Main Report Final

Foreign Exchange Practices of National Bank Limited at Babu Bazar Branch

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Chapter-1

INTRODUCTION


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1.1 Background of the Study

Practical knowledge highlights reality more clearly than theoretical knowledge. Theoretical

knowledge is guideline, but practical knowledge is experience. So, both are required, when I

go for field work in order to gain practical knowledge is called internship training and when

I achieve knowledge by applying theoretical knowledge on actual work then it is called

internship knowledge.

As a requirement for my BBA program, I have conducted this report on National Bank Ltd.

during the internship. A student is required to prepare a report on the organization where he

or she has been attached. I have got the opportunity to perform my internship at Babu Bazar

Branch of National Bank Ltd. It was a great opportunity for me to know about the foreign

exchange activities; export, import and remittance operation. It was a three months long

practical orientation program. My supervisor teacher is Professor Shibli Rubayatul Islam,

Department of Banking, University of Dhaka.

A bank is a government-licensed financial institution whose primary activity is to lend

money. Many other financial activities were allowed over time. For example banks are

important players in financial markets and offer financial services such as investment funds.

Banks have influenced economies and politics for centuries. Historically, the primary

purpose of a bank was to provide loans to trading companies. Banks provided funds to allow

businesses to purchase inventory, and collected those funds back with interest when the

goods were sold. For centuries, the banking industry only dealt with businesses, not

consumers. Banking services have expanded to include services directed at individuals, and

risk in these much smaller transactions is pooled.

Banks today are under great pressure to perform towards achieving the objectives of their

stockholders, employees, depositors and borrowing customers, while somehow keeping

government regulators satisfied that the bank policies, loans and investment are sound. But

the principal reason banks are Tableered by state and federal authorities is to make loans to

their customers. Indeed, making loan is the principal economic function of banks to fund

consumption and investment spending by individuals and businesses. How well a bank

performs its lending function has a great deal to do with the economic health of its origin,


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because bank loan support the growth of new business and jobs within the bank’s trade

territory and promote economic vitality. As banking organizations have grown in recent

years in Bangladesh, many of them have been forced to turn to the money and capital

markets to raise funds by selling stocks and bonds. Banks entry into the open market to raise

funds means that their financial statements are increasingly being scrutinized by investors

and by the general public. This development has placed management under great pressure to

set and meet bank performance goals.

At the same time, competition for banks traditional loan and deposit customers has increased

dramatically. Bankers are dealing with risk—especially the risk of loss due to changing

interests rates. But recently Bangladesh Bank has declared a maximum rate for all kinds of

investment, and the rate is 13%. Today banks are highly complex organizations. Bankers

have been called upon to continually reevaluate their loan and deposits policies, review their

plans for expansion and growth, assets their returns and risk in the light of this new

competitive environment. Thus the effective management tools can be marshaled in a

coordinated fashion to handle many of the risks banks face.

1.2 Objective of the study:

The general objective of the study is to get an on-the-job experience to practical business

world and an opportunity for translation of theoretical concept into real life situation.

However the specific objectives of the study are as follows:

To present theoretical aspects of National Bank’s Foreign Exchange Practice

To achieve Practical idea about overall activities of Bank regarding Foreign

Exchange

To study the Foreign Exchange practice of National Bank Ltd.

To find out some problems and limitations of National Bank and its Foreign

Exchange mechanism.

To suggest some possible remedial measures to overcome the problems of Foreign

Exchange Division.


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1.3 Methodology

I have used statistical analysis, graphs and Tables to explain the findings. While I was

conducting the study I have collected various types of data to do that analysis. Data has been

collected through different sources, by interviewing the responsible officers and from

different circular published by the Bank disciplined way. The study input was collected from

two sources:

1.3.1 The Primary sources of Data:

Practical banking work.

Face to face conversation with the respective officer of the branch.

Face to face conversation with the clients.

Relevant file study as provided by the officers concerned.

Observation.

1.3.2The Secondary sources of Data:

Annual Reports of the NBL

Periodicals published by the Bangladesh Bank.

Different books, articles etc. regarding Foreign Exchange operations.

www.nblbd.com

www.bangladesh-bank.org.bd

1.4 Rationale of the Study:

Now, we are in era of competition. And because of this immense competition banking sector

is focusing on greater customer service. To ensure the greater customer service they need to

improve their service according to the customers’ expectation. And I think this study may

help National Bank Ltd. (Babu Bazar Branch) to improve the quality of their services.


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1.5 Scope and Limitation:

The scope of the study is so wide and related to Foreign Exchange Approach of National

Bank Limited. The scope of the report would include focus on how the Foreign Exchange

practice is being carried out by the respective department of the bank like what is basic

module of export, import and foreign remittance, what is payment procedure of export. In

twenty-first century’s world without banking, any organization can’t run in any moments.

And Foreign Exchange is one of the most important departments. So, here knowing scope is

available but time is very short. There are many things, which are not invented yet. So there

are many scopes for further study.

There are many limitations; some of them as below;

1. The survey has made only at Babu Bazar Branch office of the Foreign Exchange

Department of National Bank Limited.

2. Most of the clients of this branch are not educated. So, they were unable to give me

all necessary information.

3. I have got idea about Foreign Exchange Transaction only from the employees,

Department of Foreign Exchange, National Bank Limited, Babu Bazar branch.

4. The export functions are rare in this branch. So, I could not get firsthand experience

about those functions


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Chapter-2

COMPANY INFORMATION


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2.1 Overview of NBL

National Bank Limited is one of the leading private commercial bank having a spread

network of 132 branches and 15 SME/Agri Branches (total 147 service locations) across

Bangladesh and plans to open few more branches to cover the important commercial areas

in Dhaka, Chittagong, Sylhet and other areas in near future

Name National Bank Limited

Head Office 18, Dilkusha C/A

Date of Incorporation March 23, 1983

Principal Activity Commercial Banking

Number of Branches 147

Chairman Zainul Haque Shikdar

Telephone No. PABX. 9563081-5, 7168729-31

Website www.nblbd.com.

2.2 NBL Profile:

National Bank Limited has its prosperous past, glorious present, prospective future and

under processing projects and activities. Established as the first private sector bank fully

owned by Bangladeshi entrepreneurs, NBL has been flourishing as the largest private sector

Bank with the passage of time after facing many stress and strain. National Bank Limited

has been licensed by the Government of Bangladesh as a Scheduled commercial bank in the

private sector in pursuance of the policy of liberalization of banking and financial services

and facilities in Bangladesh. In view of the above, the Bank within a period of 25 years of its

operation achieved a remarkable success and met up capital adequacy requirement of

Bangladesh Bank. The emergence of National Bank Limited in the private sector was an

important event in the Banking arena of Bangladesh. When the nation was in the grip of

severe recession, the government took the farsighted decision to allow the private sector to

revive the economy of the country. Several dynamic entrepreneurs came forward for

establishing a bank with a motto to revitalize the economy of the country. National Bank

Limited was born as the first hundred percent Bangladeshi owned Bank in the private sector.


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From the very inception, it was the firm determination of National Bank Limited to play a

vital role in the national economy. We are determined to bring back the long forgotten taste

of banking services and flavors. We want to serve each one promptly and with a sense of

dedication and dignity. The then President of the People's Republic of Bangladesh Justice

Ahsanuddin Chowdhury inaugurated the bank formally on March 28, 1983 but the first

branch at 48, Dilkusha Commercial Area, Dhaka started commercial operation on March 23,

1983. The 2nd Branch was opened on 11th May 1983 at Khatungonj, Chittagong. At

present, NBL has been carrying on business through its 132 branches and 15 SME / Agri

Branches (total 147 service locations) spread all over the country. Since the very beginning,

the bank has exerted much emphasis on overseas operations and handled a sizable quantum

of home bound foreign remittance. It has drawing arrangements with 415 correspondents in

75 countries of the world, as well as with 37 overseas Exchange Companies located in 13

countries. NBL was the first domestic bank to establish agency arrangements with the world

famous Western Union in order to facilitate quick and safe remittance of the valuable

foreign exchanges earned by the expatriate Bangladeshi nationals. This has meant that the

expatriates can remit their hard-earned money to the country with much ease, confidence,

safety and speed. NBL was also the first among domestic banks to introduce international

Master Card in Bangladesh. In the meantime, NBL has also introduced the Visa Card and

Power Card. The Bank has in its use the latest information technology services of SWIFT

and REUTERS. NBL has been continuing its small credit programmes for disbursement of

collateral free agricultural loans among the poor farmers of Barindra area in Rajshahi district

for improving their livelihood. NBL focused on all key areas covering capital adequacy,

maintaining good asset quality, sound management, satisfactory earning and liquidity. As a

consequence, it was possible to a record growth of 175.51 percent with Tk. 8,809.40 million

pretax profits in the year under review over the preceding year. The net profit after tax and

provision stood at Tk. 6,860.34 million which was Tk. 2,070.47 million in the previous year

registering a 231.34 percent rise. The total deposits increased to Tk. 102,471.83 million

being 33.37 percent increase over the preceding year. Loans and advances stood at

Tk.92,003.56 million in the year under report which was Tk. 65,129.289 million

representing 41.26 percent rise over the preceding year. Foreign trade stood at Tk.

144,255.00 million in 2010 compared to Tk. 115,939.00 million, increased by 24.42 percent


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compared to that of the previous year. During 2010, the bank handled inward remittance of

Tk. 49,145.30 million, 10.73 percent higher than that of the previous year. Return on Equity

(ROE) registered a 77.84 percent rise over the preceding year.

National Bank, has now acquired strength and expertise to support the banking needs of the

foreign investors. NBL stepped into a new arena of business and opened its Off Shore

Banking Unit at Mohakhali to serve the wage earners and the foreign investors better than

before.

Since its inception, the bank was aware of complying with Corporate Social Responsibility.

In this direction, we have remained associated with the development of education,

healthcare and have sponsored sporting and cultural activities. During times of natural

disasters like floods, cyclones, landslides, we have extended our hand to mitigate the

sufferings of victims. It established the National Bank Foundation in 1989 to remain

involved with social welfare activities. The foundation runs the NBL Public School &

College at Moghbazar where present enrolment is 1140. Besides awarding scholarship to the

meritorious children of the employees, the bank has also extended financial support for their

education. It also provided financial assistance to the Asiatic Society of Bangladesh at the

time of their publication of Banglapedia and observance of 400 years of Dhaka City.

The Transparency and accountability of a financial institution are reflected in its Annual

Report containing its Balance Sheet and Profit & Loss Account. In recognition of this, NBL

was awarded Crest in 1999 and 2000, and Certificate of Appreciation in 2001 by the

Institute of Tableered Accountants of Bangladesh.


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2.3 Vision:

Ensuring highest standard of clientele services through best application of latest information

technology, making due contribution to the national economy and establishing ourselves

firmly at home and abroad as a front ranking bank of the country are our cherished vision.

2.4 Mission:

Efforts for expansion of our activities at home and abroad by adding new dimensions to our

banking services are being continued unabated. Alongside, we are also putting highest

priority in ensuring transparency, account ability, improved clientele service as well as to

our commitment to serve the society through which we want to get closer and closer to the

people of all strata. Winning an everlasting seat in the hearts of the people as a caring

companion in uplifting the national economic standard through continuous up-gradation and

diversification of our clientele services in line with national and international requirements

is the desired goal we want to reach.

2.5 Goal of NBL:

Become the most profitable bank.

Provides highest level of satisfaction to customers.

Enhance the value of shareholders investments and optimize return on their

investment.

2.6 Commitment to clients:

In serving customer In serving the bank Principle in carrying duties

Customer-first

Quality-focus

Credibility & secrecy

Loyalty

Total commitment &

dedication

Excellence through

teamwork

Discipline

Honesty & Integrity

Sincerity

Caring

Creativity


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2.7 Departments of NBL

Diagram-1

Departments of NBL In Head Office

Audit & Inspection Division

Computer Division

Credit Card Division

Financial Administration Division

International Division

Merchant Banking Division

Share Division

Audit & Budget & Monitoring Division

Credit Division

Dispatch Division

Human Resource Division

Law & Recovery Division

Marketing Division

System & Operation Division


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2.8 Management Hierarchy of NBL

Diagram-2

Chairman

Senior Assistant Vice President

Assistant Vice President

Additional MD

Board of Directors

Business Consultant

Managing Director

Principal Officer

Deputy Managing Director

Additional MD

Senior Vice President

Senior Executive Vice President

Officer

Vice President

Senior Principal Officer

Probationary Officer

Junior Officer


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2.9 Last Five year’s Performance of NBL at a glance:

(Figure in millions)

Particulars 2006 2007 2008 2009 2010

Authorized Capital

2450.00 2450.00 2450.00 7450.00 7450.00

Paid-up Capital 805.47 1208.20 1872.72 2846.54 2846.53

Reserve Fund 2468.79 33360.18 4253.55 6070.22 4502.44

Deposits 40350.87 47961.22 60187.89 76838.64 102471.83 Loan &Advance 32709.68 36475.74 50665.07 65129.29 92003.56

Investment 6239.38 7760.38 9156.61 12315.20 24953.97

Foreign Trade Business

70477.70 94583.00 114510.76 115938.62 144255.00

Remittance 21353.90 27560.80 39877.80 44381.50 49145.30

Total Assets 46796.04 56526.96 72205.50 92084.79 134748.04

Cost of Fund 6.15% 6.35% 6.76% 6.45% 6.65%

Earnings per share

63.01 66.11 53.31 72.74 89.45

Non-performing Loan

6.01% 4.53% 5.39% 5.96% 5.39%

Net Asset Value per Share (Taka)

406.50 378.12 327.13 313.25 302.15

Capital Adequacy Ratio (CAR)

10.10% 13.11% 13.42% 8.61% 12.29%

ROA 1.19% 2.40% 2.36% 2.52% 5.06%

ROE 16.89% 31.57% 28.38% 27.53% 48.96%

Number of Branches

91 101 106 131 145

No. Of Foreign Correspondents

400 405 405 415 415

Number of Employees

2270 2432 2737 2960 3442

Table-1


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Chapter-3

Foreign Exchange Department


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3.0 Foreign Exchange:

The foreign exchange department deals with the export and import business of various

clients. The clients open L/C for importing and exporting goods from and to abroad through

this division. But mainly import L/C opening functions are done here in Babu Bazar Branch.

Some foreign remittance activities are also done in this branch. But export L/C is rare case

for this branch. In the case of import, the bank usually works as the issuing bank and in the

case of export the bank works as advising bank or negotiating bank or as both. In importing

goods from abroad the clients have to give a percentage of total cost of goods, as advance.

The clients also have to flay a certain amount of commission to the bank. After receipt of the

goods in .ports, the clients have to pay the rest of the money to the banks to clear the goods

from the ports. Foreign exchange mainly deals with various kinds of documents and papers.

These documents and papers work as claim of the credits.

In this department mainly four tasks are done. These are -

i) Import

ii) Export

iii) Remittance

iv) Reporting

3.1 Import Mechanism:

Import of merchandise involves two things: bringing of goods physically into the country

and remittance of foreign exchange towards the cost of merchandise and services. In case of

import, the importers are asked by their exporters to open a letter of credit .So that their

payment against goods is ensured. Documentary credit has emerged as a vital system of

trade payment. It is a key player of foreign trade.

An Importer is required to fulfill some conditions/ criteria to be eligible as an importer as

per provisions of Import Policy Order and Guidelines for Foreign Exchange Transaction.


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An importer is required to submit the following documents along with L/C application to

get a license to import goods through National Bank-

An account with National Bank Limited, Babu Bazar Branch.

Import Registration Certificate (IRC)

Pro-forma Invoice/ Indent

Taxpaying Identification (TIN) Number

Membership Certificate from recognized Chamber of Commerce & Industry.

Letter of Credit Authorization (LCA) Form duly attested.

L/C Application duly signed by the importer.

One set of IMP Form

Insurance Cover note with money receipt

To import, a person should be competent to be an ‘Importer’. According to Import and

Export Control Act, 1950, the Office of Chief Controller of Import and Export provides the

registration (IRC) to the importer. After obtaining this, the person has to secure a letter of

credit authorization (LCA) from Bangladesh Bank and then he becomes a qualified

importer. He is the person who requests or instructs the issuing bank to open a letter of

credit. He is also called applicant of the credit.

3.1.1 Letter of Credit Authorization Form (LCAF):

The Letter of Credit Authorization Form is the form prescribed for the authorization of

opening letter of credit or payment against import and used in lieu of import license. The

authorized dealers are empowered to issue LCA forms to the importers to allow import in

Bangladesh. If foreign exchange is intended to be bought from Bangladesh Bank against a

LCAF, it has to be registered with Bangladesh Bank’s Registration Unit located in the

concerned area office of the CCI&E. The LCA forms available with the authorized dealers

are issued in a set of six pages each.


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First copy is exchange control copy, which is used for opening of L/C and effecting

remittance. Second copy is the custom purpose copy, which is used for clearance of

imported goods from custom authority.

Triplicate and Quadruplicate copy of LCAF are sent to concerned area of CCI&E office by

authorized dealer / Registration Unit of Bangladesh Bank. Quintuplicate copy is kept as

office copy by Registration Unit.

When the L/C application is found to be in order and the client has sufficient approved

credit line for opening an L/C, vouchers are prepared to record the contingent liability for

the L/C opened and realized margin, commission, telex charges, postage etc. as per bank’s

schedule of charges/ sanction letter. Accounting treatments at the time of L/C opening are

as follows-

a) For recording contingent liability -

Customers liability………………………. Debit (In equivalent. BDT)

Bankers liability…………………………Credit

b) For realization of margin, commission, telex and other charges -

Customer’s A/C………………………….Debit (In equivalent. BDT)

Margin on L/C…………………………….Credit

Commission on L/C……………………….Credit

Telex/Postage charge………………………Credit

Misc. charges………………………………Credit

After that, L/C number and above entries are given in the L/C register. L/C opening

register has following details-

Date, L/C number, Name of the customer, Foreign currency amount, Exchange rate,

Taka equivalent and source of import.

Goods, country of origin, advising bank, Expiry date, Margin.


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Charges: commission, postage, VAT, SWIFT.

3.1.2 Distribution of L/C:

After giving the accounting entries the transmission of L/C is done. National Bank takes

the following stnet profit, Through SWIFT to advise the L/C to the beneficiary.

a) Send the signed original L/C together with the copy to the dispatch section for

mailing to the L/C Advising Bank and L/C Reimbursement bank respectively by

courier/Airmail.

b) Send the approved text of L/C and reimbursement authorization to SWIFT service-

charge for their onward transmission to advising bank and reimbursing bank

respectively.

c) Deliver the customer copy of the L/C along with the debit advice to the customer over

the counter or send the same to the dispatch section for onward delivery to the

customer.

d) Send the original accounting vouchers in batches to the Accounts section for capture

and updating of the data-base/ records.

e) Check the L/C file to ensure that all the related documents i.e. L/C application with

supporting documents, approval, L/C copy, reimbursement instruction copy and copy

of accounting vouchers are filed properly.

3.1.3 Amendment of L/C:

Parties involved in a letter of credit, particularly the seller and the buyer cannot always

satisfy the terms and conditions in full as expected due to some genuine reasons. In such a

situation, the letter of credit is amended. In Revocable letter of 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 letter of credit, it can never be amended or cancelled without the

agreement of the issuing bank, the confirming bank (if any) and the beneficiary. When the


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customer approaches for amending the terms and conditions of a letter of credit opened at

his request, National Bank checks the following:

1. The type of amendment the customer is asking for-

Whether it is concerning an increase or decrease in the L/C amount.

Whether it is concerning extension of shipment/ expiry date of the L/C

Whether it is relating to change in the merchandise/ mode or route of transportation.

2. Depending on the type of amendments, bank has to review the matter in the same way

as applicable while opening a letter of credit in accordance of the provisions.

3.1.4 Amendment Procedure:

On receipt of a request letter for amendment of L/C from the customer the bank takes the

following stnet profit-

a) Record the date and time of receipt of the application.

b) Read the request letter for amendment briefly to ensure that concerned L/C number

and the instructions mentioned are clear.

c) If found in order check the request letter for amendment together with all supporting

papers.

d) In case the letter of amendment is not complete or required papers are not submitted,

the customer should be contacted promptly for rectification of the defects.

e) In case the customer does not have approved credit line for increasing/ amending the

L/C, the import section has to submit proposal to the Executive Committee of the

Board and keep pending of amending the L/C till its approval.

f) When the request letter for amendment with all papers is found to be in order, record

the particular of amendments with date in appropriate column against the relevant

L/C in the L/C register.

g) Prepare the letter of amendment either in mail, SWIFT or telex format.


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3.1.5 Accounting Entries of Amendment:

After preparing the letter of amendment, the bank prepares the vouchers To amend the

amount of contingent liability for increase (in case of increase in L/C value) and

commission & charges. In case of decrease in L/C value, refund the margin to the credit of

customer account if the L/C was established fewer than 100% margin, otherwise

management consent is required. The Accounting treatments are-

i) For amending contingent liability

a. Increase of L/C value

Customer liability…………………………Debit

Banker’s liability…………………………Credit

b. Decrease of L/C value

Banker’s liability…………………………..Debit

Customer liability………………………….Credit

ii) For increase of L/C value

Customer A/C (in BDT)………………………Debit

Margin on L/C…………………………………Credit

Commission on L/C……………………………Credit

Misc. charges…………………………………..Credit

Telex/ Postage charges…………………………Credit

iii) For refunding customer liability (after the amendment by the advising bank)

Margin A/C……………………………………Debit

CD account customer………………………….Credit

National Bank Limited, Babu Bazar branch transmits the letter of amendment to the

advising bank and L/C reimbursing bank respectively by Courier/ Airmail. A letter of


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amendment executed by issuing bank becomes enforceable / valid only after agreement of

the parties in documentary credit operation.

3.1.6 Adding Confirmation:

Sometimes beneficiary or supplier of the goods insists the importer for adding

confirmation to L/C or to issue L/C with added confirmation. In that case, at the request of

the importer, the issuing bank request the advising bank or the third bank to add their

confirmation to the L/C. Normally the charge of confirmation is borne by the beneficiary

and it differs from bank to bank.

3.1.7 Examination of Shipping Document:

The seller being satisfied with the terms and conditions of the credit proceeds to dispatch

the required goods to the buyer, has to present the documents evidencing dispatching of

goods to the Negotiating Bank. The exporter will submit those documents in accordance

with the terms and conditions as mentioned in L/C. Generally the Exporter sends the

following documents.

1. Commercial invoice

2. Bill of lading

3. Packing list

4. Certificate of origin

5. Bill of exchange

6. Clean report of finding (CRF)

7. Weight list

8. Insurance cover note

9. Pre-shipment certificate

The negotiating bank carefully checks the documents provided by the exporter against the

credit, and if the documents meet all the requirement of the credit, the bank will pay,

accept, or negotiate in accordance with the terms and conditions of the credit. Then the

bank sends the documents to the L/C Issuing Bank /opening bank.


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3.1.8 Scrutiny of Documents:

First of all it must be ensured that full set of documents as mentioned in the L/C has been

received. On receipt of shipping documents from the Negotiating bank, National Bank

officials check whether these documents have any discrepency or not. ‘Discrepency’

means the dissimilarity of any of the documents with the terms and conditions of the L/C.

the same. If any discrepency noticed or there is any deviations of the terms and conditions

of L/C , the same should be immediately brought to the notice of the importer for his

written instruction before lodgement. If the importer refuges to accept the documents it

should be notified to the Negotiating bank advising them within reasonable time but not

more than 7 working days from the date of receipt of the shipping documents. Some of the

usual discrepencies are—

L/C expired

Late shipment

Amount drawn in excess of the letter of credit

Bill of Exchange not properly drawn

Description of the goods differ

Interest clause is missing in Bill of Exchange

Bill of Lading or Airway Bill stale or Bill of Lading is issued under a Tableer party.

Insurance cover note as per terms of L/C and insurance does not cover the entire

voyage and insurance policy is not properly stamped.

The branch will proceed carefully look into some main points of each of the documents

keeping in view the terms of L/C. Some key check points for the documents are as follows-

A. Bill of Exchange:

Bill of exchange is an unconditional order written (signed) by the drawer, to another

person (the drawee) which directs to pay a certain sum at sight or at fixed or further

determinable date to the order of the party which is to receive payment. Officials check the

following-


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That the bill of exchange has been properly drawn and signed by the beneficiary as

mentioned in the L/C terms.

That the draft amount drawn does not exceed the amount available under the credit.

That the amount is identical with that amount mentioned in the invoice.

That the bill of exchange is in order and endorsed properly.

B. Commercial Invoice:

Commercial Invoice issued by exporter is the book keeping instruments for the importer.

The invoice is the list of articles containing their particulars and prices. Here the

following points are checked-

That the merchandise is properly invoiced by the beneficiary.

That the merchandise is invoiced to the importer on account of whome the L/C was

opened.

That the description of the merchandise as shown in the invoice correspond to that

required in the L/C.

That the unit price of the merchandise in the invoice tallies with that of the unit price

stipulated in the L/C and indent.

That the invoice has been correctly and properly drawn and signed by the beneficiary

as per terms of L/C.

That the relevant LCA form number, IRC number of the importer alongwith the

Registration number of the indentor with Bangladesh Bank, are correctly

incorporated in the invoice.

C. Bill of lading:

A bill of lading is a document generally issued by a carrier to a shipper, usually stipulated

in a credit when exporter dispatches the goods. It is an evidence of a contract of

carriage,and is a document of title to goods. It also constitutes a document that is or may

be, needed to support an insurance claim. The key check points are-


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That the bill of lading is clean “Shipped on Board” B/L showing freight prepaid and

properly endorsed.

That the bill of lading covers the merchandise described in the invoice.

That the port of shipment, port of destination, date of shipment, the name of the

consignee etc. shown in B/L are in agreement with those mentioned in the L/C.

That the bill of lading is properly signed by authorized signatory of the Shipping

Company or by their authorized agents.

That the bill of lading is not stale and has been produced in full set as per terms of

L/C.

D. Certificate of Origin:

In case of certificate of origin the officials check that the certificate of origin of the

merchandise is in conformity with that stipulated in the L/C.

E. Other Documents:

Other documents called for in the credit such as packing list, weight list, inspection

certificate etc. to be checked whether drawn and issued in accordance with the terms

of the credit.

3.1.9 Lodgment of Import Documents:

On scrutiny, if it is found that the documents drawn in conformity with the terms of the

credit, National Bank Babu Bazar branch lodges the documents in Inland Bill Purcshe(

IMP) register/ database giving a bill reference serially in numerical order.

The bank that opens the letter of credit is bound to honor its commitment to pay for import

bills when these are presented for payment, if drawn strictly in terms of letter of credit. The

opening bank will lodge the shipping documents to their book and will respond to the debit


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advice originated by the foreign correspondent to the debit of “Inland Bill Purcshe A/C” or

“Bills of Exchange A/C” and present the bill to the importer for payment.

The following stnet profit are involved in lodgement-

First all the particulars of the documents are entered in the IMP register and IMP No.

Seal is given on all the copies of the received documents.

Convert the foreign currency into Bangladeshi currency.

Reverse the contingent liability and entry made in the liability register.

Prepare lodgement voucher.

Send IBCA to the Head Office.

Make intimation to the importe Worry

Accounting Entries

Payment Against Document A/C …………………..Debit

Head Office General A/C…………………………………..Credit

Exchange Earnings………………………………… ……..Credit

For Contingent liability the reversal entries are as follows-

Bankers Liability…………………………Debit

Customer Liability………………………Credit

After realizing the charges, the shipping documents are then stamped with IMP number

and are entered in the IMP register. Intimation is given to the customer calling on the

bank’s counter requesting retirement of the shipping documents.


26

3.1.10 Retirement of Documents:

The importer receives the intimation and gives necessary instruction to the bank for

retirement of the bills or for the disposal of the shipping documents to release the imported

goods from the customs authority. The importer may instruct the bank to retire the

documents by debiting his account with the bank. During delivery of the documents the

following accounting entry is given-

Customer A/C or LTR a/c ( with IMP interest)…..Debit

Margin on L/C A/C……………………………….Debit

IMP A/C………………………………………….Credit

Interest/ Commission A/C…………………………Credit

3.1.11 Shipping Guarantee:

In the absence original documents, goods may be cleared by non-negotiable copies of

documents against shipping guarantee issued by L/C opening bank. The importer requests

the bank to issue shipping guarantee/ indemnity for clearance of consignment against non-

negotiable copies of documents received directly from the exporter as per clause

incorporated in the L/C. before issuance of shipping guarantee, bank recover full value of

import documents and collect an undertaking from the importer that they will accept

original documents inspire of any discrepancy and bear rate fluctuation of foreign currency

at the time of lodgment.

Voucher to be passed:

Reversal of contra voucher passed at the time of opening of the L/C

Banker’s liability for L/C……………………..Debit

Customer liability……………………………..Credit

Contra voucher


27

Customer liability on Shipping Guarantee…….Debit

Banker’s liability on Shipping Guarantee……..Credit

Importer A/C………………………………….Debit

Margin on L/C………………………………..Debit

Margin on shipping Guarantee………………..Credit

Commission/ charges………………………….Credit

On receipt of original documents, lodgment of the same is made as usual and on

retirement following vouchers is passed.

Reversal of contra voucher passed at the time of issuance of Shipping Guarantee

Banker’s liability on S.G……………………..Debit

Customer liability on S.G……………………..Credit

Margin on shipping guarantee………………..Debit

Importer’s A/C……………………………….Debit

Payment against document……………………Credit

Charges/ interest A/C………………………….Credit

3.1.12 Payment Procedure:

Payment for import is generally made through two forms. These are

a) At Sight Payment

b) Deferred Payment


28

a) At Sight Payment: In case of Sight L/C, the bank makes payment against presentation,

sight draft and documents drawn strictly as per terms under the letter of credit. Here

issuing bank release fund immediately on presentation of stipulated documents.

b) Deferred Payment: Deferred Payment means delayed payment against L/C. The

amount availed of, is not put at the seller’s disposal immediately on presentation of

documents, but only after a specified period. The credit wording always specifies duration

of the period and time at which the payment will be effected against presentation of

documents drawn under the letter of credit.

3.1.13 Import Financing:

If there is no available in cash in importer’s hand, he can request the bank to grant loan

against the documents for the purpose of post import finance. There are two following

forms of import finance-

1. Loan against imported merchandise (LIM).

2. Loan against trust receipt (LTR)

The following stnet profit are involved for retirement of documents-

Calculation of interest.

Calculation of other charges.

Passing vouchers.

Entry in register.

Endorsement made on the back of the bill of exchange as ‘Received Payment’ and

bill of lading or other transport document is endorsed under two authorezed

signatures of the bank’s officers.

Finally documents are delivered to the Importer.


29

1. Loan Against Imported Merchandise(LIM):

On the arrival of goods and lodgment of import documents, importer may request the bank

for clearance of goods from the port (custom) and keep the same to bank godown. Proper

sanction from the cxompetent authority is to be obatained before clearance of consignment.

In case of Loan Against Imported Merchandise, L/C department alongwith credit

department take prior approval of Head Office credit committee with other necessary

instructions regarding payment of duty and other taxes and mode of transportation from

Chittagong/ Chalna. After getting approval from H/O, bank grants loan in the form of

either LTR or LIM. This facility is not available in National Bank, Babu Bazar Branch.

2. Loan against Trust Receipt Facility (LTR):

Loan against Trust Receipt is post import finance, offered by National Bank, Babu Bazar

Branch.From bank’s point of view; it is risky because usually no security is taken. When

customer’s commitment is as good as cash, LTR is then issued. Loan is sanctioned based

on trust receipt (prescribed form) only, in this case the title and possession of goods both

lying with the customer. Documents are also handed over to the importer against LTR

facility

For clearance of the goods, the goods are handed over to the importer under trust with the

arrangement that sale proceeds should be deposited to liquidate the advances within the

specified period.

Accounting treatment:

While creating LIM facility following vouchers to be passed-

Margin on L/C…………………….Debit

LTR A/C………………………….Debit

IMP A/C…………………………Credit

On delivery of goods part/ whole the LTR liability should be adjusted part/ whole to

comply the instruction of Head Office sanction advice passing following vouchers-


30

Customer A/C………………………Debit

LTR A/C……………………………Credit

Interest on LTR……………………..Credit

Import Process

Diagram-3

Customer

Client Floating Customer

Revolving File Full Margin Deposited

Margin A/C

L/C (Import) applies, then opened

Import Document

Amendment of L/C (If necessary)

Payment of L/C


31

3.2 Export Mechanism:

According to Foreign Exchange Regulation Act, 1947, nobody can export by post and

otherwise than by post any goods either directly or indirectly to any place outside

Bangladesh, unless a declaration is furnished by the exporter to the collector of customs or

to such other person as the Bangladesh Bank may specify in this behalf that foreign

exchange representing the full export value of the goods has been or will be disposed of in

a manner and within a period specified by Bangladesh Bank. Payment for goods exported

from Bangladesh should be received through an Authorized Dealer in freely convertible

foreign currency or in Bangladeshi Taka from a Non-Resident Account. The Export

section deals with two types of Letter of credit that are as follows-

A) Export Letter of Credit

B) Back-to-Back Letter of Credit

Export financing can be done by Pre-shipment Credit and Post-shipment credit. In case of

pre-shipment financing 90% is financed by the bank. Of the portion 75% is by Back-to-

Back L/C and 15% by cash credit. Below the internship stated in broadly those two types

of L/C.

3.2.1 Export Letter of Credit:

The other type of L/C facility offered by National Bank Limited Babu Bazar branch is

Export L/C. Bangladesh exports a large quantity of goods and services to foreign

households. Readymade textile garments (both knitting and wove) jute, jute-made

products, frozen shrimps, tea are the main goods that the Bangladeshi exporters export to

foreign countries. Garments sector is the largest sector that exports the lion share of the

country’s export. Bangladesh exports most of its readymade garments products to USA

and European Community (EC) countries. Bangladesh exports about 40% of its readymade

garments products to USA. Most of the exporter who exports through National Bank

Limited Babu Bazar branch is readymade garment exporters. They open L/C in this branch


32

to export their goods, which they open against the import L/C opened by their foreign

importers.

3.2.1.1 Formalities for Export Letter of Credit:

The Export trade of the country is regulated by the Import & Export (Control) Act, 1950.

There are a number of formalities that an exporter has to fulfill before and after shipment

of goods. These formalities or procedures are enumerated as follows-

A. Export Registration Certificate (ERC):

The exports from Bangladesh are subject to export trade control exercised by the Ministry

of Commerce through Chief Controller of Import & Exports (CCI&E). No exporter is

allowed to export any commodity permissible for export from Bangladesh unless he is

registered with CCI&E and holds valid ERC. The ERC is required to be renewed every

year. The ERC number is to be incorporated on EXP (Export) Forms and other documents

related with export.

B. The EXP Form:

After having the registration, the exporter applies to National Bank Limited, Babu Bazar

branch with the Trade License, ERC and the Certificate from the concerned Government

Organization to get EXP Form. If the branch is satisfied, an EXP Form is issued to the

exporter.

An EXP Form usually contains the following -

i. Name and address of the Authorized Dealer.

ii. Particulars of the commodity to be exported with description and code number.

iii. Name and address of the exporter

iv. Name and address of the importer

v. Country of origin

vi. Port of shipment

vii. Port of destination

viii. Quality


33

ix. L/C value in foreign currency

x. Terms of sale

xi. Bill of lading/ Railway Receipt/ Airway Bill/ Truck Receipt number and date.

xii. Shipment date

xiii. CCI& E’s registration number and date

C. Securing the Order:

Upon registration, the exporter may proceed to secure the export order. This can be done

by contracting the buyer directly through correspondence.

D. Signing of the contract:

While making a contract, the following points are to be mentioned: (a) description of

goods, (b) quantity of the commodity, (c) price of the commodity, (d) shipment, (e)

insurance and marks, (f) inspection.

E. Procuring the material:

After making the deal and having the L/C opened in his favor, the next step for the

exporter is set about task of procuring the merchandise.

F. Registration of Sale:

This is needed when the proposed items to be exported are raw jute and jute-made good.

G. Shipment of Goods:

The following documents are normally involved at the stage of shipment: (a) EXP Form,

(b) registration certificate, (c) contract, (d) copy of L/C (e) freight certificate from the bank

in case of payment of freight, if the port of lading is involved, (f) truck receipt, railway

receipt,(g) shipping instruction,(i) insurance policy.

The following points should be checked-

The follows terms of L/C are in conformity with those of the contract.

The L/C is an irrevocable one, preferably confirmed by the Advising Bank.

The L/C allows sufficient time for shipment and reasonable time for registration.


34

If the exporter wants the L/C to be transferable, advisable, he should ensure those

stipulation are mentioned in the L/C.

At last the exporter submits all these documents along with a Letter of Indemnity to

National Bank Limited, Babu Bazar branch for negotiation. An officer scrutinizes all the

documents. If the documents are clean one the bank might decide to purchases the

documents within the limit sanctioned to the exporter, after verifying the confirmed order

covering each export. This is known as Foreign Documentary Bill Collection (FDBC).

3.2.1.2 Procedure for Foreign Documentary Bill Collection:

After purchasing the documents, National Bank Limited, Babu Bazar branch gives the

following entries-

Before realization of proceeds:

FDBC A/C……………………………..Debit

Customer A/C………………………….Credit

Adjustment after realization

National Bank, Head office General A/C……………………..Debit

FDBC A/C……………………………Credit

A FDBC register is maintained for recording all the particulars. The salient contents of a

FDBC register are as follows-

i. FDBC Ref. No

ii. Date

iii. Drawer/ Beneficiary

iv. Drawee / Applicant

v. Foreign currency

vi. Rate

vii. Local currency


35

viii. Margin (% of amount)

ix. Modes of transport

x. Merchandise

xi. Documents

xii. L/C no. and name of the opening bank

xiii. Name of the collecting bank

xiv. Initial, due date, date realized, bank charges recovered with remarks

1.Negotiation:

If the documents are free from Discrepancy or if the discrepancies are covered by

Indemnity of the party, Bank has to negotiate the Export Bills. For negotiation of cash

export bill buying rate prevailing on the date of negotiation is applied for conversion of the

foreign currency into Bangladesh currency. For this, the following entry is given

Foreign Bills Negotiated A/C………………Debit

Party A/C…………………………………..Credit

Before the close of the business, a consolidated voucher is passed against the total amount

of all the bills negotiated on that particular day.

National Bank, Head office General A/C………………………Debit

Foreign bills negotiated A/C…………….Credit

All the transaction is reported to the Head Office. The Head Office credits the Foreign

Bills Negotiated A/C by debit the balance with Foreign banks abroad A/C.

After negotiation of the export bill, the documents are to be sent abroad (Normally to the

L/C issuing bank) as per the instruction of L/C and claim Reimbursement of the proceeds

from the Bank as mentioned in the L/C.

2.Risk Involved in Negotiation:

If the bank fails to identify any discrepancy in documents, prepared by the Exporter and on

that time if the amounts are paid to the exporter then the Bank face a great loss. In this


36

situation the Negotiating Bank try to contact with the party and if they agree to deliver the

required documents, the Bank get rid of the huge loss.

3.2.2 Back-to-Back Letter of Credit:

Back-to-Back L/C is a secondary L/C opened by the seller’s bank based on the original/

master L/C to purchase the raw materials and accessories for manufacturing of the export

products required by the seller.

Under the ‘Back to Back’ concept, the seller as the beneficiary of the master L/C offers it

as a security to the advising bank for the issuance of the second L/C. the beneficiary of the

Back to Back L/C may be located inside or outside the original beneficiary’s country. In

case of Back-to-Back L/C, the bank takes no cash security (margin). Bank liens the Master

L/C and the drawn bill is a Time bill.

Readymade garment industries and specialized Textile units have been allowed the facility

of importing fabrics and other material/accessories needed for manufacturing

garments/specialized textile, free of duty under bonded warehouse system against back-to-

back L/C arrangement without involving cash foreign exchange from Bangladesh Bank.

The Bangladesh Bank has therefore allowed the authorized dealer to open Back-to-Back

L/C for import of raw materials by the readymade garment industries/ Specialized textile

unit to carry out their export orders against export L/C.

In our country, export oriented Garment Industry, operating under bonded warehouse

system are availing Back-to-Back facilities. In National Bank Limited, Babu Bazar branch

most of the Back-to-Back L/Cs opened on Garment Industry Account. Therefore the

discussion is based on account of Garment Industry in Bangladesh.


37

3.2.2.1 Opening of Back-to-Back L/C:

Besides normal formalities and requirements for L/C opening, the following points are

considered.

a) No Back-to-Back L/C on account of Garment industries should be opened without

prior approval from Head Office. Branches are required to obtain prior approval from

Head Office Division/ Credit Committee for opening all Back-to-Back L/Cs.

b) While opening of Back-to-Back L/C following instruction should be followed-

i. Separate L/C number should be used for Back-to-Back L/C and are to be recorded in

separate Register.

ii. L/C opening commission and charges are to be realized as usual.

iii. The following contingent liability voucher is to be passed at the time of opening the

L/C.

Customer liability for Back-to-Back L/C…………….Debit

Banker’s liability for Back-to-Back L/C……………..Credit

3.2.2.2 Documents Required for Opening a Back-to-Back L/C:

In National Bank Limited, Babu Bazar branch, following papers/documents are required

for opening a Back-to-Back L/C-

Master L/C

Valid Import Registration certificate (IRC) and Export Registration Certificate

(ERC).

L/C Application and LCAF duly filled and signed.

Performa Invoice

Indemnity or undertaking

No objection from previous bank (if any)

Factory Inspection Certificate


38

Insurance cover note with money receipt.

IMP form duly signed.

VAT Registration

In addition to above documents, the following are also required to export oriented

garments industries while requesting for opening a Back-to-Back L/C-

Textile Permission.

Valid bonded warehouse license.

Quota Allocation Letter issued by the Export Promotion Bureau (EPB) in favor of

applicant for quota items.

BGMEA Membership

In case the factory premises is a rented one, the Letter of Disclaimer duly executed by the

owner of the house / premises to be submitted. A check list to open a Back-to-Back L/C

is as follows-

i) Applicant is registered with CCI&E and has bonded warehouse license;

ii) The master L/C has adequate validity period and has no defective clause;

iii) L/C value shall not exceed the admissible percentage of net FOB value of relative

master L/C;

iv) Usage period is up to 180 days;

3.2.2.3 Payment of Back-to-Back L/C:

Payment of import bills against Back-to-Back L/Cs are made from relative export proceeds

of export oriented Garment Industry operating under bonded warehouse system. Therefore

at the time of negotiation of export bills on account of garment factory, bank retains a

portion covering to Back-to-Back liability to a separate foreign currency account from the

export proceeds. The amount is kept in Deposit Awaiting for Disposal (DAD) A/C and in

Retention Account (Exporter can bear this money without given any answer to customs, if

one’s will go aboard.) if customer had given indication. After realization of export proceed,


39

payment against import bills are made from DAD A/C. L/C wise and party wise A/Cs are

maintained in DAD A/C ledger.

On 30/60/90/120/180 days of maturity period, deferred payment is made. Payment is given

after realizing export proceeds from the L/C Issuing Bank. For garment sector, the duration

can be maximum 180 days. In case of export failure or non realization/ short realization of

export proceeds forced loan i.e. OAP has to be created in order to settle the Back-to-Back

L/C payment.

Vouchers and accounting treatments are the same normal L/C opening except margin.

In this case, no margin is taken by the bank. After lodgment, maturity date of the import bill

is intimated to foreign bank as per L/C terms. The documents are delivered to the order of

opener duty endorsed for clearance of goods from custom authority. Goods are cleaned

through approved clearing and forwarding agent of the bank.

3.2.2.4 Accounting Treatment of Back-to-Back L/C:

Negotiation

Foreign Bills Purchase……………….Debit

FBPARA/C…………………………..Credit

(Foreign Bills Purchase Acceptance Register)

Party’s A/C…………………………..Credit

(Deducting import & other liability)


40

On realization of export proceeds, usual realization vouchers are passed for adjustment of

FBP. After realization of export proceeds payment of import bills are made from FBPAR

A/C and following vouchers are passed

FBPAR A/C……………………………………Debit

(Foreign Bills Purchase Acceptance Register)

National Bank, Head office General A/C…………………Credit

If the party is paid in foreign currency, BC rate is applied in this regard. Foreign remittance

department takes the T.T & O.D rate.

3.2.3 Inland Letter of Credit (ILC):

Inland letter of credit means L/C within the country. This type of L/C is opened when

seller does not have trustworthy relationship with the buyer though they are in the same

country and also in the case where the business involved a big amount. This L/C‘s are two

types:

1) Local L/C (without EPZ)

2) EPZ (Export Processing Zone) L/C

3.2.3.1 Settlement of Local Bill

The settlement of local bill is done in the following ways-

The customer submits the L/C to the branch along with the documents to negotiate;

The branch officials scrutinizes the documents to ensure conformity with the terms

and conditions;

The documents are then forwarded to the L/C Issuing Bank;

The L/C Issuing Bank gives the acceptance and forwards an acceptance letter;

Payment is made to the customer on either by collection basis or by purchasing the

documents.

Accounting entries are made for purchasing the local bill-

Local Bill Purchase A/C…………………..Debit


41

Client’s A/C……………………………….Credit

Commission……………………………….Credit

Interest A/C……………………………….Credit

A Local Bill Purchase (LBP) Register is maintained to record the acceptance of the issuing

bank. Until the acceptance is obtained, the record is kept in a collection register.

3.3 Remittance Section:

Remittance means transfer of fund. If we pronunciations of the word "Remittance" we

understand transfer of fund through a Bank from one place to another place which may be

executed the country or between two countries. Remittance which is affected within the

country is called Local Remittance and which is affected between two countries is called

Foreign Remittance. Remittance plays a vital role in the development of the country.

Without effect of remittance no country can develop. Bangladesh is rich enough in respect

of human resources. So Inward Remittance has great importance in our country. Below

inward remittance is discussed shortly.

3.3.1 Inward Remittance:

The remittances, which are received from abroad and paid to the beneficiary, are Inward

Remittance. In ward remittance are mainly received in US Dollar, pound sterling and Taka

Currency. Very few remittances in miscellaneous currencies are also received.

3.3.1.1 Mode of inward Remittance:

1. T.T ---------- Telegraphic Transfer.

2. M.T --------- Mail Transfer.

3. D.D --------- Demand Draft.

4. P.O ---------- Payment Order.

5. I.M.O -------- International Money Order.

5. T.C ---------- Traveler’s Cheque.


42

3.3.1.2 Payment procedure of Inward Remittance:

The payment procedure for the most used mode of inward remittance is discussed below.

A. Demand Draft:

1. The D.D must be in original

2. The name of bank, name of Branch, Date, name and A/C number of the payee, amount

in word and figures must be mentioned.

3. The D.D must be as per prescribed format or specimen copy supplied earlier.

4. The amount is protecting graphed.

5. Payment is not stopped.

6. Draft is not reported lost.

7. Verification of drawer's signature.

8. Telex confirmation from the issuing Bank, if the amount exceeds the limit as per

agreement made earlier.

B. Telegraphic Transfer:

1. The message must be in original.

2. It must be authenticated under test, Test must be decoded and found correct.

3. T.T. must contain the name of Bank, name of Branch, name and A/C number of the

beneficiary.

If the above points are Okay, payment made to the beneficiary as soon as possible.

1. Capital Area 24 hours.

2. Major Cities 48 hours.

3. Other Towns 72 hours

4. Remote Areas 120 hours.


43

3.4 Reporting:

At the end of every month, the reporting to Bangladesh Bank regarding the following

information is mandatory-

i. Filling of E-2/P-2 Schedule of S-1 category that covers the entire month’s amount of

import, category of goods, currency, country etc.

ii. Filling of E-3/P-3 Schedule for all charges, commission with T/M Form.

iii. Disposal of IMP Form that includes:

(a) Original IMP is forwarded to Bangladesh Bank with invoice and indent,

(b) Duplicate IMP is kept with the branch along with the Bill of Entry/

Certified invoice,

(c) Triplicate IMP is kept with the branch for office record,

(d) Quadruplicate is kept for submission to Bangladesh Bank in case of

import where documents are retired.


44

Chapter-4

Findings and Analysis


45

4.1 Import Business Analysis in NBL:

This is most important and essential part of the report. After stated all procedure, here I have

discussed all findings and analyze them to reach conclusion. I have used various tables, bar

and column Table, trend analysis and regression analysis. The findings and analysis are as

follows-

4.1.1 Import at Babu Bazar Branch:

(Tk. Figure in millions)

Year 2006 2007 2008 2009 2010

Import 9366.75 10170.28 11858.83 8136.56 8421.17

Growth

Rate

9.09% 8.57% 16.60% -31.39% 3.5%

Table-2

Explanation:

The Bank has been dealing import finance with special emphasis since its inception. In 2010

NBL Babu Bazar Branch handled Tk. 8421.17 million import documents valuing USD

120.30 million with a growth of 3.5 percent over the last year.


46

Figure 1

Figure 2

9366.75 10170.2811858.83

8136.56 8421.17

2006 2007 2008 2009 2010

Babu Bazar Branch Import

9.09% 8.57%

16.60%

-31.39%

3.50%

2006 2007 2008 2009 2010

Growth RateGrowth Rate


47

Explanation:

From figure-1&2 we can easily say that there is ups and down in the amount of import

documents at the Babu Bazar branch. In 2006 that was tk. 9366.75 million on the other hand

in 2010 it was tk. 8321.17. Among these five years in 2008 it was highest and that was tk.

11858.83. After that year it decreased in 2009 in compare to the previous year and then

increased in 2010 compare to the 2009.

4.1.2 Total Import in NBL:

Year 2006 2007 2008 2009 2010

Import 42458.5 62759 78226.32 77539.77 96442.57

Growth Rate 18.83% 47.81% 24.65% -0.88% 24.38%

Table-3

Figure 3

42458.5

62759

78226.32 77539.77

96442.57

2006 2007 2008 2009 2010

Total Import in NBLImport


48

Figure 4

Explanation:

In figure-3&4 total import and growth rate trend is shown. And from that we can easily

figure out that the trend is upward although in 2009 it decreased somehow. The growth rate

of import documents is also satisfactory. The highest growth rate among last five years was

in 2007 and that was 47.81%. the lowest rate was in 2009 which was -0.88%.

18.83%

47.81%

24.65%

-0.88%

24.38%

2006 2007 2008 2009 2010



49

4.1.3 Comparison between Total Import and Import at BB Branch

Figure 5

Figure 6

9366.75 10170.28 11858.83 8136.56 8421.17

42458.5

6275978226.32 77539.77

96442.57

2006 2007 2008 2009 2010

Comparison Between Total Import and Import at BB Branch

BB Branch Total

18.83%

47.81%

24.65%

-0.88%

24.38%9.09%

8.57%16.60%

-31.39%

3.50%

2006 2007 2008 2009 2010

Growth Rate: Total vs BB Branch Total BB Branch


50

Explanation:

From the figure 5&6 we can easily conclude that the trend of total import in NBL and

import at Babu Bazar branch is positively related. In 2007 the growth of total import

increased and the import at BB branch also increased. And in 2009 the import decreased in

both cases. Here the growth rate of import at BB Branch is -0.88% and total growth is -

31.39%.

4.2 Export Business Analysis in NBL at Babu Bazar Branch:

4.2.1 Export at Babu Bazar Branch

Figure 7

Explanation:

In NBL at Babu Bazar Branch the amount of export is nil in last five years. The reason is

that, there is no such industry which usually exports. Most of the business men are importer.

2006 2007 2008 2009 2010

0 0 0 0 0

Babu Bazar BranchExport


51

4.2.2 Total Export in NBL:


Year 2006 2007 2008 2009 2010

Export 28019.2 31824 36284.44 38398.85 47812.47

Growth Rate 31.24% 13.58% 14.01% 5.83% 24.52%

Table-4

Figure 8

2006 2007 2008 2009 2010

28019.231824

36284.44 38398.85

47812.47

Total Export in NBLExport


52

Figure 9

Explanation:

From figure-8 &9 we can easily say that there is upward trend in export business in NBL. In

2006 that was tk. 28019.2 and tk. 31824, 36284.44, 38398.85, 47812.47 respectively in the

year of 2007, 2008, 2009 and 2010. But the growth rate is not constant or not in upward

trend. In 2006 the growth rate was 31.24%, which is the highest among those five years.

And in 2009 it was lowest, which is 5.83%. Although the total amount of export is

increasing but the growth is not increasing in same proportion.

4.2.3 Comparison between Total Export and Export at BB Branch:

Figure 10

31.24%

13.58% 14.01%5.83%

24.52%

2006 2007 2008 2009 2010


2006 2007 2008 2009 2010

28019.2 31824 36284.44 38398.85 47812.47

0 0 0 0 0

Comparison Between Total Export And Export At BB Branch

Total Export Babu Bazar Branch


53

Explanation:

The figure-10 shows that whether the total amount of export in NBL is increasing, on the

other hand there is no export dealing at Babu Bazar branch in last five years. So, this branch

has no effect on total export of NBL.

4.3 Remittance

As a contributor of national economy, NBL is relentlessly working to ease the flow of

inward foreign remittance. In 2010 the amount of total remittance was tk. 49145.30 million

which was higher than that of 2009 achieving a growth rate of 10.73 percent. And in 2006

the rate was 56.80 percent.


Year 2006 2007 2008 2009 2010

Remittance 21353.90 27560.80 39877.80 44381.80 49145.30

Growth Rate 56.80% 29.07% 44.69% 11.30% 10.73%

Table-5

Figure 11

21353.927560.8

39877.844381.8

49145.3

2006 2007 2008 2009 2010

Total RemittanceTotal Remittance


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Figure 12

Explanation: From figure-11 & 12 we can see that the total amount of remittance is

increasing but the growth rate is slowing down. The total amount of remittance in last five

years was as follows- tk. 21353.90, 27560.80, 39877.80, 44381.80 and 49145.30 million. On

the other hand the growth rate was 56.80%, 29.07%, 44.69%, 11.30% and 10.73%.

4.4 Regression Analysis:

Regression measures the nature and extent of average relationship in terms of the original

units of the data. If one of the regression coefficients is greater than unit the other must be

less than unit. It is an absolute measure of relationship. It hypothesizes a particular direction

of the relationship. With regression one variable is determined by the others.

56.80%

29.07%

44.69%

11.30% 10.73%

2006 2007 2008 2009 2010



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4.4.1 Correlation:

Correlation is a statistical technique which measures degree and direction of relationship

between the variables. It always lies between ±1. It is a relative measure. It is a method of

determining whether two sets of data are related in a manner such that they increase

together, if one increases, the other decreases.

4.4.2 Data for Statistical Analysis:

Year Net Profit Imports Exports Remittance

2006 507.49 42458.5 28019.2 21353.90

2007 1238.11 62759 31824 27560.80

2008 1517.43 78226.32 36284.44 39877.80

2009 2070.47 77539.77 38398.85 44381.80

2010 6860.34 96442.57 47812.47 49145.30

Table-6

Using MS Excel-2007 I have found the following calculation of correlation, multiple

regression and ANOVA. Here


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SUMMARY OUTPUT

Regression Statistics

Multiple R 0.999969

R Square 0.999938

Adjusted R

Square 0.999753

Standard

Error 39.87299

Observations 5

ANOVA

df SS MS F

Significance

F

Regression 3 25704631 8568210 5389.301 0.010013

Residual 1 1589.856 1589.856

Total 4 25706220

Coefficients

Standard

Error t Stat P-value Lower 95%

Upper

95%

Lower

95.0%

Upper

95.0%

Intercept -12812.2 131.0959 -97.7312 0.006514 -14477.9 -11146.4 -14477.9 -11146.4

Import -0.03049 0.004536 -6.72087 0.094033 -0.08812 0.027149 -0.08812 0.027149

Export 0.659671 0.009387 70.27379 0.009059 0.540396 0.778946 0.540396 0.778946

Remittance -0.18173 0.006439 -28.2244 0.022546 -0.26354 -0.09992 -0.26354 -0.09992

4.5 Multiple Regression Analysis:

The multiple regression equation is given below according to my problem:

I have regression with an intercept and the regressors Import, Exports and Remittance. The

population regression model is:


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Y=β1 +β2 x2 +β3 x3 +u

It is assumed that the error u is independent with constant variance. I wish to estimate the

regression line: y = b1 + b2 x2 + b3 x3+b4x4

Using the MS Excel-2007 I have found the value of multiple regression equation shown

below:

Y = (-12.812) + (-0.000030) x2 + 0.000659671x3+ (-0.00018173) x4

Explanation:

a) We know the actual multiple regression is Y = β1 + β2 x2 + β3 x3 + u where, β1

denotes the constant, β2 is the slope or coefficient of imports(x2), β3 is the slope or

coefficient of exports(x3), β4 is the slop or coefficient of remittance and u is the error

which accounts for the variability in Y that can be explained by the linear effect of

the 3 independent variables.

b) In the above calculated multiple regression equation, β1 = -12.812, β2 = -0.000030and

β3 = 0.000659671, β4=-0.00018173.

c) This multiple regression reveals that Y (Net profit) is dependent on the imports(x2),

exports(x3) and another independent variable named remittance.

d) If the coefficients are 0, then we may conclude that the NET PROFIT will be -12.812

regardless of the turnover components such as the imports and exports.

e) The coefficient β2 = -0.000030 expresses that if the imports increases by 1 percent,

NET PROFIT will be decreased by 0.000030% because of existing a negative

relationship between the imports and the NET PROFIT along with the condition that

the other things especially the other independent variables remain same.

f) The coefficient β3 = 0.000659671expresses that if the exports increases by 1 percent ,

NET PROFIT will also be increased by 0.000659671% because of the prevailing

positive relationship between the exports and NET PROFIT along with the condition

that the other things especially the other independent variables remain same.

g) The coefficient β4 = -0.00018173expresses that if the exports increases by 1 percent ,

NET PROFIT will also be decreased by 0.00018173% because of the prevailing


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negative relationship between the remittance and NET PROFIT along with the

condition that the other things especially the other independent variables remain

same.

4.5.1 Regression Statistics:

Regression Statistics

Multiple R 0.999969

R Square 0.999938

Adjusted R Square 0.999753

Standard Error 39.87299

Observations 5

Table-7

Explanation:

a) In this table, the value of R = 0.999969 expresses that there is a high degree of

positive relationship between the dependent variable NET PROFIT and the

independent variable exports. But there is also a negative relationship prevails

between the dependent variable NET PROFIT and the independent variable imports

and remittance.

b) The term R Square is the multiple coefficient of determination interpreted as the

proportion of variability in the dependent variable that can be explained by the

estimated multiple regression equation.

c) Hence, when multiplied by the 100, it can be interpreted as the percentage of the

variability in Y (NET PROFIT) that can be explained by the estimated regression

equation.

d) In the three independent variables (x2, x3 and x4), the R Square = 0.999969.

Therefore, 99.99% of the variability in the NET PROFIT is explained by the

estimated multiple regression equation with the imports, exports and remittance, as

the independent variables.


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e) If a variable (say for imports) is added to the model, R Square becomes larger even

if the added variable is not statistically significant. The Adjusted R Square

compensates for the number of independent variables in this model.

f) Std. Error of the Estimate expresses the total amount of error or variability in the

dependent variable Y (NET PROFIT) that cannot be explained by the linear effect

of the three independent variables in the multiple regression model expressed by

multiple regression equation.

4.6 ANOVA Test:

This is a statistical method for making simultaneous comparisons between two or more

means. The ANOVA test is used to determine the impact independent variables have on the

dependent variable in a regression analysis.

df SS MS F Significance

F

Regression 3 25704631 8568210 5389.301 0.010013

Residual 1 1589.856 1589.856

Total 4 25706220

Table-8

a. Predictors: (Constant), x2, x3,x4

b. Dependent Variable: NET PROFIT

Explanation:

a) In case of ANOVA ( Analysis of Variance), the total sum of squares can be divided

into two components: the sum of squares due to Regression (SSR) and the sum of

squares due to Error (SSE) as shown below:

SST = SSR + SSE.

Where, SST = Total sum of squares = ∑ (Yi – Ӯ) 2


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SSR = Sum of squares due to regression = ∑ (Ŷ – Ӯ) 2

SSE = Sum of errors due to error = ∑ (Yi - Ŷ) 2

b) The analysis of variance part shows the three values for my selected problem with

three independent variables (x2,x3 and x4): SST = 25706220, SSE = 1589.856, SSR =

25704631. The value of SST is same whether in case of one independent variable or

in case of two independent variables because it does not depend on Ŷ, but SSR

increases and SSE decreases when a second independent variable is added. The

implication is that the estimated multiple regression equation provides a better fit for

the observed data.

c) Adding independent variables cause the prediction errors to become smaller, thus

reducing the sum of squares due to error (SSE) because SSR = SST-SSE when SSE

becomes smaller.

d) The F-test is used to determine whether a significant relationship exists between

dependent variable named NET PROFIT and the set of all independent variables

such as imports, exports and remittance; F-test is referred to the test of overall

significance.

e) In this ANOVA model, the hypothesis for the F-test involves the parameters of the

multiple regression models:

Ho: X2 = X3 =X4= 0

H1: X2 and or X3 and or X4 are not equal to zero.

f) If H0 is rejected, I have enough evidence to deduce that two of the parameters are not

equal to zero and that overall relationship between NET PROFIT(Y) and other three

independent variables (X2, X3 and X4) are significant. However, if H0 is accepted, I

do not have the sufficient evidence to deduce that a significant relationship exists

between dependent and independent variables.

g) Before interpreting the F-test, we need to know the concept of Mean Square. A mean

square is a sum of square divided by its corresponding degrees of freedom. In the

multiple regression models, SST has (n-1) degrees of freedom, SSR has p (number of

independent variables) degrees of freedom and SSE has (n-p-1) degrees of freedom.


61

Hence the mean square due to regression (MSR) is SSR divided by p and the mean

sum of square due to error (MSE) is SSE divided by (n-p-1).

h) If H0 is accepted, MSR provides an unbiased estimate of ∂2, and the value of MSR or

MSE becomes larger. To determine how large values of MSR/MSE must be to reject

H0, I make use of the fact that if H0 is true and the assumptions about the multiple

regression model are valid, the sampling distribution of MSR/MSE is an F-

distribution with p degrees of freedom in the numerator and (n-p-1) in the

denominator . The summary of F- test is given below:

F = MSR/MSE = 8568210/1589.856 = 5389.301

i) With a level of significance α = 0.05, the tabulated value shows that three df in the

numerator and one df in the denominator, F 0.05 = 215.7. With 539.301>215.7, I

accept H1 and infer that there is significant relationship exists between NET PROFIT

and imports, exports and remittance.

j) As earlier, the mean square error renders an unbiased estimate of ∂2, the variance of

the error term the U. Referring to ANOVA table, we see that the estimate of ∂2 is the

MSE= 1589.856. The square root of the MSE is the standard deviation of the error

term. The standard deviation is called the Std. Error of the Estimate(U) found from

the process as shown below:

√MSE= √1589.856= 39.87299838 which is Std. Error of the Estimate (U) shown in the

second column of regression statistics described earlier.


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Chapter-5

Recommendation & Conclusion


63

5.1 Recommendation:

In the light of above studies we have found that banking sector requires to be studied in right

perspective and individual bank has mapped out of its own course of action /business

strategy to survive and to do good with the nation of survival of the fittest. Here I have

attempted to draw some recommendations in the light of my study of National Bank

Limited.

1. Though the National Bank is very much specialized on export import dealing so it is

very much necessary to take care of export import department.

2. Few persons are working in export import department. So, more should be recruited.

3. One stop care service point should be opened to give better service to the clients.

4. Customer’s waiting room in Foreign Exchange Section is essential.

5. More space should be required in Foreign Exchange Section.

6. Recording and Filling system should be up dated.

7. Develop more customized parameters for credit approval process under the general

guidelines of Bangladesh Bank to increase its market.

8. Modern banking services like online banking, branch network system or any branch

banking and more ATM facilities needs to be introduced.

9. Top management should give more emphasis on Research and Innovation related to

product & service designing.

10. NBL should utilize the advanced technology and multifarious banking software or

solutions to satisfy the customer’s current & emerging needs.

11. Emphasis on advertising and branding is essential to boost up the customer base of the

bank.

12. Website of NBL need to be enriched to give more information to the customers.

13. NBL’s RM should be more aware of manipulative qualitative data than business

development. There should be procedures and parameters to identify and eliminate such

manipulation.


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5.2 Conclusion:

National Bank Limited is one of the most successful banks in our country. The Bank has

followed a slightly conservative and balanced banking which has enabled it to achieve

steady growth in profit and wealth together. At Babu Bazar Branch foreign exchange

department is the busiest. Most of the clients are businessman and they come to bank mainly

for opening import L/C. And those clients are not so educated, that’s why the employees

need to give more concentrate on them. So, the bank must emphasize on foreign exchange

department at this branch for smooth working process. Besides these, blended recruitment of

new and experienced bankers in all the levels of management level has been very fruitful.

The recruits have carried forward their social connections and ultimately contributed to

strengthen the asset and liability base of the bank. Although National Bank limited is good

in operation of export import trade handling and financing. The Bank’s vision has always

been to give customer service one step forward from its counterparts and ultimately

contribute to the national economy. The fact of being successful in its journey of 27 long

years speaks for itself and the Bank is hoped to continue its superiority in the coming years.


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Reference:

www.nbl.bd

www.bangladesh-bank.org.bd

Annual report of NBL-2010

Register of Foreign Exchange Department of Babu Bazar Branch

Gupta S.P. & M.P., Business Statistics, 14th edition

Main Report Final

Documents

Transcript of Main Report Final