Impact of Providing Satisfactory Customer Service on Business Growth – A Study on National Credit and Commerce (NCC)
Chanpter-1 In the world of consumerism, the business organization strive for the customers satisfaction as number one business strategy whatever may be the product of the organization, either service or non service. Service is the product of Bank. There is a saying that customer service starts right from the stairs of the bank building. The guard at the door is the first person represents the bank, receives a customer with wishes in smiling face. 1.0 ORIGIN OF THE REPORT: As a requirement for my Bachelor of Business Administration program I have conducted this report on “Impact of Providing Satisfactory Customer Service on Business Growth – A Study on NCC Bank Limited”. During the internship, a student is required to prepare a report on the organization where he /she has been attached. My supervisor Mr. Ehsanul Huda Chowdhury, Coordinator, Office of Placement and Alumni , AMERICAN INTERNATIONAL UNIVERSITY – BANGLADESH assigned this topic to me. 1.1 RATIONALE OF THE STUDY: With the rapid growing competition (due to free market economy) among nationalized, foreign and private commercial banks operates it banking operation and how customer service can be made more attractive, the expectation of the customers has immensely increased. Reciprocating the sentiment, commercial/ private banks are trying to elevate
their traditional banking service to a better standard, to meet the challenging needs. Side by side, these banks have now concentrated their attention towards diversification of their products for better performance and existence. Under the above circumstances, it has become necessary for NCC Bank Limited, one of the leading commercial banks, to focus its attention towards the improvement of the customer service. That’s why it is quite justified to make an in-depth study about its operation and evaluate the service provided by this bank and scope for its improvement. The study may help formulating policy regarding NCC Bank Limited the ideas relating to the feelings of the customers and bankers. Further more, executives who are actually executing the policies undertaken by the top management will have a chance to communicate their feelings and will have the feedback about their dealings from the customers. 1.2 OBJECTIVES OF THE REPORT: The following are the general & specific objectives of the report. 1.2.1
General Objectives:
The general Objectives of the report are as follows: •
To fulfill the academic requirements of internship report.
•
To acquire practical experience in different banking services of NCC Bank Limited.
1.2.2
Specific Objectives:
The specific objectives of the study are as follows: •
To present an overview of NCC Bank Limited.
•
To find out the “Impact of Providing Satisfactory Customer Service on Business Growth of NCC Bank Limited”.
•
To gather comprehensive knowledge of the overall banking functions and the expectations of the customers regarding the service level of the bank.
•
To identify the factors contributing to the attractive and operative performance of the local branch of the bank.
•
To make a study of the facts in order to arrive at certain conclusion about overall banking operation.
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Critically analyst the functions and the operations of each level of the organization of Export NCC Bank Limited.
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To find out strength and weakens of the organization.
•
To learn how to use of the different ratios in practical fields.
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To prevent current observation and unique aspects of the bank.
1.3 SCOPE OF THE STUDY: While I preparing this report, I had a great opportunity to have an in depth knowledge of all the divisional work practiced by NCC Bank Limited. It also helped me to acquire a first hand perspective of a leading private Bank in Bangladesh. The scope of this report is to analyze the operation of Export Department and to evaluate the performance of the different departments of NCC Bank Limited. 1.4 METHODOLOGY: The methodology of the report is stated below, which was appropriately exercised in achieving the above stated objective. This study is based on the statements and reports available form the Bank management Information System. Beside these some secondary materials such as books, journals, reports etc. have also helped in preparing the study. •
Sources of Data Collection:
The data have been collected from the two following sources: •
Primary Sources:
•
Face to face conversation with the respective officers & staffs of the Branch.
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Informal conversation with the clients.
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Personal observation.
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Desks work in different sections/departments.
•
Secondary Sources:
•
Annual report of the Bank.
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Consultation of related books and publications.
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Different statements of branch.
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Past work on it.
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Various files, Balance sheet and various documents.
•
Data Processing:
Collected information was processed by the use of computer system. Detailed analysis, working variables and working definitions has been embodied in the report. 1.5 LIMITATIONS OF THE STUDY: •
It was difficult to communicate with the customer, as many of them were hesitant to respond. Therefore, the sample size was not big.
•
Another limitation of this report is Bank’s policy of not disclosing some data and information for obvious reason, which could be very much useful.
•
The outlet owners might have got a little biased on the fact. Because they thought that the study was being prepared for the particular department.
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Time limit of the study: I could not accommodate be able to spend enough time to make an in depth study for excessive business in official works.
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Location of the study: The study was conducted only on the head office & more or less Branches level over all branches performance could not be evaluated for time constraints.
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Shortage of written materials
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Fear of disclosure
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Lack of sufficient time of bank personnel
In spite of all this, limitations I have tried to put the best effort as far as possible.
Chapter-2 Overview of NCC Bank Limited 2.0 Organizational Overview of NCC BANK LIMITED. NCC BANK LIMITED as the name implies a newly formed commercial bank but is the first of its kind in Bangladesh. It has been incorporated in Dhaka, Bangladesh as a public limited company and its Head Office of the Bank is located at 7-8 Motijheel Commercial Area, Dhaka- 1000. In the world of consumerism the business organization of the world strive for the consumers satisfaction as a number one business strategy whatever may be the product of the organization, either service or non service. Service is the product of bank. There is a saying that customer service starts rights right from the stairs of the bank building. The guard at the door is first person pep resents of the bank, receives a customer with wishes in smiling face. 2.1 Historical Background of the NCC BANK LIMITED.: NCC BANK LIMITED incorporated under the companies Act 1994, on the June 02, 1999. NCC BANK LIMITED. believes in togetherness with its customers, in its march on the road to growth and progress with service. As a commercial bank we will do all traditional banking business including introduction of a wide rang of savings and credit products, retail banking and ancillary services with the support of modern technology and professional skills. The NCC BANK LIMITED. commenced formal commercial banking operation from August 03, 1999 with the permission of Bangladesh Bank. The sponsors of the Bank are leading business personalities and reputed industrialists.
The Bank has a sound capital base; its Authorized Capital is TK. 1000.00 Million while its Initial Paid up Capital is TK. 225.00 Million subscribed by the sponsors. To solidify its capital base further the paid up capital will raise to TK. 450.00 Million within a reasonable period by public offering of shares of the Company. The Bank will be immensely benefited furthermore from the able leadership of the Chairman and the valuable advice and guidance of the Advisor. The Board of Directors wants to carry out in the management this service industry's entire administration and credit portfolio independent without any undue influence from out side. The board will formulate policy and give policy directives to the Management. The bank will operate with integrity, competence and farsightedness abiding by all principles and provisions laid down in the Bank Company Act, 1991. NCC BANK LIMITED will endeavor it’s best in consolidating this sector in helping growth and development of the backward linkage industries. With continuous dependence on the imported raw materials, the country’s RMG sector might find base when the global apparel trade will be wide open in 2005 with the end of multi Fiber arrangements. Development of composite textile sector may be helpful to get out of this problem. Therefore, the NCC BANK LIMITED will lead its mite of the development of this vital sector. 2.2 Mission of NCC Bank Limited. The NCC Bank Limited has completed its successful existence on its career. Now it has taken a revolution of its business operation in year 2006 searching for incremental improvement in productivity, operational efficiency, and structure consequently. A new organization structure has been developing according to business focus, priorities, and competitive pressures.
2.3 Objectives of NCC Bank Limited. •
To provide high quality financial services in export and import trade.
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To provide excellent quality Customer services.
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To maintain Corporate and business ethics.
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To profit maximization.
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To become a trusted repository of customers' money and their financial advisor.
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To make our stock superior and rewarding to the customers/share holders.
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To display team spirit and professionalism.
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To have a Sound Capital Base.
2.4 Organizational Layout of NCC Bank Limited:
Chairman
Advisor
Managing Director Deputy Managing Director Senior Executive Vice President
Vice President
Executive Vice President
Senior Senior Asstt Sub Computer Asstt. Principal Staff Vice Vice President Operator Officer
Senior Vice President
Principal Officer Executive Officer Officer Management Trainee Officer Asstt. Officer Junior Officer 2.5 Audit and Inspection: During the year 2006, Bank's internal audit team conducted through inspection of all the Branches. Bangladesh Bank also carried out inspection at Head Office and Branches during the year. 2.6 Correspondent Relationship: As correspondent Bank are the trade partners in handling International Trade, NCC Bank Limited has established strong business network across the globe. The Bank has established correspondent relationship with the major Banks. At present, the Bank has
more than 180 Correspondents. The Bank is well equipped to handle International Trade at each corner of the world. 2.7 Human Resources Department: There is no alternative to skilled and trained work force in service Industry. Bearing this in mind the well educated, promising and honest workers are being appointed and trained. Bank has given top priority for developing skilled work force and introducing them with modern technologies with the purpose to develop quality customer services. We have recruited experienced Bankers as well as fresh university graduates. The fresh recruits are being trained through Bangladesh Institute of Bank Management (BIBM) and other Training Institute. 2.8 Financial Products and Services: The Bank has already introduced number of financial products such as Monthly Savings Scheme (Money Grower) and Monthly Income Scheme (Steady Money), Lease Finance. In addition, schemes like Consumers Credit, Credit Card, ATM, On Line Banking and other lucrative schemes will introduce soon. 2.9 Future Prospect: Banks drive towards market leadership as well as quality in choosing business will continue during the year 2006 although competition intensified with the opening of more financial institutions. The Bank is optimistic that the volume of business will increase in the coming years through pragmatic and market friendly policies. The Bank shall continue to explore new fields of investment and take steps to open new Branches for banking and capital market related activities. We shall endeavor to adopt customeroriented policies and introduce new techniques that will help to earn profit and increase greater confidence of the existing/ prospective customer.
2.10Present Organogram of Motijheel Branch:
NCC Bank Limited Motijheel Branch, Dhaka
MANAGER VP
General Banking & 2nd Officer, SPO
Foreign Exchange Department Officer
Deposit In-charge Officer
Investment Department Management Trainee Officer
Management Trainee Officer TO (IT)
Officer (Cash/CashIn- Charge
TAO A/C Opening & Dispatch
JO (Cash)
AO Accounts & Others
TO (IT) PC Banking
Chapter-3 Topic Analysis and Desciption 3.1 General Banking General banking is designed to provide financial services to the general people in saving their money, smoothing transactions for businessperson and ensure security of the precious wealth of the clientele. Bangladesh is one of the less developed countries. Therefore, the economic development of the country depends largely on the activities of commercial banks. So we need to emphasis whether these commercial banks are effectively and honestly performing their functions, assigned duties and responsibilities. In thus respect we need to know about the general banking function of those banks as well as "The NCC Bank Limited." is to provide the general banking service. •
Deposit:
A bank is essentially an intermediary of short-term funds. It can carry out extensive lending operations only when it can effectively channels the saving of community. A good banker is one who effectively mobilizes the saving by making it available to productive and priority sectors of the economy thereby fostering the growth and the development of the nation’s economy. Therefore, deposit is the blood of a bank. From the history and origin of the banking system, we can know those deposit collections the main function of a bank. •
Accepting Deposit:
The deposits that accepted by NCC Bank Limited like other banks may be classified in to, (i)
Demand Deposits
(ii)
Time Deposits.
•
Demand Deposits:
These deposits are withdrawn without notice, e.g. current deposits. NCC Bank Limited accepts demand deposit through the opening of; A)
Current Account
B)
Saving Account
C)
Call deposits from the fellow bankers
Time Deposits: A deposit which is payable at a fixed date or after a period of notice is a time deposit. NCC Bank Limited accepts time deposits through Fixed Deposit Receipt (FDR), Shortterm Deposit (STD) and Bearer Certificate Deposit (BCD) etc. While accepting these deposits, a contract is execute between the bank and the customer. This contract will be a valid one only when both the parties are competent to enter contracts. As account opening initiates the fundamental relationship & since the banker has to deal with different kinds of persons with different legal status, EXIM Bank Officials remain very much careful about the competency of the customers. 3.1.1 Procedure for Opening of Accounts: Before opening of a currents or savings account, the following formalities must be completed by the customer: •
Submit application on the prescribed form.
•
Furnishing photograph- 2 (Two) copies.
•
Introducer by an account holder.
•
Passport or commissioner/ Chairman identification certificate.
•
Putting specimen signatures in the specimen card.
•
Mandate, if necessary.
After fulfilling all the requirements, opens an account for the client and provide the customer with a pay-in-slip book and a chequebook in case of savings account and currents account. 3.1.2
Different types of Deposit Accounts and their Formalities:
The Bank provides different types of account under account facilities. These accounts are classified as shown as, •
Current Account:
Current account is an account is an account where the account holders can make numerous transactions within a working day. There is no restriction on the number and the amount of withdrawals from the current account within availability of funds. As the banker is under the obligation to repay this deposit on demand, no interest is paid in this account. Generally, current account is opened for businesspersons and trades for easy transaction. However, a person can open CD account for special purpose. Requirements for the different types of account holders are discussed below: •
Types of current account that are provided by the NCC Bank Limited are as follows:
•
In The Name of Individual:
The client has to fill-up an account opening form. Terms and conditions printed on the back of the form. The form contains the declaration clause, special instructions etc. two copies of passport size photograph duly attested by the introducer affixed with the form and passport photocopy first one to five pages. •
In Joint Name:
In this type, the formality is same as individual account, but in the special instruction clause, either or ‘survivor’ or ‘former or survivor’ clause is marked
•
Proprietorship Firm:
There is a different account opening from for proprietorship firm provided by the NCC Bank Limited. For this account, a customer must need to submit the following papers with the form:
In addition, the customer has to submit the valid documents for Proprietorship account •
Introduction of the A/C.
•
Two photographs of the signatories duly attested by the introducer.
•
Copy of Trade Licence
•
Seal of the concern.
•
Passport or commissioner/ Chairman identification certificate.
•
Tax Paying Identification Number (TIN) along with the application.
Partnership: In case of partnership account, the bank asks for, •
A copy of the partnership agreement (Partnership Deed)
•
A letter signed by all the partners containing the following particulars.
•
The name and addresses of all partners
•
Update Trade Licence
•
The nature of the firm’s business
•
Passport / commissioner/ Chairman identification certificate.
•
The name of the partner authorized to operate the account in the name of the firm, including the authority to draw, endorse and accepting the bills and mortgage and sell the properties belonging to the firm.
•
Seal of the concern.
•
Limited Company:
An account opening form is used for limited company. There are two kinds of limited company, public limited and private limited company. The bank always takes precautions for opening this type of accounts. Several documents submitted by the clients, which should be checked carefully by the bank to be legally in a safe position. To open a limited company current account, an NCC Bank Limited officer asks for the following documents for Limited Co. Account. •
Introduction of the A/C.
•
Two photographs of the signatories duly attested by the introducer.
•
Signature and seal of the client.
•
Trade License.
•
Certified copy of memorandum and articles of association.
•
Certificate of incorporation.
•
Passport or commissioner/ Chairman identification certificate.
•
Board Resolution for opening A/C dully certified by the chairman/managing director.
•
List of directors along with designation & specimen signature.
•
Latest certified copy of form – XII (to be certified by registrar of joint stock company)
•
Certificate from the registrar of joint stock co. is entitled to commence business (in case of Public Ltd. Co)
•
Certificate from Board of Investment (in case of joint venture or foreign co.)
•
Work permit order from Ministry of Industry. (In Case of Foreign Nation)
•
Joint venture agreement (in case of joint venture)
•
Societies, Clubs and Associations:
The following documents duly completed shall be obtained from the customer at the time of current deposit account of Association /Club/Charity/ Trust/ Society etc. In case of these sorts of accounts, NCC Bank Limited requires the following documents: •
Two photographs of the signatories duly attested by the introducer.
•
Registration Certificate Under the Societies Registration Act, 1962
•
Copies of Memorandum, Articles of Association
•
Resolution of the Managing Committee.
•
Power of Attorney to Borrow.
•
Seal of the concern.
•
Non-Government Organization (NGO):
The account opening procedure is same but in exception is that the Registration Certificate from the Social Welfare Department of Government must be enclosed with the application. •
Joint Account in the Name of Minor:
A minor cannot open an account in his own name due to the incapacity to enter a contract. He can open an account in NCC Bank Limited in Joint name of another person who will be guardian of him. •
Savings Bank Account (Individual/Joint):
Savings bank account (SB) is meant for the people of the lower and middle classes who wish to save part of their incomes to meet their furniture needs and intended to earn to an income from their savings. There is restriction on withdrawals in a month. Heavy withdrawals are permitted only against prior notice. For opening of this type of accounts, the following requirements are necessary: •
Photograph attested by the introducer.
•
Passport or commissioner/ Chairman Identification certificate.
•
An introducer of NCC Bank Limited. Introducer can be SB or CD account holder.
•
For joint accounts, signatures of all the account holders are necessary.
•
Short-term Deposit (STD):
In Short-term Deposit, the deposit should be kept for at least seven days to get interest. The interest offered for STD is less than that of savings deposit. In NCC Bank Limited various big companies, Organizations, Government Departments keep money in STD accounts. Frequent withdrawal is discouraged and requires prior notice.
•
Fixed Deposit Receipt (FDR):
They are also known as time liabilities or term deposits. These are deposits, which are made with the bank for a fixed period specified in advance. The bank need not maintain cash reserves against these deposits and therefore, the bank offers high are of interest on such deposits. In NCC Bank Limited, fixed deposit account is opened in two forms - Midterm (MTD), which is less then one year & the other is Term Deposit, which is more than one year. •
Opening of Fixed Deposit Account:
The depositor has to fill an application form where in he mentions the amount of deposit, the period for which deposit is to be made the name/ names is which the fixed deposit receipt is to be issued. In case of a deposit in Joint name, NCC Bank Limited also takes the instructions regarding payment of money maturity of the deposit. The banker also takes the instructions regarding payment of money on maturity of the deposit. The banker also takers the instructions regarding payment of money on maturity of the deposit. The banker also takes specimen signatures of the depositors. A fixed deposit account is then issued to the depositor acknowledging receipt of the sum of money mentioned therein. It also contains the rate of interest & the date on which the deposit will fall due for payment. •
Payment of Interest:
It is usually paid on maturity of the fixed deposit. NCC Bank Limited calculates interest at each maturity date and provision is made on that “Miscellaneous creditor expenditure payable accounts” is debited for the accrued interest. •
Encashment of F.D.R:
In case of premature FDR, NCC Bank Limited is not bound to accept surrender of the deposit before its maturity date. In order to deter such a tendency the interest on such a fixed deposit is made cut a certain percentage less an agreed rate. Normally savings bank deposit interest rate is allowed. •
Loss of FDR:
In case of a lost FDR, the customer is asked to record a GD (General Diary) in the nearest Police Station. After that, the customer has to furnish an Indemnity Bond to NCC Bank Limited a duplicate FDR is then issued to the customer by the bank. •
Renewal of FDR:
In NCC Bank Limited, the instrument is automatically renewed within seven days after the date of its maturity if the customer does not come to en-cash the FDR. The period for renewal is determined as the previous one. •
Bearer Certificate of Deposit (BCD):
The bearer certificate deposit is a document of title similar to time deposit receipt issued by the bank. The document is a bearer document, hence readily negotiable. Whoever presents it to the bank has the right to get the money. There is no prescribed interest rate on such funds but NCC Bank Limited offers 1% less than the rate of the term deposit of different maturity. The face value of the instrument is the future value. The face value is the sum of the principal amount and the interest. It is beneficial to both NCC Bank Limited and the investor because of the following reasons, (I)
The banker is not required to encase the deposit before the date of maturity. Hence, it is assured of funs for a minimum period.
(II)
The investor is assured of ready liquidity. In case of need he can sell the Certificate in the secondary market.
As the identification of the owner is not given in the instrument, it is very much popular. During the Encashment of the instrument, the excise duty and income tax (10%) is deducted. In case of premature Encashment, the principal amount is only paid to the customer. 3.1.3 CASH SECTION: Cash section of any bank plays a vital role in general banking procedure. Because NCC Bank Limited deals with all types of negotiable instruments, cash, and other instruments and treated are as a sensitive section of the bank. It includes the vault that is used as the beyond this limits, the excess cash is then transferred to Bangladesh Bank. There are also some electronic counting machines by which a huge amount of cash money can be counted within a few minutes. This section performs the following functions: 1. Cash Packing:
After the banking hour, cash packed according to the denomination. Notes that accounted and packed in bundles and stamped with initial. 2. Allocation of Currency: Before starting the Banking hour, all tellers give requisition of money through “ Teller cash proof sheet”. The head Teller writes the number of the packet denomination wise in “Reserve sheet” at the end of the day, all the notes remained are recorded in the sheet. 3.1.3.1 Cash Receiving Procedure: The work of cash receiving counter is examining deposit slips. Depositor uses the prescribed deposit slip supplied by the bank for deposit cash, cheque, draft, pay order etc. In all types of deposits, the teller must check the following things: •
The slip has been properly filled up.
•
The title of the account and its number.
•
The amount in figure and in words is same.
•
Instrument signed by the depositor.
•
Date of the instrument.
After checking all these things the teller will accept cash, cheque, draft, pay order etc. against deposit sleep. The teller will place the cash in the cash drawer according to denominations. The teller will place signature and affix “ cash receipt, rubber seal” and record in the cash received register book against the account number. At the end of this procedure, the cash officer passes the deposit slip to the computer section for posting purpose and returns the customer’s copy. Date xxxx
Particulars Cash A/C Customer’s A/C
3.1.3.2 Cash Payment Procedures:
Dr. Cr.
Dr.(Tk.) xxxxx
Cr.(Tk.) xxxxx
Precaution: In order to safe guard the position the playing banker has to observe the following precaution before honoring a cheque: •
A cheque must be looked whether it is an opened or closed cheque.
•
The paying officer should see whether the cheque is drawn on his /her branch.
•
He must see if the cheque is post dated or pre dated. A letter must not pay any post-dated cheque.
•
The officer must carefully see the apparent tenor of the cheque. If it is mutilated or materially altered then the officer must not honor it.
•
The officer must compare the signature of the cheque with the signature on the specimen card.
•
The officer must verify the regularity of the endorsement.
•
The officer may allow overdue against a cheque if prior arrangement is done with the bank.
•
Rules for Passing a Cheque:
In order to enable the branches to facilitate their day-to-day transaction smoothly/ efficiently/ accurately, the following schedule of Power for passing of Cheques/ Instrument signature of vouchers shall come into force with immediate effect: •
An authorized officer shall pass cheque for less than TK. 10,000.00 singly after proper supervision in computer print out.
•
Cheques for TK. 10,000.00 & above but below TK. 50,000.00 shall be passed jointly by any two authorized officers after proper supervision by any one officer in the computer printer out. He will however also ensure that no fictitious/ wrong credit in the account has been posted on the day by referring to credit vouchers of the day.
•
Cheques for TK. 50,000.00 & above shall be passed under joint signatures of two officers, one of whom must be Manager of the branch. The procedures regarding supervision of cheque as at (2) above must however be followed.
•
All suspense’s A/C (Debit) vouchers, Sundry Deposit (Debit) vouchers, Credit A/C Debit Vouchers, Expenditure A/C vouchers must be signed by the incumbent in-charge of the branch with any other authorized officer. As at the close of Business of the day all transactions (both debit & credit) shall be checked by referring to computer print out and relative cheque/ vouchers.
Accounting treatment: Date xxxx
Particulars Customer’s A/C
Dr.
Dr. xxxxx
Cr.
Cash A/C Cr. xxxxx A part from the above it will also be ensured that the total amount of debit & credit totaling to Current A/C, Saving, STD & Term Deposit corresponds with the total of cash receipt/ payment, transfer clearing (both outward and inward). Dishonor of Cheque: If the cheque is dishonored, NCC Bank Limited sends a memorandum (Cheque return memo) to the customer stating the reason in the following way, •
Refer to drawer;
•
Not arranged for;
•
Effects not cleared & may be presented again;
•
Exceeds arrangements;
•
Full cover not received;
•
Payment stopped by drawer;
•
Payee’s endorsement irregular/ required;
•
Payee’s endorsement irregular, require Bank’s confirmation;
•
Drawer’s signature differs/ required;
•
Alterations in date/ figures/ words require drawer’s full signature;
•
Cheque is post dated/ out of date/ mutilated;
•
Amount in words and figures differs;
•
Crossed cheque must be presented through a bank;
•
Clearing stamp required/ requires cancellation;
•
Addition to the discharge of Bank should be authenticated;
•
Cheque crossed” Account Payee Only”
•
Collecting Bank’s discharge irregular/ required.
If the cheque is dishonored due to Insufficiency of funds than NCC Bank Limited charges TK. 25/= as penalty. 3.1.4 REMITTANCE: Remittance is another significant part of the general banking. The bank receives and transfers various types of bills through the remittance within the country. Through timely and effective remittance a bank can earn substantial amount of income. Telegraph transfer can do remittance, mail transfer, traveler’s cheque, drafts, and cheque. There are two steps of remittance: •
Inland Remittance:
By using ways, we can do it. When one bank sends these T.T, M.T, T.C or cheque to another bank than it will be called inland remittance. It is done within the country from one bank to another. •
Foreign Remittance:
When a bank got this T.T, M.T, T.C, and cheque from outside bank, which is not situated in the home country than it will be called foreign remittance. Using these methods also has done it. •
Parties to Remittance: 1. Remitter/ Purchaser, 2. Drawer/ Issuing Branch 3. Drawee/ Paying branch 4. Payee
•
Advantages/ purposes:
•
It facilities transfer of money from one place to another;
•
Removes the risk of carrying cash physically;
•
Minimizes the cost of sending money from one place to another;
•
Offers maximum convenience for transferring amounts;
• •
Increases the business of a bank. Types of Remittances:
Bank has a wide network of branches allover the country and offer various kinds of remittance facilities to the public. The main instruments sued by the EXIM Bank of remittance of funds are: •
Payment Order (PO)
•
Demand Draft (DD)
•
Telegraphic Transfer (TT)
3.1.4.1 Payment Order (PO) An instrument is used to remit fund within a local area, i.e., within a certain clearinghouse area. For Example, if we want to remit fund from one place of Dhaka to another place of Dhaka we generally use payment order. Accounting treatment: PO by Cash Date Xxxx
Particulars Cash A/C
Dr.
Dr.(Tk.) xxxx
Cr.(Tk.)
Bill payable (PO)
Cr.
xxxx
PO commission
Cr.
xxxx
Account treatment: PO by Cheque Date Xxxx
Particulars Cheque(A/C. No)A/C Dr.
Dr.(Tk) xxxx
Cr.(Tk)
Bill payable (PO)
Cr.
xxxx
PO commission
Cr.
xxxx
NCC Bank Limited charges different amount of commission based on payment order amount. The bank charge for pay order are given in the following chart: Total amount of PO Up to Tk.10,000 Tk.10,001- Tk.1,00,000 Tk.1,00,001 – Tk.5,00,000 Tk.5,00,000 and Above
Commission/Charge in TK. Tk.15/Tk.25/Tk.50/Tk.100/-
3.1.4.2. Demand Draft (DD) It is an instrument that is drawn on one banker office to another, or other banker’s branch to pay certain sum of money to the named person. It is generally used to remit fund from one corner of the country to another. For, Example: if we want to remit fund from Dhaka to Chittagong. We use DD. DD is very much popular instrument for remitting money from one corner of the country to another. Commission for DD is 0.15% of the principal amount. •
Different between Pay Order and Demand Draft:
There are some difference between pay order and demand draft, which are: •
In case of Demand Draft, both the payer and payee need to accounts. But there is o no certain rule for pay order.
•
PO is used in the same clearing area, DD is used for all kinds. DD cannot be done in the same clearing area.
•
DD is drawn on a certain bank office. However, there is no certain rule for PO.
3.1.4.3 Telegraphic Transfer (TT): Some times the remitter of the fund wants that money to be available to the remitter immediately in that case bankers are requested to remit the fund telegraphically. Here the remitter bears the additional charge for telex/telephone. Charge for TT is 0.15% of the principle amount and the additional charge for telex/telephone is Tk.50/-. In case of TT both the parties must have account. Accounting treatment: TT Date xxxx
Particulars
Dr.(TK.) xxxxx
Cr.(TK.)
Cash A/C
Dr.
TT A/C
Cr.
xxxxx
TT commission A/C
Cr.
xxxxx
TT charge A/C
Cr.
xxxxx
3.1.5 PROCEDURES FOR BILL AND CLEARING SECTION: For safety and security in financial transaction people use financial instrument like DD, PO, Cheque etc. commercial bank’s is to collect these financial instruments on behalf of their customer. The process that the banks use is known as clearing and collection. The main function of this section is to collect instrument on behalf of the customers through Bangladesh Bank Clearing House, Outside bank clearing (OBC), Inter Branch Clearing (IBC), upon the receipt of the instruments this section examines the following things: •
Whether the paying bank within the Dhaka city.
•
Whether the paying bank outside the Dhaka city.
•
Whether the paying bank is their own branch.
3.1.6 PROCEDURES FOR CHEQUES COLLECTION & SEND TO CLEARING: The following procedures are taken for collection, “Received” seal is stamped on the cheque
Crossing of the Cheques are done
“Payee’s A/C Credited” endorsement
Entries are given in the outward Clearing Register
“Clearing” seal is given cheque
Cheques are sorted bank wise and entries given to the computer
Entries are given to the “Clearing House Register”
3.1.7 PROCEDURE FOR OUTWARD BILLS FOR COLLECTION (OBC):
Depositing the cheque along with Deposit Slip
Crossing of the Cheques are done indicating Principal Branch as collecting bank
Endorsement “Payee’s A/C will be credited on realization ” is given
Entries are given in the outward clearing Register
Essential things for clearing the instruments: There are three essential things required for clearing the instruments: 1. Crossing seal. 2. Endorsement seal. 3. Clearing seal •
Clearing:
According to the Article 37(2) of Bangladesh Bank Order 1972, the banks, which are the member of the clearinghouse, called as Scheduled Banks. The scheduled banks clear the Cheques drawn upon one another through the clearinghouse. This is an arrangement by the central bank where everyday the representative of the member banks gathers to clear the Cheques. Banks for credit of the proceeds to the customer’s accounts accept Cheques and other similar instruments. The bank receives many such instruments during the day
from account holders. Many of these instruments are drawn payable at other banks. If they were to present at he, drawer banks to collect the proceeds it would be necessary to employ many messengers for the purpose. Similarly there would be many Cheques drawn on this the messengers of other banks would present bank and then at the counter. The whole process of collection and payment would involve considerable labor, delay, risk, and expenditure. All the labor, risk, delay and expenditure are substantially reduced by the representative of all the banks meeting at a specified time, for exchanging the instruments and arriving at the net position regarding receipt or payment. The place where the banks meet and settle their dues are called the Clearinghouse. The clearinghouse sits for two times a working day. The members submit the climbable Cheques in the respective desks of the banks and vice-versa. Consequently the debit and credit entries are given. At the debit summation and the credit summation are calculated. Then the banks clear the balances through the cheque of Bangladesh Bank. The dishonored Cheques are sorted and returned with return memo. 3.1.8 ACCOUNTS SECTION: This is a very much crucial department for each branch of a commercial bank. Records of all the transactions of every department are kept here as well with other respective branches. Accounting department verifies all financial amounts and contents of transactions. If any discrepancy arises regarding any transaction this, depart report to the concerned department. 3.1.8.1 Tasks of account department: Accounts department plays a vital role in commercial banking. In private banking sector accounts department of NCC Bank Limited, performs its take property. The activities of account section are as follows: •
Record all transaction in the Cashbook.
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Record all transaction in general and subsidiary ledger.
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Prepare daily fund function, weekly position, periodic statement of affairs etc.
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Prepare necessary statement for reporting purpose.
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Pay all expenditure on behalf of the branch.
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Make salary statement and pay salary.
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Branch to branch fund remittance and support for accounting treatment.
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Budgeting for branch.
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Make charges for different types of duties.
3.1.8.2 Closing of an Account: The closing of an account may happen, •
If the customer is desirous to close the account.
•
If NCC Bank Limited finds that the account is inoperative for a long duration.
•
If the court on NCC Bank Limited issues garnishee, order.
To close the account the Chequebook is to be returned to the bank. NCC Bank Limited takes all the charges by debiting the account and the remaining balance is then paid to the customer. Necessary entries are given to the account closing register and computer. 3.1.9 OTHER SERVICES: Other product and services offered by EXIM Bank Ltd. are as follows: •
Locker services:
The locker services of the NCC Bank Limited with a view to expanding services to the clients, for safe keeping of Jewellery, valuables, documents etc. Customers can withdraw their personal effects in a convenient time .It is given to strict privacy that even bank officials are not permitted to know what types of item the customer is putting inside the locker. •
Grameen Phone Bills Collection:
NCC Bank Limited made an agreement with Grameen phone to receive the Grameen phone bills.
3.2 Credit Operations: Credit operations is one of the significant schemes of the NCC Bank Limited. It contributes a huge portion of income in the NCC Bank Limited total revenue. It provides different types of loan to its borrowers as a lender. The bank operates advance facilities through different branches but the entire loan sanction procedure is controlled and monitored by Head Office. Certain terms and condition are followed when sanctioned to the borrowers. Now credit operations is discussed in detail as follows: 3.2.1 CREDIT POLICY: The NCC Bank Limited is a new generation Bank. It is committed to provide high quality financial services/products to the growth of G.D.P. of the country through stimulating trade & commerce, accelerating the pace of industrialization, boosting up export, creating employment opportunity for the educated youth, poverty alleviation, raising standard of living of limited income group and over all sustainable socioeconomic development of the country. In achieving the affaire said objectives of the Bank, Credit Operation of the Bank is of paramount importance as the greatest share of total revenue of the Bank is generated from it, maximum risk is centered in it and even the very existence of Bank depends on prudent management of its credit port-folio. The failure of a commercial Bank is usually associated with the problem in credit portfolio and is less often the result of shrinkage in the value of other assets. As such, credit portfolio not only features dominant in the assets structure of the Bank, it is critically important to the success of the Bank also.
To provide a broad guide line for the Credit Operation towards achieving the objectives of the Bank, for efficient and profitable deployment of its mobilized resources and to administer the Credit port-folio in the most efficient way, a clearly defined, well planned, comprehensive and appropriate Credit policy and control guidelines of the Bank is a pre-requisite. In view of the above, this Credit Policy and Control Guidelines of the Bank has been prepared which is subject to amendment, revision, re-adjustment and refinement from time to time as may be warranted by the change of circumstances due to passage of time to suit the requirement of the Bank. The purpose of this policy statement, which replaces all previous ones, is to set out the credit policies of the Board of Directors. The policies are described under the following headings: •
Credit Principles
•
Global Credit port-folio limits
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Types of Credit activities
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Credit administration
•
Credit approval
3.2.2 CREDIT PRINCIPLES: The Following are the principal to be adopted for lending authority, approval, monitoring and control on a basis consistent with the global operational objectives and business strategies of the Bank. I. General: The Bank shall provide suitable credit services and products for the markets in which it operates. Loans and advances shall normally be financed from customers' deposits and not out of temporary funds or borrowing from other Banks.
Credit will be allowed in a manner, which will in no way compromise the Bank's standards of excellence and to customers who will complement such standards. All Credit extension must comply with the requirements of Bank's Memorandum & Articles of Association, Banking Companies Act 1991 as amended from time to time, Bangladesh Bank's instruction & other applicable rules & regulations. II. Structural: The authority structure for extension of Credit should enable effective adaptation to changes in the economic, technological, regulatory and competitive environment within which the Bank operates. III. Performance: The Conduct and administration of the loan portfolio should contribute, within defined risk Limitation, to the Bank's achievement of profitable growth and superior return on the capital of the Bank. Credit advancement shall focus on the development and enhancement of customer relationship and shall be measured based on the total yield for each relationship with a customer (on a global basis), though individual transaction should also be profitable. Credit facilities will be extended to those companies/ persons, who can make best use of them, thus helping to maximize our profit as well as economics growth of the country. To ensure achievement of this objective we will base our lending decision mainly on the borrower's ability to repay. If credit facilities are granted on a transaction/one-off basis, the yield from the facility should be commensurate with the risk.
IV. Loan pricing: Interest on various lending categories will depend on the level of risk and type of security offered. It should be borne in mind that rate of interest is the reflection of risk the transaction. The higher is the risk, the higher is the interest rate. Interest may be reviewed at least once in 6 month and more often when appropriate. Fixed interest rate should be discouraged. Preferable all rates should vary with cost of funds fluctuation based on a spread for profit. Effective yield can be enhanced to the extent thee borrower are required to maintain deposits to support borrowing activities. Commitment fee and Service charges should further improve yield where possible. All pricing of loans should however have relevance with the market condition and be approved by the executive committee/ Managing Director from time the time. V. Administration/ Monitoring: The administration of the loan process shall ensure compliance with all laws and regulation at both local and global levels including Bank Policy as set out in this documents and the Bank's Credit manual/circulars. Proper analysis of credit proposal is complex and requires a high level of numerical as well as analytical ability and common sense. To ensure effective understanding of the concepts and thus to make the overall credit portfolio of the bank healthy, proper staffing of the credit departments shall be done through placement of qualified officials who have got the right aptitude, formal training in finance, Credit risk analysis, bank Credit procedures as well as required experience. Where repayment and interest servicing performance of a Credit deteriorates it shall be identified at an early state and closely monitored in order to avoid loan losses. Loans/facilities, and where appropriate, related security, shall be monitored and reviewed by a separate unit unconnected with the credit approval process on a regular
basis in order to assess the collect ability of the loan and effectiveness of the security. This unit will report to the Managing Director or his designated officer. VI. Exception of Loan Policy: It is recognized that there will be exceptions to the stated policy, which can be justified. However, these should be approved by Executive Committee or by the Board and the circumstances must be fully documented in the Credit file. 3.2.3 GLOBAL CREDIT PORTFOLIO LIMITS: The Nature of portfolio shall be governed within guidelines set down by Head Office and regulatory requirements. These guidelines will however be consistent with the global limit identified below for the Bank's credit portfolio in aggregate. Criteria for exposure to customers are set out below: •
Total Facilities:
The aggregate of all cash facilities shall not exceed 80% of customer deposits. It is further governed by the statutory and liquidity reserve requirement of Bangladesh Bank. •
Term Facilities:
Aggregate long-term facilities shall not exceed 20% of the total credit portfolio. Facilities shall not be allowed for a period exceeding five (five) years. Any exceptions will require the approval of the Board of Directors.
•
Country / Cross-border Exposure:
Limits to be established by the Board for individual Country as well as for aggregate Bank Credit exposure to different countries. These limits are to be reviewed from time to time with due regard to the political and economic environment in each country. The country exposure limits may be utilized up to maximum amounts for different maturities as follows: For maturities up to one year
:
100% of the limit
For maturities up to two years
:
maximum 50% of the limit
For maturities up to three years
:
maximum 25% of the limit
For maturities beyond three years
:
maximum 10% of the limit
For exceptions, approval is required from the Board of Directors. •
Exposure to Customer Groups:
Credit facilities in aggregate extended to any one customer group shall not normally exceed 15% of the Capital Fund or TK. 10 (Ten) crore which ever is lower. However, Board of Directors may relax these limits in deserving cases. All proposals submitted to Head Office will also be required to indicate the extent of the Bank's global exposure to that customer group. •
Unsecured facilities:
Aggregate Bank advances to corporate or individual customers (i.e. other than government or parastatal organizations), which are not secured by collateral and are allowed on the strength of customer's personal integrity and financial standing or the corporate customer's balance sheet, with or without hypothecation of stock shall not exceed 30% of the total credit portfolio. For the unsecured credit facilities extended to a business dominated by one or two individuals, the Bank shall insist on taking Life Insurance Policies by the principals which is sufficient to repay the loan in the event of death or injury of any one key individual. The policy to be assigned to the Bank and the premium to be paid by the customer through the Bank under suitable arrangement.
•
Security:
Security accepted against credit facilities shall were properly valued and shall be effected in accordance with the laws of the country in which the security is held. An appropriate margin of security will be taken to reflect such factors as the disposal costs or potential price movements of the underlying assets. 3.2.4 TYPES OF CREDIT ACTIVITIES: Depending on the various nature of financing, all the lending activities have been brought under the following major heads:
Loan
Long Term
House building loan, project, or industrial loan and transport loan.
Short Term
Commercial Loan
Cash credit (pledge), Cash credit (Hypothecation), Loan general, Secured overdraft (SOD), Loan against imported merchandise (LIM), and others loan.
I. Loan (General):
In case of loan, the banks sanction certain some of a certain period. The enter amount is one time disbursement and paid in cash or credit loan A/C. the interest is charged on full sanctioned amount @15%. The bank generally sanctioned loan to established industry. These type of loans are granted for capital expenditure such as purchase of land, construction of factory building, purchase of new machinery and modernization of plant. The borrower cannot withdraw this type of loan once repaid in full or in part again. II. House Building Loan (General): Loans allowed to individual/enterprises construction of house (residential or commercial) fall under this type of advance. The amount is repayable by monthly installment within a specified period, advances are known as Loan (HBL-GEN). •
Introduction:
House Building loan is one of the common credit policies of banking sector. There was only one institution in our country, which is specified in HBFC, Bangladesh House Building Finance Corporation. Now days, besides this bank many commercial banks and Leasing Company provides house-building loan to the customers. •
Interest rate:
Currently the interest rate is 15%. However, it may changes from time to time depending on the market interest rate. From the customers point of view this changes have an adverse impact on the customers. Some times, if they have to bear a higher interest on the principal amount this causes a great burden on them. However, from the point of view of the bank this is very good to maintain the markup. Because when the market interest rate raises 1% than they are getting 1% less markup. So for this clause of increasing interest rate they can have the same markup by increasing the
Interest rate changing on the clients. Therefore, this is very effective for the Bank to maintain markup. •
Disbursement Procedure:
The disbursement procedure or timing of disbursement depends on the client or the progress of work of the construction. The disbursement can be made two or three stages or more depending on the above conditions. •
Mode of repayment:
The loan shall be adjusted by monthly installment basis. The repayment will start from 6(six) months of the date of first disbursement (it may change according to the terms and conditions of the agreement) •
Collateral:
The land and the construction on the land are normally given as collateral. It may change. The documents to be obtained: •
DP note.
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Letter of disbursement.
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Letter of installment.
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Letter of guarantee.
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Letter of undertaking.
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Letter of agreement,
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Irrevocable general power of attorney.
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Memorandum of deposit of title deed.
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Any other documents if considered.
III. House Building Loan (Staff):
Loans allowed to our Bank employees for purchase/construction of house shall be known as Staff Loan (HBL-STAFF). •
Required papers for sanctioning H/B loan:
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Copy of general power of attorney.
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Copy of material certificate.
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Copy of engineer’s estimate.
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Copy of projected cash flow.
IV. Other Loans to Staff: Loans allowed to employees other than for House Building shall be grouped under head-staff Loan (Gen.). V. Cash Credit (CC). A Cash Credit is an arrangement by which the customer is allowed to borrow money up to a certain limit. This is a permanent arrangement and the customers need not to draw the sanctioned amount of money at a time. The borrower can draw the money when required. The borrower can put back any surplus amount, which he/she may be affected frequently. Interest is charged only to the amount withdrawn and not the whole amount sanctioned. Cash Credit arrangement is usually divided in to two such ways such as: Cash Credit Pledge. Cash Credit Hypothecation.
•
Cash Credit Pledge:
In case of cash credit pledge possession of the goods belongs to bank and ownership of the goods belongs to borrower and bank takes the possession of the goods as primary security. The goods stored in go down under lock and key by direct supervision of the bank. If the borrower wants to sell any portion of the pleased goods he /she needs permission of the bank with returning the value of the amount. It is therefore regarded as the most secured type of advance. •
Cash Credit Hypothecation:
In case of cash credit hypothecation possession of the goods is not transferred to the bank and therefore such and advance is no better than a clean loan, such an advance can thus only be granted to a person in whose integrity the banked has full confidence and cash credit in the form of “Hypothecation” is normally accompanied with mortgage of immovable properties. The party/borrower possesses the lock and key of the go down. •
The Formalities of Opening Cash Credit:
The intending cash credit holder should submit the following documents and being fill up property: •
Stock Report, Rend Receipt.
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Trade license.
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Up to date income tax clearing certificate.
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Charge documents.
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Letter of continuity.
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Letter of arrangement.
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D. P. (Demand Promissory) notes.
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Letter of guarantee.
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Letter Lien.
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Limit sanction advice.
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Non- Encumbrance Certificate.
Observing the document, the bank authority prepares a CC proposal from that contains the following information: •
Nature of Business
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Banking with NCC Bank Limited.
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Transaction with CD account by the client.
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Allied deposit with SB/STD account.
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Number of adjustment(s) (applicable only for renewal of CC)
[How many times the CC holder made his/her account nil that means debit
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balance equal to credit balance]
Recycling: it is the ratio of total credit summation to the limit. If the ratio is higher, it is better from banker’s point of view.
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Turn over in the account.
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By the encasement authority the bank holders the power to incase the FDR or Defense Saving Certificate at any time in case of borrower’s failure to repay the loan amount with interest in due time.
VI. Hire-Purchase: Hire-Purchase is a type of installment credit under which the Hire-Purchaser agrees to take the goods on hire at a stated rental, which is inclusive of the repayment of Principal as well as interest for adjustment of the loan within a specific period. VII. Lease Financing: Lease Financing is one of the most convenient sources of acquiring capital machinery and equipment whereby a client is given the opportunity to have an exclusive right to use an asset usually for an agreed period of time against payment of rent. It is a term financing repayable by installment.
VIII. Consumers Credit Scheme: It is a special credit scheme of the Bank to finance purchase of consumers’ durable to the fixed income group to raise their standard of living. The customers allow the loans on sort-terms against personal guarantee and deposit of specified percentage of equity. The loan is repayable by monthly installment within a fixed period. •
Introduction:
Consumer Credit Scheme is a major program of . In CCS the bank, engage an agent who works on behalf of the Bank. This agent performs all the works before the sanction of the CCS. They do the inspection and make all the documents necessary for CCS. For this purpose, they get commission. •
Clients:
The clients are Service Holders and Businessman. Service holders can be Government and Private. In case of Government officer, the client must be an officer in rank. •
Products:
Electronic goods, cars, jeeps, microbuses, Mobile telephone, T&T telephone etc. •
Interest Rate:
Interest rate is 15%. 2% risk fund, and 2% service charge. •
Down payment:
Down payment is 20% of the CCS amount. It is considered as equity. The payment is 50% for vehicles. •
Maturity and Loan Limit:
1-2 Years for electronic goods. Here limit is 1,00,000/=.
3 Years for vehicles. Here limit is 3700,000/=. •
The documents, which is demanded by the bank:
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Two letters of guarantee.
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Bank statements the assets and liabilities of the clients-
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Assurance letter from the organization where he is currently working.
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Trade license for the businessperson or Article of Association.
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Non-Judicial stamp amounting Tk.300/=.
•
Penalties:
2% penal interest is charged in the residual amount. Recovery rate is 93%. It is a special credit scheme of the finance purchase of consumers' durable to the fixed income group to raise their standard of living. The customers allow the loans on soft terms against personal guarantee and deposit of specified percentage of equity. The loan is repayable by monthly installment within a fixed period. IX. Overdraft: Overdraft is an arrangement between the banker and the customer by which the letter is allowed to withdraw over his/her credit balance in the current account up to an agreed limit. The borrower is permitted to draw and repay any number of times, provided the total amount overdrawn does not exceed the agreed limit. Here the interest is charge only for the amount withdrawn over the limit, not for the whole amount. •
Overdraft is divided into different categories:
•
Secured Overdraft (SOD) General:
Advances allowed to individual/firms against financial obligation (i.e. lien on FDR/PSP/BSP/Insurance Policy/Share etc). This may or may not be a continuous credit. •
SOD (Others):
Advances allowed against assignment of work order for execution of contractual works falls under this head. This advance is generally allowed for a definite period and specific purpose i.e. it is not a continuous credit. It falls under the category "Others". •
SOD (Export):
Advance allowed for purchasing foreign currency for payment against L/Cs (Back to Back) where the exports do not materialize before the date of import payment. This is also an advance for temporary period, which is known as export finance and falls under the category "Commercial Lending". X. Payment against Document (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 advance 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 customs authority. It falls under the category "Commercial Lending". XI. Loan Against Imported Merchandise (LIM): Advances allowed for retirement of shipping documents and release of goods imported through L/C taking effective control over the goods by pledge in goodness under Bank's lock & key fall under this type of advance. This is also a temporary advance connected with import, which is known as post-import finance and falls under the category "Commercial Lending".
XII. Loan Against Trust Received (LTR): Advance allowed for retirement of shipping documents and released of goods imported through L/C falls under this head. The goods are handled over to the importer under trust with the arrangement that sale proceeds should be deposited to liquidate the advances within a given period. This is also a temporary advance connected with import and known as post-import finance and falls under the category "Commercial Lending". The bank generally provides vehicle and medical instruments. The vehicle class includes all the commercial vehicles like bus, truck car, jeep and prime moves etc. XIII. Inland bill Purchased (IBP): Payment made through purchase of inland bills/checks to meet urgent requirement of the customer falls under this type of credit facility. This temporary advance is adjusted from the proceeds of bills/checks purchased for collection. It falls under the category "Commercial Lending". XIV. Export Cash Credit (ECC): Financial accommodation allowed to a customer for export of goods falls under this head and is categorized as "Export Credit". The advances must be liquidated out of export proceeds within 180 days. XV. Packing Credit (PC): Advance allowed to a customer against specific L/C / Firm contract for processing / Packing of goods to be exported falls under this head and is categorized as "Packing
Credit". The advances must be adjusted from proceeds of the relevant exports within 180 days. It falls under the categories "Export Credit". XVI. Foreign documentary bill Purchased (FDBP): Payment made a customer through purchase/negotiation of a foreign documentary bills falls under this head. This temporary advance is adjustable from the proceeds of the shipping/export documents. It falls under the category "Export Credit". XVII. FDBP (Local): Payment made against documents representing sale of goods to Local export oriented industries which are deemed as exports and which are denominated in Local Currency/Foreign Currency falls under this head. This temporary liability is adjustable from proceeds of the Bill. XVIII. FBP: Payment made a customer through Purchase of Foreign Currency Checks/Drafts falls under this head. This temporary advance is adjustable from the proceeds of the check/draft. XIX. Local documentary bill purchased (LDBP): Payment made to a customer through purchase of inland documentary bills. This temporary liability is adjustable from proceeds of the bill. 3.2.5 GENERAL PROCEDURE FOR GIVING LOAN & ADVANCES: The following procedure is applicable for giving loans and advances to the customer:
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The potential will submit application to NCC Bank Limited for by filling up a specific Application form.
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Application for credit
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Collecting Credit information Bureau (CIB) report from Bangladesh Bank.
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Making credit line proposal.
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Project appraisal
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Head office approval
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Sanction letter
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Documentation
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Disbursement
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Monitoring
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Recovery
3.2.6 LOAN APPLICATION: When credit proposal has to be proposed, a banker first study the loan application made by the brewer. A loan application usually contains information pertaining to the name of the concern. Constitution and nature place of business, year of establishment, borrowers experiences in line, particulars of assets, liabilities and purpose of advance, repayment, names of present bankers with details of borrowing and other facilities. Some banks obtained these information from borrower in a specially designed from "Declaration of borrower". A specimen of which is given hereinafter. 3.2.6.1 Collecting Credit Information Bureau (CIB) report from Bangladesh Bank: The Credit Information Bureau (CIB) of Bangladesh bank has undertaken the task of collecting and storing detailed credit information from scheduled banks and other financial institutions in its proper prospective. So that these can be exchanged among the scheduled banks, financial institution and Bangladesh bank for quick processing of new loan proposals are scheduling of existing loans. The CIB has also been supplying credit
information to the Govt. and other national and international organizations that engaged in the formulation of monetary, economic and credit policy.
The information is collected by CIB is given bellow: •
Debtor's/ Borrowers information (Segment – I)
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Owner's information (Segment – 2)
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Group / Affiliation information (Segment-3)
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Third, party Guarantor's information.
The information under the above segment has been structured and necessary software has been developed for providing credit information to the banks and financial institution for loan processing and MIS purpose. 3.2.6.2 Documents required to be submitted for taking loan and advances: •
Client's prayer
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Photograph of proprietor/all directors.
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Loan application (Bank's pro –forma).
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Personal Net worth statement (Bank's pro-forma).
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CIB information( Bank's pro-forma)
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Trade licenses.
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Supporting papers in connection with possession right in establishing business in the place like ownership deed/lease deed rent arrangement along with rent receipt of the company /business concern.
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Confidential opinion/ report of local and previous bank branches.
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Opinion or certificate regarding business reputation and integrity of the customer from 3 or 4 business firms established in the area/ locality in their business pad.
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TIN certificate.
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Three years audited balance sheet and income statement.
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Sock report
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Previous bank's statement for last one year
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Previous bank's loan sanction advice
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Declaration of the customer regarding liability/ outstanding loan with other banks including name of the banks/ branches.
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List of machinery and equipment.
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Certified copy of memorandum of association & articles of association (in case of limited company) including certificate incorporation
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Certified copy form XII, particulars of directors of the company if there is any change in directors.
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If there any changes in directors of the company during continuation of loan of a bank, then No of that banks board of directors to be required regarding change in director of the company.
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Copy of partnership deed/Agreement (in case of partnership concern).
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Board resolution covering borrowing and documentation(For Ltd. company)
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Organization chart.
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Bio-data of essential personnel.
3.2.6.3 List of paper /Documents to submitted in respect of proposed mortgage property: A. Owned property: •
Original title deed.
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Bio deed
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Certified copy of C.S Parcha, S.A Parcha and R.S Parcha.
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Present R.S Parcha.
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Resent NEC.
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Up-to- date rent receipt.
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Certified copy of Mutation Parcha with DCR
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Approved plan (if there is any construction in the land0 by competent authority.
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Site map (for vacant)
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Municipality tax receipt
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Photograph of the owner of the land.
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Chairman's certificate of the owner of the (3rd party owner)
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Valuation certificate along with possession confirmation (to be done by the bank)
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Lawyer opinion (to be obtained by the bank)
B. Lease holds property: •
Lease deed
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Allotment letter
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Possession letter.
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Final measurement letter.
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Mortgage permission form RAJUK or competent authority in favor of NCC Bank Limited.
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Non Encumbrance certificates.
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Up-date-rent receipt.
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Mutation letter with permission letter with DCR.
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Approved plan (if there is any construction in the land) by competent authority.
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Site map (for vacant)
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Photograph of the lessee of the land.
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Chairman's Certificate of the land (3rd party).
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Valuation certificate (to be done by the bank).
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Lawyers opinion (to be obtained by the Bank).
3.2.7 CREDIT ADMINISTRATION OF NCC BANK LIMITED:
The principal elements of bank credit administration are as follows: •
Credit Approval
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Credit files maintenance.
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Facility evidence maintenance.
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Monitoring and review.
3.2.8 CREDIT APPROVAL: The primary factor determining the quality of the Bank's credit portfolio is the ability of each borrower to honor, on a timely basis, all credit commitments made to the Bank. The authorizing credit personnel before credit approval must accurately determine this. I. Credit Evaluation principles: To have the optimum returns from the deployed funds in different kinds of lending, more emphasis shall be given on refund of loans and advances out of funds generated by the borrowers. From their business, activities (cash flow) instead of realization money by disposing of the securities held against the advance that is very much uncertain and time consuming. Accordingly, the credit evaluation principles must be adhered to at every level of approval. The lending risk analysis tool containing analysis of both the business risk and security risk provides overall ratings of risk in a particular loan under the following lending process: •
Assess risk of failure to repay.
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Decide whether to accept or reject a loan proposal.
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Set price and terms.
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Obtain sanctioning documents and disburse loan.
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Monitor performance and ensure repayment/recovery.
The most pertinent and prime part of the process is assessment of risk of failure to repay which deals with the overall lending risk combining the business risk. The security risk in a matrix derived out of six segments of the Business risk viz. 1) Suppliers risk, 2) Sales risk, 3) Performance risk, 4) Resilience risk, 5) Management competence risk & 6) Management integrity risk and two segments of the Security risk viz. (i) Security control risk & (ii) Security covers risk. The overall matrix provides four kinds of lending risk for decision-makers viz. •
Good,
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Acceptable,
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Marginal and
•
Poor, which are detailed in the Lending Risk Analysis Circular/Credit Manual?
Bank shall not approve any lending having an overall risk as "marginal" and "poor" without proper justifications except for renewal of existing facilities. Under compelling circumstances or for other reason such as salvage, this shall also contain covenants for future improvement of the position. All credit applications rated "Poor" shall require the approval of the Board regardless of purpose, tenor, or amount. II. Credit Risk Evaluation/Assessment:
The importance of a detailed and complete credit risk assessment for each facility and customer relationship cannot be over emphasized. The steps that should be followed in carrying out such an assessment are set out in the Bank Credit manual and in Head Office Circulars issued from time to time. All proposals of credit facilities must be supported by a complete analysis of the proposed credit. A comprehensive and accurate appraisal of the risk in every credit exposure of the Bank is mandatory. No proposal can be put up for approval unless there has been a complete written analysis. It is the absolute responsibility of the proposing officer to ensure that all necessary proposal documents are collected before the facility request is sent to the sanctioning officer. III. Lending Authority: To assure proper and orderly conduct the business of the Bank, the Board of Directors will empower the Managing Director and other Executives of the Bank to lend up to certain amount under certain terms and conditions at their discretion. The lending officers are broadly categorized as follows: •
Managing Director
•
Deputy Managing Director
•
Executive Vice President
•
Senior Vice President
•
Vice President
•
Senior Asst. Vice President
•
Asst. Vice President
The amount and scope of each Officer's lending authority is a function of the amount. The extent of authority required by the Officer's to carry out his/her responsibilities to the Bank and its clients in a prudent, effective and efficient manner. It must be emphasized that an Officer will not be delegated lending authority only based on his position. In other words, an officer does not automatically get lending authority
by virtue of his corporate and/or functional title. Specified lending authority will be delegated by the Managing Director to various Executives after taking into consideration his proven credit judgment, knowledge and experience. The amount of lending authority approved by the Board for various Executives forms the upper limit of the authority that may be delegated to an officer holding corporate title. Each individual's lending authority will be delegated to him in writing. Authorities given to an incumbent will not automatically be transferred to a replacement. The later will have lending authorities delegated to him in writing and amount delegated will depend upon the individual. All lending authorities will be reviewed periodically by the Managing Director with the Executive Committee/Board. IV. Approval under Dual Signature: 1) All approval of credit facilities must be conveyed under dual signature; 2) Ideally both the signatories must have the required lending authority; 3) If, however, two lending officers of the required lending authority are not available, one of the signatory must have the lending authority; The responsibility for Credit Policy, Procedure, Approval, & Review shall vest amongst the following groups: a) Board of Directors: •
Established overall policies and procedures for approving & reviewing Credits.
•
Delegating authority to approve and review Credits.
•
Approving Credit for which authority is not delegated.
•
Approving all extensions of credit, which are contrary to Bank is written credit policies.
b) Executive Committee: Executive Committee of the Board shall be responsible: •
Establishing overall policies and procedures for approving & reviewing Credits.
•
Delegating authority to approve and review Credits.
•
Approving Credit for which authority is not delegated.
•
Approving all extensions of credit, which are contrary to Bank's written credit policies.
c) Policy Committee: o Established Lending Policy. o Established Policies & procedure for reviewing and analyzing extensions of credit and loan portfolios. d) Head Office Credit Committee: The Managing Director will head Office Credit Committee; he will nominate other members. The Committee shall be responsible, •
Reviewing, analyzing and approving extension of credit in accordance with authority established and delegated by the Board of Directors.
•
Evaluating the quality of lending staff in the Bank & take appropriate steps to improve.
•
Recommending Credit Proposal to the Executive Committee/Board of Directors, which are beyond their delegated authority?
•
In exceptional circumstances when approval of an extension of Credit is required at short notice, the Branches may refer the proposal directly to the Head Office, Credit Division by Telex/Fax. The Head Office, Credit Division with the approval of Managing Director and in case where the amount exceeds the Authority of Management with the approval of both the Managing Director & the Chairman of the Executive Committee/Board of Directors may approve the extension. All such approvals, together with the appropriate supporting documentation, must be submitted to Head Office Credit Committee/Executive Committee/Board of Directors as the case may be for post-facto approval at their next regular meeting.
•
Ensuring that all elements of the Credit application i.e. forms, analysis, statement, and other papers have been obtained and are in order.
•
Confirming that the transaction is consistent with existing loan policy and Bangladesh Bank guidelines & if not the Committee may prepare a recommendation for an exception to or a change in policy for consideration by the Executive Committee /Board of Directors.
e) Branch Credit Committee: Branch Credit Committee to be headed by the Branch Manager, other members to be selected by the Manager in consultation with Head Office.
V. Responsibilities: •
The Branch Managers will be the first line-lending officers and are responsible for exercising their authority with due diligence and discipline. They must also: Know their borrower fully;
•
Comply with the applicable instructions, circulars, and other rules of the Bank as well as those of Bangladesh Bank including Banking Companies Act 1991 (as amended from time to time).
•
Ensure that Credit proposals submitted to Head Office, Credit Division are complete and consistent with established policies & procedure.
•
Review and analyze the following in connection with credit risk proposals covering any obligor: a) History of antecedent of the obligor and its management personnel. b) Financial condition of the obligor evidenced by comparative statement, latest
Balance
Sheet,
income
statement,
opening
results,
and
supplementary facts as well as by Personal Net worth Statement of the Proprietor, Partners, & Directors. c)
Bank & Credit Information Bureau (CIB) checking and trade standing obtained through investigation.
d) Any other pertinent information. •
Secure, necessary and adequate legal & Banking documentation as well as insurance cover, all in our favour to ensure maximum legal protection. They should also ensure that all charge documents, securities, collateral etc. as per sanction letter have been obtained before disbursement.
•
Comply with necessary and customary internal & external control & safeguard.
•
Ensure continuing review of the risks and exposure and compliance with limits with particulars attention being paid to term loans. At the minimum the following should be done:
a) Every month the Branch Manager along with other members of Branch credit committee should review all credit facilities.
b) Ensure that all loan covenants are being complied with. c) Review that regular deposits are being made in the accounts especially for CC & SOD limits and the deposits commensurate with limits and business. d) Ensure verification of stock reports by the Manager or his authorized officer every month. e) Visit the Business establishment/factories/office of the borrower at least once in a month to review business position, profitability, future projection etc. and prepares a report of the findings which is to be copied to Head Office. •
Ensure that all credit facilities are covered by appropriate approval and that they are kept within approved limits and ensure compliance with terms and conditions of the approval.
VI. Loans to Directors: No credit facilities should be allowed to any Director of the Bank as defined by Bangladesh Bank in Banking Companies Act. 3.2.9 TYPES OF CLASSIFICATION OF LOANS: In banking practice, there are three types of loans. This classification is prepared based on the non-repayment within particular period of the loan; the Bangladesh Bank's rules and regulations have developed this classification type. •
Substandard Loan.
•
Doubtful Loan.
•
Bad or Loss (BL) Loans.
3.2.10 BASIS OF CLASSIFICATION OF LOANS: The classification procedure is done as per the Central Bank’s instruction in BCD Circular No. 34/1989, BCD Circular No. 20/1994. According to these rules and regulations, EXIM Bank classified loans based on the following criteria:
•
Overdue: If the borrower does not repay the loan instrument within the stipulated time frame then the loan would be known as overdue loan.
•
Limit Overdrawn: If the borrower crosses the granted limit of loan then it would be known as limit overdrawn.
•
Required payment: If the required payment is not made within the particular time then it would be classified as required payment.
•
Legal action: If the bank takes any legal action at any time against the borrower for defaulting the loan repayments then it would be known as the loan classified on legal action.
•
Qualitative judgement: this is the basis of loan classification upon the borrower performance. If the bank authority observes that the borrower has, chance not to repay the loan amount within the required period then they consider it as qualitative judgement classified loan.
3.2.11 PROVISION: If any borrower fails to pay his/her borrower amount, the account is classified as substandard, doubtful and bad depending on the period of non-payment. When the amount of classified loan is big, the bank cannot operate banking operations very smoothly. At that time bank required provision and then a proportion of net profit transfer to the provision. The main function of provision is to overcome bad debt and loss on one side. A big amount of provision is good because the bank can operate banking functions and disburse to new probable sector in the economy to develop the country. On the other hand, a big amount of provision is bad because the amount of reserve is small. As per latest BRPD circular no.16/1998, Bangladesh bank the length of overdue and reserve for provision for classified loans are given below: Status of classification Unclassified Sub-standard
Length of overdue Reserve for provision Less than three month 1% 3 months or more but less than 6 20%
Doubtful
month 6 months or more but less than 12 50%
Bad and loss
month 12 months or more
100%
[Base of provision = total outstanding amount – Interest suspense – 50% of the collateral security.] 3.2.12 BANK GUARANTEE: According to the section 126 of Contract Act, 1872 guarantee can be define as a contract to perform the promise or discharge of liability of a third person in case of his default. The person who gives the guarantee is called the ‘surety’, the person in respect of whose default the guarantee is given is called ‘the principle debtor', and the person to whom the guarantee is given is called the ‘creditor’. It is an irrecoverable undertaking to pay in case of a certain eventually. Banks generally provide three type of guarantee: 1. Big Bond 2. Performance Guarantee. 3. Advance payment Guarantee. Accounting Treatment: Date
Particulars Customer’s liabilities L/G account Banker’s Liabilities L/G account
Dr.
Dr.(Tk) xxx
Cr.
Cr.(Tk) xxx
(Being received for L/G margin ) Date
Particulars Cash A/C S/D Account margin on L/G
Dr. Cr.
Dr.(Tk) xxx
Cr.(Tk) xxx
(Cash received for L/G margin ) Date
Particulars Cash A/C Income A/C Commission L/G
Dr.
Dr.(Tk) xxx
Cr.
Cr.(Tk) xxx
(Cash received from commission L/G ) Date
Particulars Party Account Cash Account
Dr.
Dr.(Tk) xxx
Cr.
Cr.(Tk) xxx
(Being margin realized)
3.3 Foreign Exchange One of the large businesses carried out by the commercial bank is foreign trading. The trade among various countries falls for close link between the partied dealing in trade. The situation calls for expertise in the field of foreign exchange operations. The bank, which provides such operation, is refereed to as rending international banking operation. Mainly transactions with overseas countries are respects of import; export and foreign remittance come under the preview of foreign exchange transaction. International trade demands a flow of goods from seller to buyer and payment from buyer to seller. In this case, the bank plays a vital role to bridge between the buyer and seller.
3.3.1 FOREIGN EXCHANGE DEPARTMENT: Foreign Exchange department of NCC Bank Limited is one of the most important departments of all departments. This department handles various types of activities by three separate sections. •
Import Section.
•
Export Section
•
Foreign Remittance section
3.3.2 IMPORT SECTION: The function of this section is mainly to deal to with various components such as: •
Letter of Credit (L/C).
•
Payment against Document (PAD).
•
Payment against Trust Receipt (PTR)
•
Loan against Imported Merchandise (LIM).
• Letter of Credit (L/C) •
Definition:
A letter of Credit (L/C) can be defined as “an arrangement where in a bank guarantees on behalf of his customers to make payments to the beneficiary upon presentation of documents specified in the credit” •
Parties involved in L/C
Opener/Buyer/ Importer The person who opens the L/C is known as Opener/Buyer/Importer of the L/C. the buyer and the seller conclude a sales contract providing for payment by documentary credit. •
Opening Bank:
The bank issuing the L/C in favor of exporter is known as opening bank. The opening bank opens L/C on request importer according to the application of the importer. •
Advising Bank:
The bank through L/C advised. L/C will be sent to the beneficiary through their agent (corresponded bank) abroad. The duty of the advising bank is to authenticate the message so that the seller can act on it without any fear of forgery etc. •
Beneficiary:
Seller and exporter in whose favor the L/C is opened. The beneficiary is normally the seller of goods who receive payments under documentary credit if he has compiled with terms and conditions thereof. •
Negotiating Bank:
The bank that is authorized to handle (purchase) the documents under the L/C in the exporting country are known as negotiating bank. L/C will stipulate either a notified bank to negotiate (restricted L/C) or any bank can negotiate in the seller’s country (unrestricted L/C). •
Reimbursing Bank:
The bank that is (by the L/C issuing bank) to effect reimbursement is known as reimbursing bank. Reimbursing bank is authorized to honor the reimbursement claims in settlement of negotiation/ acceptance/payments lodged with it by the paying /negotiation/ accepting bank. •
Confirming Bank:
A confirming bank is one which adds the guarantee to the credit opened by another bank, thereby undertaking the responsibility of payment/ negotiating/ acceptance under the credit in addition to that of the issuing bank. A confirming bank normally does so request by the issuing bank. •
Types of L/C:
•
Revocable / Irrevocable L/C.
•
Confirmed/ unconfirmed L/C.
•
Transferable L/C
•
Back to Back L/C.
•
Acceptance L/C.
•
Revolving L/C.
•
Red Clause L/C.
•
Green Clause L/C.
The NCC Bank Limited deals with Irrevocable L/C, which cannot amend or cancelled by the issuing bank at any moment and without prior notice to the beneficiary. It also deals Back to Back L/C, which is the letter of Credit provided by the bank to bank exporter to the importer the raw materials from abroad in order to produce the exportable commodity for the importer. •
Procedures for opening L/C
•
Application for opening L/C
An importer who is desirous to import goods from foreign country will apply issuing bank for opening a L/C. the importer will provide an application mentioning the following aspects: •
Full particulars of applicant's bank account.
•
Types of business.
•
Historical background.
•
Amount of required L/C limit.
•
Amount of L/C margin.
•
Terms of payments.
•
Name of imported goods.
•
Repayment schedule and source of fund.
•
Documents required for opening L/C
An importer or L/C opener has to submit the following documents: •
Current deposit A/c holder
•
Application form (provided by the bank).
•
Valid import registration certificate (IRC).
•
Proforma Invoice.
•
Four set of IMP form (Import form).
•
Insurance cover note.
•
VAT registration number.
•
Letter of Credit authorization form (LCA form).
•
TIN certificate (Tax identification number)
•
Contingency liability voucher.
•
Examination for opening L/C:
The concerned officer considering the facts mentioning below must carefully check application: •
The terms and conditions of L/C applications are consistence with exchange control
•
In addition, import trade regulation Uniform Customs & Practice for Documentary Credit (UPPDC), ICC Publication no. 500.
•
Illegibility of imported goods.
•
The L/C must be opened in favor of importer.
•
That is signed by the importer and agreed with the terms and conditions.
•
Indenting registration number.
•
Goods are not of Israel and vassals to be used are not of Israel.
•
Insurance cover note with date of shipment.
•
Whether IRC is up to date or not.
•
Whether IMP form is dully filled up and signed.
•
The imported goods are marketable.
After scrutinizing all legal aspects entry is given to the margin register and charges, commission and margin is realized. Accounting Treatment: Date
Particulars Party A/C Sundry Deposit margin on L/C S. Deposit VAT on L/C S. Deposit A/C tax deducted from L/C com. (Imp) Income A/C Commission on L/C. Income A/C Data Max Income A/C Postage Charge Income A/C Courier Charge Income A/C Miscellaneous
Dr. Cr. Cr. Cr. Cr. Cr. Cr. Cr. Cr.
Dr.(TK.) xxxx
Cr.(TK) xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx
Transmitting the L/C: The L/C is transmitted to the advising bank for advising the L/C to the beneficiary. L/C is generally transmitted through tasted telex or fax. Before transmission, a final examination of the L/C contents is necessary for the issuing bank. It is customary to advice a credit to the beneficiary for receiving L/C. Add confirmation:
Very often advising bank receive request from the issuing bank to add their confirmation while advising credit to the beneficiary. The advising bank can do it if there is prior arrangement between advising and issuing bank or if it feels that the issuing bank is repute and reliable institution and good enough to discharge this obligation.
• Payment against Document (PAD) The issuing bank starts PAD procedure after getting all documents from the exporter as evidence of exporting goods. Documents required for PAD is mentioned below: •
Original (Non-negotiable) bill of Leading.
•
Commercial Invoice.
•
Certificate of Insurance.
•
Certificate of Origin.
•
Bill of Exchange.
•
Pre-shipment Inspection Certificate.
•
Packing List.
•
Clean Report of Findings (CRF).
•
Examination of PAD Documents:
Scrutinizing documents is very important for the issuing bank. As after examining all the documents the issuing bank will make payment to the negotiating bank. So any mistake in the examination process may cost issuing bank. •
Examining the Bill of Exchange:
•
It is drawn and duty signed by the maker indicating as the beneficiary.
•
It is drawn on the importer indicating him drawee.
•
L/C number quoted on it.
•
Tenors of the draft are strictly in conformity with the terms stipulated in the L/C.
•
Amount is identical.
•
Amount in words and in figures is same.
•
Examining the commercial invoice.
•
It is address to the importer.
•
It is dated, signed, and submitted in required number.
•
It must bear detailed description of goods that must tally with L/C and Bill of Lading.
•
Price, quality, quantity etc. is corresponded to L/C.
•
It must be prepared in the language of L/C.
•
Invoice must bear L/C authorization and other relevant number.
•
Charges relevant to merchandise are included in the invoice and are permitted by the L/C
•
Examination of Transport Document:
•
It is presented in full set of negotiable and non-negotiable copies.
•
Date of shipment on the Bill of Leading.
•
Bill of Lading must be made out in the name of bank notify the importer.
•
Description of goods in the Bill of Lading must agree with invoice and L/C.
•
Port of shipment and destination is as per L/C.
•
The sipping company of their agent signs bill of lading.
•
Examination of other documents:
Weight list, inspection certificate, quality certificate, certificate of origin, packing list etc. Should agree with L/C terms and conditions and be signed by the appropriate authority. These certificates are usually dated before the date of shipment.
•
Common Discrepancies of the Import Document
Following are the common discrepancies found in the documentary operation: •
Inadequate number of invoice.
•
Submission of documents after expiry of L/C.
•
Late shipment or transshipment beyond L/C terms.
•
“One Board” endorsement unsigned or not dated on the Bill of Leading.
•
Specifications of goods are not as per terms of L/C.
•
Tenor of draft wrong.
•
Inconsistent documents presented.
•
Absence of some documents.
If any major discrepancies found in the documents, it is informed to the buyer for his/her opinion. If discrepancies are minor then these are overlooked. Lodgment and Retirement of Import Document are usually payment is given days of documents received Accounting treatment: When documents are received: Date
Particulars PAD Cash A/C
Dr.(TK) xxxxxx
Dr.
Cr.(TK)
ETCA Head Office ID
Cr.
xxxxxx
Income A/C Telex
Cr.
xxxxxx
Income A/C Interest on PAD
Cr.
xxxxxx
Income A/c Exchange on Earnings
Cr.
When margin amount is transferred to PAD: Date
Particulars Sundry deposit L/C margin A/C
Dr.(TK) xxxxxx
PAD Account
Cr.(TK) xxxxxx
When payment is made: Date
Particulars
Dr.(TK)
Cr.(TK)
Party Account Customer liability Account
Dr. Cr.
xxxxxx xxxxxx
Loan against Trust Receipt (LTR) There may be situation where storage of collateral in an independently controlled field warehouse is impractical. An improper may require the goods for further processing or for displaying the merchandise in order to make the final sale. In such cases, a financing institution that has a great degree of trust in the importer may be willing to release the negotiable Bill of Lading and thereby the goods to the importer against the signing of trust receipt. After the importer has made his/her final sale and received the proceeds, he/she can pay the financing institution that he/she received as advance.
Loan against Imported Merchandise (LIM) If the importer does not come to negotiate the shipping documents from the issuing bank then it creates LIM through the bank clears the goods from the port and holds the goods in its Godown. Beside the above as soon as the imported goods come to the port the party may fall into financial crisis and requests the bank to clear the goods from the port making payment to the exporter. In this case, the party later may take the goods partly or fully from the bank by making required payment (if he/she takes the goods time to time payment will be adjusted simultaneously.) 3.3.3 EXPORT SECTION This section negotiates the export documents and collects and purchases the export bill. The two types of credit facilities allowed by the bank to the exporter in relation to export credit. •
Pre-Shipment Finance.
•
Post-Shipment Finance.
Export finance arises from trade between two trades trading in two different countries. A brief idea of the both categories is given below: •
Pre-Shipment Finance:
When an exporter intends to ship the goods to an overseas buyer he/she needs fund for purchasing goods to be exported. He/she may also depend upon the bank for arranging credit for the supply of goods.
•
Post- Shipment Finance:
Post- Shipment Finance is more concerned with banks than Post- Shipment Finance. This type of finance starts after the goods have been already shipped. •
Function of Export Section
Export section performs different types of tasks such as: •
Back to Back, L/C Open.
•
Foreign Documentary Bill for Purchase (FDBP).
•
Foreign Documentary Bill for Collection (FDBC).
•
Local Documentary Bill for Purchase (LDBP).
•
Local Documentary Bill for Collection (LDBC).
•
Secured Overdraft (SOD) Export.
•
Packing Credit (PC).
•
Accepted Bills Payable (ABP).
•
Opening Back to Back L/C
Back to Back, L/C is a secondary letter of credit opened by the advising bank in favor of a domestic/foreign supplier. On behalf of the beneficiary original foreign L/C. As the original letter of credit of bank by import letter, it is called Bank to Bank L/C. The second L/C is opened on the strength of the original L/C for a smaller amount i.e. maximum 75% is shipped under Lien and 10% under packing credit. There are different types of BTB L/C opened by NCC Bank Limited. •
Back to Back L/C (Local)
When the Back to Back L/C is opened for local purchase of materials it is called Back to Back L/C (Local). It is generally payable within 90 days at sight •
Back to Back L/C (Foreign)
When the BTB L/C is opened in a foreign country supplier, it is called BTB L/C (Foreign). It is generally payable within 120 days at site. •
Back to Back L/C (EPZ)
Another kind of L/C is for EPZ (Export Processing Zone). Here the exporter will import accessories from EPZs in Bangladesh. There are six EPZs in Bangladesh of which four are operating now. Here the L/C issued for EPZ (Export processing zone) though there is foreign investors. The beneficiary party is EPZ. The code is 12 here in IBB, Uttara. Branch charges less than foreign BTB L/C for opening this type of BTB L/C. Here the negotiating bank may be local or foreign Bank. There are not too many L/C opened like local or foreign, but this is encouraging for the exporter and less time consuming for the exporter. •
Back to Back L/C (EDF)
EDF stands for Export Development Fund that is provided by the ADB to Bangladesh Bank for export promotion of Third-world-Country like Bangladesh. When the Bank is
not in a position to support the amount of back to back L/C then they apply for loans to the Bangladesh Bank for Back to Back (EDF). •
L/C Margin
L/C margin varies bank to bank and customer to customer. Generally, it depends on the following factors: •
Relationship between the banker and customer
•
Seasonal factor
•
Feature of the goods
•
EXP Form:
The exporter will first fill an EXP from declaring the amount to be export, item, and quantity, Country etc. The EXP-form has a specific number given to the party. This number is very important. Suppose the number is 1949 – 0135 – 03. This number will be treated as the reference number on invoice (Where the price and quantity is mentioned by the importer). A copy of (duplicate) is send to Bangladesh Bank. Original EXP form is retained with the party. Triplicate is required for customer purpose. A quadruplet is kept for office purpose. In Exp. form, Banks authorized officer will sign in two places mentioning the date of Exp. The supplier must declare all export from Bangladesh on EXP forms to the Bank enabling them to submit the duplicate within 14 days from the date of shipment. The shipper is required to repatriate the export proceeds within 4 months from the date of shipment otherwise, penalty is imposed upon them. The following things are in EXP form •
Quantity of goods to be exported(pieces or dozens)
•
Item of the goods (Suppose men's shirt etc)
•
Amount in dollar or Euro (Amount will match the L/C value or may slight vary for sampling and other purpose.)
•
Bill of Lading number
•
Carrying vessel no.
•
Date of departure
•
Last date of shipment
•
Mood of advising L/C
•
Whether transshipment is allowed
•
Export L/C number and date.
The application form along with other 3 papers (1) promissory note (2) Exchange form with a forwarding that the party wants to open back-to–back L/C is submitted to the bank. Before the procedure of Back-to-Back L/C, the party must submit the original master L/C to the bank. The form is to be stamped under stamp act, enforce in Bangladesh. •
LCA form
L/C authorization form consists of six copies. First, copy the original one for exchange control purpose, second copy is for custom purposes for delivery goods. Third and fourth copy will be sent to the concerned licensing office. Fifth copy is for registration unit of the Bangladesh bank. Sixth copy is retained in the Bank. •
About the Master L/C
The original master L/C is a beneficiary note mentioning that the importer will pay the money as soon as he receives the goods at his disposal. It may take three months or more.
The L/C or letter of credit is a document or paper mentioning L/C no, terms and condition from the importers parts, form of L/C revocable or irrevocable etc. (An original master L/C is attached for reference in the next pages). •
Latest date of shipment
•
Transshipment allowed or not
•
Issuing bank
•
Beneficiary name
•
Description of goods
•
Trade terms
•
Back to Back L/C opening Procedures:
The party will propose to open that back to back L/C with in the limit of original master L/C. as discussed earlier the party will apply for opening BTB L/C. The following procedure is followed. In the L/C opening register, the following things will be recorded: •
L/C No.
•
Beneficiary name
•
Importers name
•
Shipment date
•
Shipment expiry date
•
Goods of items
•
Master L/C No. and issuing bank, date of issuing
•
EXP No.
•
Commission charged
A certain amount will be paid as the commission for opening BTB L/C. This is 0.5% of the total amount of L/C converted into Taka. For data transmission or courier charge or postage charge, some fees will be deducted from party account.
Accounting treatment: The following vouchers are passed for opening back to back L/C. Date ****
Particulars Party A/C
Debit (TK.) *****
Credit(TK.)
Income A/C – Commission on BTB L/C
*****
Courier service/Datamax Charge
*****
Stamp-in hand
*****
Then the number will be inscribed in the L/C form. Other things will be printed on the L/C as formatted. The amount and the L/C condition will be typed. The L/C consists of 3 copies. The original copy will be send to the importer bank. Second copy will be for customer copy and the third copy is the office copy. The original copy after typed by the computer in a formatted way checked and signed by the authorized officer with their P.A number will be sent in an envelope writing the address of the importer bank. A file will be open for the newly opened BTB L/C. The office copy will be attached at the back of the file. On the file L/C number, amount and the date when opened L/C will be written. Below the file party name and the address will be written. In this, file other papers such as triplicate and quadruplet copy of Exp. form. Courier receipt, office copy of FDBP and FDBP also kept. •
Consideration for Back to Back L/C
•
Whether client can manufacture within the time-period.
•
The unit of the finished pro-forma invoice should be considering while allowing margin.
•
Consider the expiry date and shipment date.
•
On-side inspection whether manufacturing is carried out.
•
Payment under Back to Back L/C
Deferred payment is made in case of Back to Back L/C as 60, 90, 120, 180days date of maturity period. Payment will be given after realizing export proceed from the L/C issuing bank from the abroad. •
Reporting of Bangladesh Bank
At the end of every month reporting of Bangladesh Bank is mandatory regarding the whole month’s export operation. The procedures in this respect are as follows: •
To fill-up the E-2 / P-2 schedule of S-1 category. The whole month import amount, quantity, goods category, country, currency etc. all are mentioned. Respective IMP forms are also attached with the schedule to fill the E-3 / P-3 for all invisible payment.
•
Original IMP is forwarded to Bangladesh Bank with mentioning invoice value.
•
Duplicate IMP is skipped with the bank along with bill of entry.
•
Amendment of L/C
In case of revocable L/C, amendment can be brought without prior notice of the beneficiary or issuing bank. However, in case of irrevocable L/C prior notice of the beneficiary is essential. Issuing bank will accept amendment of the L/C after getting consent of both importer and exporter. •
How amendment for BTB L/C is made:
Amendment can be made through Telex or courier. Telex copy is retained in the L/C file. Message given by the telex is very easy. Just send message through Telex that how much the amount would be or the new shipping date or the quantity changed.
The party will make an application to the manager of the branch for the necessary amount to done. The followings things are amended: •
Value of the L/C
•
Quantity of the goods
•
Shipping date
•
Value of the L/C:
If the value of the BTB L/C increases it will be treated as a new L/C. L/C commission will be taken from the party in addition to the old L/C. In L/C opening register, the value will be included. Other charges like L/C opening amendment commission, Datamax charge or the courier charge will be taken from the party. In the BTB L/C liability, register liability is created and the liability voucher is passed. While amending, the following accounting treatment is done:
Date ****
•
Particulars Party A/C
Debit *****
Credit
Commission on L/C amendment
*****
Datamax Charge
*****
Export procedures:
A person desirous to export should apply to obtain ERC form CCLNE. Then the person should take step for export purpose into the bank for obtaining EXP form. He/she must submit the following documents: •
Trade license.
•
Export registrations certificate (ERC).
•
Certificate from concerned Government Organization.
After satisfaction on the documents, the banker will issue EXP from to the exporter. Now exporter will be getting shipping and other documents form the shipment procedure. Exporter should submit all these documents along with letter of indemnity to bank for negotiation. Documents of Export: Following major documents are required for export purpose: •
Commercial Invoice.
•
Bill of Lading.
•
EXP form.
•
Bill of Exchange.
•
L/C copy.
•
Packing List.
•
Certificate of Origin.
•
Quality Control Certificate.
•
Weight list.
•
Inspection Certificate.
•
Procedures for Collection of Export Bill
There are two types of procedures regarding collection of Export Bill: •
Foreign Documentary Bill for Collection (FDBC).
•
Foreign Documentary Bill for Purchase (FDBP).
•
Foreign Documentary Bill for Collection (FDBC)
Exporter can collect the bill through negotiating bank on the basic collection Exporter in this case will submit all the documents to the negotiating bank for collection of bill from inspector. The exporter will get money only when the issuing bank gives payment. In this connection bank will scrutinize all the documents as per terms and conditions mentioned in L/C. Accounting treatment: Date
Particulars Head office Account
Dr.
Party Account
Dr.(TK) *****
Cr.(TK)
Cr.
*****
Govt. Tax Account (@o.25% of invoice value) Cr.
*****
Postage Account
Cr.
*****
Income Account profit on Exchange
Cr.
*****
FDBC Register: •
Entry given twice in this register.
•
When document is forwarded to the issuing bank.
•
When proceeds realized
•
Foreign Documentary Bill for Purchase (FDBP)
When exporter sale all the export documents to the negotiating bank then it is known as FDBP. In this case, the exporter will submit all the documents to the bank. The bank give 60%-80% amounts to the exporter against total L/C value. Accounting treatment: Before realization of proceeds: Date
Particulars FEBP Account
Dr.
Dr.(TK) *****
Customer Account Cr. Adjustment after realization of proceeds:
Cr.(TK) *****
Date
Particulars Head office Account
Dr.
FDBP Account
Cr.
Dr.(TK) *****
Cr.(TK) *****
•
Local Documentary Bill for Purchase (LDBP)
•
Incoming of L/C customer with the L/C to negotiate.
•
Documents given with L/C.
•
Scrutinizing documents as per L/C terms and conditions.
•
Forward the documents to L/C opening bank.
•
L/C issuing bank give acceptance and forward acceptance letter.
•
Payment given to the party by collection basis or by purchasing
Accounting Treatment: Date ****
•
Particulars LDBP Account
Dr.
Dr.(TK) *****
Cr.(TK)
Party Account
Cr.
*****
Commission Account
Cr.
*****
Cr.
*****
Interest account Packing Credit (PC)
It is one kind of credit sanctioned by the department to meet the exported goods shipment timely. The bank will give the facility after deduction of back to back L/C value. •
Secured Overdraft (SOD)
Secured overdraft is one kind of credit facility enjoying by the exporter from export section. It is generally given to meet the back to back L/C claim. Sometimes it is given to the exporter by force for meeting the back to back L/C claim due to delay of Master L/C payment.
•
Accepted bill for payment (ABP)
The party after receiving the goods will pay for the importers. This will obviously done by the party's bank. With ABP the party can make the payment at a latter time after receiving his payment against the original L/C. He may take 90 days or 120 days for this purpose. This arrangement is called accepted bill for payment. This means that the bank has accepted the bill from the importer for payment. The importer must have sent the documents to the branch bank. The document includes bill of lading, commercial invoice, certificate of origin, packing list, DHL receipt etc. •
ABP Process
Upon receive the documents an ABP no will be given on the documents and on the L/C file. In the ABP register, the number is given first with the date of maturity and due date. In the ABP liability register, a liability will be created debiting banker's liability on ABP and crediting customer's liability on ABP. Date ****
Particulars Bankers Liability on ABP Customers liability on ABP
Debit *****
Credit *****
The document received from the exporter from whom BTB L/C opener imports goods handed over to the party. Then the question of payment comes. At the maturity/due date, the branch bank will pay to the negotiating bank of the importer. Maturity date should be convened to the negotiating Bank. 3.3.4 FOREIGN REMITTANCE SECTION Different funds are mobilized from foreign country to our country through the foreign remittance section. Purchase of currencies institutes inward foreign remittance and sale of foreign currencies constitutes outward foreign remittance. NCC Bank Limited has a
rich environment where funds flow from different countries. The transaction of the authorized dealer in foreign exchange involves either inward or outward remittances of foreign exchange between the two countries. NCC Bank Limited has authorized has authorized dealership. Different branches of NCC Bank Limited such as Motijheel branch to its customers. NCC Bank Limited foreign remittance facilities include FBC, LFBC purchase, and sale of FCY, FTT, and traveler's cheque, FBP. •
Remittance procedure of Foreign Currency
There are two types of remittance: •
Inward Remittance.
•
Outward Remittance.
•
Inward remittance: Inward remittance can be divided into different types. These remittance procedures are describe in the following:
•
Foreign Demand Draft (FDD)
If any draft is send to the name of any organization from abroad then the draft is fill-up from “C” where the draft holder is to fill-up who has send this draft, from where this draft has been sent etc. whether family purpose or not, if the draft has been family purpose then no VAT is required against the draft. For payment of draft concerned officer maintains a register, which is called Register for foreign Currency paid. •
Telegraphic Transfer (TT)
TT is one of the important tools of foreign currency from one country to another. The person who wants to send TT to the abroad at first he /she has to deposit amount mentioned in voucher to the cash department. The bank branch through their respective NOSTRO account that is maintaining any foreign bank account outside the country generally performs it. The originating bank send a message to the paying foreign bank
for making payment against the mentioned TT accounts number. The foreign make payments to the party and make debit ‘account’ against respective bank. At the same time foreign bank send advice to Head Office ID division for acknowledgement the payment. •
Outward Remittance: Outward remittance includes sales of TC and FC notes etc.
•
Sales of TC and FC Notes
To get TC and FC notes at least the customer has to submit an application form filling up the required column, which is formatted by the bank, is called T/M form. After checking the form, the desk officer passes voucher and issues a TC and gives cash dollar to the customer. In both the cases, the banker endorses total amount in customer’s passport. The bankers require photocopy of customer's passport (page one to seven) and endorsement paper. The charge of endorsement taken by the branch is Tk.300 only. Sale of TC and FC and Notes amount varies from different countries. 3.4 Financial Statement Analysis Financial Statement Analysis is the combination of some tools and techniques that used to identify the relationship between the items and group of items of income statement, Balance Sheet. Financial Analysis is the selection, evaluation, and interpretation of financial data, along with other pertinent information, to assist in investment and financial decision-making. Financial Analysis is the assessment of a firm's past, present and anticipated future condition. This is done by means of comparison, evaluation, and trend analysis. It objective is to determine the firm's strength and identify its weakness. Financial analysis may be used internally to evaluate issues such as employee performance, the efficiency of operations and credit polices, and externally to evaluate potential investments and the credit-worthiness of borrowers, among other things.
Financial Statements Includes: •
Income Statement
•
Balance Sheet
•
Cash flow statement
3.4.1 Techniques of Financial Statement Analysis: •
Trend analysis
•
Common – size statement analysis
•
Ratio analysis
3.4.2 Types of Comparison:
o Horizontal analysis or Time series analysis o Vertical analysis or Cross sectional analysis o Combined analysis •
Horizontal analysis or time series Analysis
Time –series analysis evaluates performance over time. Comparison of current to past performance, using ratios, allows the firm to determine whether it is progressing as planned. Developing trends can be seen that using multiyear comparisons and knowledge of these trends can assist the firm in planning future operations. •
Vertical analysis or Cross sectional analysis
Cross sectional analysis involves the comparison of different firm's financial ratios at the same point in time. The typical business in interested in how well it has performed in relation to other firms in its industry. Often, the reported financial statements of
competing firms will be available for analysis. Frequently, a firm will compare its ratio values to those of an essential competitor or group of competitors that it wishes to emulate •
Combined analysis
The most informative approach to ratio analysis is one that combines cross- sectional and time – series analysis. A combined view permits assessment of the trend in the behavior of the ratio in relation to the industry. 3.4.3 Ratio analysis:
Ratio analysis is a technique of financial analysis by which relationship between items or group. Groups of items are identified in terms of ratio, percentage, and times to assess the financial condition of the business concerning the following aspects: •
Liquidity
•
Profitability
•
Rate of return
•
Long term Solvency
•
Activity Ratio
•
Market Measure
Ratio analysis involves of calculating and interpreting financial ratios to assess the firm's performance. The basic inputs to ratio analysis are the firm's income statement and balance sheet.
3.4.4 Four aspects of Ratio Analysis:
I.
How liquid is the firm?
II.
Is management generating sufficient profits from the firm's assets?
III.
How does the firm's management finance its investment?
IV.
Are the common stock holders receiving sufficient returns on investments?
3.4.5 The Standards of Comparison used in ratio Analysis •
Conventional Standards
•
Past years / Previous years Ratio
•
Competitors
•
Industry (combination of some firms)
•
Projected Ratio
3.4.6
NCC Bank Limited Financial Administration Division, Head Office 7-8, Motijheel Commercial Area Dhaka – 1000. Consolidated Balance Sheet for the Two Years ended December 31, 2004 2004
2003
190,152,334 1,019146,505
129,871,767 563,793,875
PROPERTY AND ASSETS Cash: In hand (including foregin currencies) With Bangladesh Bank and sonali Bank (including foreign currencies)
1,209,298,839
693,665,642
748,832,964 461,948,589
805,135,395 319,241,380
1,210,781,553
1,124,376,775
-
605,000,000
1,500,689,600 42,295,814 1,542,985,414
2,200,360,200 176,713,581 2,377,073,781
18,005,716,816 1,326,719,256 19,332,436,072
11,324,591,109 964,529,067 12,289,120,176
Fixed assets
150,822,688
127,724,487
Other assets
909,426,885
671,696,525
24,355,751,451
17,888,657,386
Balance with other banks and financial institutions In Bangladesh Outside Bangladesh Money at call and short notice Investments (shares and bonds): Government securities Others Investments: General investments Bills discounted and purchased
Non-banking assets Total assets
2004
2003
LIABILITIES AND CAPTAL Liabilities: Borrowing from other banks, financial institutions and agents Deposits and other accounts: Al wadeah current deposits and other accounts Bills payable Mudaraba saving bank deposits
2,012,789,637 138,047,759 1,159,670,831 15,716,470,619
1,258,920,268 101,050,630 998,239,535 12,027,460,890
Mudaraba term deposits Call deposits Foreign currency deposits Other liabilities Total liabilities Capital/shareholder’s equity: Paid up capital Proposed issue of bonus shares share premium Dividend equalization account Statutory reserve Retained earnings Total Shareholder’s equity Total liabilities and shareholder’s equity
51,196,943
820,000,000 37,297,082
19,078,175,789
15,242,968,405
3,877,570,922 22,955,746,711
1,897,414,904 17,140,383,309
627,750,000 251,100,000 94,162,500 62,775,000 357,329,881 6,887,359
313,875,000 82,575,000 228,202,241 123,621,836
1,400,004,740 24,355,751,451
748,274,077 17,888,657,386
859,399,747 5,009,355,187 451,115,577 2,679,607,500 8,999,478,011 8,999,478,011
514,386,572 2,383,041,275 536,126,303 4,457,007,820 7,897,561,970 7,897,561,970
OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance And EndorsementsLetters of guarantee Irrevocable letters of credit Bills for collection Other contingent liabilities Total contingent liabilities Other commitments Total contingent liabilities 3.4.7
NCC Bank Limited Financial Administration Division, Head Office 7-8, Motijheel Commercial Area Dhaka – 1000. Consolidated Income Statement for the Two Years ended December 31, 2004
2004
2003
Investment income Profit paid on deposits, borrowings, etc. Net investment income Income from investment in shares/securities Commission, exchange and brokerage Gain on sale of investment in shares Other operating income Total operating income Salaries and allowances Rent, taxes, insurance, lighting, etc. Legal expenses Postage, stamp, telegram and telephone Audit fees Stationery, printing, advertisement, etc. Managing Director’s remunerating Managing Director’s fees Directors’ fee Depreciation on and repairs to Bank’s property Other expenses Total operating expense Profit before provisions Provision for investment Profit before tax Provision for tax Profit after tax Profit available for appropriation Appropriations: Retained earnings carried forward Earnings per ordinary share
1,820,283,897 (1,425,511,622) 394,772,275 78,639,501 597,695,893 73,643,453 74,325,865 1,219,076,987
1,396,081,422 (1,121,309,068) 274,772,354 121,535,735 379,929,474 9,669,915 54,696,256 840,603,734
183,089,157 50,456,074 1,090,982 20,740,411 181,750 18,993,547 2,400,000 317,500 3,130,000 26,127,561 76,742,592 383,269,574 835,807,413 190,169,211 645,638,202 263,840,039 381,798,163 387,114,999 380,227,640 6,887,359 60.82
134,004,574 41,076,938 522,184 14,677,332 156,750 13,299,014 2184,000 292,500 2,613,672 19,733,147 49,318,699 277,941,810 562,661,924 84,154,418 478,507,506 223,715,350 254,792,156 219,323,337 95,701,501 123,621,836 81.18
3.5 Customer Service on Business Growth Bank is service provider. They provide various kinds of service for their customer satisfaction. Here describe about some service that’s helps for business growth.
3.5.1 Office Automation: From the very first day of operation, the bank is fully automated with computer. The Bank is capable of generating the relevant financial statements at the end of the day. Bank has also launched a Web Page of its own to take place in the World Wide Web.
Website is www.nccbank-bd.com Basic Accounting Systems of the Bank Branches has been automated to optimize benefits and increase overall efficiency for superior customer services by way of increased speed, accuracy and ensures security. The Bank has continuously looked for more and more sophistication and efficiency.
Online
Banking and credit card has already introduced. 3.5.2 The Sources and Uses of Fund: The compositions of sources of Banks fund are Paid-up Capital, Reserves, Customers Deposit, and Call Loan from different Banks. The Bank used major portion of this fund for Investment in Loans and Advances. The Bank also invested in Securities and Shares. The surplus fund was prudently applied in Call Money Market to earn satisfactory returns.
3.5.3 Branch Expansion: The Bank started its journey in 1993 with two Branches one in Dhaka Metropolitan and another is in Chittagong. In the year 2005, the total number of Branches stood at 29 Branches with in short time and the proposed Branches are five. The following 29 Branches are now doing its Business in different District: Motijheel
Gulshan
Panthapath Nowabpur
New Eskaton RajukAvenue
DHAK A
Uttara
Mirpur
Immamgonj Elephant Road Agrabad Chittagong
Khatungonj Jubilee Road
Noakhali
Sonaimuri
Comilla
Laksham
Narayangonj
Narayangonj BR Shimrail
Gazipur
Sylhet
Gazipur Chowrashta BR
Sylhet BR
3.5.4 Capital & Reserve fund: The authorized capital of the bank is TK. 1000 million and the paid up capital of the bank is Tk. 1400.00 million as of December 31, 2004. The bank also maid a 1% general provision on unclassified investments of the Bank, which amounted to Tk.188.22 Million. 3.5.5 Deposit:
The Bank mobilized total deposit increased to Tk.19078.18 million as on December 31, 2004 from Tk.15242.97 million as at the end of the previous year indicating an increase of 25.16% than the previous year. We remain committed to increasing our deposit base by growing low cost personal, business accounts, and thereby lowering our overall cost of fund.
[Source of Data: Annual Report 2003, 2004 3.5.6 Investment Portfolio: The total investment of the Bank stood at Tk.19332.44 million as on December31, 2004 was against Tk.12289.12 million in the previous year showing an increase of 57.31%. The notable investment represents deployment in Treasury bills, Shares, Prize Bond, and others.
[Source of Data: Annual Report 2003, 2004] Investments( Share & Bonds):
The Size of the investment portfolio in 2004 is Tk. 1542.99 millon. The portfolio Comprises Share’s and Prize Bonds.
[Source of Data: Annual Report 2003, 2004] 3.5.7 Foreign Exchange Business: Import Business: From the very beginning, the Bank has embarked on extensive Foreign Exchange Business with a view to facilitating international trade transactions of the country. The total import business handed by the Bank during 2004 was Tk.26481.80 million compared to the previous year showing an increased rate of 39.05%. The main items of import were Industrial raw materials, Consumer goods, machinery, fabrics, accessories etc.
[Source of Data: Annual Report 2003, 2004] •
Export Business:
The total export business handled by the bank during 2004 was Tk.22418.40 million compared to Tk.15124.60 million in the previous year showing an increased rate of 48.22%. Export item handled by the Bank includes Jute, Jute goods, readymade garments, leather and leather goods, etc.
[Source of Data: Annual Report 2003, 2004] Foreign Remittance: Foreign Remittances handled by the Bank stood at Tk.113.79 million as of December31, 2004. Countries from which inward foreign remittances were received included USA, UK, Canada, Japan, Taiwan, KSA etc. 3.5.8 SWIFT Services: The SWIFT service helped us in sending and receiving the messages and instruction related to our NOSTRO account operation and L/C related matters. We have brought six of our Branches under SWIFT network. Other Branches will come under the network hopefully by the year- 2006. Besides, we have BKE arrangements with 430 Bank Branches in 100 countries 3.5.9 Customer Service of NCC BANK LIMITED.: Customer Service on Business growth NCC BANK LIMITED employees is always ready to help them. That they are always help how can reduce the expenditure and increased income. They do a lot for customer Faber for those reasons customer get more facilities. NCC BANK LIMITED makes their system-computerized system for that they can save their time and money. Banks invest money for customer business growth. In some time Bank give customer Bank guarantee in international sector which help customer to do business in abroad. After consideration, every thing we can say that performance of NCC BANK LIMITED help to increase the growth in nation and international sector at the Faber of the customer. 3.5.10 Data Analysis and Interpretation Based on Questionnaire and Interview about “Customer Service on Business Growth of NCC BANK LIMITED.�
What is your opinion about the banking environment of NCC BANK LIMITED? Table-1 SL No. 1 2 3 4
Comments Very Good Good Fair Poor Total
Interview ees No. of persons 7 12 1 0 20
Percentage(%) 35 60 5 0 100
Interpretation: From the above data analysis we can see, most of the clients agreed that the banking environment of NCC BANK LIMITED is good. Some people commented it is very good and a few said it fair. Employees are always ready to help/co-operate the customers. Do you agree? Table-2 SL No.
Comments
1 2 3
Yes No Sometimes Total
Interview ees No. of persons 19 0 1 20
Percentage(%) 95 0 5 100
Interpretation: Analysis shows that most of the clients agreed that the employees are always ready to help them. They are very cooperative. Do you think customers are getting more facilities here in comparison with other banks? Table-3 SL No. 1 2 3
Comments Yes No Not all cases Total
Interview ees No. of persons 12 0 8 20
Percentage(%) 60 0 40 100
Interpretation: From the analysis we can see that, customers are getting more facilities comparing to the banks. At the same time, a large number of clients expressed that in
some specific cases such as interest rate etc. they are getting more facilities, but not all sectors of banking service. How do the employees behave with the customers? Table-4 SL No.
Comments
1 2 3
Very cordial Satisfactory Rude Total
Interviewees No. of persons 14 6 0 20
Percentage(%) 70 30 0 100
Interpretation: From the analysis it is found, most of the clients agreed that the employees are well behaved with the clients. Do you think NCC BANK LIMITED is using modern technical equipment? Table-5 SL No. 1 2 3
Comments
Interview ees No. of persons Percentage(%) 4 20 2 10 14 70 20 100
Yes No. Need modification Total
Interpretation: Our data analysis shows that majority of the person support that they should modernize their equipment for banking service. Very few customers are satisfied with their technical support. Do you think they are providing prompt service at cash section? Table-6 SL No. 1 2 3
Comments Yes No. Should be fast Total
Interviewees No. of persons 2 8 10 20
Percentage(%) 10 40 50 100
Interpretation: Our data analysis shows that customers are not satisfied with the cash service. Support that they should modernize their equipment for banking service. Very few customers are satisfied with their technical support. "Where credit and commerce integrates"- The slogan of NCC BANK LIMITED. Do you think they are maintaining their service quality according to their slogan? Table-7 SL No. 1 2 3 4
Comments Certainly Most of the time Should extend their service No Total
Interviewees No. of persons 6 9 5 0 20
Percentage(%) 30 45 25 0 100
Interpretation: From the above analysis we can see, most of the time they are maintaining the quality and they are trying to expand their service in the whole country as well as all over the world.
Modern technological changes should be added to improve the service like ATM machines, Do you agree? Table-8 SL No. 1 2
Comments Definitely Not essential Total
Interviewees No. of persons 20 0 20
Percentage(%) 100 0 100
Interpretation: All the people want that the bank should take initiative to start many other facilities with its present operations.
9. They should open more branches in Dhaka City as well as the other cities of the countries. Do you agree? Table-9 SL No.
Comments
1 2
Obviously Not needed Total
Interviewees No. of persons 20 0 20
Percentage(%) 100 0 100
Interpretation: Data revealed that all the clients want that they should open more branches in Dhaka city as well as the whole country.
10. What is your suggestion to improve the service quality of EXIM Bank of Bangladesh Limited?
In order to improve the service quality customers expressed different opinion in their point of view. I can summarize their opinion, which is the gist of their suggestions. They have to take some more steps to improve the service quality. Each department of the bank should be computerized. The cash transaction process would be easier and prompt that it would take a very short time. More branches should be opened in Dhaka City and the other cities of the country. They will have to start consumer credit scheme and other schemes that will help the consumer. It is badly needed to provide modern banking services such as credit card, ATM card, visa card etc. NCC BANK LIMITED is providing better service comparing to other private banks. However, there are almost fifty-two banks in our country. In the near future, some new banks are going to be opened. Therefore, in order to compete in the market NCC BANK LIMITED should be very careful about their service. They will have to improve their service quality and provide more facilities
.3.6 SWOT Analysis of NCC BANK LIMITED.
SWOT Analysis is an important tool for evaluating the company's Strength, Weakness, Opportunities, and Threats. It helps the organization to identify how to evaluate its performance and scan the macro environmental, which in turn would help the organization to navigate in the turbulent ocean of completion.
Strength: 1. Top Management: The top management of the Bank is an essential strength for the NCC BANK LIMITED . and contributed heavily towards the growth and development of the Bank. The top management officials all have had reputed of Banking experience, skill and proficiency. 2. Company Reputation: NCC BANK LIMITED. has created standing in the Banking industry of the country chiefly among the new comers. NCC BANK LIMITED has already established a firm grip in the Banking sector having tremendous growth in the profits and deposits within a phase of five years. 3. Modern facilities and computer: From the very beginning of NCC BANK LIMITED tried to furnish their work surroundings with modern equipment and facilities. For the speedy services to the customer, NCC BANK LIMITED has installed money-counting machine in teller counter. The Bank has computerized banking operations under the software called PC bank. More over computer, printed statements are available for internal use and occasionally for the customers. NCC BANK LIMITED. is equipped with Telex, Fax, or Swift facilities. 4. Stirring Branches: From the formative stage, NCC BANK LIMITED. tried to furnish their branches by impressive style. This well decorated branch gets attention of the potential customers; this is one kind of positioning strategy. 5. Interactive corporate culture:
The corporate culture of NCC BANK LIMITED Ltd. is very much interactive compare to our other local organization. This interactive environment encourages the employees to work attentively. Since the Banking job is routine work oriented, NCC BANK LIMITED. friendly, interactive and lovely environment boosts up the work capability of the employees highly qualified.
Weakness: 1. Advertising and promotion: Advertising and promotion is the one of the weak point of NCC BANK LIMITED does not have any effective truck for aggressive marketing activities. This lacking pushes the bank far behind from the other competitor. 2. Disguised Employment: Reference appointment is very much effective in NCC BANK LIMITED. Because of this, there are many people who are only drawing salaries at the end of the month but making a minimum contribution towards the organization. In addition, this related to the problem of reference appointment. On the other hand, officers work hard but are not appreciate accordingly. Those frustrated officers leaving the bank to other bank. 3. Limitation of Information system (PC Bank): PC bank is not comprehensive banking software. It is desirable that a more comprehensive banking system should replace PC Bank system. 4. Law remuneration Package: At the entry level and mid level officers experiences considerable low remuneration packages than DBL and PBL. This low pay structure does not attract potential MBA and BBA; they are interested to join other banks instead of joining NCC BANK LIMITED Ltd. Heavily Depends a Head Office for Decision-Making.
Opportunity: 1. Diversification: NCC BANK LIMITED can pursue a diversification strategy in expanding its current line of business. The relationship management can consider options of starting merchant banking or diversify in to Leasing and Insurance. By expanding business portfolio, EXIM Bank can shrink business risk.
2. ATM: This is the fastest growing modern banking concept. NCC BANK LIMITED should lunch ATM. It can form an alliance with other contemporary banks in lunching the ATM. Standard Chartered, The City Bank and Dhaka Bank already successfully launched ATM. 3. Tele banking: These are the new retail banking services provided by the foreign banks. NCC BANK LIMITED can evaluate the option of launching credit cards and Tele banking system. 4. In addition of those things, NCC BANK LIMITED can introduce special corporate scheme for the corporate customer or officer who have an income level higher from the service holder. At the same time, they can introduce scheme or loan for various service holders. Moreover, the scheme should be separate according to the professions, such engineers, lawyers, doctors etc.
Threats: 1. Contemporary Banks: The contemporary Banks of NCC BANK LIMITED like Dhaka Bank, Prime Bank, Dutch-Bangla Bank, IFIC Bank are its major rivals. They are carrying out aggressive campaign to attract lucrative corporate clients as well as major depositors. EXIM Bank should remain vigilant about the steps taken by these banks, as these will in turn affect EXIM Bank strategies. 2. Multinational bank: The rapid expansion Multinational bank poses a potential threat to the new PCB's. Due to the booming energy sector, more foreign banks are expected to operate in Bangladesh. Moreover, the already existing foreign banks such, as Standard Chartered is new pursing an aggressive branch expansion strategy. Since the foreign banks have tremendous financial strength, it will pose a threat to local banks to a certain extent in terms of grabbing the lucrative clients. 3. Upcoming pharmaceuticals: The upcoming private local banks can also pose threats to the PCB's. It is the expected that in the next few years more local private banks may emerge. If that happens the
intensity of competition will rise further and banks will have to develop strategies to compete against an on slaughter of foreign banks. 4. Default Risks: The default risks of all terms of loan have to be minimizing in order to sustain in the financial market. Because default risk leads the organization towards to bankrupted. NCC BANK LIMITED has to remain vigilant about this problem so that proactive strategies are taken to minimize this problem if not elimination. 5. Default Culture: Default Culture is very much familiar in our country. For a bank is very harmful. As NCC BANK LIMITED is new, it has not faced seriously yet. However the bank grows older it may be ill with this situation. Chapter-4 Findings of Studies
4.0 Findings in different sections of the Bank: General Banking Department: •
In general banking department, they follow the traditional banking system. The entire general banking procedures are not fully computerized. Therefore, some processing for example collecting money from the deposit take a long time to perform.
•
There is no computer in Accounts opening section. That's why the service is not as prompt as the customer demand.
•
Lack of variety services is also a drawback of the general banking area of the NCC BANK LIMITED. The bank provides only some traditional limited services to its client. Consequently, the bank is falling behind in competition.
•
There are not using Database Networking in Information Technology (IT) Department. So they have to transfer data from branch to branch and branch to Head Office by using Floppy disk and sure it is not a good system.
•
In case of opening an account, some big parties are come to open accounts in reference with the high officials of the bank. They do not submit all papers that required opening an account and in future they do not feel any urge to submit those papers but already they become accounts holders. I think that in this case the authority is violating the rule.
•
According to some clients opinion introducer is one of the problems to open an account. If a person who is new of the city wants to open account, it is a problem for him/her to arrange an introducer of SB or CD accounts holder.
•
Encoding & decoding process of test number consume most of the time of the officer who works in that desk. However, a simple computer program could do the same if the desk were computerizing.
•
Credit operations Department:
•
Political influence is one of the major problems in Bangladesh. Due to political intervention, the bank becomes obliged to provide loans in most of the cases, which are rarely recovered. Bank has to face this in convenience situation almost every year.
•
The credit operations department takes a long time to process a loan because the process of sanctioning loan is done manually.
•
The employee unlawfully help the client deliberately overvalues Some times the securities taken against the loan. Therefore, if the client fails to repay the loan the bank authority cannot collect even the principal money invested by the selling those assets. In addition, a very important factor leads to loan default.
•
Credit Information Bureau (CIB) reports is not readily available from Bangladesh Bank.
•
Bank should provide advances towards the true entrepreneur with considering conventional system of security collateral, more over, the whole process completed with in an expectable time.
•
Foreign Exchange Department:
•
In the foreign exchange department, it is required to communicate with foreign banks frequently and quickly. To make the process easily modern communication media for example e-mail, Fax, Telex, Swift, Internet etc. used. However, the bank has not so much practice of using these media.
•
The bank may give more to its customer better service if all of its departments are computerized and incorporated under local area network (LAN).
•
There is no training institute of NCC BANK LIMITED, which is very essential for employees for betterment for the job.
Chapter-5 5.0 RECOMMENDATION In the light of the above studies I have found that banking sector requires to be studied in right perspective and individual bank has map out its own course of action/business strategy. To survive and to do well with the notion of survival of the fittest, here I have attempted to draw some recommendation in the light of my study at NCC BANK LIMITED Banking is a service- oriented marketing. Its business profit depends on its service quality. That's why the authority always should be aware about their service quality. •
Increase Promotional Activities
NCC BANK LIMITED should pursue an aggressive advertisement campaign in order to build up a strong image and reputation among the potential customers. It must give up
the idea of maintaining a low profile in the market. Rather, it should come in to the limelight through an aggressive marketing campaign such as advertisement in the newspaper and magazine, more billboard and neon signs, publicity messages and promotional campaigns. Bank can also pursue promotional campaigns with its customers particularly the corporate clients in order to build up a stronger rapport with them. Advertisement to be made in Newspaper/Journal/Magazine/, Television etc. Television advertisement is also a major method for attracting the potential customers. The bank can sponsor sports event of the country. •
Rearrange Recruitment Process:
Recruitment should be in a systematic and effective process that can make sure that the right people are in the right place. Now as the bank is expanding, it must focus on attracting, getting and retaining qualified personnel for filling up the positions. It rather then getting is worth spending more or attracting qualified human resources the wrong people in the wrong position. •
Eliminate Reference Appointment Tendency
NCC BANK LIMITED management and particularly the board of directors must change the system of appointing people by giving their reference. It has been deeply observed that most of the reference appointees are not up to the standard and have a poor performance. For the good future of the bank and make further strengthening the banks quality of workforce reference appointment should be stopped immediately. •
Up Gradation of service quality
Compare to other competitor and multinational banks NCC BANK LIMITED failed to provide better services to its customers. The service is worst in the general banking division where the retail customers are not getting the service properly. The management
has to take special care and steps to improve this situation. People of this area should be more skilled and well trained. •
Restructuring Remuneration Package
The present compensation package at NCC BANK LIMITED is not very special and not capable to attract quality personal to fill its position. Many skilled and devoted officers of the bank are depressed with their compensation package. The foreign banks pay almost double and other private banks have a higher scale than NCC BANK LIMITED it is high time that the management should consider revising the remuneration package in order to attract quality human resources. •
Advance banking software
PC banking software is not sufficient software that can help the bank to provide speedy services to customer and internal uses. Therefore, the concerned authorities should consider replacing the PC bank system with more advances banking software. •
Establishing Library
Sufficient books on banking and finance and other necessary journals are not available in the bank. The bank authority should enrich its collection in order to keep all necessary references available to the employees as needed. This step will able to make employees knowledge on banking different critics and current banking events. •
Appointing a Relationship Manager
NCC BANK LIMITED should start to appoint a relationship manager (who will deal with individual customer and try to solve their problems) in their all branches. •
Be Innovative
To seize the market leading position NCC BANK LIMITED should be innovative. They should always think about the present time and the requirement of the situation. They have always implemented modern technologies and facilities. In terms of modern technologies and services hey are far behind from other competitor. •
NCC BANK LIMITED should offer automated teller machines (ATM) card introduced as soon as possible because of its prevailing demand of the customer and the customer is now transferring in the technology based.
•
NCC BANK LIMITED should special gift like pen, key ring, Moneybag; Knife etc. embossed NCC Bank's monogrammed to be provided to the customer.
•
Times of interest earned is not enough the NCC BANK LIMITED should improve the times of interest position for better customer service.
•
For customer’s convenience in Foreign Exchange Department of. NCC BANK LIMITED should provide more personnel to deliver faster services to their honorable customer
Chapter-6 6.0 Conclusion: The National Credit And Commerce Bank Limited has been trying to operate its business successfully in Bangladesh since 1994. NCC BANK LIMITED has already developed an images and goodwill among its clientele by offering it excellent services. This success has resulted from the dedication, commitment, and dynamic leadership of its management over the periods. During the short span of time of its operation the bank has successfully grabbed a position it self as a progressive and dynamic financial in the country. If the bank goes this way, it is expected that near future NCC BANK LIMITED may become one of the top performers in this banking sector.
BIBLIOGRAPHY
Name of the Book Managerial Accounting Financial Management Managerial Finance Financial Management
Publisher BPI/IRWN
Ray H. Garrison Block and Hirt Person Education Asia Gitman Azizia Book Depo & Professor M.S. Mina
Shahitta Kosh ModernWorking Capital Prentice-Hall Management Financial Management
Author
Frederick C. Scher
International Vikas Publishing I M Pandey House Pvt.Ltd. Philip Kotler
Marketing Management NCC BANK LIMITED Annual Report - 2003 NCC BANK LIMITED Annual Report - 2004 Banking Law & Practice The Management of
NA NA Varsheny P.N. Robinson
Bank Funds General Banking NCC BANKWeb site
Md. Mubarak Hossain www.nccbank-bd.com
Edition 5th 9th 3rd Latest 8th 7th NA NA 18th 2nd First