A case study on National Bank Ltd

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A case study on National Bank Ltd

Executive Summary

The topic of internship report is foreign Exchange Business of Commercial Bank in Bangladesh- A case study on National Bank Ltd. The report which has been conducted under the supervision of Senior Lecturer Stamford University of Bangladesh is the final output of experience as an internee in the National Bank Ltd. at Foreign Exchange Branch. The period of internship lasted for three month.

In the age of open global economy banks play an important role in order to keep up with the current economic needs which the banks provides though various services. Among the various services the bank provides “Foreign Exchange service”. In this service the banks act as a media between the exporter and the importer buy means of providing guarantee letter of credit of correct execution of the deal between the parties. Our country is a developing country whatever limited resources the country exports are not sufficient to meet requirements of the current economy. Therefore banks should up late the banking system so that they can improve the country, export.

National Bank is a schedule commercial bank registered by Bangladesh Bank. The National Bank and hence the foreign exchange section is under the guidance of Bangladesh Bank. The National Bank follows the rules and regulations set forth by the Bangladesh Bank, which includes methods and procedures for conducting foreign exchange business. For expansion and smooth of small trade the bank has already establish a large network of foreign covering most of the important business countries around the world.

The report helps to know a lot about the foreign trade practically.

Chapter – 1

1.3 Objective of the report:

General Objective:

To provide a brief idea of Foreign Exchange business of National Bank Limited.

Specific Objective:

The objectives of the study are mentioned below:

1 To focus the problems of import financing.

2 To focus the problems of export financing

3 To recommend possible solutions of the problems.

4 To show how the foreign exchange functions of NBL is done.

5 To present the growth rate of foreign exchange business of NBL.

6 To compare performance and growth rate of foreign exchange business of NBL

1.4 Scope of the Report:

This report gives a narrative overview National bank and its front desk activities and services. Any development of national bank thereafter is thus out of the scope of the report. This report does explain the methodology of model development and illustrates the model and tries to extract the theoretical lessons from the exercise. However, since various information is sensitive and confidential in nature such is kept out of the report scope.

1.5 Methodology of the study:

Correct and smooth completion of research work requires adherence tosome rules and methodologies. Rules are followed to case the data collection procedures. Accuracy of study depends on the information and data analysis.

The collected the annual report of the bank from assign bank’s head office. A good annual report is the mirror of the bank. Have gone though the ‘annual report’ of the bank very carefully. To meet the objective of the study the realized that a single method would not be effective. Formal and oral discussion, direct observation, questioning clients and printed paper of the bank were found useful. To collect the necessary meaningful information the following method are applied:

1.6. Source of data:

1.7. Tools of analysis:

To make the report more understandable and give a nice look, different analytical tools and software, have been used to prepare the report have used:

a) Graph

b) Table

c) Different computer software (MS Word, MS Excel etc.)

1.8. Limitations of the Study:

This internship report is first assignment outside our course curriculum in the practical life. the student of finance discipline just have completed our formal education stage. After completing the institutional experience, practical performance in the formal stage becomes difficult. So in performing this report our lack of proper knowledge greatly influenced in this performances.

Although have got the full co-operation from clients and other official of NBL ID and they also gave me much time to prepare this report properly in the way of my study, have faced some difficulties, which made my conduction of the program little hazardous.

1 First of all data finding of National Bank Ltd. of Bangladesh was a troublesome work because of Office secrecy was one of the most important problems. Disclosing of some information was restricted.

2 Secondly, it should be certainly mentioned that the time constraint is another issue to complete report on such complex topics. And

3 Thirdly, as we are newcomer, there is a lack of previous experience in this concern. And many practical matters have been written from our own observation that may vary from person to person.

Chapter-2

Background of the BANK

2.1 Historical Background of NBL:

National Bank Limited is one of the front ranking first generation private sector banks in Bangladesh. 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.

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

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 26 years of its operation achieved a remarkable success and met up capital adequacy requirement of Bangladesh Bank.

2.2. 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.

2.3. Mission:

1 We aim to come one of the leading Banks in Bangladesh by our prudence fair and quality of operation.

2 We intend to meet the need of our clients and enhance our profitability by crating corporate culture.

3 We believe in strong capitalization.

4 We aim to ensure our completive advantage by upgrading banking technology and information system.

5 We maintain high standard of corporate and business Seth’s.

6 We provided high quality financial to strength the well being and success of individual industries and business communities.

2.4. Objectives and goals of NBL:

1 NBL is always ready to maintain the highest quality of services by upgrading banking technology prudence in management.

2 NBL is committed to ensure its contribution to national economy by increasing its profitability through professional and disciplined growth strategy for its customer and by creating corporate culture in international banking arena.

3 The objective of NBL is not only to earn profit but also to keep the social commitment and to ensure its co-operation to the person of all level, to the businessman, industrialist-specially who are engaged in establishing large scale industry by consortium and agro-based export oriented medium & small scale industries by self inspiration.

2.5. Organizational Strategy:

As the financial services industry is a very competitive industry, the main strategy of NBL is the organic growth – to build branches and strengthen their distribution network. They will continue to invest and expand in Bangladesh as fast as local regulations allow.

The principle strategies are –

People – Attract, retain and reward top performers.

Profitable Growth – Growing sales and increase the revenues.

Execution – Performing with skill and speed.

Credit Quality – Maintaining credit quality and understand the role in managing losses.

Customer Centered – Always providing exceptional customer service.

Ownership – The performance and results should be owned.

Efficiency – Lowering the costs and wise use of resources.

2.6. Management aspect of NBL:

Like any other business organization, the top management makes all the major decisions in NBL. The board of directors being at the highest level of organizational structure plays in important on the policy formation. The board of directors is not directly concern with the day to day operation of bank. They have delegated there authority to its management committee. The board established the objective and policies of the bank.

In 2006 National Bank Limited made commendable progress in all business, like deposit, credit, fund management, investment, foreign remittance, credit card & foreign exchange related business. Bank has expended business activities as holding previously & parallels by diversification its investment to a new product, as a major financier remarkable portion of total exports of the country.

Thebank has in its management a combination of highly skilled and eminent bankers of country of varied experience and expertise successfully led by Md. Abdur rahaman shaker a dynamic banker, as its managing directors and well educated energetic and delegated officer. Mid and lower level employees get the direction and instruction from top executives about the duties and task they have to perform. Management of National Bank Ltd. assumes that employees are members of the team, who actively participate in accomplishing the organizational goal. The chief executive provides the guide line and board direction to the managers and employees but delegates responsibility for determine how tasks and goals are to be accomplished.

2.7. Organizational structure of NBL:

Organizational setup of the National bank Limited is consisting of three organizational domains. Firstly the central top management, which contains Board of Directors, Managing Director, Additional Managing Director and Deputy Managing director. The major responsibilities of this group are to take central decision and transmit it to the second step. Secondly the executives level management, which contains Executive Vice Presidents, Senior Vice Presidents, Vice Presidents and Assistant Vice Presidents. The major responsibilities of this part are to supervise and control divisions/ departments. Thirdly the branches operate management, which contains branch manager and other mid/ lower level management. The major responsibilities of this part are to the 137 branches of this bank and report to the Head Office from time to time. The organogram is showed in the Appendix.

2.8. General banking

At present, NBL has been carrying on business through its 137 branches spread all over the country. Besides, the bank has been smoothly conducting its overseas activities with utmost efficiency through its 415 correspondents in 75 countries of the world. NBL has drawing with 32 overseas exchange houses including the gulf overseas exchange. NBL was the first domestic bank to establish agency arrangement with the world famous ‘’Western Union Money Transfer’’ in order to facilitate quick and safe remittance of the valuable foreign exchanges earned by the expatriate Bangladeshi nationals. NBL was also the first among domestic banks to introduce international Master Card in Bangladesh.

National Bank Limited is a customer oriented financial institution. It remains dedicated to meet up with the ever growing expectations of the customer because at National Bank, customer is always at the center. In 1995 NBL acquired equity and management of Nepal Arab bank ltd. And in 1996 NBL opened a representative office in Myanmar.

With a strong sense of all business area of commercial banking, NBL could foresee tremendous growth in home bound remittance from Bangladeshi expatriates in USA, UK, and Middle East and in different countries of the world.

This branch performs three departments as:

1 General Banking Department (for customer service)

2 Foreign Exchange Department (for foreign transaction)

3 Advanced Department ( for lending)

National Bank provides different types of accounts, locker facilities and special type of saving scheme under general banking. For proper functioning and excellent customer service this department is divided into various as follows:

1 Dispatch section

2 Accounts opening section

3 Cash section

4 Deposit section

5 Bills and clearing section

6 FRR section

7 Accounts section

2.9. Product and services:

In National Bank, the following products and services are available for its customers:

2.10. Account opening department: A bank maintained different types of account for different process.

1. Current account (CD)

2. Saving Bank deposit(SB)

3. short term deposit (STD)

4. Fixed deposit receipt (FDR)

5. Monthly savings scheme (MSS)

6. cash credit (CC)

7. consumer credit scheme (CCS)

8. Security Overdraft (SOD)

The last three accounts are created in loan purpose. Other types of account are usual purpose. The different account opening producers will be discussed in detail in the forward topic.

2.11. Different accounts can be opened by-

Individuals / Sole proprietorship firms / Partnership firms / Limited companies either public or private / Clubs / Societies

Chapter-3

SPECIAL FUNCTION OF NBL

3.1. Special function of NBL:

Consequently NBL established unique money remittance system with the western union of USA for out bound and inbound remittance. Though an online computer system found can be transferred instantly 26 thousand locations in 100 countries of the world. In addition, there are number of drawing arrangements with the bank and exchange houses particularly in the USA & Europe, Middle East south East Asia to facilities remittance back home. Joining to the largest money transfer service “western union” NBL has introduced Bangladesh to faster track of money remittance.

With a wide range of modern corporate and consumer financial products National Bank has been operating in Bangladesh since 1985. In 1997, the bank introduced automated branch banking system to increase efficiency and improve customer service. The bank is one of the leading banks which introduced first Credit Card in Bangladesh. The technology has been upgraded to manage the growth of the bank and meet the demands of our customers. ATMs now allow customers to retrieve 24×7 hours cash withdrawals.

National Bank Limited is a customer oriented financial institution. It remains dedicated to meet up with the ever growing expectations of the customer because at National Bank, customer is always at the center.

3.2. Special Services

National bank Foreign Exchange Branch in association with other branches of the bank offers two special services to its values customers. These are –

1 E-Cash – ATM Cards Services

2 SWIFT Service

3.2.1. E-Cash – ATM Card

Automated Teller Machine (ATM), interlaid, has unveiled the horizon of Electronic Banking of 21st Century. Through ATM, customers can avail non-stop online teller service without going to the specific branch of the member bank. They can withdraw or deposit cash or cheque as well as pay utility bills like DESA, BTTB, WASA, TITAS etc. with the help of this modern computer controlled machine. The service is now offered by ETN.

Facilities:

1 ATM Card holders can withdraw cash from ATM at any time.

2 Customers can make transactions from any of the machines with logo ‘E-cash’ installed at different places in the city.

3 In course of time utility bills like WASA, TITAS, DESA etc can be paid through ATM.

4 Customers may know their present balance at any time from the machine.

3.2.2. SWIFT

Society for Worldwide Inter-Bank Financial Telecommunication (SWIFT) is a bank owned co-operative serving the financial community worldwide. The SWIFT Transport Network (STN) is a dedicated global network for secure communication between SWIFT Customers.

3.2.3. Credit Card

NBL Credit Card is accepted in many merchant outlets around the country. Our wide range of merchants include hotels, restaurants, airlines, & travel agents, shopping malls and departmental stores, hospitals & diagnostic centers, jewelers, electronics & computer shops and many more.

Benefits (Condition Apply)

50% Cash withdrawal facility.

No hidden costs.

Credit Card Fees

3.3. Function of NBL:

1 The main task of the NBL is to accept deposited from various customer through various accounts.

2 Provide loans on east term and condition.

3 It creates loan deposit.

4 The bank invest it fund into profitable sector.

5 It transfer money by demand draft (DD), pay order (PO), telegraphic transfer etc.

6 The bank is doing the transaction of bill of exchange, cheque etc. on behalf of the client.

7 Assists in the foreign exchange by issuing letter of credit.

8 The bank insures the securities of valuable documents of the client.

9 It brings the increasing power of dimension of transaction.

10 Above all NBL help the businessman financially by giving discount facility for bill of exchange and by providing the facility of letter of guarantee.

11 To bui1d up strong-based capita1ization of the country.

12 To conduct social welfare activities.

13 To work for continues business innovation and improvements.

14 To ensure the best uses of its creativity, well disciplined, well manages and perfect growth.

Capital Funds

The Authorized and Paid up Capital of the Bank are Tk. 7450.00 million and Tk. 2846.54 million respectively. The Bank raised its paid up capital from Tk. 1872.72 million to Tk. 2846.54 million during the year by paying stock dividend to share holders. The Capital Adequacy Ratio is 13.56% as on 31.12.2009, which is well above the stipulated 8% required for Banks in Bangladesh. The ratio of Tier l capital is 10.89%.

Deposits

Deposits of the Bank grew by 27.66% to Tk. 76838.64 million as at 31st December 2009 as against national average of 17.07%. The Bank introduced several deposit schemes to encourage and mobilize savings. The bank’s various purpose-oriented deposit schemes have been appreciated by the Public and have gained good popularity

Loan and Advances:

Loans and Advances of the Bank stood at Tk. 65129.29 million as on 31-12-09 against Tk. 50665.07 million last year. During the year under review, the Bank extended loans and advances of Tk. 14464.22 million to the private sector for domestic and international trade as well as for project finance and working capital. Due to liberal Credit to Export Sector, the Bank was able to handle larger volume of Foreign Exchange Business. The Bank also extended a number of project finance and industrial loans in syndication with other Banks.

Foreign Exchange Business

With several Banks and Exchange Houses and expects to handle increased volume of Remittance Business. In the year under review, Foreign Trade Operation of the Bank played a pivotal role in the overall business development of the Bank. We have established relationship with as many as 30 new foreign correspondents abroad thereby raising the total number of correspondents to 415. During the year 2009, the Bank handled Foreign Exchange transactions amounting to Tk. 160320.12 million which is an increase of 17% over the last year. The Bank has also entered into remittance arrangements.

Chapter -4

Loan & advance

4.1 Loan and advance department:

Banking is essentially a business dealing organization with money and credit like all other business activities. Banks are profit oriented organization. A bank invites is fund in many ways to earn more profit and most of its income is derived from loans and advanced. Banks make loan and advanced to traders, business persons, industrialist and many other persons against security of some cautious policy.

4.2 Types of loan and advance:

There are may be different types of loans advance given from the commercial banks such as national bank ltd of our country. Loans and advanced may be the following types:

1 Cash credit

2 Secured overdraft

3 Investment against import merchandises

4 Investment against trust receipt

5 Payment against document

6 House building investment

7 Term investment

8 Bank guarantee

9 Export cash credit

10 Foreign documentary bill purchase

11 Local documentary bill purchase.

4.2.1. Cash credit (cc):

Cash credit or continuing credits are those, which form continuous debit and credits into a limit and have an expiration date. This credit may be of the nature of pledge and hypothecated and bank should report these in separate heads incorporated under the main head cash credit. Cash credit arrangement is usually divided in to two such ways as:

1 Cash credit pledge

2 Cash credit hypothecation.

4.2.1.1. Cash credit pledge:

Under this arrangement a cash credit is sanctioned against pledge of goods or raw materials. The ownership of the goods however, remains with the borrower. The pledge creates an implied lien in favor of the bank on the underlying merchandise. No collateral security is normally asked for grant of such credit.

4.2.1.2. Cash credit hypothecation:

In case of Cash credit hypothecation possession of the goods is not transferred to the bank and therefore such and advance is no better that a clean loan such an advance can thus only be granted to a person in whose integrity the bank has full confidence and cash credit in the form of hypothecation is normally accompanied with mortgage of immoveable properties.

The cash credit holder should submit the following documents and being fill-up properties:

1 Stock report

2 Trade license

3 Up to date income tax clearing certificate

4 Charge document

5 D.P note

6 Letter of partnership or resolution of the board of directors

7 Letter of arrangement

8 Letter of continuity

9 Letter of pledge

10 Letter of hypothecation

11 Letter of lien

12 Non- encumbrance certificate

4.2.2. Overdraft:

Overdraft is an arrangement between the banker and the customer by which the letter is allowed to withdraw over his/her credit balance in the current account up to an agreed limit. Overdraft is divided in two categories:

1 Secured overdraft(SOD)

2 Temporary overdraft(TOD)

4.2.3. Car Loan:

This is a special type of loan, which is only providing for the employer of national bank. Usually SVP, AVP and above level officers get this kind of facility.

4.2.4Loan:

In case of loan the banks sanction certain some of a certain period of time. The interest charged on full sanctioned amount@16%.

4.2.5. House Building loan (General/ Staff):

Generally house-building loan is providing in two sections:

· General

· Staff

Required papers for sanctioning House Building Loan:

1 Copy of general power of attorney

2 Copy of material certificate.

3 Copy of engineers estimate.

4 Copy of projected cash flow.

4.3. Investment against imported Merchandises:

Investment allowed for retirement of shipping document and release of goods imported through L/C taking effective control over the goods by pledge in go downs under/ banks lock key fall under this type of advance. This is also a temporary advance connected with import, which is known as post-import financing, falls under the category ‘commercial leading’.

4.4 Payment against document:

Payment made by the bank against lodgment of shipping document of goods imported through L/C falls under this head. It is and interim advance connected with import and is liquidated against payment usually made by the party fort retirement of the document for release of imported goods from the customer’s authority. It falls under the category’ commercial Bank’

4.5. Investment against Trust Receive:

Advance allowed for retirement of shipping documents, release of goods imported though: /C falls under trust with the arrangement that sale proceed should be deposited to liquidate within a given period. This is also a temporary advance connected with import, which a known as post-import financing. Falls under the category commercial leading.

4.6. Term loan:

A bank advance for a specific period repaid with interest under fixed schedules.

The term loans may be as follows:

a) Short Term: Upton and including 12 months.

b) Medium Term: More than 12 months unto and including 60 months.

c) Long Term: More than 60 months

4.7. Continua’s Loan:

The loan which has not particular repayment schedule, but contains date of expiry, credit limit etc, will be termed as Continuous loan.

4.8. Demand Loan:

The loan, which is considered repayable, only after the banks claim it, will be termed as Demand loan. If contingent or any other liability is converted to compulsory Loan or Forced Loan then it will be termed as Demand Loan.

4.9 Fixed Term Loan:

The loan, which is repayable within particular periods of time as per repayment schedule, will be term as Fixed Term Loan.

4.10 Short Term Agricultural and Micro- Credit:

Those Credits, which are enlisted, as short-term credit under the annual credit programmed declared by ACD of Bangladesh Bank. Will be termed as short term agricultural Credit. It will also include credit extended to agricultural sector and repayable within a period net exceeding 12 months. The short term Micro-Credit will be that which will not exceed an amount of Tk.10000/ and will be repayable within a period not exceeding 12 months. Such loans may be none.

4.11. Consumer Credit Scheme:

National Bank’s Consumer Credit Scheme gives you a great opportunity to buy household and office items on easy installments. This scheme gives you the advantage of part payment to cope with the high price tags of many necessary home and office appliances. Television, Refrigerator, VCR, Personal Computer, Photocopier, Washing Machine, Furniture, Microwave Oven, Car, and a number of other expensive items are now within your buying range. With this scheme NBL makes better living possible for people living on fixed income. Customers can buy those home and office equipment’s without over taxing their budget.

4.12. Types of classification of loan:

Investment classification is a process by which the risk or loss potential associated with the investment accounts of a bank on a particular date is identified and quantified to measure accurately the level of reserves to be maintained by the bank to provide for the probable loss on account those risky investment. All types of investment of national bank fall into following four scales:

1 Unclassified: Repayment is regular.

2 Substandard: Repayment is stopped or irregular but has responsible prospect of improvement.

3 Doubtful debt: Unlikely to be repaid but special collection efforts may result in partial recovery.

4 Bad/ Loss: very little chance of recovery.

4.13 Provision:

As per latest BRPD circular No. 16/1948 Bangladesh Bank the length of overdue and reserve for provision for classified loans are given:

4.14 Credit Risk:

Credit risk is the primary financial risk in the banking system. Identically and assessing credit risk is essentially. A first step in managing it effectively. In 1993 Bangladesh Bank sagest by Financial sector Refer Project first introduced and directed to use credit risk Grading system in the Banking sector of Bangladesh under the caption Landing risk Analysis.

Definition of Credit risk Grading (CRG):

1 The credit Risk grading is a collective definition based on the pre specified scale and deflects.

2 The Credit risk grading is collective definition based on the pre specified scale and deflects the underlying credit –risk for a given exposure.

3 A credit risk grading deploys a number/ alphabet/ symbol as a primary summary indicator of risks associated with a credit exposure.

4 Credit Risk grading is the basic module for developing a credit risk management system.

Chapter -5

FOREIGN EXCHANGE OPERATION OF NATIONAL BANK

5.1 Foreign Exchange:

National Bank Ltd. Continued to be very active in international trade through financing export import business and mobilizing wage earners remittance. In 2007, the bank opened 24385 imports L/Cs worth USD 1117.61 million (Tk. 77539.77 million) and handled 18761 Export documents worth USD 559.58 million (Tk. 38398.85 million). The bank has also expanded its external business by undertaking export bill negotiation, realization of export proceeds, foreign remittance, etc.

5.2 Meaning of Foreign Exchange

Foreign Exchange means currency & trade exchange say conversion of one to another. This is a part of economic & Science. This is a big deal divided into different currencies instrument such as Draft, Traveler’s Cheque, Bill of Exchange business including sell, purchasing of currency notes & TC etc.

Currency Exchange means the conversion of one Currency into another.

5.2.1. Foreign Exchange Market:

Foreign Exchange market means the places where foreign currency is bought & sold. In this more that supply, currency value.

Alternately following are the features of foreign exchange market:

1. Bank & client.

2. Different Banks in the same foreign exchange market.

3. Different Bank & Schedule Bank of the same country.

4. Different Control Bank.

Bank follows the following the two craters in respect & payment of foreign exchange:

1. Local currency market value &

2. Foreign currency market value.

Exchange is being controlled:

1. To stabilize the rate of exchange.

2. To protect domestic industries.

3. For proper implementation of plans.

4. To increase the bargaining strength

5. To check over invoicing & Under invoicing

6. To check the Blank marketing and smuggling

7. For regulating the international movements of goods

5.3. National bank performs the following tasks:

a) Opening letter of credit (L/C) against commission for importing industrial, agricultural and other permissible items under Import policy.

b) Opening letter of credit on the principle of under wage earner scheme.

c) Handling of export/import document.

d) Negotiation of export / import document when discrepancy occurs.

e) Financing in import

f) Financing to export on profit or loss sharing.

g) Handling Inward and outward remittance.

5.4. There are three kinds of foreign exchange transaction

1. Import

2. Export &

3. Remittance.

Part-A

5.4.1. Import:

Import trade finance by NBL rose to USD 1117.61 million (Tk. 77539.77 million) in reporting year compared with USD 1127.51 million (Tk. 78226.32 million) in 2008. The growth in USD is decreased by 0.88%. Large LCs were opened mainly for importing old ships, rice, wheat, edible oil, fertilizer, capital machinery, fabrics and accessories, petroleum products and other consumer products.

5.4.1.1. Meaning of Import:

Import means lawfully carrying out of anything from one country to county for Buying. It will be occurred according to the Government law.

5.4.1.2 Important Policy Order

Based on the needs of commodity and availability of finance, Government declares policy. For import of goods for a particular period having approval from the National Assembly is defined as Import policy order. Import policy is a guideline of a set of rules envisaged by Government Authority i.e. the Ministry of Trade and commerce for the registered importer for import of goods inside the country.

Duration

Earlier import policy has been formulated for two years. But present import policy order has been formulated for 5 (five) years, Effect from the 14^th June 1999 to 30^th June 2003 and valid till announce of new import policy order. If require Government can revise the policy in each every years.

5.4.1.3. Import related fees

Four categories of importer registration renewal fees are as under

Charges for different years are as under:

1 year late TK 50/-

2 year late TK 100/-

3 year late TK 200/-

5.4.1.4. Regulations of Import

Import of goods under this policy shall be regulated as under:

1. Control list:

Unless otherwise specified items which have been indicated as banned in this list shall no be permissible for import. An items included in this list with specific conditions for import shall be importable only on fulfillment of the conditions specified.

2. Freely Importable Items:

Unless otherwise specified an items the name of which does not appear in the control list shall be freely importable.

3. Notwithstanding anything mentioned elsewhere, all imports into Bangladesh shall be subject to such general or specific conditions as many have been prescribed in this order.

4. In addition to the conditions mentioned in the control list the conditions. Restrictions and procedures for import of various items mentioned in the test portion of this order, shall as usual, apply in case of import of those items.

5. If, while determining the import status of an items mentioned in the control list the description of goods does not conform to the H.S.C Code mentioned against item, or any discrepancy arises between the H.S Code and the description of goods, in that case the description of goods shall prevail, In other words, if the import of a particular item is shown as banned in the control list, or is shown as importable as subject to fulfillment of conditions in the list, the said ban or restriction as the case may be, shall equally apply to the import of that item , even if such ban or restriction is mentioned elsewhere and not against the appropriate H.S Code, if any importer, taking , advantage of such discrepancy, import any banned items or restricted items or restricted item without fulfilling the respective conditions, such import shall be treated to have been made as in contravention of the provisions of this order.

Regulations of Import:

L/C: may be open under deferred payment basis.

1. Direct Payment in Abroad:

Only for Bangladeshi National who live in abroad for service. Those who are entitled to purchases the importable goods for direct payment to the beneficiary from his own service without opening any L/C, The goods must be sent to the Bangladesh. Nationals who lived in Bangladesh. In that case no approval is required from CCI & E.

2. Time Limit Opening of L/C:

Letter of Credit shall be opened by all importers within 120 days from the date of registration of LCAF with the Bangladesh Bank unless otherwise notified.

3. Validity of LCA for Shipment:

Unless otherwise specified, shipment of goods shall take place within 17 month in the case of machinery and spare parts and 11 months in the case of all other items from the date of issuance of LCA from by Bank or registration of LCA form within Bangladesh Bank registration unit as the case may be.

4. Document required to be submitted along with LCA Form:

Importers in both public sector and private sector shall submit to their nominated banks the following documents along with the L/C authorization Form for opening letter of credit.

a) L/C application form duly signed by the importer.

b) Indent for goods issued by indenture or pro-forma invoice obtained from the foreign supplier, as the case may be and

c) Insurance cover note.

5.4.1.5. Import procedure of NBL:

Import means purchasing products from other countries for further process or to sell in local market. National Bank Ltd plays a vital role in import financing system. There are some different steps in whole import process. These are as follows:

1. L/C Opening

2. Document Negotiate

3. Payment Clear

4. Bill of entry

5. File closed

5.4.1.6. L/C opening 🙁 letter of credit)

The rules of L/C are established by ICCI (London). The guidelines are provided by UCPDC (Uniformed Customs & Practice for Documentary Credit). L/C is nothing but a guarantee from a bank in favor of a party to pay certain amount in case of transaction.

5.4.1.7. Conditions of L/C:

i. The party must have current account which is treated as a business account.

ii. TIN Certificate is compulsory.

iii. VAT Certificate

iv. IRC

v. Proforma Invoice or Indent is needed.

vi. Insurance Cover Note

Opening of L/C is the first requirement of import. The importer must have account in the certain bank. Some of the most essential documents of L/C are described as follows:

a) IRC 🙁 Import Registration Certificate)

IRC is the first essential of L/C opening. The meaning of IRC is Import Registration Certificate. It is issued by the Chief Controller of Import & Export. The IRC is compulsory for the trading company.

Trading is a continuous process. It is not for own purpose rather for business purpose. The trading importer imports products, bring into our country and sells into the local market. For this reason IRC is compulsory. The IRC can be renewed by some authorized bank. The authorization is given by Bangladesh Bank. NBL has this authority. However, in case of industrial purpose like purchasing industrial equipment, IRC is not necessary. Instead of IRC here a permission letter is issued by the Board of Investment.

b) Invoice:

Invoice, quotation, contract all these codes contain same meaning and purpose. This document is issued by the exporter. In the invoice, some important items must be presented. There are major items and additional items.

i. Major items: Quality, quantity, price, description of goods etc.

ii. Additional items: Shipment date, expiry date, code of loading etc.

c) Bank charged documents:

Bank charges some documents to the exporter on behalf of the party or importer. These documents are:

i. L/C Application form

ii. IMP from

iii. DP Note/ Promissory Note

iv. Additional guarantee letter etc.

5.4.1.8. Import L/C (Letter of Credit):

A letter of credit is a conditional Bank undertaking of payment. In other words letters of credit is a letter from the importer Bankers to the exporter that the bills if drawn as per terms & conditions complied with will be honored on presentation.

5.4.1.9. Definition of L/C:

A letter of Credit is a conditional bank undertaking of payment. In other words letters of

credit is a letter from the importer bankers to the exporter that the bills if drawn as per terms and conditions are compiled with will be honored on presentation

As per UCPDC 500 a credit may be either:

i) Revocable.

ii) Irrevocable.

The Credit, therefore, should clearly indicate whether it is revocable or irrevocable. In the absence or such indication the credit shall be deemed to be irrevocable.

5.4.1.9.1. Classification of L/C:

.Revocable L/C, Irrevocable L/C, Confirmed L/C, Transferable L/C, Divisible L/C, Revolving L/C, Restricted L/C, Red Clause L/C, Green Clause L/C, Back-to-Back L/C

5.4.1.9.2. Revocable Credit:

As per Article no. 8 (a) A revocable credit is a credit which can be amended or cancelled by the issuing bank at any time without prior notification to the seller since to offers little security to the seller.

5.4.1.9.3. Irrevocable Credit:

As per Article no 9 an irrevocable credit constitutes a definite undertaking of the issuing Bank. A credit cannot be amended or cancelled without the agreement of all parties. It gives the seller greater assurance of payment. An irrevocable credit can be either confirms or unconfirmed dependant on the desire of the seller.

5.4.1.10. Classification of importer:

Importers are those who ate authorized by the import Trade authority i.e. & CCI & E for import of goods essential for consumption or for production purposes.

There are mainly three types of importers.

1. Commercial Importer

2. Industrial Importer

3. Importers under Wage Earner Scheme

5.4.1.11. L/C application & Procedure for Opening L/C :

For opening L/C the client is to submit to the bank an application in the printed format of the designated bank. This is called L/C application form which is also an agreement between the importer and the bank. The form is to be stamped under stamp Act. In force in Bangladesh. The importer must submit the LCA & IMP and indent or contract. Purchase order/pro-forma invoice (duly accepted by the importer) along with L/C application.

The L/C application must be completed/ filled in and signed by the authorize person of the importer giving the following particulars:

a. Full name and address of the supplier of beneficiary and importer.

b. Brief description of the goods.

c. L/C value for US$, etc. (CFR value) which must not exceed the LCA value.

d. The unit price, quantity quality of the goods.

e. Origin of the goods, port of loading and port of destination must be mentioned.

f. Model of shipment (Sea, Air, Truck or Rail etc.)

g. List date of shipment and negotiation time (must not be beyond 30 days from the shipment date).

h. Insurance cover note number and name or the company.

i. Tenor of draft (1.e, sight/ issuance/ deferred etc.

j. Mode of advising L/C (i.e. airmail/ full telex short cable etc.)

k. Opening of L/C under UCPDC publication No. 500/- ICC revision 1993.

l. Whether shipment/ transshipment is allowed.

m. Instruction to add confirmation if required.

n. LCA Number.

o. Any other relevant information and instruction if any must be mentioned in the L/C application form.

A written application from opener is verified a relevant license/ LCA/ permit of the loan/ Barter must remain valid up to that period the extension is sought. Increase of L/C amount may be done provided the LCA covers the increase in amount.

L/C amount can be decreased provided the relevant Indent is amending accordingly and with the consent of beneficiary.

Each of clauses of the L/C can be amended provided the parties involve the L/C consent to it. Procedure or preparation and dispatch:

Amendment is to be typed in the Banks printed format. The copies of the amendment must be dispatched to all concerned as done in dispatching the L/C. Amendment be kept in the L/C file chronologically date wise.

5.4.1.12. Back to Back L/C

Meaning of Back to Back L/C

Back to Back L/C is a type of import L/C either in inland or in abroad, which open against lien on valid expert L/C.

In our country in export garment this method of finance is widely used and very well known to the manufacturers of garments. Bangladesh exporter received an irrevocable L/C. for supply readymade shirts from an American Bank. For manufacture of the ordered shirts the exporter. Dose not has required raw materials and cloths. To execute the order he is to import materials and cloths from Korea.

Then the Bangladesh exporter does not have the required raw materials and clothes. To excite the order he is to import materials and cloths from Korea.

Then the Bangladeshi exporter will have to open an import L/C favoring Korean supplier for import of cloths and accessories. The L/C is opened by the Bangladeshi bank keeping the American Bank L/C in the ‘back’ (i.e. to fulfill the requirement) of the export L/C is called back to back L/C.

While opening such import L/C the Bangladeshi exporter is to pledge to manufacture the shirt by the Korean in imported cloths under bonded ware house system.

5.4.1.13. Problems of Back to back L/C

1. Shipment time gap: Sometime time is shorted for exporting against import L/C, kit may be caused.

2. Terms and rules violations: NBL cannot violate the rules & term of council.

3. Selling violation: Out of agreement NBL cannot receive excess wanted.

4. Payment of back to back L/C bill: No stock bills are supported against regulations.

5. Gaps of International rules & regulations.

5.4.1.14. Prospects of back to back L/C

1. It is Garment oriented readily.

2. Backward lender (must have)

3. To continuous quality improvement.

4. To exchange customer facilities.

5. To be continuous of our authorized.

5.4.1.15.L/C Opening functions

The following functions are maintained for opening L/C.

1. Opening the L/C.

2. L/C Lodgment.

3. L/C Retirement.

5.4.1.16. Lodgment of L/C

When the documents received from the foreign correspondent and checked with L/C file by two persons to ascertain the correctness it is found in order at that time make entry in the bill register and pass the necessary voucher (reverse the liability entry). The process is known as lodgment. Document must be lodged within 3 (three) days. In three ways the documents may be transferred to the parties.

5.4.1.17. Retirement of L/C

When the parties retire the documents by cash payment or by MPI/LIM arrangement is known as retirement.

5.4.1.18. Kinds of Bill:

a. At sight

b. Collection (30 cash/ Loan? Barter

Check up the document:

Before lodgment, documents must be checked with L/C file. Check up as under:

1. Invoice