Overall Banking system and Performance Analysis of NCC Bank Limited

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“Overall Banking system and Performance Analysis of NCC Bank Limited”

1.0 INTRODUCTION PART

1.2. Objectives of the report

Main objective of the report is to analyze the general banking system of the National Credit and Commerce Bank Ltd (NCCBL). Moreover, the study also embodied the following specific objectives:

1) To study the existing operations/activities of General Banking Section

2) To study the existing operations/activities of foreign exchange section.

3) To study the existing operations/activities of loans and advance section.

4) To study existing banker-customer relationship,

1.3 Methodology of the Study

The methodological section of the study is designed as data collection:

Methods of Data Collection

The report was fully exploratory in nature. Data have been collected from both primary and secondary sources.

Primary sources of data

· Face to face conversation with the bank officers & staffs.

· Informal conversation with the clients

Secondary sources of data

· Different manuals of NCC Bank Limited

· Different circulars of NCC Bank Limited

· Annual report of NCC Bank Limited, (2002,2003,2004,2005)

· Prospectus of NCC Bank(2005)

1.4 Limitation of the Project

The present study was not out of limitations. But as an intern it was a great opportunity for me to know the banking activities of Bangladesh specially NCC Bank. Some constraints are appended bellow:

* The main constraint of the study is inadequate access to information, which has hampered the scope of analysis required for the study. As it is a new bank it could not start all its operation, it was unable to provide some formatted documents data for the study.

*Every organization has their own secrecy that is not revealed to others. While collecting data i.e. interviewing the employees, they did not disclose much information for the sake of the confidentiality of the organization.

* Since the bank personals were very busy, they could provide me very little time.

* Another problem is that creates a lot of confusions regarding verification of data. In some cases more than one person were interviewed to clarify each concept as many of the bankers failed to provide clear-cut idea about the job they perform.

OVERVIEW

OF

NATIONAL CREDIT AND COMMERCE

BANK LTD.

2.0 NATIONAL CREDIT AND COMMERCE BANK LTD.

2.1 Introduction

NCC Bank Limited is a new generation bank. It is a scheduled bank under private sector established under ambit of Bank Company Act, 1991 and incorporated as Public Limited company act, 1994 on 17^th May 1993.Prior to conversion into a scheduled commercial bank, National Credit Limited (NCL) was incorporated as public limited investment company in Bangladesh on 18^th November 1985. It made its journey with a modest beginning on 25^th November 1985 at its registered office and first branch at 7-8 Motijheel Commercial Area, Dhaka-1000. The initial Authorized Capital of the company was 30 (Thirty) crore consisting of 30 (Thirty) lac. Ordinary share of Tk. 100/- each. A new opportunity in this field of financial activities was opened for the business. NCL made a careful journey and maintained its successive growth for few years with its qualified professional management under most unpredictable, unregulated, uncertainties and limitations.

The emergence of NCC Bank Limited at the Juncture of liberalization of global economic activities, after the URUGUAY round has been an important event in the financial sector of Bangladesh. The experience of the prosperous force and the strategic operational policy option of the bank. The company philosophy, “A Bank with vision” has been precisely the essence of the legend of Bank’s success.

2.1.1 NCC Bank- At Present

Like clothes shops, candy shops, bake shops, food shops, NCCBL is not a “debt shop” the term being used by many to call the present say banks. It is now been called a modern bank that undertakes all its operation at international standard.

Having standard its operation as a commercial bank in 1993, recording from some primary difficulties, NCC bank has now emerged as a major player in the financial sector. Listed in both Dhaka and Chittagong bourses since late 1999 with an IPO that raised the paid-up capital of the bank to Tk. 39 crore.

Banks are the pillars of the financial system. Specially, in Bangladesh, the health of the banking system is very vital because the capital market is little developed here. As the banks are still the major sources of credit and exercise great influence on the financial system, it is extremely important that the country’s banking systems should be in good health in the interest of investment activities, meeting the needs of all kinds of finance and related matters.

Over the years, NCC bank has built itself as one of the pillars of Bangladesh’s financial sector and is playing a pivotal role in the extending the role of the private sector of the economy. The bank has a strong branch network nation wide with 32 branches.

2.1.2 Mission of NCC bank

We shall be the forefront of national economic development by:

· Anticipating business solutions required by all our customers everywhere and innovative supplying them beyond expectation.

· Setting industry benchmarks of world class standard delivering customer value through our comprehensive product range, customer service and all our activities building an exciting team-based working environment that will attract, develop and retain employees of exceptional ability who help celebrate the success of our business, of our customer and of national development.

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

· Continuously improving productivity and profitability, and thereby enhancing shareholder value.

2.1.3 Vision

To be in the front of national development by providing all the customers inspirational strength, dependable support and the most comprehensive range of business solution through our team of professional that work passionately to be outstanding in everything we do.

2.1.4 Goal of the Bank

To share a significant portion of the banking sector’s by utilizing available manpower and also state of the art technology for maximizing the shareholders wealth.

i. Long Term Goal

To maximize the wealth of the shareholders.

ii. Short Term Goal

To earn satisfactory rate of return on investment by providing wide range of banking service.

2.1.5 Board of Directors

At present there are 26 members in the Board of Director. Out of 26 members 23 of them are the sponsor of the shareholder and 3 of them are publicly nominated as the equity participants from capital market have included them.

However the members are obliged to maintain the annul general meeting and declare the dividend payout schedule on due time. Moreover, the committee selected by shareholders represents individual body that then looks after the periodic issue with the management and tries to solve the problem.

2.1.6 Features of NCCBL

Bank is an intermediary institute. Like other commercial bank NCCBL also has some special features. They are as follows:

1. Legal Entity: It is compulsory matter for a bank to achieve legal entity. The stronger legal entity leads to effective banking program. NCCBL has a strong legal entity.
2. Organizational Structure: NCCBL has a well-set organizational structure. Organizational structure is a precondition of effective banking activities.
3. Financial Solvency: Though NCCBL is a new bank, its ratio of liquidity is well and strong. So, the clients get greater confidence in the bank.
4. Location of The Bank: Location is very useful for bank. The Head Office and the branches of NCCBL are located in the central point of the capital and the other district towns.
5. Relation with the Central Bank: As the NCCBL is the government-registered bank, so it maintains a friendly behavior with the Bangladesh Bank.
6. Security: the NCCBL is totally a secured bank. The clients of the bank get a heavy security on their deposit.
7. Management of the Bank: The executives and the officers of NCCBL are very experienced. Maximum executives are ex-government bank officers.
8. Foreign Exchange: NCCBL operates foreign exchange business promptly. There 13 branch deals with foreign exchange.

2.1.7 Nature of the business

NCC bank is a progressive commercial bank in privet sector in Bangladesh. It creates a new opportunities for its clients. It gives customized service and harmonious banker-client relationship. It contributes towards formation of national capital, growth of saving and investment in trade, commerce and industrial sectors. It provides different types of commercial banking and services to the customer of all strata in the society with in the stipulation laid down in the Bank Company Act 1991. Rules and regulations framed by the Bangladesh bank from time to time.

2.1.8 Business Operation

National Commerce and Credit Bank Limited emerged as bank in the country on 17^th May 1993 out of a great turbulent situation encounter by set while National Credit Limited. However the institution survived the ordeals and come out as a full-fledged commercial bank. The company raised its Authorized Capital to Tk. 750 million as per guidelines set out by the Bangladesh Bank. The paid up capital was fixed at Tk. 480.48 million as against Tk. 429.00 million.

2.1.9 Trade Finance and Correspondent Banks

Successful companies today are fully aware that they need to be able to rely on the services of a bank that can handle international trade with a good hand. Ever since its conversion into a full –fledged bank in 1993, NCC bank has been an accomplished “Trade Finance” bank. With a highly professional team experienced and competent professionals we are able to provide a wide range of services to companies engaged in international trade.

NCC Bank has also positioned itself as an established correspondent bank. Through a worldwide network of 260 correspondent banks NCC Bank is present in all key areas of the globe. Our ambit of correspondent includes top ranking international banks with a global reach.

2.1.10. Name of the Branches of NCCBL

NCCBL has 32 (Thirty two) branches all over in Bangladesh. The name of the branch, their addresses are given in the appendix-1.

2.1.11. Performance of the Bank

The bank may sustain its strong image in the mind of the customers and shareholders as a leading financial institution despite serious competition from both local and foreign banks operating in the country. Sill they are increasing their profit. Its opening profit was Tk. 624.94 million in 2003, which were Tk. 597.57 million in previous year. But whole performance of the bank is not looking well.

2.1.12 Authorize Capital

The authorize capital of the bank remain unchanged at Tk. 750 million in the year 2003.

2.1.13. Paid-up Capital

The bank raises its paid-up capital from Tk. 480.48 million to Tk. 552.55 million for 2002 to 2003. With the increase of paid-up capital to Tk. 552.55 million, the capital based of the bank has become strong.

Reserve Fund and Other Reserves

The reserve fund of the bank increased of Tk. 336.12 million in the year 2003 as against Tk. 336.12 million of previous year, increase being 24.85%.

2.1.14 Corporate Mission

• To provide high quality financial services in export and import trade.
• To provide excellent quality Customer service.
• To maintain Corporate and business ethics.
• To become a trusted repository of customers’ money and their financial advisor.
• To make our stock superior and rewarding to the customers/share holders.
• To display team spirit and professionalism.
• To have a Sound Capital Base.

2.1.15 Corporate Culture

This bank is one of the most disciplined Banks with a distinctive corporate culture. Here we believe in shared meaning, shared understanding and shared sense making. Our people can see and understand events, activities, objects and situation in a distinctive way. They mould their manners and etiquette, character individually to suit the purpose of the Bank and the needs of the customers who are of paramount importance to us. The people in the Bank see themselves as a tight knit team/family that believes in working together for growth. The corporate culture we belong has not been imposed; it has rather been achieved through our corporate conduct.

2.1.17 SWOT Analysis

SWOT analysis is the detailed study of an organization’s exposure and potential in perspective of its strength, weakness, opportunity and threat. This facilitates the organization to make their existing line of performance and also foresee the future to improve their performance in comparison to their competitors. As though this tool, an organization can also study its current position, it can also be considered as an important tool for making changes in the strategic management of the organization.

Strengths:

— NCC BANK Limited has already established a favorable reputation in the banking industry of the country. It is one of the leading private sector commercial banks in Bangladesh. The bank has already shown a tremendous growth in the profits and deposits sector.

— NCC BANK has provided its banking service with a top leadership and management position.

— NCC BANK Limited has already achieved a high growth rate accompanied by an impressive profit growth rate in 2001. The number of deposits and the loans and advances are also increasing rapidly.

— NCC BANK has an interactive corporate culture. The working environment is very friendly, interactive and informal. And, there are no hidden barriers or boundaries while communicate between the superior and the employees. This corporate culture provides as a great motivation factor among the employees.

— NCC BANK has the reputation of being the provider of good quality services too its, potential customers.

Weaknesses:

— The main important thing is that the bank has no clear mission statement and strategic plan. The bank doesn’t have any long-term strategies of whether it wants to focus on retail banking or become a corporate bank. The path of the future should be determined now with a strong feasible strategic plan.

— The bank failed to provide a strong quality-recruitment policy in the lower and some mid level position. As a result the services of the bank seem to be Deus in the present days.

__ The poor service quality has become a major problem for the bank. The quality of the service at NCC BANK is higher than the Dhaka Bank, NCC BANK or Dutch Bangla Bank etc. But the bank has to compete with the Multinational Bank located here.

— Some of the job in NCC BANK has no growth or advancement path. So lack of motivation exists in persons filling those positions. This is a weakness of NCC BANK that it is having a group of unsatisfied employees.

__ In terms of promotional sector, NCC BANK has to more emphasize on that. They have to follow aggressive marketing campaign.

__ The default risks of all term loans have to be minimized in order to sustain in the financial market. Because of default risk the organization may become bankrupt. NCC BANK has to remain vigilant about this problem so that proactive strategies are taken to minimize this problem if not eliminate.

Opportunities:

_ In order to reduce the business risk, NCC BANK has to expand their business portfolio. The management can consider options of starting merchant banking or diversify into leasing and insurance sector.

— The activity in the secondary financial market has direct impact on the primary financial market. Banks operate in the primary financial market. Investment in the secondary market governs the national economic activity. Activity in the national economy controls the business of the bank.

— Opportunity in retail banking lies in the fact that the country’s increased population is gradually learning to adopt consumer finance. The bulk of our population is middle class. Different types of retail lending products have great appeal to this class. So a wide variety of retail lending products has a very large and easily pregnable market.

— A large number of private banks coming into the market in the recent time. In this competitive environment NCC BANK must expand its product line to enhance its sustainable competitive advantage. In that product line, they can introduce the ATM to compete with the local and the foreign bank. They can introduce credit card and debit card system for their potential customer.

— In addition of those things, NCC BANK can introduce special corporate scheme for the corporate customer or officer who have an income level higher from the service holder. At the same time, they can introduce scheme or loan for various service holders. And the scheme should be separate according to the professions, such as engineers, lawyers, doctors.

Threats:

— All sustaining multinational banks and upcoming foreign and private banks pose significant threats to NCC BANK Limited. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete againstthese local and foreign banks.

— Other commercial banks are offering higher salary that may create problem for NCCBL to retain their experienced managers and executives.

2.1.18 Management of NCC BANK

For any financial and non-financial organization, Management is the most valuable and important resources of any kind of organization. And, a well-organize management provides the organization to reach its ultimate goal. Management means planning, organizing, staffing, directing and controlling of all financial and non-financial resources of an organization. Different aspects of management practice in NCC BANK planning, organizing, staffing, directing & controlling, human resources practices and recruitment finally.

3.0 PRODUCTS OF NCC BANK

Before discussion about products of NCC Bank, we have to understand what bank’s products are. Bank is a service oriented industry and deals with various financial products and services for financial gains.

Financial products and services products that a bank offers to its customers are mainly classified as under:

a) Deposit Products to generate funds.

b) Lending products for financial gains

c) Money Transmission products

d) International business products

e) Special fee earning service3s

f) social services products

Products that are marketing by NCC Bank are as under

3.1.1. Deposit Products

Deposit is the lifeblood of a bank. From the history and origin of the banking system we know that deposit collection is the main function of a bank.

Accepting deposits

Procedures of collecting deposit procedure are almost same in the entire bank and the branches as well. The deposits that are accepted by NCC BANK like other banks may be classified into:

· Current Deposit

· Short term deposit

· Saving Deposit

· Fixed deposit

· Special Saving Scheme Deposit (SSS)

3.1.2. Lending Products

Bank has its own principle about the credit sanctioned or loan to the customers, but lending product of a bank or of a branch is equal important to verify the outstanding at the end of any fiscal year. Every bank pays special attention about their lending products, because these products are handed over on a regular basis.

· Continuous Loan

a. Secured Overdraft against Financial Obligation {SOD (FO)}

Advances allowed to individual /firms against financial obligation (i.e lien of FDR/PSP/BSP/Insurance Policy etc.) and against assignment of works order for execution of contractual works fall under this head. It is a continuous advance facility. By this agreement, the banker allows his customer to overdraft his current account up to his credit limits sanctioned by the bank. The interest is charged on the amount, which he withdraws, not on the sanctioned amount. NCC BANK sanctions SOD against different security.

b. Secured Overdraft against Work order/ Real Estate etc [SOD (G)}

Advances allowed against assignment of work order or execution of contractual works falls under this head. This advance is generally allowed for a definite period and specific purpose i.e. it is not a continuous credit. It falls under the category “others”.

c. Cash Credit (Hypothecation)

Advances allowed to individual /firm for trading as well as wholesale purpose or to industries to meet up the working capital requirements against hypothecation of goods as primary security fall under this type of lending. It is a continuous credit. It is allowed under the category (i) “Commercial Lending” when the customer is other than a industry and (ii) Working Capital when the customer is an industry.

d. Cash Credit (Pledge)

Financial accommodations to individual / firm for trading as well as sole- sale purpose or to industries as working capital against pledge of goods as primary security fall under this head of advance. It is also a continuous credit and like the above allowed under the categories (i)”Commercial Lending” and (ii) “Working Capital”.

e. Export Cash Credit (ECC)

Financial accommodation allowed to a party for export of goods falls under this head and is categorized as “Export Credit,” The advances must be liquidated out of export proceeds within 180 days.

· Demand Loan

a. Loan General

Short term, Medium term & Long term loans allowed to individual /firm /industries for a specific purpose but for a definite period and generally repayable by installments fall under this head .this type of lending are mainly allowed to accommodate financing under the category (a) Large & Medium Scale industry and (b) Small & Cottage Industry . Very term financing for (a) Agriculture & (b) Others are also included here .

b. Demand Loan Against Ship breaking

This type of loans does not exercise in this branch, but being exercised to another branch that provide advances against ship breaking.

c. Payment against Documents (PAD)

Payment made the bank against lodgment of shipping documents of goods imported through L.C. falls under this head. It is an interim advance connected with import and is generally liquidated shortly against payments usually made by the party for retirement of the documents for release of imported goods from the customs authority. It falls under the category “Commercial Lending” .

d. Loan Against Imported Merchandise (LIM)

Advances allowed for retirement of shipping documents and release of goods imported through L.C. taking effective control over the goods by pledge in brokerage house under bank’s lock & key fall under this type of advance. This is also a temporary advance connected with import which is known as post-import finance and falls under the category “Commercial Lending.”

e, Loan Against Trust Receipt (LTR)

Advance allowed for retirement of shipping documents and release of goods imported through L.C. without effective control over the goods delivered to the customer falls under this head. The goods are handed over to the importer under trust with the arrangement that sale proceeds should be deposited to liquidate the advances within a given period. This is also a temporary advance connected with import and known as post-import finance and falls under the category “Commercial Lending”.

g. Packing Credit

Advance allowed to a party against specific L.C/firm contract for processing/ packing of goods to be exported falls under this head and is categorized as “Packing Credit.” The advances must be adjusted from proceeds of the relevant exports within 180 days.

i. Foreign Documentary Bills Purchased (FDBP)

Payment made to a customer through purchase/ negotiation of a foreign documentary bills falls under this head. This temporary advance is adjustable from the proceeds of the shipping/export documents. Its falls under the category “Export Credit”

j. Local Documentary Bills Purchased (LDBP/IDBP)

Payment made against documents representing sell of goods to local export oriented industries which are deemed as exports and which are denominated in Local currency/ foreign currency falls under this head. The bill of exchange is held as the primary security. This temporary liability is adjustable from the proceeds of the bills.

k. Festival Business Loan.

This type of loan are generally sanctioned depending on the occasion, more than two festival business loans are generally sanctioned in an annum.

· Term Loan

a. Project Loan

NCC BANK offers different conventional credit/investment schemes and the Banking products to their customers. So far loans and advances portfolio includes Project Finance in the form of Term Loan, Real Estate Finance, Secured Overdraft against FDR, different security certificates, working capital in the form of Cash Credit Hypothecation, Import Trade Finance in the form of PAD/LIM/TR etc.

NCC BANK considers the loans, which are sanctioned for more than one year as term loan. Under this facility, an enterprise is financed from the starting to its finishing, i.e. from installation to its production

b. Transportation Loan

Considers the loans, which are sanctioned for the purpose of delivering the goods on to its final destination, its generally used in the form of inland exporting or back to back leter of credit.

c. House Building Loan

Loans allowed to individual/ enterprise construction of house (residential or commercial) fall under this of advance. The amount is repayable by monthly installment within a specified period, advances are known as Loan (HBL?GEN).

d. Small Business Loan

Short term and long term loans allowed to individual/ firms / industries for a specific purpose but a definite period and generally repayable by the installments fall under this head. These types of lending are mainly allowed to accommodate financing under the categories.

Small and Cottage Industries, Very often term financing for agriculture and others are also included here.

e. Consumer Finance Loan

NCCBL keeping in mind the economic development and helping the fixed income group in fulfilling their demand to upgrade the standard of living will continue before consumer finance scheme for:

• Household appliances, Furniture & Fixture, Air Conditioner, Fax Machine, motor cycle/Car, Cellular phone, and Other equipment

f. Lease Finance

NCCBL to keep its contribution to the growth of national GDP, accelerate the total economic development by infusing the fund in productive sector in more efficient and effective way: diversity its portfolio and satisfy the customers need would go for lease finance for:

• Setting up of small and cottage industries/Projects, BMRE of existing projects
• Transports (roads/marine), Medical equipment/surgical/clinical/lab equipment/x-ray machine etc, Construction equipment and Other fixed assets of other productive and service oriented ventures.

g. Personal Loan

To meet emergency financial requirement especially for medical treatment/surgical operation, marriage, admission of children/ educational expenses, maternity the loan facility may be extended.

3.1. 3. Money transmission Product

Carrying cash money is troublesome and risky. That’s why money can be transferred from one place to another through banking channel. This is called remittance. Remittances of funds are one of the most important aspects of the Commercial Banks in rendering services to its customers.

· Payment order/security deposit receipt (PO/SDR): This term will be discussed in the overall activities section under remittance department.

· Demand Draft (DD): This term will also been discussed in the overall activities section under remittance department.

· Telegraphic Transfer (TT): This is also a common term that in the remittance section as well. .

· Travelers Cheque

3.1.4. International Business Products

In banks when we talk of international business products, we refer to the general mechanism by which a bank converts currency of one country into that of another. Foreign Exchange Department (FED) is the international department by which a bank or an AD branch transects with other international bank or of a brach. Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These banks are known as Authorized Dealers. If the branch is authorized dealer in foreign exchange market, it can remit foreign exchange from local country to foreign countries by transacting their international business products. So NCC BANK, Principal branch is an authorized dealer.

· Letter of Credit (L/C)

· Back to back Letter of credit (BTB L/C)

· Buying and selling of foreign exchange

· Foreign demand draft (FDD)

· Foreign telegraphic transfer (FTT)

Outward remittance covers sales of foreign currency through issuing foreign T.T. Drafts, Travelers Check etc. as well as sell of foreign exchange under L/C and against import bills retired.

3.1.5. Special fee earning products

NCC Bank considers the special earning product to the different consumer, as it to play a comprehensive role in financing the bank product. Among those following are some issues relate to special fee earning product:

· Bank guarantee

· Foreign bank Guarantee (F.B/G)

· Underwriting

· Brokerage House and locker Service

· Issuances of Sanchaya Patra, Wages Earners Development Bond, National Investment Bond, Prize Bond are some special earning fee product of NCC bank.

3.1.6. Social Service Products

NCC Bank Considers several service products by looking at the social point of view, At this competitive edge, banking might have reached to preserve its market share and to penetrate new market share through diversification of its product range. Following are the services that are designed to provide for society:

· Sale of Lottery Tickets for collection of fund for social establishment

· Collection of Zakat Fund

· Collection of Haj Deposit

3.2 CREDIT POLICY & CREDIT OPERATION OF NCCBL

Credit policy is a guideline of a financial institution to determine-

• Who shall get credit (eligibility to get loan)
• How much to lend (Amount of lending)
• Why to lend (Purpose of lending)
• Where to finance (Portfolio Management depending upon profitability and requirement for participation on socio –economic benefits)

Credit division of a bank especially acts as a key financial machine to haunt for earning revenue of a bank to achie3ve its ultimate goal for profut maximization with minimal risk maintaining balanced portfolio management.

3.3 WHERE TO FINANCE (FINANCING ACTIVITIES OF NCC BANK)

Financial activities of a bank depend upon its portfolio management of its funds through deposit. Our lending policy would be within the broad policy frame work envisaged above. Bank’s lending activities may be classified into the following broad segments.

1. Trade and Commerce
2. Industries
3. Lease Financing
4. Consumer Financing
5. Real Estate & Civil Construction
6. Agrobased
7. Small Business Loans
8. Personal Loans

3.4 Security Policies

The term loans, if any extended by the bank shall gave to be secured by first charge mortgage on the fixed asset coverage leaving a margin of at leas 25% depending upon the viability of the project. Consideration in this regard will vest purely on viability criteria irrespective of bank client-relationship. The determinants in this respect are debt service coverage, debt-equity ratio, and fixed coverage to term loan with a margin of 25-30% minimum.

The working capital may be additionally covered by 1^st charge mortgage of the fixed asset or by sharing first mortgage ranking PARIPASU with the financial institutions providing term loan. Decision is this regard shall be at the sole discretion of the bank.

PROJECT PART

GENERAL BANKING

AT NCC BANK LIMITED

4.0 FUNCTIONS OF NCC BANK LIMITED

4.1 GENERAL BANKING

General banking department is the heart of all banking activities. This is the busiest and important department of a branch, because funds are mobilized, cash transactions are made; clearing, remittance and accounting activities are done here.

Since bank is confined to provide the services everyday, general banking is also known as ‘retail banking’. In NCC BANK LTD Principal Branch, the following departments are under general banking section:

A) Account opening section

B) Deposit Section

C) Cash Section

B) Remittance section

C) Clearing section

D ) Accounts section

4.1.1 A) ACCOUNT OPENING SECTION

Account opening is the gateway for clients to enter into business with bank. It is the foundation of banker customer relationship. This is one of the most important sections of a branch, because by opening accounts bank mobilizes funds for investment. Various rules and regulations are maintained and various documents are taken while opening an account. A customer can open different types of accounts through this department. Such as:

1. Current Deposit.

2. Savings account.

3. Short notice deposit (SND)

?Types of Accounts with Terms and Conditions

Current Deposit

Current account is purely a demand deposit account. There is no restriction on withdrawing money from the account. It is basically justified when funds are to be collected and money is to be paid at frequent interval. Some important points have been discussed in the project part.

Savings Bank Account

This deposit is primarily for small-scale savers. Hence, there is a restriction on withdrawals in a month. Heavy withdrawals are permitted only against prior notice. Some Important Points have been discussed in project part.

SND (Short Notice Deposit) Account

Normally various big companies, organizations, Government Departments keep money in STD account. Frequent withdrawal is discouraged and requires prior notice. The deposit should be kept for at least seven days to get interest. The interest offered for STD is less than that of savings deposit. Interest is calculated based on daily minimum product and paid two times in a year. Interest rate is 6.00%.

Table-01

? Account Opening procedure

?Documents required for opening account

? Individual / Joint Account

1. Introduction of the account.
2. Two photographs of the signatories duly attested by the introducer.
3. Identity (copy of passport).
4. Joint Declaration Form (For joint a/c only).
5. Employee’s Certificate (in case of service holder).

? Partnership account

1. Introduction of the account.
2. Two photographs of the signatories duly attested by the introducer.
3. Partnership letter duly signed by all partners (Sign should be similar as stated in Partnership Deed).
4. Partnership Deed duly certified by Notary public.
5. Registration (If any).
6. Updated Trade license.

? Proprietorship account

1. Introduction of the account.

2. Two photographs of the signatories duly attested by the introducer.
3. Valid copy of Trade License.
4. Rubber stamp.
5. TIN number certificate.
6. Identity (Copy of passport).
7. Permission letter from DC/ Magistrate (in case of newspaper)

? Limited company

1. Introduction of the account.
2. Two photographs of the signatories duly attested by the Introducer.
3. Valid copy of Trade License.
4. Board resolution of opening A/C duly certified by the Chairman/Managing Director.
5. Certificate of Incorporation.
6. Certificate of Commencement (In case of Public limited company).
7. Certified (joint stock) true copy of the Memorandum and Article of Association of the Company duly attested by Chairman or Managing Director.
8. List of directors along with designation & specimen signature.
9. Latest certified copy of Form – xii (to be certified by register of joint stock companies) (In case of Directorship change).
10. Rubber Stamp (Seal with designation of each person)
11. Certificate of registration (In case of Insurance Company – Obtained from department of Insurance from the Peoples Republic of BD).

? Club / societies account

1. Introduction of the account.
2. Two photographs of the Signatories duly attested by the introducer.
3. Board Resolution for Opening A/C duly certified by President/ Secretary.
4. List of Existing Managing Committee.
5. Registration (if any).
6. Rubber Stamp.
7. Permission letter from Bureau of N.G.O.(In case of N.G.O. A/C).

?Closing of an account

The closing of an account may happen,

· If the customer is desirous to close the account,

· If the NCC BANK finds that the account is inoperative for a long duration.

· If the court of NCC BANK issues garnishee order.

A customer may close his/her account any time by submitting an application to the branch. The customer should be asked to draw the final check for the amount standing to the credit of his/her account less the amount of closing an other incidental charge and surrender the unused check leaves. The account should be debited for the account closing charge etc. and the authorized officer of the bank should destroy unused check. In case of joint account the application for closing the account should be signed by the joint account holder. The fee for closing of an account is Tk.50.

4.1.2 B) LOCAL REMITTANCE

Carrying cash money is troublesome and risky. That’s why money can be transferred from one place to another through banking channel. This is called remittance. Remittances of funds are one of the most important aspects of the Commercial Banks in rendering services to its customers.

Types of remittance:

• Between banks and non banks customer
• Between banks in the same country
• Between banks in the different centers.
• Between banks and central bank in the same country
• Between central bank of different customers.

The main instruments used by the NCC BANK of remittance of funds are

· Payment order (PO)

• Demand Draft (DD)
• Telegraphic Transfer (TT)

So the basic three types of local remittances are discussed below:

Table- 02

Term Deposit Receipt

The Local Remittance section of NCC BANK Motijheel Branch also issues TDR. They are also known as time deposit or time liabilities. These are deposits, which are made with the bank for a fixed period, specified in advance. The bank need not maintain cash reserves against these deposits and therefore, the bank offers higher of interest on such deposits.

• Term Deposits: These rates are not negotiable. In this table we can find out the percentage that is given by the bank for specific period of time to the customer.

4.1.3 C) CLEARING SECTION

The amount of Cheques, Pay Order (P.O), and Demand Draft (D.D) Collection from other banks on behalf of its customer is a basic function of a Clearing Department.

• Clearing: Clearing is a system by which a bank can collect customers fund from one bank to another through clearing house.

• Clearing House: Clearing House is a place where the representatives of different banks get together to receive and deliver Cheques with another banks.

• Normally, Bangladesh Bank performs the Clearing House in Dhaka, Chittagong, Rajshahi, Khulna & Bogra. Where there is no branch of Bangladesh Bank, Sonali bank arranges this function.

• Member of Clearing House: NCC BANK limited is a scheduled Bank. According to the Article 37(2) of Bangladesh Bank Order, 1972, the banks which are the member of the clearinghouse are called as Scheduled Banks. The scheduled banks clear the cheque drawn upon one another through the clearinghouse.

· Types of Clearing

A) Outward Clearing: When the Branches of a Bank receive cheques from its customers drawn on the other Banks within the local clearing zone for collection through Clearing House, it is Outward Clearing.

B) Inward Clearing: When the Banks receive cheque drawn on them from other Banks in the Clearing House, it is Inward Clearing.

• Who will deposit cheque for Clearing: Only the regular customers i.e. who have Savings, Current, STD & Loan Account in the bank can deposit cheque for collection of fund through clearing house.

· Responsibility of the concerned officer for the Clearing Cheque and being work with department, following are the issues

1) Crossing of the cheque.

2) (Computer) posting of the cheque.

3) Clearing seal & proper endorsement of the cheque.

4) Separation of cheque from deposit slip.

5) Sorting of cheque 1st bank wise and then on branch wise.

6) Computer print 1^st branch wise & then bank wise.

7) Preparation of 1^st Clearing House computer validation sheet.

8) Examine computer validation sheet with the deposit slip to justify the computer posting

9) Copy of computer posting in the floppy disk.

· Bills Collection: In modern banking the mechanism has become complex as far as smooth transaction and safety is concerned. Customer does pay and receive bill from their counterpart as a result of transaction. Commercial bank’s duty is to collect bills on behalf of their customer.

Types of Bills for Collection

i. Outward Bills for Collection (OBC).

ii. Inward Bills for Collection (IBC).

What is OBC?

OBC means Outward Bills for Collection .OBC exists with different branches of different banks outside the local clearinghouse. Normally two types of OBC:

1) OBC with different branches of other banks

2) OBC with different branches of the same bank

Procedure of OBC:

1) Entry in the OBC register.

2) Put OBC number in the cheque.

3) “Crossing seal” on the left corner of the cheque & “payees account” will be credited on realization “seal” on the back of the cheque with signature of the concerned officer.

4) Dispatch the OBC cheque with forwarding.

5) Reserve the photocopy of the cheque, carbon copy of the forwarding and deposit slip of the cheque in the OBC file.

Inward bills for collection (IBC)

When the banks collect bills as an agent of the collecting branch, the system is known as IBC. In this case the bank will work as an agent of the collection bank. The branch receives a forwarding letter and the bill.

Procedure of IBC:

1. IBC against OBC: To receive the OBC cheque first we have to give entry in the IBC Register .The IBC number should put on the forwarding of the OBC with date.
2. Deposit of OBC amount: OBC cheque amount is put into the “sundry deposit-sundry Creditors account”, prepare debit & credit voucher of it. If the OBC cheque is honored, send credit advice (IBCA) with signature & advice number of the concern branch for the OBC amount.
3. If the OBC cheque is dishonored, the concerned branch is informed about it.

4. Again place in the clearing house or send the OBC cheque with Return Memo to the issuing branch according to their information.

4.1.4 D) ACCOUNTS SECTION

Accounts Department is called as the nerve Centre of the bank. In banking business, transactions are done every day and these transactions are to be recorded properly and systematically as the banks deal with the depositors’ money. . Improper recording of transactions will lead to the mismatch in the debit side and in the credit side. To avoid these mishaps, the bank provides a separate department; whose function is to check the mistakes in passing vouchers or wrong entries or fraud or forgery. This department is called as Accounts Department. If any discrepancy arises regarding any transaction this department report to the concerned department.

Besides these, the branch has to prepare some internal statements as well as some statutory statements, which are to be submitted to the Central Bank and the Head Office. This department prepares all these statements.

Workings of this department:

• Packing of the correct vouchers according to the debit voucher and the credit voucher
• Recording the transactions in the cashbook.
• Recording the transactions in general and subsidiary ledger
• Preparing the daily position of the branch comprising of deposit and cash
• Preparing the daily Statement of Affairs showing all the assets and liability of the branch as per General Ledger and Subsidiary Ledger separately
• Making payment of all the expenses of the branch
• Recording inters branch fund transfer and providing accounting treatment in this regard.
• Preparing the monthly salary statements for the employees
• Preparing the weekly position for the branch which is sent to the Head Office to maintain Cash Reserve Requirement (C.R.R)
• Preparing the monthly position for the branch which is sent to the Head Office to maintain Statutory Liquidity Requirement (S.L.R)
• Make charges for different types of duties
• Preparing the budget for the branch by fixing the target regarding profit and deposit so as to take necessary steps to generate and mobilize deposit.
• Checking of Transaction List
• Recording of the vouchers in the Voucher Register

4.2 E. FOREIGN EXCHANGE

Foreign exchange is the means and methods by which rights to wealth in a country’s currency are converted into rights to wealth in another country’s currency. In banks when we talk of foreign exchange, we refer to the general mechanism by which a bank converts currency of one country into that of another. Foreign Exchange Department (FED) is the international department Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These banks are known as Authorized Dealers. If the branch is authorized dealer in foreign exchange market, it can remit foreign exchange from local country to foreign countries. So NCC BANK, Principal branch is an authorized dealer.

There are three kinds of foreign exchange transaction:

A) Import

B) Export

C) Remittance.

4.2.1 A) IMPORT

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. In an international business environment, buyers and sellers are generally unknown to each other. So seller of goods always seeks security for the payment of his exported goods. Bank gives export guarantee that it will pay for the goods on behalf of the buyer if the buyer does not pay. This guarantee is called Letter of Credit. Thus the contract between importer and exporter is given a legal shape by the banker by ‘Letter of Credit’.\

4.2.1.1?Letter of Credit

§ Definition

A letter of credit is a letter issued by a bank (know as the opening or the issuing bank) at the instance of its customer (known as the opener) addressed to a person (beneficiary) undertaking that the bills drawn by the beneficiary will be duly honored by it (opening bank) provided certain conditions mentioned in the letter gave been complied with.

Table- 03

4.2.1.2§ Parties to the L/C