Students' World: August 2013

Origin of the Report

For ensuring quality education in the BBA program we need to know the application of theoretical knowledge in practical field. So, in order to identify the consistencies and inconsistencies of theoretical knowledge learnt in BBA program with the practical condition of our country’s economy we have made a general analysis and an empirical analysis from ‘Uttara Bank’ perspective on the systems and procedures of Letter of Credit as a partial requirement of our “Law and Practice of Banking”.

Objectives of the report

Though this report is prepared as a partial requirement for the completion of the BBA program, this is not the prime concern to make this report. The main intention of the study is to investigate how our banking sectors open and operate Letters of Credit.

We also tried to find out any discrepancies if have between theoretical knowledge and practical system of Letter of Credit.

The supplementary objectives of the report are to meet up the following queries to fulfill the academic requirements of report.
To acquire experience in different banking services of Uttara Bank Ltd.

To know the Letter of Credit system of Banking sector in the light of ‘Uttara Bank Limited’ in particular.
To present an overall banking activities.
To get a clear idea about Banks and how it runs and what functions they do.

Methodology & Data Collection

Data Collection The Primary Sources of Data:

The primary sources of data are as flows;

Face-to-face conversation with the respective officers and stuff of the branch and head office.
Relevant field study as provided by the officer concern.

The Secondary Sources of Data:

Secondary sources of data are flows;

Annual report of Uttara bank Ltd.
Website of Uttara bank Ltd.
Various book articles regarding general banking functions.
Different procedure manual published by Uttara bank Ltd.
Different circular sent by Uttara bank Ltd. and Bangladesh Bank.

Data Collection Method:

Relevant data for this report have been collected primarily by direct investigations of different records, papers, documents, operational process and different personnel. The interviews were administrated by formal and informal discussion. No structured questionnaire has been used. Information regarding office activities of the bank has been collected through consulting bank records and discussion with bank personnel.

Data processing:

Data collected from secondary sources have been processed manually and qualitative approach has been used through the study.

Data analysis and interpretation:

Qualitative approach has been adopted for data analysis and interpretation taking the processed data as the base. So the report relies primarily on an analytical judgment and critical reasoning.

Methodology:

This report has been prepared for a better understanding of the basis of experience gathered during the period of interview. For preparing this report, we have also get information from annual report and website of the Uttara Bank Limited. we have presented our experience and finding by using different charts and tables, which are presented in this analysis part.

Limitations:

It was very different to collect the information from various personnel for the job constrain.
Bank policy was not disclosing some data and information for obvious reasons.
Due to the time limitation many of the aspects could not be discussed in the present report.
Since the bank personnel’s ware very busy, they could provide us little time.
Another significant problem faced during the preparation of this report was the contradictory explanation of a single subject by different employee.
Because of the limitation of information some assumptions were made. So, there may be some personal mistake in the report.

Introduction

A standard, commercial letter of credit (L/C) is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking.

The letter of credit can also be source of payment for a transaction, meaning that redeeming the letter of credit will pay an exporter. Letters of credit are used primarily in international trade transactions of significant value, for deals between a supplier in one country and a customer in another. In such cases the International Chamber of Commerce Uniform Customs and Practice for Documentary Credits applies. They are also used in the land development process to ensure that approved public facilities (streets, sidewalks, storm water ponds, etc.) will be built. The parties to a letter of credit are usually a beneficiary who is to receive the money, the issuing bank of whom the applicant is a client, and the advising bank of whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended or canceled without prior agreement of the beneficiary, the issuing bank and the confirming bank, if any. In executing a transaction, letters of credit incorporate functions common to giros and Traveler’s cheques. Typically, the documents a beneficiary has to present in order to receive payment include a commercial invoice, bill of lading, and documents proving the shipment were insured against loss or damage in transit. However, the list and form of documents is open to imagination and negotiation and might contain requirements to present documents issued by a neutral third party evidencing the quality of the goods shipped, or their place of origin.

Definition

Letters of credit are often used in international transactions to ensure that payment will be received. Letter of credit can be classified into two kinds; one is Travelers’ Letter of Credit and another is Letters of Commercial Credit. But Letter of Credit mainly indicates the Letter of Commercial Credit. Due to the nature of international dealings including factors such as distance, differing laws in each country and difficulty in knowing each party personally, the use of letters of credit has become a very important aspect of international trade. The bank also acts on behalf of the buyer (holder of letter of credit) by ensuring that the supplier will not be paid until the bank receives a confirmation that the goods have been shipped.

Therefore a Letter of Credit is a letter issued by the banker of the foreign buyers describing a commitment in favor of the exporter informing him that the issuing banker undertakes to accept the bills drawn in respect of exports made to the foreign buyer according to predetermined conditions. It is an arrangement, however named or described, whereby a bank (the “Issuing Bank”) acting at the request and on the instructions of a customer (the “Applicant”) or on its own behalf.

1. Is to make a payment to or to the order of third party (the beneficiary) or is to accept any pay bills of exchange (Drafts) drawn by the Beneficiary, or

2. Authorizes another bank to effect such payment, or to accept and pay such bills of exchange (Drafts).

3. Authorizes another bank to negotiate, against stipulated documents, provided that the terms and conditions are complied with.

Importance of L/C

In international trade since the buyer and seller are quite distant from each other a problem often arises to make the delivery of goods and when to make the payment for the delivery. This problem is absent in home trade. But in foreign trade neither the importer nor the exporter can rely completely upon the others. L/C is effective instruments that can solve this problem also act as finance for the buyer. This method is a compromise between buyer and seller because it affords certain advantage to both parties. The exporter is assured of receiving payment from the issuing bank as long as its present documents in accordance with L/C. the issuing bank is obligate to honor drawing under l./c regardless of the ability or willingness to pay. Importer does not have to pay until shipment has been made and the documents presented in good order. However the importer still rely upon the exporter to ship the goods as described in the documents, since the L/C does not guarantee that the goods purchased will be those invoice and shipped. So the usual time under a L/C is when shipment has been made. While the goods are available after payment, the risk to the exporter is very little, depending on credit term, while the risk to the importer is that he has to rely on the exporter to ship goods described in the documents. Because of all the protection and benefits it can accords both exporter and importer.

Parties involved in letter of credit

The applicant:

The applicant is the parties who generally approaches in order to issue the L/C. generally the applicant ids the exporter who reaches an agreement with the exporter before approach in the bank to issue the L/C.

The issuing bank;

The bank issuing the L/C is known as issuing bank and it is usually the bank with which the importer maintains an account. The issuing bank undertakes an absolute obligation to pay upon presentation of documents.

The advising bank:

The correspondent bank sends the L/C is commonly referred to as advising bank. The advising bank simply advises the L/C without any obligation on its part. However, the advising bank shall take reasonable care to check the apparent authenticity of the credit that it advises.

The beneficiary:

The beneficiary or exporter is the party entitled to draw payment under L/C. The Beneficiary will have to present the required documents to avail payment under L/C.

The Confirming bank:

The confirming bank confirms that the issuing bank has issued a letter of credit. The confirming directly obligated on the credit to the extent of its confirmation and by confirming it acquires the right and obligation of an issuer.

The negotiating bank;

The bank that agrees to examine the documents under the L/C and pay t5he beneficiary is called the negotiating bank. Typically, the advising bank is nominated as the negotiating bank.

Back to back L/C

Back to back L/C is mostly issued in Bangladesh. When a beneficiary receives a letter of credit, which is not transferable, and he cannot furnish the goods himself, he may arrange with his banker to issue a second credit, which is known as back-to-back L/C to supplier to supply the goods.

As both L/C cover the same goods the back to back credit must be issued with identical terms to the muster L/C, except that the credit amount, unit price if any are smaller. The expiry date under the back-to-back credit is earlier while the latest shipment date may have to be advanced. The bank issuing back-to-back credit will obtain repayment through muster credit, which is deposited to the issuing bank of the back-to-back credit. The bank must try to maintain control of the documents and hold them after payment to the supplier pending receipt of its customer’s invoices and present the documents itself for payment under the muster credit in favor of its customer.

Advantage and disadvantage of L/C

Advantages

· An importer can assure that the exporter has complied with certain terms and condition as specified in L/C before payment.

· Importer can insist on shipment of goods within a certain time stipulated a latest shipment date.

· He can get advice from the banker according to L/C terms.

· He can ask for financial assistance from the banker.

· Protection offered by UCP500.

Disadvantages

· Since bank deals with documents only goods may not be the same as those specified in the credit.

· Issuing bank obliged to pay even though the conditions of goods may be poor.

· L/C commission is relatively high.

Advantages for exporter

· The risk for nonpayment is lower as complies provided with L/C.

· It is a safe method through which prompt payment obtains after shipment.

· Exporter can get expertise advice from the banker.

· The exporter can get financial assistance before the buyer makes payment.

Disadvantages

· Sometimes terms and condition cannot fulfill such as unreasonable shipment date adding on L/C the clause of “restriction of a designated vessel to be informed by L/C amendment

· The goods shipped before receiving payment and so it is not 100 percent safe.

Letter of Credit opening of Uttara Bank Limited

Foreign exchange Practices of Uttara Bank Limited

Foreign Exchange is very lucrative & profitable in modern Banking business. Its recognized as a way of generating maximum profit with low investment. In other Banking like advance needs high capital investment. But foreign exchange required comparatively low investment. In foreign business complexity is high due to rapid change in technology especially for a bank consists of so many branches dispersed in a wide region. The system is easy for a bank to control rich in capital equipped with modern technology concentrated in a small areas. Technology is necessary to prepare quick statement, getting information, preparing reports .Now technology is a turbulent in foreign exchange business. To survive in the competition a bank has to adapt with this changes. For this it will require skilled manpower, on line banking, 24- hours banking services, high capital investment. Problems arise in foreign exchange for changes in economical, and political business environmental changes of the country. Changes in exchanges rate, change in currency rate, govt. rules and regulations, create problems while dealing in foreign business. So it needs always a conscious mind for successfully dealing in foreign business.

Sample Form for Requesting a Letter Of Credit

Dear International Buyer:
We are providing the following instructions as a guideline to be used when opening a letter of credit to us. Because a letter of credit is a very critical document, please verify that the information is accurate and complete, without any mistakes which can create a discrepancy and lead to our subsequent request for an amendment, and delay the shipment.
Regarding your purchase order number dated , please ask your bank to open an irrevocable, at sight, commercial letter of credit according to the following terms and conditions.
Beneficiary Name
Beneficiary Address
Requested Advising Bank Name
Requested Advising Bank Address
Telephone	Fax	Swift
In the amount of US$
The letter of credit must be payable at the counters of or it must be negotiable and payable at the counters of a bank in .
The letter of credit must be in the possession of the Advising Bank and received by us days before the agreed upon shipment date. Shipment will occur days after an acceptable letter of credit is in the possession of the Advising Bank.
Shipment terms are: Incoterms 2000
Partial shipments are permitted.
Latest shipment date is . Latest expiration date is .
Documentary requirements are: 1. Signed commercial invoice originals and copies 2. Packing list originals and copies 3. 4.
Documents are to be presented within days from the shipping date.
All bank charges will be paid by the Applicant.

How to open an L/C:

For opening an L/C there must be a relationship between banker and customer through opening an account with the bank.

1. L/C must be open through current account.

2. Perquisite for opening L/C

Have to take some charge documents from the party

a) Trading Licensee

b) Chamber of Commerce certificate

c) last fiscal year Income Tax certificate

Then the importer have to submit a proposal for opening L/C along with-

· L/C application.

· License no.

· Performa invoice.

· Party’s application.

· L.c. set

· IRC.

· Insurance covered note.

L/C dealing officer have to properly check the Proforma invoice –description of goods along with its price, quantity, quality, sources of export country, marketability of goods, shipment dates, shipping days, bill of entry. Packing list, certificate of origin, H.S. code no. Brand new.

· Certificate of taxpayers from tax commissioner.

· Trade License from city commissioner.

· Certificate from import and export registration department.

· Money receipt from insurance company to reduce risk export port to import destination.

· L/C Authorization form of the bank contains IRC number, shipping period, description of goods date of l./c issues. – 1 copy for Bangladesh banks. With name and address of dealer remittance, l./c form, description of goods, inventor name, price for exchange clearance. 1- copy for custom purpose, another copy for office record.

Nature of L/C

1. Cash L/C (sight)

2. Cash L/C

3. Inland B/B L/C (sight)

4. Foreign B/B L/C

5. L/C under AID loans

6. Import from EPZ B/B/L/C)

7. Import from EPZ B/B/L/C) (sight)

8. Import from EPZ 9CASH L/C (SIGHT)

9. L/C UNDER sta.

10. Others

A L/C is most suitable under following conditions

· When the importer is not well known. The exporter selling on credit may wish to have the promise of payment.

· When the importer doesn’t want to pay the exporter until it is reasonable certain that the merchandise has been shipped in good condition.

L/C procedure:

The various steps involved in the operation of credit are described as follows

· The importer and exporter have contract before a L/C has been issued.

· The importer applies for a L/C from his banker known as the issuing bank. He may use his credit lines.

· The issuing bank opens the L/C that is channeled through its overseas correspondent bank, known as advising bank.

· The advising bank informs the exporter of the arrival of the credit.

· Exporter ships the goods to the to the importer or other designed place as stipulated in the L/C.

· Meanwhile the exporter also prepares his own documents and collects transport documents or other documents from relevant parties. All documents will be sent to his banker, which is acting as negotiating bank.

· Negotiation of export bills occurs when the banker agrees to provide him with finance. In such case he obtains payment immediately upon presentation of documents. If not the documents will be sent to the issuing bank for payment or an approval basis in the next step.

· Documents are sent to issuing banker reimbursing bank, which is a bank nominated by the issuing bank to honor reimbursement from negotiating bank for reimbursement or payment.

· Issuing bank honors to its undertaken to pay the negotiating bank on condition that the documents comply with the L/C terms and conditions.

· Issuing bank releases documents to the importer when the letter makes payment to the former or against the letter trust receipt facilities.

· The importer takes delivery of goods upon presentation of the transport (usually shipping documents).

Types of Letter of Credits offered by ‘Uttara bank limited’

Documentary credits may be either:

1. Revocable Letter of Credit.

2. Irrevocable Letter of Credit.

Revocable Letter of Credit:

A revocable credit is a credit, which can be amended or cancelled by the issuing bank at any time without prior notice to the seller.

Irrevocable Letter of Credit:

An irrevocable credit constitutes a definite undertaking of the issuing bank (since it cannot be amended or cancelled without the agreement of all parties thereto), provided that the stipulated documents are presented and the terms and conditions are satisfied by the seller. This sort of credit is always preferred to revocable letter of credit.

Parties to a Letter of Credit (L/C):

Importer/Buyer Procedure or Formalities

1. Procurements of IRC (Import Registration Certificate) from the concerned authority.

2. Signing purchase contract with the seller.

3. Requesting the concerned bank (importer’s/issuing bank) to open a L/C on behalf of the importer favoring the exporter.

4. The issuing bank opens or issues the L/C in accordance with the request of the importer and request another bank (advising bank) located in the exporter’s country to advice the L/C to the beneficiary.

5. The advising bank advises or informs the seller that the L/C has been issued.

6. As soon as the exporter receives the L/C and is satisfied that he can meet the L/C’s terms and conditions, he is in a position to make shipment of the goods.

7. After making shipment of goods in favor of the importer, the exporter submits the documents to the negotiating bank for negotiation.

8. The negotiating bank examines the documents and if found in order, negotiates the documents and send them to the issuing bank.

9. After receiving the documents the L/C issuing bank also examines the documents and if found in order makes to the negotiating bank.

10. The L/C opening bank then the importer to receive the documents on payment.

11. The importer after paying all the dues receives the documents from the L/C issuing bank and releases the imported goods from the port authority.

Import Procedure Including Registration

To carry on the business of import, the first thing one need is registration with the licensing authority. To get this registration the interested person submits the application along with the following papers or documents directly to the Chief Controller of Imports AND Exports or the respective Zonal Offices of CCI and E.

1. Income tax registration certificate.

2. Nationality certificate.

3. Certificate from Chamber of Commerce and Industry or Registered Trade Association.

4. Bank Solvency Certificate.

5. Copy of Trade License.

6. Any other documents if required by CCI and E.

On receiving application the respective CCI and E offices will examines the documents and conduct physical verification and issue demand notice to the prospective importers to submit the following papers through their nominated bank.

1. Original Copy of Treasury Challan deposited as IRC fees.

2. Asset certificate.

3. Affidavit from 1^st class Magistrate.

4. Rent receipt.

5. Two copies of passport size photograph.

6. Partnership deed in case of partnership firms.

7. Certificate of Registration, Memorandum, Articles of Association in case of limited company.

The nominated bank of the applicant will scrutinize the documents and verify the signature of the applicant. After scrutinization and verification, the nominated bank will forward the same to the respective CCI and E office with forwarding schedule in duplicate through bank’s representative. The CCI and E office will ac knowledge on duplicate copy of the forwarding schedule and return back the same to the bank representative.

On being satisfied, after scrutinization of the documents, the respective zonal offices of CCI and E will issue Import Registration Certificate (IRC) to the applicants.

Typical Letter of Credit (L/C):

If the relationship with the customer is good, other methods of financing can make business transactions easier. We might want to consider three special types of letters of credit that offer more flexibility:

1. Revolving Letter of Credit (L/C): This is useful when shipping a variety of goods to an established customer. It normally runs a period less than one year and it provides for prompt reinstatement when drawn against.

2. Assignable Letter of Credit (L/C): This type the same as the normal letter of credit, except that it includes the phrase “and/ or assignees” following the name of the beneficiary. This allows the exporter to make his or her domestic purchase by using the overseas buyer’s credit. That is, we agree that payment for the letter of credit may be made to us U.S. suppliers. This is a way for an exporter to conduct business with limited capital.

3. Banker’s Acceptances: As our business grows we will want to extend credit to our importer. One of the most efficient methods of doing this is through a banker’s acceptance. After agreeing to the terms (e.g. 90 days at sight), the importer opens a draft (check) under a letter of credit in favor of the exporter (beneficiary). The exporter presents the draft and the requested shipping documents to the paying bank. The bank reviews the documentation for correctness, then “accepts” the draft to become payable (mature) in 90 days, or if the exporter requires, “accepts” the draft and discounts the amount because of the need for immediate funds.

Documentary Drafts (Bill of Exchange):

Drafts are a popular and common method of financing exports. A draft is a written instrument drawn by one party (exporter) on a buyer for certain sum of money at sight (D/P) or at some definite future time. Since World War II, Letters of credit have become less popular because of competition.

When using drafts, we and the buyer usually agree beforehand that the transaction will be on a sight draft basic or perhaps on a 60 or 90 days deferred payment basis (60 SD, DA).

· Sight Draft Document Against Payment (S/D, D/A): The overseas importer orders merchandise directly from us, and we arrange to ship the goods. We then take us shipping documents and our own drafts, drawn on the importer, to our bank. Our bank U.S. bank forwards all documents to its correspondent bank overseas. This overseas bank notifies the importer when the documents arrive. If terms are payment at sight, this arrangement would be called a sight draft document against payment (S/D, D/A), and the importerwould be required to pay immediately to obtain the shipping documents so she or he can pick up the goods.

· Document Against Payment (D/A): If the importer has agreed to “accept” (pay letter) (D/A) the draft, he or she is permitted to obtain the documents by accepting the draft and the merchandise but is not obliged to make payments until the draft matures (e.g. 60 days D/A). The exporter will, of course, have established credit locally and made arrangements with his or her bank prior to undertaking the shipment.

Two other types of drafts are used less frequently: time drafts and date drafts.

1. 1. Time Draft: They are used to give the buyer better financing because they are forms of deferred payment. In the case of Time Draft, the buyer may take possession of the merchandise with payment deferred.

2. 2. Date Draft: With a Date Draft, the seller retains the title of goods until payment. The main problem with this type of financing is the possibility of the buyer being insolvent when the drafts are presented for payment. Therefore, before offering such terms, we should be fairly certain of the buyer’s financial stability.

Documents required for New Importer while Opening L/C:

An importer should follow the relevant import formalities while the importer tends to import goods to Bangladesh. A list of significant documents which are required for a new importer while opening a L/C is given below:

1. Account to be maintained with the bank.

2. Valid Import Registration Certificate (IRC).

3. Bonded warehouse license (in case of export oriented industry).

4. Pro-forma Invoice (PI) issued by the foreign supplier.

5. Insurance cover note.

6. Trade license.

7. TIN (Tax Identification Number) Certificate.

8. VAT (Value Added Tax) Certificate.

9. Declaration in triplicate regarding the payment of income tax by the importer.

10. Letter of Credit Authorization Form duly filled in and signed by the importer.

11. One set of IMP form duly signed by the importer.

12. Valid membership certificate from a registered Chamber of Commerce and Industry or Trade Association.

13. Membership certificate from BGMEA (Bangladesh Garment Manufacturers and Exporters Association) in case of Garments Industry.

14. Proof of payment of renewal fees for the IRC.

15. Certificate of incorporation with RJSC (Registrar Join Stock Companies).

16. Certificate of commencement.

17. Resolution of Board of Directors.

18. Any such documents as may be required as per Import Policy Order (IPO).

Discrepant Documents:

A list of common discrepancies is given below:

1. Unclean Bill of Lading.

2. Bill of Lading.

3. Bill of Lading undated.

4. Shipment effected from port other than that stipulated in the credit.

5. Goods shipped on deck (unless stipulated in the credit).

6. Full set of bill of lading not presented.

7. Certificate of country of origin not presented.

8. Certificate notifying insurance company of shipment not presented.

9. Weighment certificate not presented.

10. Cuttings or alterations in documents not authenticated.

11. Documents inconsistent with each other.

12. Description of goods on invoice differs from that in the credit.

13. Weights differ between documents.

14. The amount shown in invoice and bill of exchange differ.

15. Shipping marks and numbers differ between documents.

16. Credit amount exceeded.

17. Credit expired.

18. Documents not presented in time.

19. Late shipment.

20. Short shipment.

21. Absence of documents called for in the credit.

22. Bill of exchange drawn on a wrong party.

23. Bill of exchange payable on an indeterminable date.

24. Absence of signatures in the documents.

25. Packing list not submitted.

26. Inspection certificate not submitted.

27. Unit price not mentioned in invoice.

Operations of Documentary Letter of Credit (L/C):

The following five major steps are involved in the operation of a documentary Letter of Credit:

1. 1. Issuing.

2. 2. Advising.

3. Amendment (If necessary).

4. Presentation.

5. Settlement.

1. Issuing Letter of Credit: Before issuing L/C, the buyer and seller located in different countries, concludes a “sales contract” providing for payment by documentary credit. As per requirement of the seller, the buyer then instructs the bank-the issuing bank-to issue a credit in favor of the seller (beneficiary).Instruction or application for issuing a credit should be made by the buyer (importer) in the issuing bank’s standard form. The credit application, which contains the full details of the proposed credit, also serves as an agreement between the bank and the buyer. After being convinced about the ‘necessary conditions’ contained in the application form and ‘sufficient conditions’ to be fulfilled by the buyer for opening a credit the opening bank then proceeds for the credit to be addressed to the beneficiary.

2. Advising a Letter of Credit (L/C): Advising through a bank is a proof of apparent authenticity of the credit to the seller. The process of advising a credit consists of forwarding the original credit to the beneficiary to whom it is addressed. Before forwarding, the advising bank has to verify the signature of the officer of the opening bank and ensures that the terms and conditions of the credit are not in violation of the existing exchange control regulations and other regulations relating to export. In such act of advising, the advising bank does not take any liability.

3. Amendment of Credit: Parties involved in a L/C, particularly the seller and the buyer cannot always satisfy the terms and conditions in full as expected due to some obvious and genuine reasons. In such a situation, the credit should be amended.

In case of revocable credit, it can be amended or cancelled by the issuing bank at any moment and without prior notice to the beneficiary. But in case of irrevocable credit it can neither be amended nor canceled without the agreement of the issuing bank, the confirming bank (if any) and the beneficiary.

4. Presentation of Documents: The seller being with the terms and conditions of the credit proceeds to dispatch the required goods to the buyer and after that, has to present the documents evidencing dispatching of goods to the negotiating bank on or before the stipulated expiry date of the credit. After receiving all the documents, the negotiating bank then checks the documents against the credit. If the documents are found in 0rder, the bank will pay, accept or negotiate to the issuing bank. The issuing bank also checks the documents and if they are found as per credit requirements, either.

1. Effects payment.

2. Reimburses in the pre-agreed manner.

5. Settlement: Settlement means fulfilling the commitment of issuing bank in regard to effecting payment subject to satisfying the credit terms fully. This settlement may be done under three separate arrangements as stipulated in the credit.

· Settlement by Payment: Here the seller presents the documents to the paying bank and the bank then scrutinizes the documents. If satisfied, the paying bank makes payment to the beneficiary and in case this bank is other than the issuing bank, then sends the documents to the issuing bank if the issuing bank is satisfied with the requirements, payment is obtained by the paying bank them the issuing bank.

· Settlement by Acceptance: Under this arrangement, the seller submits the documents evidencing the shipment to the accepting bank accompanied by the draft drawn on the bank (where credit is available) at the specified tenor. After being satisfied with the documents, the bank accepts the documents and draft and if it is a bank than the issuing bank, then sends the documents to the issuing bank stating that it has accepted the draft and at maturity the reimbursement will be obtained in the pre-agreed manner.

· Settlement by Negotiation: This settlement procedure starts with the submission of documents by the seller to the negotiating bank accompanied by a draft drawn on the buyer or any other drawee, at sight or at a tenor, as specified in the credit. After scrutinizing that the documents meet the credit requirements, the bank may negotiate the draft. This bank, if other than the issuing bank, then sends the documents and the draft to the issuing bank. As usual, reimbursement will be obtained in the pre-agreed manner.

Findings:

1. Lack of modern technology.

2. Higher educated and smart employees are not present.

3. Sitting space for customers is not sufficient.

4. The decoration and environment of this branch is poor compare with other banks.

5. Workloads on the employees are too heavy; it also creates problems to provide proper services.

6. This branch has no customer services department.

7. Customer turnover is high.

8. This branch offers only a few loan schemes to customers.

Recommendation:

Uttara Bank Limited is successfully doing their business in Bangladesh. From the findings it has been found that the overall position of the bank is satisfactory. But in some case it has been found that their performance is below the optimum level. As an old bank in Bangladesh, UBL can follow the following recommendations to improve their business.

1. Uttara bank Ltd (Tongi Branch) should use modern technology to provide better services and attract to customers.

2. UBL should be needed to provide standard payment structure. It will be very easy to attract and retain higher educated employees.

3. UBL should need to increase sitting space for customers by this way customers will be satisfied and attracted.

4. The authority of UBL should decorate it nicely both inside and outside of the branch.

5. To reduce workloads of the employees the bank should use latest technology and provide training to employees.

6. UBL should open customer care department within very short time customer so that customers get there required information easily.

7. UBL should open ATM card, debit card, marriage loan, home loan, educational loan, car loan; it should open different types of schemes to reduce the customer turnover.

8. UBL should offer all types of loan scheme which is already offers by the other branches, like commercial lending (Export, Import, Internal trade).

Conclusion:

Banking sector being a service of Bangladesh continues to contribution to a great in the economy of Bangladesh. Uttara Bank Ltd. is one of the leading banking services of the country. Though UBL is the new entrants in the banking industry, it has already shown huge potentials 7 years of operation.

I observe the total foreign exchange department very carefully while completing my internship in UBL. With a keen attention and observation the study has been tried to complete. The following are some extract of the major findings:

· For the effectiveness of the foreign exchange department, UBL has divided the whole department into three major parts, which are Export, Import, and Remittance.

· The monitoring system of the command is strictly maintained here. The executives now and then visit the department, which keeps all the officers alert about their duty.

· Sometime officers show negligence to the clients, which have a negative impact on its service.

I also think that there is bright future waiting for the Uttara Bank Ltd. and UBL is in a position to go as a catalyst for third development in the banking sector in Bangladesh. Another thing I have to mention here that the UBL is going through the oath in which they need to go and as like today it will bring more and welfare oriented activities in the banking sector in the years to come.

Students' World

Pages

Aug 30, 2013

University Of Dhaka admission for session 2013-14

Aug 28, 2013

Letter of credit : "customs and procedures used in Bangladesh particularly “

Have to take some charge documents from the party

Then the importer have to submit a proposal for opening L/C along with-