doesn't have any payment guarantee by a bank in the exporter's country. It contains the obligation of the issuing bank only. This type is usually used when the opening bank of the undoubted reputation and financial strength or the transaction is small.

Sight L/C means payment is immediately made to the beneficiary on presentation of the stipulated documents and on condition that all the terms of the credit have been complied with. It is advantageous to the exporter as he can get the payment quickly. Usance L/C or Time L/C implies that the seller is paid in a specified number of days after the presentation of the stipulated documents. It can be further divvied into: Bankerâ&#x20AC;&#x2122;s acceptance credit and deferred payment credit. Banker's acceptance credit calls for Usance drafts to be drawn on and accepted by the opening-paying bank. Under this type, the paying bank guarantees to make payment in a specified number of days after its acceptance of the time draft. Deferred payment credit doesn't call for a time draft drawn on and accepted by the paying or opening bank. Under this type, buyer and seller agree a period of credit. It is similar to banker's acceptance credit except that under deferred payment credit the seller cannot make use of discounting facilities and therefore cannot get payment in advance. Transferable credits arise where the exporter is obtaining the goods form a third party, does not have the resources to buy outright and await payment from his overseas customer No letter of credit is transferred unless specifically authorized in the credit and this kind of credit can be transferred only for one. Non-transferable credit is one that cannot be transferred. If a letter of credit is not indicated with "Transferableâ&#x20AC;?, it is a non-transferable credit. Back to back credit arises in circumstances similar to those of the transferable credit. It means that the middlemen receives a credit in his favor from the buyer and ask his bank (usually the advising bank of the primary credit) to establish a second credit in favor of his supplier against the security of the credit in his own favor. Red clause credits are also called anticipatory credits. This instrument similar to a normal letter of credit accepts that it contains a clause (originally typed or printed in red) authorize the negotiating bank to make clean advances of a certain percentage or the total amount of the L/C to the exporter. The clean advances are based on the guarantee of the opening bank and the importer, which means that the opening bank or the importer is liable for repayment plus interest in cases where no shipment is made under the letter of credit or when the loan is not repaid by the beneficiary. These types of L/C are often used as a kind of "back up" in the event of the buyer not paying for the goods. They normally require the issuing bank to make payment to the seller upon presentation of documents evidencing non-payment by the importer.

Standby L/C can only be used when the applicant fails to fulfill it payment obligation.

6.5.2 Mechanism of L/C operation Importer

Who applies for L/C

Issuing Bank

It is the bank which opens/issues a L/C on behalf of the importer.

Confirming Bank

It is the bank, which adds its confirmation to the credit and it, is done at the request of issuing bank. Confirming bank may or may not be advising bank.

Advising or Notifying Bank

It is the bank through which the L/C is advised to the exporters. This bank is actually situated in exporterâ&#x20AC;&#x2122;s country. It may also assume the role of confirming and / or negotiating bank depending upon the condition of the credit.

Negotiating Bank

It is the bank, which negotiates the bill and pays the amount of the beneficiary. The advising bank and the negotiating bank may or may not be the same. Sometimes it can also be confirming bank.

Accepting Bank

It is the bank on which the bill will be drawn (as per condition of the credit). Usually it is the issuing bank.

Reimbursing Bank

It is the bank, which would reimburse the negotiating bank after getting payment â&#x20AC;&#x201C; instructions from issuing bank.

The Mechanism of Letter of Credit is as follows:

INDENTOR

Makes Payment

Advises and/or confirms

SELLER EXPORTER BENEFICIARY

Submit Documents

Application for Opening L/C

Makes Payment against Document

Present Document

BUYER/ IMPORT

Issue L/C

ADVISING BANK/ NEGOTIATING BANK

ISSUING BANK

Docume nt Market s

Payme

Pays or Reimburses

Instruction to Pay or Reimburse

Forward

FIG: FOREIGN EXCHANGE MECHANISM OR REIMBURSING BANK

The Operational Procedures of L/C in Export & Import Business are as follows: Issuing Bank (Bangladesh)

(Advising Bank: HONG KONG) (Hong Kong)

(Negotiating Bank) (Hong Kong)

Reimbursing Bank (Japan)

Importer L/C Opener Or Applicant

Performa Invoice Contract Intenderâ&#x20AC;&#x2122;s Intend

Exporter or Supplier Beneficiary

Shipment Issuing Bank The bank will deal with L/C for the buyer against supplier & through the L/C advising bank.

of Goods

Negotiation Bank This bank negotiates with issuing bank in the favor of exporter for the bill and pays the amount to the exporter.

Advising Bank This bank will deals with the exporter & inform the supplier that a L/C came from the buyer.

Reimbursement Bank This bank deals with payment in favor of issuing bank.

6.5.3 Accounting procedure of L/C opening in UCBL When the officer thinks fit the application to open a L/C, giving the following entries-creates the following chargesParticulars Party A/C SD Margin on L/C I/A Commission A/C on L/C SD VAT on L/C I/A SWIFT Charge I/A Data max I/A Stamp

Dr. Cr. Cr. Cr. Cr. Cr. Cr.

Dr(Tk.) XXX

Cr(Tk.) XXX XXX XXX XXX XXX XXX

Charges in Tk 10% 0.5% 15% on Commission Tk.3000 Tk.1000 Tk.150

I/A Postage I/A Courier charge I/A miscellaneous

Cr. Cr. Cr.

XXX XXX XXX

Tk.300 Tk.1500

6.6 Import Imports are foreign goods and services purchased by consumers, firms, & Governments in Bangladesh. The importers are asked by their exporters to open letter of credits so that their payment against goods is ensured. Goods are being imported for personal use, commercial purpose or industrial use. So, there are three kinds of importers such as: 1. Personal importer (who imports for his personal need) 2. Commercial importer (who imports for commercial purpose) 3. Industrial importer (who imports for industrial purpose) The following documents are required to be submitted to the licensing authority for registration as importers:  The LCA Form properly filled in quintuplicate signed by the importer  Questionnaire from duly filled in and signed  Insurance cover note with money receipt  TIN certificate  Trade license from the Municipal or Local Authority  Bank Certificate  National ID Card  Partnership deed where applicable  Certificate of Registration with the Registrar of Joint Stock Companies & memorandum and articles of the association in case of Private & Public Limited Company  Proof of having VAT registration certificate  Certificate from the Chamber of Commerce/ Registered trade Association  Ownership documents of rent receipts of the place of business  Any other documents required under the relevant import policy

6.6.1 Import procedure Step 1 - Registration with CCI & E  For engaging in international trade, even trader must be first registered with the Chief Controller of Import and Export (CCI & E).  By paying specified registration fees to the CCI & E- the trader will get IRC/ERC (Import/Export Registration Certificate), to open L/C with bank, this IRC is must. Step 2 - Determination terms of credit  The terms of the letter of credit are depending upon the contract between the importer and exporter Step 3 - Proposal for Opening of L/C

To have an import L/C limit an importer submits an application to department to EXIM Bank. The proposal contains the following particulars:       

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

Step 4 – Submission of documents by importer to the banker  For opening L/C, the importer is required to fill up a prescribed application form provided by the banker along with the following documents: 1. L/C Application form 2. Filled up LCA form 3. Pay Order for insurance 4. Pro-forma invoice 5. Tax Identification number 6. Import registration certificate

7. Beneficiaries credit report 8. Filled up amendment request Form 9. IMP form 10. Insurance cover note and money receipt 11. No Objection Certificate (NOC) 12. VAT certificate

Step 5 - Opening of L/C by the bank for the opener:  Taking filled up application form from the importer.  Collects credit report of exporter from exporter's country through his foreign correspondence there.  Opening bank then issues credit by air mail/TELEX/SWIFT followed by L/C advice as asked by the opener through his foreign correspondent or branch as the case may be, at the place of beneficiary. The advising bank advises the L/C to the beneficiary on his own form where it is addressed to him or merely hand over the original L/C to the beneficiary if it is so addressed.

Step 6 - Shipment of goods and lodgment of documents by exporter: Then exporter  Ships the goods to the destination of the importer country.  Sends the documents to the L/C opening bank through his negotiating bank. Generally the following documents are sent to the opening banker with L/C: 1. Bill of Exchange 6. Packing List 2. Bill of Lading

7. Advice Details of Shipment

3. Commercial Invoice

8. Pre-shipment Inspection Certificate

4. Certificate of Origin

9. Vessel Particular

5. A certificate stating that each packet 10. Shipment Certificate contains the description of goods over the packet.

Step 7 - Lodgment of Documents by the opening Bank from the negotiating bank: After receiving the documents, the opening banker scrutinizes the documents. If any discrepancy found, it informs the importer. If importer accepts the fault, then opening bankers call importer retiring the document. At this time many thing can happen. These are indicated in the following:  

Discrepancy found but the importer accepts - no problem occurs in lodgment. Discrepancy found and importer not agreed to accept - In this case, importer protest and send back all the documents to the exporter and request his to make in the specified manner. Here banker is not bound to pay because the documents send by exporter is not in accordance with the terms of L/C.



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



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

Step 8 - Retirement The importer receives the intimation and gives necessary instruction to the bank for retirement of the import bills or for the disposal of the shipping document to clear the imported goods from the customs authority. The importer may instruct the bank to retire the documents by debiting his account with the bank or may ask for LTR (Loan against Trust Receipt).

The following chart shows the whole procedure of import: Exporter Reimbursing Bank

viii. Payment

vii.

(PAD)

Shipping doc.

vi. Shipment of goods

iv. Collect credit info of exporter

Open L/C and send doc. ix. Payment (LIM & LTR)

Port

Instruct

Negotiating Bank

Foreign Correspondent

UCBL

Bank

iii. Apply for L/C with documents

xi. Payment for PAD, LIM & LTR.

Importer x. Collect goods

ii. i. Collect IRC CCI&E

Figure: Import Procedure of UCBL

6.6.2 Import financing by the UCBL bank 1. Loan against Trust Receipts (LTR)

Contract between exporter & importer

Advance against a â&#x20AC;&#x153;Trust Receiptâ&#x20AC;? obtained from the customers are allowed to only first class tested parties when the documents covering an import shipment or other goods pledged to the bank as security are given without payment. However, for such advances prior permission/sanction from head office must be obtained. The trust receipt is a document that creates the banker's lien on the goods and practically amounts to hypothecation of the proceeds of sale in discharge of the lien. 2. Loan against Imported Merchandise (LIM) Advance (Loan) against the security of merchandise imported through the bank may be allowed either on pledge or hypothecation of goods, retaining margin prescribed on their landed cost, depending on their categories and credit restriction imposed by the Bangladesh Bank. Bank shall also obtain a letter of undertaking and indemnity from the parties, before getting the goods cleared through LIM Account. Loan against Imported Merchandise (LIM) is a facility provided by the Bank to the importers who are in shortage of fund to retire the import bills and thus to clear the goods from the post authority. In other works it may be referred as an advance against merchandise. LIM Accounts may be created in the following two cases: a) LIM Account on importer's request b) Forced LIM Account. After lodgment of documents, the importers concerned to be intimated for early retirement of the documents by paying outstanding bill amount including other charge. If the importer is not in a position to retire the bill out of his own sources at that moment may request the bank to clear the goods by creating LIM Account. On receipt of the importer request the official of the import bills section will prepare an office note by calculating the total landed cost of the consignment. To ascertain the landed cost the following points to be considered. Efforts should be taken so that at least 20% to 30% margin of the landed cost may realize from the importer. Immediately after lodgment of documents the branch incumbent and concerned dealing official shall vigorously pursue importers far retirement of bills. PAD should not remain outstanding fare more than 30 days from the date of lodgment on as per norms. If the party fails to retire the documents within 30 days or within the date of arrival of ship which ever is earlier the branch should sent the documents for clearance the goods. Other formalities in connection with the forced LIM A/C will be the same as in the case of LIM A/C created on importer's request. No further L/C's of the party for whom the Bank was forced to clean the consignment and the party failed to take delivery of the goods within the time specified below under the head disposal of LIM stocks should be opened without prior approval from Head Office even if the same is within the discretionary power of branch Manager.

3. Payment against documents (PAD) Payment made by the bank against lodgment of shipping documents of goods imported through L/C falls under this head. It is an interim advanced connected with import and is

generally liquidated against payments usually made by the party for retirement of the documents for release of imported goods from the customer’s authority. It falls under the category of “Commercial Loan”.

6.6.3 Payment procedure of the import documents This is the most sensitive task of the import department. The officials have to be very much careful while making payment. This task constitutes the following: 

Step 1- Date of Payment: Usually payment is made within 7 days after the documents have been received. If the payment is become deferred, the negotiating bank may claim interest for making delay.



Step 2- Preparing Sale Memo: A sale memo is made at BC rate to the customer. As the TT & DD rate is paid to the ID, the difference between these two rates is exchange trading. Finally, an Inter Branch Exchange Trading Credit Advice is sent to ID.



Step 3- Requisition for the foreign Currency: For arranging necessary fund for payment, a requisition is sent to the international department.



Step 4- Transmission of telex: A telex is transmitted to the correspondent Bank ensuring that payment is being made.

6.7 Export Export brings the foreign currency in the economy. Higher the export higher the reserve of foreign currency, the export section of UCBL engaged with various export-related activities for the encouraging the exporter. The major function of this section is comprises with purchase, collection and negotiate the export bill, provide the exporter in export financing and helps the exporter in different issues.

6.7.1 Export procedure Export Procedure is given below:  The Exporter has to get Export registration certificate from CCI&E.  Making contract with the buyer for securing export order.  He asks the buyer for letter of credit clearly starting terms and conditions of export payment: (here the regulatory framework is UCPDC 500).  He takes preparation for export and arrange for delivery of goods as per L/C.  He prepares and submits shipping documents for payment/acceptance/negotiation.

6.7.2 Export flow chart Receiving the order

Asking to open letter of credit

Booking of Freight

Booking of Exchange rate

Procurement of goods

Getting the goods insured

Shipment of goods

Advice of shipment

Preparing export Papers

Securing Payment

Close of transaction

Document needed for export procedure are as follows:  Export Registration Certificate (ERC) from CCI & E.  LC Documents.  EXP form duly signed by the exporter.  Certificate of origin.  Shipping documents.  Inspection Certificate.  Packing List & Bill of Loading.  Invoice & Certificate of export form by authorized dealer (Bank). As soon as a L/C is opened, the following vouchers are passed in the books of the opening bank: Customer’s liabilities on L/C – DR Banker’s liabilities on L/C – CR Margin commission postage and SWIFT charges are recovered from the party by the passing entry as follows: Party’s A/C - DR Margin A/C on L/C - CR Commission - CR Postage - CR SWIFT - CR Parties involved in L/C, particularly the seller and the buyer cannot always satisfy the terms and conditions in full as expected due to the some obvious and genuine reasons. In such a situation the credit should be amended.

The seller being satisfied with the terms and conditions of the credit proceed to dispatch the required goods to the buyer and after that, have to present the documents evidencing dispatching goods to the negotiating bank on or before the stipulated expiry date of the credit.

After receiving all the documents the negotiating bank then cheeks the document against the credit. If the documents are found in order, the bank will pay, accept or negotiate to the issuing bank Settlement means fulfillment the commitment of issuing bank in regard to effecting payment subject to satisfying the credit terms fully. This settlement may be done under three separate agreements as stipulated in the credit. These are:  Settlement by payment  Settlement by acceptance  Settlement by negotiation Here the seller presents the documents to the paying bank and the bank then scrutinizes the documents. If satisfied the paying bank makes payments to the beneficiary and in case of this bank is other than the issuing bank, then sends the documents to the issuing bank. If issuing bank is satisfied with the requirement, payment is obtained from the issuing bank. after being satisfied with the documents, the banks accept the documents and the draft and if it is a bank other than the issuing bank, then sends the documents to the issuing bank stating that it has accept the draft and at maturity the reimbursement will be obtained in pre-agreed manner.

6.7.3 Export Financing Financing exports constitutes an important part of a bank’s activities. Exporters require financial services at four different stages of their export operation. During each of these phases exporters need different types of financial assistance depending on the nature of the export contract. Mainly there are following two types of financing: b) Pre-shipment credit Pre-shipment credit, as the name suggests, is given to finance the activities of an exporter prior to the actual shipment of the goods for export. The purpose of such credit is to meet working capital needs starting from the point of purchasing of raw materials to final shipment of goods for export to foreign country. Before allowing such credit to the exporters the bank takes into consideration about the credit worthiness, export performance of the exporters, together with all other necessary information required for sanctioning the credit in accordance with the existing rules and regulations An exporter can obtain credit facilities against lien on the irrevocable, confirmed and unrestricted export letter of credit in form of the followings: i)

Export cash credit (hypothecation)

iii) Packing credit Packing Credit is essentially a short-term advance granted by a Bank to an exporter for assisting him to buy, process, manufacture, pack and ships the goods. Generally for movement of goods from the hinterland areas to the ports of shipment the Banks provide interim facilities by way of Packing Credit. This type of credit is sanctioned for the transitional period starting from dispatch of goods till the negotiation of the export documents. iv) Back to Back Letter of Credit (BTB) As Bangladesh is a developing country exporters face problems of scarcity of raw material. Because raw materials are not available in the country. These have to be collected from abroad. In that case, exporter gives lien of export L/C to bank as security and opens an L/C against it for importing raw materials. This L/C is called Back To Back L/C. In back to back L/C, MBL keeps no margin. Sometimes there is provision in the export L/C that the importer can use the certain portion of the export L/C amount for importing accessories that are necessary for the making of the product. Only in that case, BTB is opened. Payment of Back to Back L/C: Client gives the payment of the BTB L/C after receiving the payment from the importers. But in some cases, client sells the bills to the MBL. But if there is discrepancy, the MBL sends it for collection. In case of BTB L/C, MBL gives the payment to the beneficiary after receiving the payment from the L/C of the finished product (i.e. exporter). Bank gives the payment from DFC Account (Deposit Foreign Currency Account) where Dollar is deposited in national rate. For BTB L/C, opener has to pay interest at LIBOR rate (London Inter Bank Offering Rate). Generally LIBOR rate fluctuates from 5% to 7%. A schedule named Payment Order; Forwarding Schedule is prepared while making the Contract of payment sale payment. This schedule is prepared when the of L/C is made. This schedule contains (1) the followings: i. Reference number of the beneficiaryâ&#x20AC;&#x2122;s bank and date & beneficiaryâ&#x20AC;&#x2122;s name. ii. Bill value. iii. Payment order number and date & equivalent amount in Taka.

Exporter London b)(Beneficiary) Post shipment credit

Ships Goods to (5)

Importer Dhaka (Applicant)

This type of credit refers to the credit facilities extended to the exporters by the banks after shipment of the goods against export documents. Necessity for such credit arises as the Presents Applies for opening exporter L/C cannot waitdocuments for a long time Recovers for withoutAmount paying manufacturers/suppliers. Forwards to afford toand of L/C (2) the Before extending such credit,obtains it is necessary on the part of banks to look into carefully (4) from (8) financial soundness ofpayment exportersfrom and (6) buyers as well as other relevant documents connected with the export in accordance with the rules and regulations in force.

The international trade can be illustrated byObtains the following diagram: Mercantile Bank Midland Bank London/ advising negotiating Bank reimbursement Ltd., Dhaka from (7) (Issuing Bank)

Opens L/C and send it to (3)

The export procedures start from the registration of the exporters with necessary documents and end with the submission of documents to the bank. The exporters require achieving ERC certificate, L/C documents. Then he requires procuring the materials to prepare the goods and also require necessary documents for shipment. Sometimes the procuring raw materials become trouble for the exporters and in this stage he needs financing. In this step Mercantile Bank Limited helps the exporters to continue his operation. The export documents are verify and checked by the MBL to find out the discrepancies, if exists.

6.8 Foreign remittances Foreign remittance refers to the transfer of fund from one country to another either through the office channel i.e. banking channel, Post office or the informal channel. In Bangladesh still informal market is playing a significant role. Foreign remittance has two wings i.e. inward and outward remittance. This can be shown below: Foreign Remittance

Foreign Inward

Foreign Outward

Remittance

6.8.1 Requirement to deal with foreign remittance:  Authorized dealer branches of the bank are those who are permitted by the Bangladesh Bank to deal in foreign exchange business subject to the fulfillment of foreign exchange rules & regulations of the country.  Agency arrangement, to facilitate foreign exchange business throughout the world, may be made between local bank and foreign bank. However, in case of agency arrangement accounting relationship may or may not be made.  Drawing arrangement is made to facilitate remittances through concluding accounting relationship between a bank & corresponding bank or exchange house.  The foreign currency account maintained by the authorized dealers in foreign exchange with the foreign banks /correspondents are called Nostro Accounts. All foreign exchange transactions are routed through nostro accounts. Nostro Account means our account with you.  Current accounts of foreign banks with their correspondents in the latter’s currency is called Vostro Accounts. Vostro account means your account with us.

6.8.2 Modes of foreign inward & outward remittance:     

6.8.3 Modes of foreign outward remittance    

executed to the applicant only after observing all the existing formalities. The remittance process involves the following four modes are: Cash Remittance

Sell

Bank sells Dollar / Pound for using in abroad by the purchaser. The maximum amount of such sell is mentioned in the Bangladesh Bank publication of ‘Convertibility of Taka for Currency Transactions in Bangladesh’.

Purchase

Bank can purchase dollar from resident and non – resident Bangladeshi and Foreigner. Most dollars purchased comes from realization of Export Bill of Exchange.

Issue of TC

TC is useful to traveler abroad. Customers can encash the TC in abroad from the drawee bank. TC is alternative to holding cash and it provides better security than holding cash in hand.

Buying

If any unused leaf of TC is surrendered bank buys it from the customer. All payments are made in local currency. Banks generally buy only those TC.

Dollar/ Pound

Traveler’s Cheque (TC)

Of TC Telex Transfer

Outward TT

It remits fund by tested TT via its foreign correspondence bank in which it is maintaining its NOSTRO Account.

Incoming TT It also makes payment according to telegraphic message of its foreign correspondence bank from the corresponding VOSTRO Account. Foreign Demand Draft

Bank issue Demand Draft in favor of purchaser or any other according to instruction of purchaser. The payee can collect it for the drawee bank in which the Issuing bank of Demand Draft holds its NOSTRO Account. Bank also makes payment on DD drawn on this bank by its foreign correspondence bank through the VOSTRO Account.

6.9 Documents used in foreign exchange Foreign trade involves the movements of goods from one country to another, passing of ownership of the goods from the seller to buyer, the payment for the goods & its remittance from the importer’s to exporter’s country. A large number of documents are, therefore, used in foreign trade and the exporter has to tender these documents specified in the contract of sale. These documents are called documents of foreign trade and the negotiating banks in settlement of claims use them. These documents are submitted in sets and are issued and signed by the designated authorities with terms of contract of sale. These documents can be classified into six categories:     

Commercial Documents Official Documents Insurance documents Transport documents Financial & Financing Documents



Custom Documents

6.9.1 Commercial documents The following commercial documents are generally used in foreign trade:     

Invoices Certificate of Origin Weight Notes or Certificates Packing List Quality or Inspection Certificate

An invoice or bill is a commercial document issued by a seller to the buyer, indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. An invoice indicates the buyer must pay the seller, according to the payment terms. In the rental industry, an invoice must include a specific reference to the duration of the time being billed, so rather than quantity, price and discount the invoicing amount is based on quantity, price, discount and duration. Generally speaking each line of a rental invoice will refer to the actual hours, days, weeks, months etc being billed. From the point of view of a seller, an invoice is a sales invoice. From the point of view of a buyer, an invoice is a purchase invoice. The document indicates the buyer and seller, but the term invoice indicates money is owed or owing. In English, the context of the term invoice is usually used to clarify its meaning, such as "We sent them an invoice" (they owe us money) or "We received an invoice from them"

There are different types of invoices:  Pro forma invoice - In foreign trade, a pro forma invoice is a document that states a commitment from the seller to provide specified goods to the buyer at specific prices. It is often used to declare value for customs. It is not a true invoice, because the seller does not record a pro forma invoice as an accounts receivable and the buyer does not record a pro forma invoice as an accounts payable. The seller does not issue a pro forma invoice until the seller and buyer have agreed to the terms of the order Terms of Payment: By Irrevocable Letter of Credit for 100% of Invoice value. Please follow the attached Instructions for Letter of Credit. (You may insert in above text any other terms you wish i.e. Confirmed L/C, Sight Draft, and Term Draft) Delivery: 4 to 6 weeks from the receipt of Letter of Credit (Change the period as needed but do not go for less then above in case of L/C, even though you may be shipping your goods in 2 days.)

ď&#x201A;§ Commercial invoice - a customs declaration form used in international trade that describes the parties involved in the shipping transaction, the goods being transported, and the value of the goods. It is the primary document used by customs, and must meet specific customs requirements, such as the Harmonized System number and the country of manufacture. It is used to calculate tariffs. ď&#x201A;§

Certified Invoice: The exporter or his/her agent who is responsible for certifying any statement required by the importer from the exporter issues Certified Invoices. All certified invoices must be signed. A third party is sometimes expected to witness the signature.

A Certificate of Origin (often abbreviated to CO or COO) is a document used in international trade. It traditionally states from what country the shipped goods originate, but "originate" in a CO does not mean the country the goods are shipped from, but the country where their goods are actually made. This raises a definition problem in cases where less than 100% of the raw materials and processes and added value are not all from one country. An often used practice is that if more than 50% of the sales price of the goods originate from one country, that country is acceptable as the country of origin (then the "national content" is more than 50%). In various international agreements, other percentages of national content are acceptable. When countries unite in trading agreements, they may allow Certificate of Origin to state the trading bloc as origin, rather than the specific country. The document may be informal, i.e. issued for example by the exporter, but often the importing country may require a formal document, often to be confirmed by an official body in the exporting country. In many cases specific formal documents are required, such as for shipments under the North American Free Trade Agreement, or for preferential customs treatment in importing countries for shipments of processed/manufactured goods from less developed countries to developed ones (often referred to as the green CO form "A", or GSP (Generalized System of Preferences) Form A CO).

Packing list, packing slip (also known as a bill of parcel, unpacking note, packaging slip, (delivery) docket, delivery list, or customer receipt), is a shipping document that accompanies delivery packages, usually inside an attached shipping pouch or inside the package itself. It commonly includes an itemized detail of the package contents and may or may not include customer pricing. It serves to inform all parties, including transport agencies, government authorities, and customers, about the contents of the package. It helps them deal with the package accordingly. Sample Packing List

Item

Ideal (grams)

Ruck sack

2,610

Rain cover

106

Sleeping bag Sleeping mattress Tent

1,650 855 1,200

Rain poncho/ Rain Shell

314

Rain pants

467

Cooking

912

1.5 x Gas

530

First aid & sun block

750

Navigation ( maps compass GPS)

750

Water bottles

120

10x Plastic bags Weight without food/water

40 12,804

Food and snacks (6 days)

4,200

Water (1 liter)

1,000

Total

15,504

6.9.2 Official documents The official documents include: •

Consular Invoice

•

Legalized invoice

•

Black-listed Certificate

Consular Invoice means a document prepared by the shipper and certified in the country of origin by a consul of the country of importation. It shows the transaction details and origin of the goods. A consular invoice, obtained from the consul of the importing country at the point of shipment, insures that the exporter's trade papers are in order and the goods being shipped do not violate any laws or trade restrictions. Legalized invoice means Original Certificate of Origin issued from the Chamber of Commerce in the Origin Country or the Exporting Country consistent with the original. Black-listed Certificate means the certificate where due to strained political relations or any other reason some countries do not allow transaction with some particular countries.

Blacklisted Certificate (Sample) _________________ Date _________________________ City Government of Tagum Rizal St., Tagum City Attention: The Chairman Bids & Awards Committee Dear Sir/Madame: I n compliance with the requirements of the _________________________________ BAC and pursuant to the Implementing Rules and Regulations of Republic Act 9184, the undersigned hereby declares that the firm/company intending to bid for this project, ______________________________, is not included in the blacklist of contractors for government or any of its agencies, office, corporations, or LGU’s. For your reference, attached is a copy of the recent certification from CIAP that the applicant is not included in the list of “blacklisted” contractors of the Philippines. Very truly yours, _________________________

6.9.3 Insurance documents Insurance Documents are ones, issued by the issuer, certifying that the insurer and the insured have signed an insurance contract covering the goods to be transported. If the goods under the contract do incur damages or even losses in transit, the insured can lodge a claim against the insurance documents. Since insurance documents are the evidence of insurance contract between the insurer and the insured, they are mainly classified as the following four types: Insurance Policy is a written legal contract between the insurer and the insured containing all terms and conditions of the agreement. It shows full details of the risks covered, and is also called formal insurance documents. Key elements of insurance policy are illustrated as follows: 

Name of the insurer with a signature identified as that of insurance company, or underwriter, or insurance agent.



Name of the insured, both the seller and the buyer might be the insured if they have insured interest and with good faith.



The insured goods that include description of subject matter.



Type of risks covered which should be one of the three basic risks, i.e. F.P.A., W.P.A. and All Risks.



Insurance provisions



Amount and currency insured.



Place of claim payable.



Transport model and vessel's name.



Port of shipment and port of destination. If transshipment is required, the goods should cover transshipment risks such as warehouse-to-warehouse clause including transshipment risks.



Time and place of insurance.

An insurance certificate is a document issued to the insured certifying that the insurance has bee affected. It contains the same details as an insurance policy except that version of provisions is abbreviated. If a documentary credit requires an insurance policy, issuing bank will refuse an insurance certificate for payment. An insurance policy is an insurance document evidencing insurance has been taken out on the goods shipped, and it gives full details of the insurance coverage. An insurance certificate certifies that the shipment has been insured under a given open policy and is to cover loss of or damage to the cargo while in transit. Insurer or Insurance Agent or Insurance Broker prepares it.

6.9.4 Transport documents Transport documents are

Airway bill



Mate’s Receipt



Bill of lading



Railway consignment Note



Roadway bill(CMR)

Air Waybill (AWB) or air consignment note refers to a receipt issued by an international courier company for goods and an evidence of the contract of carriage, but it is not a document of title to the goods. Hence, the AWB is non-negotiable. The AWB has a tracking number which can be used to check the status of delivery, and current position of the shipment. The number consists of a three digits airline prefix issued by IATA and a 8 digit number. The first three copies are classified as originals. The first copy is retained by the issuing carrier or their appointed agent. The 2nd copy by the receiving carrier or their appointed agent. The 3rd copy is used as Proof Of Delivery (POD). Mate’s Receipt means Document signed by an officer of a vessel evidencing receipt of a shipment onboard the vessel. It is not a document of title and is issued as an interim measure until a proper bill of lading can be issued.

A bill of lading (sometimes referred to as a BOL,or B/L) is a document issued by a carrier to a shipper, acknowledging that specified goods have been received on board as cargo for conveyance to a named place for delivery to the consignee who is usually identified. A through bill of lading involves the use of at least two different modes of transport from road, rail, air, and sea. The term derives from the noun "bill", a schedule of costs for services supplied or to be supplied, and from the verb "to lade" which means to load a cargo onto a ship or other form of transport. It is quite evident that a bill of lading can be used as a traded object. The standard short form bill of lading is evidence of the contract of carriage of goods and it serves a number of purposes: 



It is evidence that a valid contract of carriage, or a chartering contract, exists, and it may incorporate the full terms of the contract between the consignor and the carrier by reference (i.e. the short form simply refers to the main contract as an existing document, whereas the long form of a bill of lading (connaissement intégral) issued by the carrier sets out all the terms of the contract of carriage); It is a receipt signed by the carrier confirming whether goods matching the contract description have been received in good condition (a bill will be described as clean if the goods have been received on board in apparent good condition and stowed ready for transport); and It is also a document of transfer, being freely transferable but not a negotiable instrument in the legal sense, i.e. it governs all the legal aspects of physical carriage, and, like a cheque or other negotiable instrument, it may be endorsed affecting ownership of the goods actually being carried. This matches everyday experience in that the contract a person might make with a commercial carrier like FedEx for mostly airway parcels, is separate from any contract for the sale of the goods to be carried, however it binds the carrier to its terms, irrespectively of who the actual holder of the B/L, and owner of the goods, may be at a specific moment.

Railway receipt or Railway Consignment Note means railway receipt given by railway authority after receipt of payment. The correct procedure regarding delivery of parcels should also be followed in the case of delivery of goods, when the railway receipt or invoice is not available. Specimen forms of the indemnity note also appear in the I.R.C.A. Goods Tariff. Roadway Bill (CMR) will be issued after the shipment moves from Place of Exporter to Destination and will provide them with a copy of it.

6.9.5 Financial & Financing documents Financial & Financing Documents includes Bills of exchange  Promissory Note A bill of exchange or "draft" is a written order by the drawer to the drawee to pay money to the payee. A common type of bill of exchange is the cheque (check in American English), defined as a bill of exchange drawn on a banker and payable on demand. Bills of exchange are used primarily in international trade, and are written orders by one person to his bank to pay the bearer a specific sum on a specific date. Prior to the advent of paper currency, bills of exchange were a common means of exchange. They are not used as often today.

A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at fixed or determinable future time a sum certain in money to order or to bearer. (Sec.126) A promissory note is a written promise by the maker to pay money to the payee. Bank note is frequently transferred as a promissory note, a promissory note made by a bank and payable to bearer on demand. A maker of a promissory note promises to unconditionally pay the payee (beneficiary) a specific amount on a specified date. A negotiable promissory note is unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at fixed or determinable future time, sum certain in money to order or to bearer. (see Sec.194) There are originally two parties in a promissory note. The one who makes the promise and signs the instrument is called the "maker" and the party to whom the promise is made or the instrument is payable is called the "payee"

6.9.6 Custom documents & procedures Custom Documents include

Shipping Bill



Bill of entry



Custom Duties



Warehousing



Free port etc.

6.10 Problems faced by foreign exchange department 

Modern technical equipment such as computer is not sufficient in foreign exchange department. As a result the exchange process makes delay and it is also complicated.



Employees of foreign exchange department are not as much as skilled along with modern equipment.



Customer of the bank tries to dominate the employee over their work.



In some cases, this branch takes different Margin and commission on L/Cs from different customer. The bank should review the customer’s behavior for a period and certain policy in this regard.



In many cases, the foreign banks want confirmations from other foreign banks with which this bank has correspondence. This proves the poor financial condition of our country



Lack of space in the office, which is not well decorated.



Some rules and regulations of government work as barrier for the free flow of remittance, export and import of profitable goods.

6.11 Conclusion Foreign Exchange Department is the largest department of UCBL in terms of manpower and profit earned. In this year, it earned more than 60% of total profit. As a private bank it provides all the necessary services regarding Foreign Exchange. In this respect it follows procedure in case of Foreign Exchange i.e. Import. Export & Remittance determined by the UCPDC600, Bangladesh Bank & Other applicable laws. The performance Of Foreign Exchange Department of UCBL shows that it is progressing day by day. As other commercial banks involved in foreign trade, it always faces some problems both controllable & uncontrollable. But, in spite of all problems & limitations, in the previous couple of years the output from this department in terms of productivity, profit & efficiency has improved tremendously. It is sure that this department has a brighter prospect in future. In this respect, it can be said strongly that UCBL is running steadily and within a very near future, it would take a vital responsibility for the national economy Chapter –7 Conclusion & Recommendations

CHAPTER SEVEN: CONCLUSION & RECOMMENDATIONS 7.1 Conclusion The report titled as “Overall Banking System”: the case of United Commercial Bank Limited (Barisal Branch). The main objective of this study is to have a clear concept and some practical experience about Financial Statement Analysis Systems of an organization. Bangladesh has a strong & efficient banking sector. The banking sector of Bangladesh comprises of four categories of scheduled banks. These are nationalized commercial banks (NCBs-04), government owned development finance institutions (DFIs-05), private commercial banks (PCBs-30) and foreign commercial banks (FCBs-09). All the banks are registered & operate under the Banking Companies Act 1991. The controller of the banking sector of Bangladesh is Bangladesh Bank. It has working as the central bank of the country since the independence of the country. Its prime jobs include issuing currencies, maintaining foreign exchange reserve. United Commercial Bank Limited (UCBL) having 89 branches is one of the leading private commercial Bank. As a commercial bank, UCBL Bank provides all traditional banking services including a wide range of savings and investment scheme products, foreign exchange and ancillary services with the support of modern technology and professional management & has a warm relationship with its clients. The Bank maintain the highest ethical standards and community responsibility worthy of leading corporate citizen and now searching for continuous improvement in productivity, operational efficiency and there by enhancing local customer value and strengthen foreign syndicate relationship. So as a private

bank, UCBL is running steadily and within a very near future, it would take a vital responsibility for the national economy. Barisal Branch is one of the most productive branches of UCBL As a branch of commercial bank it provides all general banking. The bank has a warm relation with its clients. The branch is concentrating on the continuous improvement so that it can serve better service to the clients. In previous couple of months the output from this branch in terms of productivity, profit & efficiency has improved tremendously. Moreover, the branch has got an efficient team of manpower. So, it is sure that the Barisal Branch of UCBL has a brighter prospect in future. Foreign Exchange Department is the largest department of UCBL in terms of manpower and profit earned. In every year, it earned major portion of total profit. As a private bank it provides all the necessary services regarding Foreign Exchange. In this respect it follows procedure in case of Foreign Exchange i.e. Import. Export & Remittance determined by the UCPDC600, Bangladesh Bank & Other applicable laws. The performance Of Foreign Exchange Department of UCBL shows that it is progressing day by day. In the previous couple of years the output from this department in terms of productivity, profit & efficiency has improved tremendously. It is sure that this department has a brighter prospect in future. In this respect, it can be said strongly that UCBL is running steadily and within a very near future, it would take a vital responsibility for the national economy.

7.2 Recommendations UCBL always contributes a sustainable growth in the economic development throughout the country. However the Bank should have concentration on continuous improvement to ensure a quality service. Here the following recommendations are embedded with:       

First, UCBL should increase the number of branches so that it can reach the remote and rural people of the country and provide them banking facilities. UCBL has to create a new marketing strategy, which will attract more clients and thereby increase the total export import business. It should adopt long-term training program for foreign exchange officials. UCBL should update its brochure and to be made advertisement on TV so that every initiative of the bank can go at the door of the customers. New updated banking software installed for foreign exchange department Offices are decorated in a much-unstructured way. All the offices should be decorated with the help of interior design Company, so that maximum efficacy of service can be provided. In foreign exchange department it is required to communicate with foreign banks frequently and quickly. To make the process easily modern communication media for example e-mil, Fax and win fax, Internet etc. should be used. But the bank not so much practice of improved banking software.



Margin on L/Cs varies from customer to customer which may create discrimination. So, I think the bank should develop a certain policy with a certain rate in this regard.



UCBL is now in an image crisis problem. There are no AGM for 4 years & in stock market their share transaction stopped since a long time. Because of these facts clients feel discouraged to make foreign business. That is why; I strongly feel that they should solve these problems immediately.