Internship Report on L/C Operation of Janata Bank Internship Report on Career Plan and development Importer

Internship Report
on

L/C Operation of
Janata Bank

Internship Report on

Career Plan and development

Submitted to
Mr. Md Moqbul Ahmed
Assistant Professor
Department of Management Information Systems
University of Dhaka
Dhaka

Prepared by
Mohammad Mohiuddin
SL No-15
MBA 2nd Batch
University of Dhaka

Date of Submission

30th September 2006

Letter of Transmittal

30th September 2006

Moqbul Ahmed
Assistant Professor
University of Dhaka
Dhaka

Dear Sir,

I hereby present the internship report entitled "Career Plan and
Development", which is an integral part of the MBA program.

I have tried my best to gather the most complete information available in
order to prepare this report. I have prepared this report using the
experience that I have gained during my internship. As you will see, my
observations pointed out to the relevant information about Foreign Trade
especially Letter of Credit.

I appreciate having this task. If you need any kind of assistance in
interpreting this report or further explanation, I will be glad to provide
it accordingly.

Sincerely yours,

Mohammad Mohiuddin
Sl No - 15
MBA Program 2nd Batch
University of Dhaka

Table of Contents

"Contents "Page No. "
" " "
"Executive Summary "VIII "
" " "
"INTRODUCTION TO THE INTERNSHIP REPORT "1-3 "
"Origin of the Report "2 "
"Objective "2 "
"Scope "2 "
"Limitation "2 "
"Research Design "3 "
"Report Organization "3 "
" " "
"CHAPTER – 1 : GLOBAL AND BANGLADESH ECONOMY "4-6 "
"Global Economy "5 "
"Bangladesh Economy "5 "
"Banking Sector "6 "
" " "
"CHAPTER – 2 : OVERVIEW OF THE JANATA BANK "7-10 "
"History of the Bank "8 "
"Functions of the Bank "8 "
"Branch network "8 "
"Management system "8 "
"Products and Services "8 "
"Import-Export Business "9 "
" " "
"CHAPTER – 3 : L/C OPERATION : A THEORITICAL REVIEW "11-16 "
"Letter of Credit : Definition "12 "
"Advantages of L/C "13 "
"Parties to a Letter of Credit "13 "
"Uniform Customs and Practices of L/C "14 "
"Regulatory Provisions Regarding L/C "15 "
" "16 "
"BIBLIOGRAPHY " "
" " "

List of Tables

" " "
"Table-1 : Information of ICC& UCPDC "15 "
"Table-2 : Major charges in different steps for L/C "28 "
"processing "29 "
"Table-3 : Avg. Time requirement for the basic "32 "
"activities of L/C issuing "32 "
"Table-4 : Month-wise income from Import L/C "33 "
"Table-5 : Month-wise income from BTB Export L/C "34 "
"Table-6 : Major charges for L/C processing in different"35 "
"Banks "35 "
"Table-7 : Avg. Time requirement in different Banks "36 "
"Table-8 : Number of Import L/C Issued Per Month "36 "
"Table-9 : Number of BTB Export L/C Issued Per Month "38 "
"Table-10: Number of Import L/C Issued Per Country " "
"Table-11: Number of Import L/C Issued Per Item " "
"Table 12: Import, Export and Profit of 2001 to 2005 " "

List of Charts

" " "
"Chart-1 : Operational Flow of the Import-Export Process"16 "
"Chart-2 : Flow Chart mentioning Steps in issuing an L/C"22 "
"in Janata Bank "31 "
"Chart-3 : Comparison of Sources of Income from Import "31 "
"L/C "32 "
"Chart-4 : Comparison of Sources of Income from BTB "32 "
"Export L/C "35 "
"Chart-5 : Month-wise income from Import L/C "35 "
"Chart-6 : Month-wise income from BTB Export L/C "36 "
"Graph 7: Number of Import L/C Issued Per Month "36 "
"Graph 8: Number of BTB Export L/C Issued Per Month "38 "
"Graph 9: Number of Import L/C Issued Per country " "
"Graph 10: Number of Import L/C Issued Per Item " "
"Graph 11: Import, Export and Profit of 2001 to 2005 " "

Preface

An individual can expect to have a good understanding and knowledge on the
various methods of operations performed by the Janata Bank in case of Trade
Finance operations, i.e., Import and Export , going through this report.
Everything is tried to include here in precise form. This report is to be
used only for the academic purpose. I have collected all the necessary and
relevant data and information from various primary and secondary sources.
The data and information is truly and strictly confidential and no one can
use its components in full or partial. I would like to give thanks to
everyone who has helped and encouraged me in the process of preparation of
this report.

Acknowledgement

First of all I would like to thanks to the all mighty for special blessing
in completing the report. This project work is an accumulation of many
peoples' effort. So, with my honesty I would like to show my gratitude to
them who helped me through kind advice, suggestions, directions and co-
operations in preparing this report.

I am thankful to the Department of Mis, University of Dhaka for giving me
such exposure to the practical business world. My warmest thanks go to Mr.
Md. Abul Kashem, Assistant Professor of Dhaka University.

I am thankful also to my class-mates for their help in preparing this
report.

Finally, I am thankful to my internal supervisor Mr. Md. Abul Kashem,
Assistant Professor of Dhaka University, for his appropriate suggestions,
moral support and invaluable co-operation from time to time in completing
the internship program and submitting the report.

However, the responsibilities of errors and omissions in the report, if
any, lie with me.

Md. Majidul Hosain

Executive Summary

This internship report is prepared on the basis of one year long
theoretical knowledge and one months long practical experience at the
Dilkusha Corp. Branch of Janata Bank. This internship program and
preparation of this report helped me a lot to learn about the practical
environment and situation of a financial institution and also make up a
bridge between the theoretical and practical aspects.

Bank provides the means and mechanisms of transferring resources over the
country. Currently it is playing an important role in Foreign Trade. Higher
import demands in china and continued higher domestic consumption in USA
sustained the growth momentum resulting 10.2 % increase in world trade
volume.

Janata Bank has already established a world wide network and relationship
in international Banking through its 4 (four) overseas branches and 1221
foreign correspondents. The Bank has earned an excellent business
reputation in handling and funding international trade particularly in
boosting export & import of the country. The Bank finances exports within
the frame-work of the export policy of the country. It is one of the
pioneers in promoting back to back Letter of Credit for the RMG (Ready Made
Garments) sector.

In order to avoid differences in interpretation of letter of credit terms,
the International Chamber of Commerce has formulated a set of rules to
guide banks in the use of documentary letter of credit, although the first
attempt in this direction was made as early as 1933, the latest version is
contained in publication No. 290 which has come into operation from October
1, 1975.

In processing L/C, Janata Bank earns income through charging various
activities relating to it such as L/C opening charge, postage charge
including Telex and SWIFT, amendment charge, and miscellaneous charges
which include issuance of Bank Certificate, advice etc. L/C opening charge
acts as the major source of income from import L/C.

In February the income from import L/C was highest and afterwards the
income is decreasing gradually. And again in October the income raises
suddenly. In April the income from BTB Export L/C is highest and afterwards
the income is decreasing gradually. The charges charged by Sonali and
Janata Bank are almost the same in most services but PCB charges more than
NCB.

The highest no. of import L/C opened in the month march and most of the L/C
is opened during month February to June. The highest no. of BTB Export L/C
opened in the month February and most of the L/C is opened during month
January to May. China and India dominate the import market. Accessories
dominate the import market.

Correlation analysis shows that there is a high degree of negative
correlation exists between Import and Profit; a low degree of positive
correlation exists between Export and Profit, and a very low degree of
negative correlation exists between Foreign Trade and Profit.

The initial part of the report contains the global & Bangladesh's economy,
Janata Bank's history, operations & activities, financial condition and
services. The main part of the report includes theoretical overview of L/C,
L/C related operations practiced in Janata Bank, analysis of gathered
information and finally recommendations depending on analysis.
INTRODUCTION
TO THE INTERNSHIP REPORT

Origin of the Report:
As a mandatory part the MBA Program, all the students of the faculty of
Business Studies, University of Dhaka have to undergo a three month long
internship program with an objective of gaining practical knowledge about
current business world. After this internship program each and every
students have to submit an internship report mentioning their activities
during the internship program.

I've started my internship at the Janata Bank, Dilkusha corporate branch,
Dilkusha on 3rd January 2006 and at the end of the program I am submitting
my internship report focusing on the contribution of Export-Import Business
to the overall performance of bank especially on profitability perspective.

Objective:
The main objective of this report is to reflect the practical knowledge
that the author gained during his internship and to relate the one year
long theoretical learning of MBA Program. Besides this broad objective, the
followings were given emphasis-
Define Letter of Credit and different stages of L/C processing
Analyze the entire process of L/C issuing in Janata Bank
Identify the sources of income from L/C operations in Janata Bank
Identify the general behavior of the L/C issuance

Scope:
A comprehensive knowledge on the organization and a thorough knowledge on
the Export-Import operation of the organization have come under the scope
of the report.

The report is limited only to Import-Export Business of the Janata Bank,
Dilkusha Corp. Branch in last 4 years and L/C operations during January
2005 to December 2005.

Limitation:
The organization maintains confidentiality in providing some relevant
information, so the author could not incorporate those.

Information regarding L/C is not maintained in a structured manner and they
are so though to gather.

The project covers only 12 months data gathered from the Dilkusha Corp. Br.
of the Janata Bank. It may not represent the overall scenario.

Research Design:
Data collection: Both primary and secondary data is used for this report
writing.
Primary Data: Most of the information was collected from primary
sources. This includes the interviews with the managers and officials
of the bank.
Secondary Data: This includes a number of books, journals, handbooks,
annual report and websites.

Research Approach and Instrument: In this research informal questionnaire
was used to interview the bank officials instead of structured
questionnaire. Observation and experience of month long internship served
as a major source of information.

Sample unit and sample size: Only the L/C issued from January 2005 to
December 2005 in the Dilkusha Corp. Branch of Janata Bank is taken as the
sample unit and the sample size includes all those L/Cs.

Report Organization:
The report is organized as follows:

The initial part of the report includes the global & Bangladesh
economy and overall organization; which describes overall global and
national situation, banking sector as well as the history, background,
operations & activities, financial conditions and the products &
services offered by the Janata Bank at a glance.

The later part is the main project part, which includes five chapters
describing theoretical overview, practice in Janata Bank, behavior
analysis, recommendations regarding L/C operation and overall
profitability point of view.

CHAPTER 1 : GLOBAL AND BANGLADESH ECONOMY
CHAPTER 2 : OVERVIEW OF THE JANATA BANK
CHAPTER 3 : L/C OPERATION : A THEORITICAL REVIEW
CHAPTER 4 : L/C OPERATION : PRACTICED IN JANATA BANK
CHAPTER 5 : L/C OPERATION : ANALYSIS
CHAPTER 6 : RECOMMENDATION AND CONCLUSION
APPENDIX AND BIBLIOGRAPHY

Global Economy
The year 2004-2005 was eventful in the world scenario. Events like natural
disaster, political instability, surging oil price, declining exchange
value of US Dollar had great impact on world economy. Despite these
impediments, world economy had grown by 4% during the year of 2004-2005.
Among the major factors in this growth were the on going economic boom in
china, surges in economic activities in Japan and the USA. During this
period European high income countries experienced less growth rate and
slower economic recovery. Higher import demands in china and continued
higher domestic consumption in USA sustained the growth momentum resulting
10.2 % increase in world trade volume.

According to the global outlook 2005, a report published by World Bank, GDP
growth rate was 6.00 % in south Asian countries except India, compared to
5.6% in the previous year. Productive growth in industrial sectors of
Bangladesh & Pakistan, development of services & agricultural sector of
Nepal and Srilanka were the major contributors to such growth.

The experts believe that global economic growth might slow down in 2006 and
2007. Several factors may contribute to the expected slower growth. Some of
the notable causes for slower will be the investment cycle in the USA may
reach its peak, the world demand may grow much higher than supply resulting
in substantial increase in prices of oil and other essential commodities.
As a result it may imply a decline in income. Central banks around the
world may continue to take more neutral stance in their monetary policies,
which may hinder the investment. Besides this china's effort to achieve a
sustainable pace of growth should contribute to lesser demand in the medium
term. Moreover predictions are that china's aggressive presence in the
world trade may a continuous opportunity for improvement.

Bangladesh Economy
During the year 2004-2005 the growth rate of GDP was 5.52% as against 5.20%
of previous year. Rising oil price and price hike in essential commodities
could not weaken the growth rate. Steady growth in the industrial and
service sector contributed to this achievement.

Growth rate in agricultural sector declined to 2.41% in financial year 2004
as against 3.29% of previous year. Despite favorable weather conditions
there was significant reduction of growth in crops and horticulture sub
sector. As a result in financial year 2004 the growth of agriculture sector
was hampered. The forestry and fishing sub-sector marked a sharp growth due
to increase in domestic demand. While growth rate remained unchanged in
animal farming sector.

Overall growth in the year 2004-2005 was substantial. Exports increased by
16.1% to US $7603 million against US $6548 million of financial year 2003-
2004. Ready made garments sector had substantial contribution to this
growth.

Import increase by 12.9% in financial year 2004-2005 over the previous
year. Sugar import increased by 6.3%, edible oil increased by 29.1%,
fertilizer by 37.8%, capital goods by 5.1%, plastic and rubber articles by
30.5%. While import of rice declined significantly.

At the same time wage earners remittance by Bangladeshis working abroad
increased by 9.7% resulting current account surplus of 0.20 billion.
Consequently foreign currency reserve increased significantly. Anti money
laundering measures also contributed significant increase in foreign
remittance and foreign exchange reserve.

Broad money (M2) growth stood at 13.8% in financial year 2004-2005, higher
than the projected growth of 12.2% but lower than 2003-2004 growth o
f15.65%. Despite various adversities economic growth was substantial.

Banking Sector:
The banking sector of Bangladesh played an important role towards economic
growth of Bangladesh. From the beginning of financial year 2003 Bangladesh
Bank took initiatives in reforming financial sector. Steps for prevention
of money laundering, loan write off policy and effective measures to gain
accountability and transparency made banking operations more acceptable. As
a result, the image of banking sector has been elevated. Bangladesh Bank
also identified five core risks areas for management of the banks and
provided necessary guidelines for implementation. Those are: Foreign
Exchange Risk Management, Asset Liability Management, Prevention of Money
Laundering, Credit Risk Management, Internal Control and Compliance. This
initiative will bring overall discipline in the sector and enhance
operational profit.

History of the Bank www.janatabank-bd.com
Janata Bank established under Bangladesh Bank (Nationalization) Order 1972,
is one of the leading Government Owned Commercial Banks in Bangladesh. The
Bank's Authorized and Paid-up Capital as on 31st December 1994 was Tk.
800.00 crore and Tk. 259.40 crore respectively. Reserve Fund of the Bank as
on 31st December 1994 was Tk. 12.20 crore. The Bank is governed by the
Bangladesh Bank (nationalization) Order 1972 and also by its own internal
regulations.

Functions of the Bank
Janata Bank provides complete range of services to its customers both
domestic and foreign. Rendering of General Banking Facilities & Utility
Services, Deposit Mobilization, providing various Credit Facilities
including Working Capital to Industries, Investment, Outward & Inward
Remittances, Financing Import & Export etc. are the major functions
performed by Janata Bank. In order to provide better services to its
Customers and Correspondents Janata Bank is now more organized to handle
sophisticated operations through a well trained and efficient Manpower.
Recently Janata Bank has entered into computer operations to provide prompt
and efficient services to the Customers.

Janata Bank has been involved in Micro financing since 1973 through its
vast branch network spread all over the country. Bank has launched these
micro credit programs/projects on its own initiative and also in
collaboration with local and foreign agencies.

Branch network
Janata Bank is one of the largest Nationalized Commercial Bank of
Bangladesh. Presently the bank has been functioning with a network of total
904 branches. The Bank has been functioning with a net work of Total 897
Branches including 4 Overseas Branches in U.A.E. Besides Janata Bank, has,
at present 780 Foreign Correspondents abroad. It has 44 Authorized Dealer
Branches and 29 Branches to deal with Wage Earners' Remittances.

Management system
The Bank's present Board of Directors comprises of One Chairman and Six
Directors appointed by the Government.

Products and Services
Financing IT sector
Financing of industry
Ready cash
Windows for SMEs
Loan to travel agencies
Loan to diagnostic center
NRB escrow account
NRB gift cheque

Import-Export Business
Garments) sector.

Janata Bank always aims to increase its foreign exchange business. The Bank
has been doing international banking with all major Banks of the world. It
has been, however, handling bulk of the international businesses with the
following multinational Banks:
Citibank N. A.
American Express Bank Ltd.
Standard Chartered Bank
HSBC.
The Chase Manhattan Bank

Through quite a good number of Authorized Dealer Branches and 1221 nos.
foreign correspondents world wide Janata Bank has been extending full range
import and relevant finance facilities.
To boost up country's Export, Janata Bank has been providing different
kinds of assistance to exporters. Some of which are as under:-
Providing Pre-Shipment and Post-Shipment Finance, Export Guarantee
and bonding facility etc.
Concessional rate of interest for exports Finance.
Back to Back L/C under bonded Warehouse facility
Sight & Unasked L/C against Firm Contract for import of raw
materials.
Sight L/C under EDF
Exporter's Retention Quota A/C both interest bearing and non-interest
bearing.
Export incentive Program.
Banking at Export Processing Zone
Scope for establishment of export oriented industry by 100% foreign
investment and by joint-venture
The sole bank to disburse Government Export Promotion Fund against
export of Computer Software & Data Entry Processing
Providing services to the exporter by utilizing most modernized
technology like Swift, Reuters, Internet, Fax etc. Any latest business
information will be available at their website; http://www.janatabank-
bd.com/
Consultancy and advisory services by an expert group of officials.
Special export financing program towards computer software, data
entry and service.

Facilities Offered:
Opening of L/C at competitive/ reasonable margin and commission
Concessional rate of interests on import finance to the prime
customers & interest rebate facilities.

Import Items:
Capital Machineries and Industrial raw materials.
Fuel & Lubricants.
Intermediate goods.
Consumer durable, spare parts and equipments.
Consumer goods: Baby food, Petroleum, CDSO (Crude Degummed Soyabean
Oil), Oilseeds, Cement, Construction Materials, Fertilizer, Chemicals,
etc.

Salient Features:
A Firm or Company having valid ERC, necessary infrastructural and
technical facilities and sufficient skilled man power related
computer.
Member of BASIS or BCS.
Having Computer Literacy or related professional background.
Preference to the firm/company having prior experience
Satisfactory performance Certificate/Acceptance Letter from
Counterpart abroad.
Valid Export Orders are in hand.

Letter of Credit
A letter addressed by a bank, at the insurance and responsibility of a
buyer of merchandise, to a seller, authorizing him to draw drafts to a
stipulated amount under specified terms and undertaking conditionally or
unconditionally to provide eventual payment for drafts.

Letter of credit is a documentary credit of a bank. This is a kind of pre-
shipment financing. Through this letter bank assures the exporter to give
acceptance of his/her bills or pay the value of the bill when importer
fails to do so. In international trade, there is the peculiar of distance
and unfamiliarity between parties' concerned exporter and importer. If the
importer fails to pay price, the exporter will find it difficult or too
costly to recover the amount. The importer is generally required to open a
letter of credit with a certain bank having branches or agent thereto in
both the importing and exporting countries. Thus the importer proves his
creditworthiness to the foreign exporter by obtaining a letter of credit
from the bank and sending the same to the foreign dealer.

Trade between countries is mainly financed through letter of credit. The
international chamber of commerce has defined a letter of credit as:

"Any arrangement however named or prescribed whereby a bank (the
issuing bank) acting at the request and in accordance with the
instructions of a customer (the applicant of the credit), is to make
payment to or to the order of a third party (the beneficiary ) or is
to pay, accept or negotiate bills of exchange (drafts) drawn by the
beneficiary, or authorize such payments to be made or such drafts to
be paid, accepted or negotiated, by another bank, against stipulated
terms and conditions."

Letter of Credit is quite literally a letter that extends a line of credit
to an individual or business entity. A bank on behalf of one of its
customers writes it. A letter of credit is a banking mechanism that allows
importers to offer secure terms to exporters.

Every Letters of Credit contain these elements:
A payment undertaking given by the bank (issuing bank)
On behalf of the buyer (applicant i.e.; importer)
To pay a seller (beneficiary i.e.; exporter)
A given amount of money
On presentation of specified documents representing the supply of
goods
Within specific time limit
These documents conforming to terms and conditions set out in the
letter of credit
Documents to be presented at a specified place.

Thus when a stipulation is incorporated in the sale contract that the goods
shall be paid by a banker's letter of credit , the seller need not to worry
whether the goods will be cleared by the buyer on arrival at the
destination and the buyer need not block up his funds by making payment in
advance. As a matter of fact, a commercial letter of credit substitutes the
creditworthiness of the banker issuing the letter of credit since it is a
promise by the bank to pay or accept the bill, provided the exporter (the
beneficiary) fulfills the terms and conditions set out in the credit.

Advantages of Letter of Credit
L/C as a means of finance international trade provides benefits to both the
exporter and the importer.

Advantages of L/C to the exporter:
Eliminates credit risk
Reduces ambiguity regarding transaction because terms are
specified in the L/C
Facilitates pre-shipments financing through packing cash
credit or Back to Back L/C

Advantages of L/C to the importer:
Ensures that the goods sent by the exporter comply with the
specifications
Facilitates financing.

Parties to a Letter of Credit:
The buyer, the seller, the issuing bank, the notifying bank, the
negotiating bank, the confirming bank and the paying bank are the parties
to a letter of credit.

Buyer/importer: the buyer/importer, who is applies to the bank for
the opening of a letter of credit
Seller/exporter: the seller/exporter is the beneficiary of the
letter of credit
Issuing Bank: the bank, which issues the letter if credit at the
request of the buyer, is the issuing bank. The buyer gives
instructions regarding the terms and conditions of the credit.
Notifying Bank: the correspondent bank situated in the same place
as that of the seller, which advices the credit to the beneficiary.
But the notifying bank does not commit itself to any liability
under the credit. Generally, the services of a notifying bank are
utilized when the credit is advised to the seller through a cable
message.
Negotiating Bank: the bank which negotiates the bills or drafts
under the letter of credit. Generally, the same bank acts as the
notifying and the negotiating bank.
Confirming Bank: usually, the seller insists that a bank in his own
country must confirm the credit. Such a bank is known as the
confirming bank. The advantage of this confirmation from the
seller's point of view lies in the fact that he is assured of
payment as soon as the shipment documents are presented his own
centre. It may be noted that, the primary liability lies with the
confirming bank, once the credit is confirmed by it, provided the
seller fulfills the terms and conditions of the credit.
Paying Bank: the bank on which the bill or draft is drawn. It can
be the issuing bank, the notifying bank or the confirming bank.

The following section will gives a more detailed overview of how these
parties participate in the L/C operations.

A Letter of Credit, simply defined, is a written instrument issued by a
bank at the request of its customer, the Importer (Applicant), whereby the
bank promises to pay the Exporter (Beneficiary) for goods or services,
provided that the Exporter presents all documents called for, exactly as
stipulated in the Letter of Credit, and meets all other terms and
conditions set out in the Letter of Credit. A Letter of Credit is also
commonly referred to as a Documentary Credit.

Uniform Customs and Practices of L/C
In order to avoid differences in interpretation of letter of credit terms,
the International Chamber of Commerce has formulated a set of rules to
guide banks in the use of documentary letter of credit, although the first
attempt in this direction was made as early as 1933, the latest version is
contained in publication No. 290 which has come into operation from October
1, 1975.

It may, however, be pointed out here that the uniform customs and practice
for documentary credits are not law as such. The parties have voluntarily
agreed to apply the set of rules. Banks in 153 countries adhere
collectively to the rules laid down in uniform customs and practice. Bank
in another 23 countries adhere individually to them. Banks in these
countries expressly state that the letters of credit issued by them are in
accordance with uniform customs and practice, publication no. 290.

UCPDC-500 is a set of rules formulated by International Chamber of Commerce
(ICC) to apply to all transactions in Letters of Credit carried out by
banks. The purpose of the rules is to bring about uniformity in the form of
Letters of Credit and the practice and Procedures adopted by banks in
handling the instruments. Banks all over the world handle letters of
credit, and variations in forms and procedures and the civil and commercial
laws of different countries may cause confusion in their dealings with one
another. In order to provide common understanding about the interpretation
of the terms and terminology, a uniform code is very essential. Therefore,
the International Chamber of Commerce formulated the Uniform Customs and
Practice, which is universally accepted, and Letters of Credit transactions
everywhere are subject to this set of rules.

These uniform customs and practice for documentary credit were first
published in 1933. Revised versions were issued in 1951, 1962, 1974 and
1983. The last version of the Uniform Customs and Practice for documentary
credits was adopted by the ICC council in 1993 and published as ICC
publication no. 500 in may 1993.

The following table provides brief information of ICC & UCPDC-500

"Table- 1 : "
"Information of ICC& UCPDC "
"ICC "(International Chamber of Commerce) "
" "world business organization "
"Founded "1919 "
"Membership and "Thousands of members companies and "
"Association "associations of over 153 countries. "
"Purpose "To promote international trade, "
" "investment system and market economy "
" "worldwide. "
"ICC publication "UCPDC-500, URR-525, URC-522 etc. "
"UCPDC "Uniform Customs and Practice for "
" "Documentary Credits. "
"Application "Import and export through L/C "
"1st publication "1933 "
"Revised versions were "1951, 1962, 1974, 1983 and 1993 "
"issued " "
"Latest version "UCPDC (Rev. 1993) "
"Effective from (in "January 01, 1994 "
"force) " "
"Number of Articles "49 "
"UCPDC-500 contains "Definition, liabilities and "
" "responsibilities of all parties "
" "involved in L/C, Rules and Guidelines "
" "for L/C operation (issue, advise, "
" "negotiation and reimbursement). "
"Source : Secondary Data "

Regulatory Provisions Regarding L/C
Local Rules:
Guidelines for foreign exchange transaction regulation on import
(guideline-chapter-XV)
The Import/Export Act 1950
Import policy for the concerned year
Customs duty, VAT, SRO, Tariff
Rate of exchange and its application
Fe Circular, IBD Circular
Public notice issued by CCI&E Office

Uniform Rules:
UCUDC-ICC Publication No. 500
URC-ICC Publication No.522
URR-ICC Publication No.525
INCOTERM-ICC Publication No.560
Harmonized Commodity Description & Coding System (H.S. Code)

Operational Flow of the Process:

The complete Import and Export process in includes the following stages.
Both the importer and exporter are involved in this flow. Some tasks are
done by importer's side and some are done by exporter's side and some are
done by others. The process is very much like the following:

Chart-1:

Operational Flow of the Import-Export Process

Description of the Flow:
1. Establish a buying and selling contract between the buyer and the
seller.
2. Submission of application with necessary documents to the bank to
issue an L/C
3. L/C issue and advise it to the advising bank
4. Issue reimbursing instruction to the reimbursing bank
5. Advise the L/C to the exporter by the advising bank after verification
of the L/C
6. Asking for the confirmation of the L/C to the importer
7. Issuing request letter by the issuing bank to the confirming bank (as
per exporter's requirement) toe confirm the L/C
8. Issuing confirmation by confirming bank
9. Shipment of the goods
10. Submit required document to the negotiating bank for negotiation
11. Negotiate the bill by the negotiating bank and make payment to the
exporter
12. Claim to the issuing bank or reimbursing bank for payment
13. Payment reimbursed by the issuing bank or reimbursing bank
14. Ask the importer to collect the documents from the bank
15. Collect documents from the issuing bank by paying the bank's dues.

Garments) sector. In Janata Bank, only authorized branches are allowed to
open an L/C.

Considered Factors of the L/C Applicant:
Account holder of the bank: first of all, L/C applicant must be a
client of the bank. If a new client comes in for opening L/C, he/she
has to open an account with Janata bank first.
Trustworthiness: this is the vital issue while considering about
opening the L/C. the past experience of dealings with that person is
considered. For a new applicant, his/her previous dealings with other
banks are considered.
Volume of business: the volume of business is also a major factor to
be considered.
Post-import retirement: Post-import retirement is another factor that
will have to be considered for opening L/C.
Detailed analysis of financial condition: Detailed analysis of
financial condition of the applicant is required for the process,
especially for a new applicant.
And finally the personal relationship of the applicant with the bank
or its high officials plays a vital role in opening L/C.

Documents required while applying for L/C:
In credit operation, all parties deal with documents, and not with goods,
services and/or other performance to which documents may relate. Thus
documentation has foremost important in all types of L/C processing and
operations. The following documents are required for opening L/C with
Janata bank for a new applicant.

Trade License (up to date)
Import Registration Certificate (IRC) (up to date)
Tax Identification Number (TIN) (up to date)
VAT Registration Certificate (up to date)
Membership Certificate of a bona fide trade body (up to date)
Chamber Membership Certificate
L/C Application (in letterhead pad of the client)
LCA (L/C Application) form-duly filled in and signed by the importer
IMP Form- duly filled in and signed by the importer
Charge documents
Supplier's Credit Report
Applicant's Credit Report
Other necessary papers depending on the nature of import.

Forms provided by Janata Bank:
After scrutinizing the above mentioned documents carefully, the authorized
officer delivers the following forms to be filled in by the applicant of
L/C.

L/C Application Form:
L/C Application Form is a sort of an agreement between the customer and the
bank on the basis of which letter of credit is opened. Janata bank provides
a printed form for opening of L/C to the importer. A special adhesive stamp
of value TK. 150 is affixed on the form in accordance with the stamp act
currently in force. Usually, the importer expresses his decision to open
the L/C quoting the amount of margin in percentage. In filling up the form,
the importer has to provide the following information:

Full name and address of the importer
Full name and address of the beneficiary
Draft amount
Time bar within which the documents should be presented
Sales type (CIF/FOB/C&F)
Brief specification of commodities, price, quantity, indent No. etc.
Country of origin
Import license No.
IRC No.
Account No.
Documents No.
Insurance Cover Note/Policy No., date, amount
Name and address of insurance company
Whether the partial shipment is allowed or not
Whether the transshipment is allowed or not
Last date of shipment
Last date of negotiation
Other terms and conditions (it any)
Whether the confirmation of the credit is requested by the
beneficiary or not
The L/C application must be completed / filled in properly and signed
by the authorized person of the importer before it is submitted the
issuing bank.

L/C Authorization Form:
The Letter of Credit Authorization Form (LACF) is the form prescribed for
the authorization of opening Letter of Credit / payment against import and
used in lieu of import license. The authorized dealers are empowered to
issue LCA Forms to the importers on the basis of licensing of the Import
Policy Order in force to allow import into Bangladesh. If foreign exchange
is intended to be bought from the Bangladesh Bank against an 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 authorized
dealers are issued in set of five (5) copies each. First copy is exchange
control copy, which is used for opening of LC and effecting remittance.
Second copy is the custom purpose copy, which is used for clearance of
imported goods from custom authority. Third and fourth copies of LCAF are
to be sent to concerned area of CCI&E office by authorized
dealer/Registration Unit of Bangladesh Bank. Fifth copy is kept as office
copy by authorized dealer/Registration Unit. The Letter of Credit
Authorization Form (LCAF) contains the following-

Name and address of the importer
IRC No. and the year of renewal
Amount of L/C applied for (both in figure and in word)
Description of item(s) to be imported
ITC number / HS Code number
Signature of the importer with seal
List of goods to be imported

Import Permit Form
Import Permit Form contains the following-
L/C authorization form no.
date
value in taka
registration of LCAF
quantity of goods
invoice value
country of origin
port of shipment
name of the steamer
indenter's address

Communication media:
Communication between the parties and bank involved in the process is very
important for the efficiency of L/C operation. Janata Bank has the facility
to use the following communication media:
postage for mailing
courier
cable / telex

L/C Issuing Process:
The generalized process of L/C issuing in Janata Bank is explained below.
For a business customer approached for the first time, the process will
start with opening an account with the bank.

Step 1: Application in company's letterhead pad

First of all, the person shall have to submit an application written
or printed in the company's letterhead pad. In the application he/she
will have to mention the name of the products to be imported, margin
and so on. The applicant shall have to apply for the required forms of
the bank.

Step 2: Discussion between Janata Bank and the party:
After receiving the application form, the Bank pays attention to the
issues mentioned below.
The products that are going to be imported are considered.
Because there are restrictions by the government on some
products.
The quoted rates are specially analyzed as there also some
restrictions by the government.

Step 3: Collecting forms and depositing those with necessary documents:
In this step, the applicant collects the L/C application form, LCA
Form and IMP Form from the bank. These forms are to be filled up by
the client. The forms and all other necessary documents are then
deposited at the desk of the dealing officer.

Step 4: Checking Documents:

All the documents are checked out by the dealing officer. He/she
checks specially the quoted rates, the terms and conditions of the
indent or pro forma invoice and the validity of the documents.
Generally the person from whom the forms are collected is engaged in
checking out the documents.

Step 5: Putting L/C No:
After checking the documents and L/C No. is given. Generally the
officer who checks the documents puts the L/C No.

Step 6: Preparing offering sheet:

The offering sheet is prepared by the dealing officer. Usually the
officer who checks the documents prepares the offering sheet.

Step 7: Singing offering sheet:

The offering sheet is then signed by the officer having the authority
to open the L/C of the specified amount. If it is within the maximum
limit of the amount (for which the L/C is applied) of the SAVP or
branch manager, he can sign it. But if it is beyond his/her limit
proposal must be sent to the head office, either for case-to-case
sanction or for credit limit. Generally, in Janata Bank, SAVP or
branch managers are empowered to open an L/C without communicating
with the head office, if the L/C amount is within his / her limit.

Step 8: Typing the L/C:

After the approval of opening L/C is given, the L/C is typed in a
structured format.

Step 9: Checking the L/C:

A final check is done to find out any discrepancies after the typing
is completed. This is done by the dealing officer who is generally in
charge of the whole process.

Step 10: Crediting the account of the customer:

On the basis of credit arrangement with the bank of r import
financing, the customer's account is affected with certain credit.

Step 11: Dispatching L/C:

At the final stage, the L/C is dispatched through postage mail or
telex or SWIFT or so forth.

Although this is the generalized process for issuing L/C, for the speed of
the process sometimes the typing and checking of documents are done before
the offering sheet is signed. Then after signing the L/C it is dispatched.

Chart-2:

Flow Chart mentioning Steps in issuing an L/C in Janata Bank

Letter of Credit in Import Financing
One of the important functions of the commercial banks in the world is to
undertake the import of merchandise into the country and payment of foreign
exchange towards the cost of the merchandise to foreign suppliers.
Bangladesh's import policy requires letters of credit (L/C) for all imports
of goods. However, in certain condition goods can be imported without L/C
but within a limit of US $25,000 annually per importer. L/C, as a tool of
financing, provides benefits to both the importer and the exporter. Import
financing by Janata Bank can be shown by the diagram below:

However, post import finance is beyond the scope of this report. Thus the
following few sections will describe the import L/C processing of Janata
Bank.

Import L/C – The Process:
The whole process of L/C in Janata Bank completes in three stages:
L/C issuance
Lodgment
Retirement

L/C Issuance: This is the step where the importer opens an L/C with
the bank. This is the main part the report will focus on and will be
discussed in detail later.

Lodgment: On receipt of the documents from the negotiating bank, the
L/C issuing bank will make entry the particulars of the documents in
the "Inward Foreign Bills Register" and prepare the voucher by
converting the foreign currency into Bangladeshi Taka. This stage is
known as the Lodgment of import bills.

Retirement: On receipt of the copy of lodgment from the bank, the
importer will deposit the required amount and take delivery of the
shipping documents. This stage is known as the Retirement of Import
Bills.

Check list for Import L/C:
Janata Bank uses a checklist to verify the overall issuing process of
import L/C. The check list contains the following:

Written request of importer for issuing L/C is obtained
L/C application form duly filled in, signature of importer / guarantor
is taken and verified, affixing adhesive stamp with proper value &
defaced.
IMD form obtained
LCAF duly filled in, signed by the importer & verified by Bank's
official with proper seal
Copy of indent / pro forma invoice is duly signed & accepted
Insurance cover note obtained covering minimum "B" category risk
Evidence of payment of VAT registration fee through Form-Ga (VAT
registration certificate)
IRC / pass book is valid
Opening of L/C is duly approved by competent authority, as per
designated power
Margin, commission, and other charges are realized as per prescribed
rates properly and timely
Proof regarding obtainment of TIN (Tax identification No.)
Valid membership certificate issued by member organization of FBCCI
Contra liability entries are passed on the same day of opening of L/C
Margin is realized on the same day of the opening of L/C
Commission and other charges are realized on the same day of the
opening of L/C
L/C's is advised promptly within 24 hours time
Amendments of L/C in respect of time, value or items are effected in
accordance with written request of L/C openers and charges thereof
realized
L/C copy along with LCAF is sent to the office of the CCI&E within
fifth of every month covering the entire previous month
Registration of indenter is valid. Indenter must incorporate
Bangladesh Bank permission no. in indent
VAT is being deducted on L/C commission and sent to competent
authority of Janata Bank
Balancing of liabilities and margin is done periodically

Letter of Credit in Export Financing
Export business creates inward remittance. For that reason, government
encourages investing in export business and offers incentive like tax and
duty free entrance of raw materials in RMG business in our country. As
import of one party is an export to the other, L/C also plays a vital role
in financing exports. Following diagram shows means of export financing
that Janata Bank deals with.

Post shipment finance has not been included for discussion in this report.
Thus the following few sections deal with the means that Janata Bank uses
for pre shipment finance, i.e. PCC and BTB L/C.

Packing Cash Credit (PCC):
PCC is a short term credit with a fixed repayment date granted by the bank
to an eligible exporter. This loan is generally given on the basis of
irrevocable L/C, but sometimes it can be given without L/C on the basis of
agreement which is given to valued constituents or exporters.

PCC is given for the following purpose:
To buy raw materials
To process raw materials
To pay freight
To pay insurance
To pay inspection fees
To pay packing charge

Documents verified for granting PCC:
After the L/C is submitted to the bank counter, the bank starts to process
all the documents as per the L/C terms and conditions. Before sanctioning
the PCC, the following points are verified in Janata Bank:
Check whether the L/C is issued by the reputed bank (1st class bank).
Obtain the credit report of importer, especially when the applied loan
amount is large.
L/C expiry date is checked and PCC is not allowed after that date.
Stock report must be submitted regularly to the bank
Loans are given for the period from the time of purchasing raw
materials up to shipment of goods.

Back To Back L/C:
Back to Back L/C may be defined as an L/C which is backed by another. In
Bangladesh, this type of L/C is being used in the form of pre-shipment
finance especially against export order of ready-made garments. BTB L/C is
the highest processed L/C in Janata Bank. Due to extensive use of BTBLC,
Bangladesh Bank has introduced a special chapter in its "Guidelines for
Foreign Exchange Transaction".

BTB L/C is opened against lien of another credit. It is an L/C where the
beneficiary is procuring goods from suppliers and like the suppliers to get
the benefit under the credit. Beneficiary may need to purchase the raw
materials and accessories and make the payment by opening a second L/C
favoring the ultimate supplier. To do this, the beneficiary requires Janata
Bank to open another L/C in favor of the supplier on the original credit.
Such an ancillary L/C is known as Back to Back L/C.

The original or master L/C forms the security based on which the bank
undertakes the risk under BTB L/C. BTB L/C is issued in conformity of the
terms and conditions as stipulated in master L/C. In our country, BTB L/C
is generally opened for reprocessing purpose to manufacture exportable
merchandise. The value of BTB L/C is restricted up to a maximum amount of
FOB value of the master Export L/C.

Documents Necessary for Export L/C:
As soon as the seller / exporter receives the credit and is satisfied that
he can meet its terms and conditions, he is in position to load the goods
and dispatch them. The seller then sends the documents evidencing the
shipment to the bank. Exporter will submit those documents in accordance
with the terms and conditions as mentioned in L/C. generally the documents
observed by the bank are as follows:

Bill of Exchange
Commercial Invoice
Bill of Lading
Air Way Bill
Rail Way Receipt
Insurance Policy
Certificate of Origin
Certificate of Manufacture
Inspection Certificate
Packing List
Clean Report of Finding (CRF)

Check List for Export L/C
Like import L/C, Janata Bank officials use a checklist to make the L/C
operation flawless also for Export L/C. The points of the Export L/C
checklist are as follows:
Authenticity of Export L/C established
If advised by another local bank bona fide of L/C established through
paper communication which is documented
In case of 2nd beneficiary L/C, KYC of both beneficiary established
and documented
BTB L/C pro forma invoice apparent legitimacy established by connected
papers
Possible in-house L/C or BTB L/C transaction eliminated
Exporter or BTB L/C opener is not a first time client
L/C opener has established adequate collateral security with the bank
Present L/C value is not disproportionate to past business record of
the client
CIB report is clean
Market report is good
BTB L/C is within the production capacity of the RMG unit/exporter's
unit
Quota availability and validity
Sufficient lead time is available to ensure export in time
No track record of forced payment of BTB L/C due to shortage of funds
Value addition requirement as per IPO in force.

Source: Primary Data

Amendments to Letter of Credit:
An amendment to L/C means to make a change to the terms of the credit.
After opening a L/C either beneficiary or applicant sometimes observes that
the terms and conditions laid down in the credit are not complete to serve
their purpose. They need some changes or alteration to the credit to make
it workable. This is done by the way of issuance of amendment to the L/C.

At the request of the applicant, as the issuing bank Janata Bank only can
issue amendment to the L/C. there can be more than one amendment to a
credit. All the amendments form an integral part of the original credit.
L/C amendments are to be communicated by authenticated telex, SWIFT or
mail. If there is more than one amendment to a credit, all the amendments
must bear the consecutive serial number so that the missing of any
amendment can be identified by the advising bank or the beneficiary.

If the L/C is an irrevocable one, the amendment can not be done without the
consent of both the partied; i.e. he beneficiary and the applicant. Janata
Bank as the issuing bank can make amendments but if the beneficiary does
not accept the amendment, it will not be effective. If the L/C is
revocable, the applicant can make any amendment to the L/C at any time he
desires and such amendment will be effective if the credit is not executed.

Janata Bank generally asks for amendment on the following points:
Extension of shipping date
Extension of expiry date
Increase or decrease of L/C value
Increase or decrease of quantity of goods
Change in description of merchandise
Name and address of the beneficiary
Inserting of new clause
Change the mode of transport
Change of the loading port or destination
Change of certain terms and conditions of L/C
Terms of delivery; i.e. FOB, CFR, CIB
Inspection clause

Bank charge in different steps during L/C processing:
The following table shows the major cost accounts that the bank charges for
different steps in L/C processing:

"Table-2: "
"Major charges in different steps for L/C processing "
"L/C opening charges "
"Cash "1st Quarter ".5% "
" "Subsequent ".25% "
" "Qtr. "Taka 250 "
" "Minimum " "
"BTB "1st Quarter ".75% "
" "Qtr. "Taka 300 "
" "Minimum " "
"Deferred "1st Quarter ".8% "
" "Qtr. "Taka 300 "
" "Minimum " "
"Inland "1st Quarter ".5% "
" "Qtr. "Taka 250 "
" "Minimum " "
"Postage charges "
"Mail "Taka 100 "
"Courier "At actual, Min. Taka 1500 "
"Telex "At actual, Min. Taka 1500 "
"SWIFT "At actual, Min. Taka 1500 "
"Amendment Charges "
"Value increased / decreased"Taka 250 "
"Maturity extension "Taka 250 "
"Others "Taka 100 "
"Other Charges "
"L/C cancellation "Taka 500 "
"Export L/C advising charge "Own party: Taka 250 "
" "Other Bank party: Taka 500 "
"L/C transfer "Taka 500 + Actual Telex Charge "
"Issuance of Bank "Taka 100 "
"Certificate " "
"Stamp "Taka 150 "
"Source: Primary Data "

Required Time duration in L/C Processing:
In most cases the L/C clients of the banks are regular and old. For that
reason, the bank generally has all the required documents for opening L/C
of the clients. When a regular client applies to open another L/C, they
just provide photocopies of most documents and the bank officials do not
take much long time to check those documents. Even often a regular client
first informs his intention to open another by phone and Bank's officials
start the process; although this highly depends on nature of personal
relationship of the client with the back. For a regular client it generally
lakes less than an hour to open another L/C. however, in case of new client
bank's officials engaged in L/C issuing process check the documents
thoroughly and often it takes time to make the client understand the bank's
requirements. However, it generally does not take more than two days even
for a new client applying to open an L/C.

"Table-3: "
"Average Time requirement for the basic activities of L/C issuing "
"process "
"Activity "Average Required Time (in minutes) "
"Checking Documents "10 "
"Putting L/C No. "2 "
"Preparing Offering Sheet"12 "
"Signing Offering Sheet "15 "
"Typing the L/C "15 "
"Checking the L/C "10 "
"Crediting the account of"15 "
"the customer " "
"Total Time* "90-120 "
" "

Total time mentioned here is not simple addition of the time required for
basic activities. Rather it is provided from the interview with the bank
officials.

Relevant activities that affect the time structure:
Application for forms in company letterhead pad
Discussion between bank and the applicant
Filling in the forms
Dispatching the L/C

Analysis of Income from L/C:
In processing L/C, Janata Bank earns income through charging various
activities relating to it such as L/C opening charge, postage charge
including Telex and SWIFT, amendment charge, and miscellaneous charges
which include issuance of Bank Certificate, advice etc. as the amount of
income of any party is considered as confidential information and the
author committed not to disclose the figures, the following section
provides only an idea of comparison of income from L/C related activities.
In case of Export L/C processing, all most all the Export L/C are BTB L/C.

Comparison of Sources of Income from Import L/C:
The following chart exhibits a comparison of income at Janata Bank,
Dilkusha Corp. Branch, from different activities relating L/C processing
without mentioning the confidential income amounts, during the period of
January to December, 2005.

Chart-3:
Comparison of Sources of Income from Import L/C

The diagram shows that L/C opening charge acts as the major source of
income from import L/C as it provides more than half of the total. Earnings
form miscellaneous charges constitutes just below one fifth of the banks
total income whereas income from amendment and postage charges are just
more than one tenth of the bank's total income.

Comparison of Sources of Income from BTB Export L/C:
The following chart exhibits a comparison of income at Janata Bank,
Dilkusha Corp. Branch, from different activities relating L/C processing
without mentioning the confidential income amounts, during the period of

Chart-4:
Comparison of Sources of Income from BTB Export L/C

The diagram shows that L/C opening charge acts as the major source of
income from BTB Export L/C as it provides more than half of the total.
Earnings form amendment charges constitutes just below one fifth of the
banks total income whereas income from miscellaneous and postage charges
are just more than one tenth of the bank's total income.

Month-wise Income from Import L/C:
The following chart exhibits a comparison of month-wise income at Janata
Bank, Dilkusha Corp. Branch, from Import L/C with mentioning the
confidential income amounts, during the period of January to December,
2005.

The chart shows that in February the income was highest and afterwards the
income is decreasing gradually. And again in October the income raises
suddenly.

Month-wise Income from BTB Export L/C:
The following chart exhibits a comparison of month-wise income at Janata
Bank, Dilkusha Corp. Branch, from BTB Export L/C with mentioning the
confidential income amounts, during the period of January to December,
2005.

The chart shows that income is increasing and decreasing gradually in wave
form. In April the income is highest and afterwards the income is
decreasing gradually.

Analysis of Charges in L/C Processing of Different Banks

The following table shows the major cost that the different bank charges
for different steps in L/C processing:

"Table-6: "
"Major charges for L/C processing in different Banks "
"L/C opening charges "Janata Bank "Sonali Bank "City Bank "
" " " "Ltd. "
"Cash "1st Quarter ".5% ".5% ".5% "
" "Subsequent ".25% ".25% ".3% "
" "Qtr. "Taka 250 "Taka 250 "Taka 400 "
" "Minimum " " " "
"BTB "1st Quarter ".75% ".75% ".6% "
" "Subsequent ".5% ".5% ".4% "
" "Minimum " " " "
"Deferred "1st Quarter ".8% ".8% ".6% "
" "Subsequent ".4% ".5% ".3% "
" "Minimum " " " "
"Inland "1st Quarter ".5% ".5% ".6% "
" "Subsequent ".25% ".25% ".35% "
" "Minimum " " " "
"Postage charges "
"Mail "Taka 100 "Taka 100 "Tk.100(Local)"
" " " "Tk.300(Foreig"
" " " "n) "
"Courier "At actual, "At actual, "At actual, "
" "Min. Tk.1500"Min. Taka "Min. Taka "
" " "1500 "1500 "
"Telex "At actual, "At actual, "At actual, "
" " "1500 "3500 "
"SWIFT "At actual, "At actual, "At actual, "
" " "1500 "3500 "
"Amendment Charges "
"Value increased / decreased"Taka 250 "Taka 250 "Taka 500 "
"Maturity extension "Taka 250 "Taka 250 "Taka 500 "
"Others "Taka 100 "Taka 100 "Taka 500 "
"Other Charges "
"L/C cancellation "Taka 500 "Taka 500 "Taka 500 "
"Export L/C advising charge " " " "
"Own party: "Taka 250 "Taka 250 "Taka 750 "
"Other Bank party: "Taka 500 "Taka 500 "Taka 1000 "
"L/C transfer "Taka 500 + "Taka 500 "Taka 1000 "
" "Actual Telex" " "
" "Charge " " "
"Issuance of Bank "Taka 100 "Taka 100 "Taka 200 "
"Certificate " " " "
"Stamp "Taka 150 "Taka 150 "Taka 150 "

The above table shows that, the charges charged by Sonali and Janata Bank
are almost the same in most services. But the costs charged by CBL vary in
most cases from these two, although not a great degree. In almost all
cases, CBL charges higher than the two NCBs. According to bank officials
interviews, this is due to CBL being a PCB and Sonali and Janata Bank being
NCBs. the officials of CBL also claim that they provide much better and
faster service , which justifies charging higher costs.

Analysis of Time Requirement in L/C Processing of Different Banks

"Table-7: "
"Average Time requirement for the basic activities of L/C issuing "
"process "
"Activity "Average Required Time (in minutes) "
" "Janata Bank "Sonali Bank "City Bank Ltd. "
"Checking Documents "10 "10 "5 "
"Putting L/C No. "2 "2 "1 "
"Preparing Offering Sheet"12 "10 "10 "
"Signing Offering Sheet "15 "15 "5 "
"Typing the L/C "15 "15 "15 "
"Checking the L/C "8 "8 "5 "
"Crediting the account of"15 "15 "10 "
"the customer " " " "
"Total Time* "90-120 "90-120 "50-60 "

Total time mentioned here is not simple addition of the time required for
basic activities. Rather it is provided from the interview with the bank
officials.

From the table the following decision can be made:
City Bank Ltd. as PCB works much faster than the two NCB mentioned
Putting L/C no. is the least time consuming activity in the process
Typing the L/C and checking the L/C are the activities that do not
vary much from bank to bank in terms of time
Typing the L/C is the most time consuming activity among the
mentioned.

Relevant activities that affect the time structure:
Application for forms in company letterhead pad
Discussion between bank and the applicant
Filling in the forms
Dispatching the L/C

Analysis of Behavior or Trend

Number of Import L/C Issued Per Month

The following table shows the number of import L/C issued per month at
Janata bank, Dilkusha Corp. Branch, during the period of January to
December, 2005.

Table-8: Number of Import L/C Issued Per Month
"Month "No. of L/C "
" "issued "
"January "8 "
"February "22 "
"March "26 "
"April "23 "
"May "17 "
"June "12 "
"July "8 "
"August "7 "
"September"8 "
"October "10 "
"November "9 "
"December "10 "
"Total "160 "

Graph 7: Number of Import L/C Issued Per Month

The table and chart shows that, the highest no. of import L/C opened in the
month march and most of the L/C is opened during month February to June.
And the lowest no. of L/C is opened in month August.

Number of BTB Export L/C Issued Per Month

The following table shows the number of BTB Export L/C issued per month at
Janata bank, Dilkusha Corp. Branch, during the period of January to
December, 2005.

Table-9: Number of BTB Export L/C Issued Per Month
"Month "No. of L/C "
" "issued "
"January "10 "
"February "30 "
"March "21 "
"April "22 "
"May "15 "
"June "5 "
"July "9 "
"August "12 "
"September"14 "
"October "16 "
"November "8 "
"December "7 "
"Total "169 "

Graph 8: Number of BTB Export L/C Issued Per Month
The table and chart shows that, the highest no. of BTB Export L/C opened in
the month February and most of the L/C is opened during month January to
May. And the lowest no. of L/C is opened in month June.
Number of Import L/C issued per Country
The following table shows the number of Import L/C issued to different
countries at Janata bank, Dilkusha Corp. Branch, during the period of

Table-10: Number of Import L/C Issued Per Country
"Country "No. of L/C "
" "issued "
"India "42 "
"China "31 "
"Singapore"12 "
"Netherlan"9 "
"ds " "
"Thailand "3 "
"Indonesia"7 "
"Switzerla"4 "
"nd " "
"S. Korea "14 "
"Other "38 "
"Total "160 "

Graph 9: Number of Import L/C Issued Per country

The table and chart shows that, China and India dominate the import market.
The highest no. of import L/C opened the beneficiary country India.

Item-wise BTB Export L/C

The following table shows the number of BTB Export L/C issued to different
items at Janata bank, Dilkusha Corp. Branch, during the period of January
to December, 2005.

Table-11: Number of Import L/C Issued Per Item
"Item "No. of L/C "
" "issued "
"Fabrics "34 "
"Yarn "38 "
"Accessori"92 "
"es " "
"others "5 "
"Total "169 "

Graph 10: Number of Import L/C Issued Per Item

The table and chart shows that, accessories dominate the import market.
Analysis of Stability of Export-Import:

Standard Deviation, Variance and Co-efficient of Variation:
" "Import "Export "FrnTrd "Profit "
"2001 "192.43 "250.54 "442.97 "4.50 "
"2002 "203.69 "283.81 "487.50 "4.76 "
"2003 "172.54 "436.06 "608.60 "7.49 "
"2004 "197.20 "267.53 "464.73 "5.80 "
"2005 "155.01 "325.00 "480.01 "22.70 "
"Sum "920.87 "1562.94"2483.81"45.25 "
"Avg. "184.17 "312.59 "496.76 "9.05 "
"SD "17.91 "66.49 "57.95 "6.91 "
"Variance"320.92 "4421.55"3358.76"47.69 "
"Co-effic"9.73 "21.27 "11.67 "76.30 "
"ient of " " " " "
"Variatio" " " " "
"n " " " " "

Growth Rate Import
"Year "Import"Import Growth Rate "
"2001 "192.43" "
"2002 "203.69"5.85% "
"2003 "172.54"-15.29% "
"2004 "197.20"14.29% "
"2005 "155.01"-21.39% "
"SD "17.91 "14.68% "

Growth Rate Export
"Year "Export"Export Growth Rate "
"2001 "250.54" "
"2002 "283.81"13.28% "
"2003 "436.06"53.65% "
"2004 "267.53"-38.65% "
"2005 "325.00"21.48% "
"SD "66.49 "33.13% "

Growth Rate Foreign Trade
"Year "FT "FT Growth Rate "
"2001 "442.97" "
"2002 "487.50"10.05% "
"2003 "608.60"24.84% "
"2004 "464.73"-23.64% "
"2005 "480.01"3.29% "
"SD "57.95 "17.57% "

Performance analysis


Table 12: Import, Export and Profit of 2001 to 2005
Amount in Crore Taka

The performance of the Janata Bank in the last five (5) years especially in
the sector of import and Export and comparison of the data with the net
profit of the branch is shown above and graphically presented below:

Graph 11:
Import, Export and Profit of 2001 to 2005

A statistical tool like correlation analysis is done here to determine the
relationship between the following:
Import business and profitability
Export business and profitability
Foreign Trade business and profitability
Correlation Analysis:

Correlation between Import and Profit:
" "Import "(X-[pic" "Profit "(Y-[pic" " "
" " "]) " " "]) " " "
"Year "X "x "x2 "Y "y "y2 "xy "
"2001 "192.43 "8.26 "68.16 "4.50 "(4.55) "20.70 "(37.56)"
"2002 "203.69 "19.52 "380.87 "4.76 "(4.29) "18.40 "(83.72)"
"2003 "172.54 "(11.63)"135.35 "7.49 "(1.56) "2.43 "18.15 "
"2004 "197.20 "13.03 "169.68 "5.80 "(3.25) "10.56 "(42.33)"
"2005 "155.01 "(29.16)"850.54 "22.70 "13.65 "186.32 "(398.09"
" " " " " " " ") "
"Sum/Avg"184.17 " "1604.60"9.05 " "238.43 "(543.56"
". " " " " " " ") "

Co-efficient of Correlation:

r = -0.878799573
Co-efficient of determination, r2 = 0.772289

Correlation between Export and Profit:
" "Export "(X-[pic" "Profit "(Y-[pic" " "
" " "]) " " "]) " " "
"Year "X "x "x2 "Y "y "y2 "xy "
"2001 "250.54 "(62.05)"3849.95"4.50 "(4.55) "20.70 "282.32 "
"2002 "283.81 "(28.78)"828.17 "4.76 "(4.29) "18.40 "123.46 "
"2003 "436.06 "123.47 "15245.3"7.49 "(1.56) "2.43 "(192.62"
" " " "3 " " " ") "
"2004 "267.53 "(45.06)"2030.22"5.80 "(3.25) "10.56 "146.44 "
"2005 "325 "12.41 "154.06 "22.70 "13.65 "186.32 "169.42 "
"Sum/Avg"312.59 " "22107.7"9.05 " "238.43 "529.02 "
". " " "4 " " " " "


r = 0.230422799
Co-efficient of determination, r2 = 0.053095

Correlation between Foreign Trade and Profit:
" "Fr.Trd "(X-[pic" "Profit "(Y-[pic" " "
" " "]) " " "]) " " "
"Year "X "x "x2 "Y "y "y2 "xy "
"2001 "442.97 "(53.79)"2893.58"4.50 "(4.55) "20.70 "244.75 "
"2002 "487.50 "(9.26) "85.78 "4.76 "(4.29) "18.40 "39.73 "
"2003 "608.60 "111.84 "12507.7"7.49 "(1.56) "2.43 "(174.47"
" " " "4 " " " ") "
"2004 "464.73 "(32.03)"1026.05"5.80 "(3.25) "10.56 "104.10 "
"2005 "480.01 "(16.75)"280.63 "22.70 "13.65 "186.32 "(228.66"
" " " " " " " ") "
"Sum/Avg"496.76 " "16793.7"9.05 " "238.43 "(14.54)"
". " " "8 " " " " "


r = -0.007266563
Co-efficient of determination, r2 = 5.28029E-05

Regression Analysis:

Calculation of Regression Function of Import

"Year "Import("Profit("XY "X2 "
" "X) "Y) " " "
"2001 "192.43 "4.50 "865.94 "37029.30 "
"2002 "203.69 "4.76 "969.56 "41489.62 "
"2003 "172.54 "7.49 "1292.32"29770.05 "
"2004 "197.20 "5.80 "1143.76"38887.84 "
"2005 "155.01 "22.70 "3518.73"24028.10 "
"Sum "920.87 "45.25 "7790.31"171204.91"
"Avg. "184.17 "9.05 " " "

Slop,

Intercept,

Regression Equation of Import, Profit(y) = a + bX
= 71.43938 + (-0.33875)*X

Calculation of Regression Function of Export

"Year "Export("Profit("XY "X2 "
" "X) "Y) " " "
"2001 "250.54 "4.50 "1127.43"62770.29 "
"2002 "283.81 "4.76 "1350.94"80548.12 "
"2003 "436.06 "7.49 "3266.09"190148.32"
"2004 "267.53 "5.80 "1551.67"71572.30 "
"2005 "325.00 "22.70 "7377.50"105625.00"
"Sum "1562.94"45.25 "14673.6"510664.03"
" " " "3 " "
"Avg. "312.59 "9.05 " " "

Slop,

Intercept,

Regression Equation of Export, Profit(y) = a + bX
= 1.570000 + 0.023929*X

Calculation of Regression Function of Foreign Trade

"Year "FrnTrd("Profit("XY "X2 "
" "X) "Y) " " "
"2001 "442.97 "4.50 "1993.37"196222.42"
"2002 "487.50 "4.76 "2320.50"237656.25"
"2003 "608.60 "7.49 "4558.41"370393.96"
"2004 "464.73 "5.80 "2695.43"215973.97"
"2005 "480.01 "22.70 "10896.2"230409.60"
" " " "3 " "
"Sum "2483.81"45.25 "22463.9"1250656.2"
" " " "4 "0 "
"Avg. "496.76 "9.05 " " "

Slop,

Intercept,

Regression Equation of Foreign Trade, Profit(y) = a + bX
= 9.48011 + (-0.00087)*X

So, if the bank has a profit target of Tk. 20.00 crore in next year,
The bank is required to generate the following:

Regression Equation of Import, Profit(y) = 71.43938 + (-0.33875)*X
Regression Equation of Export, Profit(y) = 1.570000 + 0.023929*X

Target Import, 20 = 71.43938 + (-0.33875)*X
X = 51.43938 / 0.33875
X = 151.85 Crore

Or, Target Export, 20 = 1.570000 + 0.023929*X
X = (-18.43) / (-0.023929)
X = 770.195 Crore

Or, the combination of Import and Export, Instead of achieving only Import
Target or only Export Target.

Overview of Findings:
The whole process of Letter of Credit is highly dependable on the
personal skills of the officers engaged in the process.

In processing Letter of Credit almost all activities charges lower
than the private commercial banks.

For regular and old client, Letter of Credit issuance does not take
more than an hour. But for new clients, it generally takes around one
to two hours, provided no discrepancy found in documents deposited.

Relationship and introduction with the client plays a vital role in
processing Letter of Credit, especially the time factor.

Janata bank takes more time in issuing Letter of Credit in comparison
with the PCBs.

More than half of the total Foreign Trade's income is come from
opening charges of Letter of Credit. Other sources of income from
Letter of Credit includes: postage charges, amendments charges, advise
charges etc.

Of the 12 months of observation, maximum numbers of Import L/C issued
in March, 2005, minimum numbers of Import L/C issued in August, 2005
and maximum numbers of BTB Export L/C issued in February, 2005,
minimum numbers of BTB Export L/C issued in June, 2005.

Of the 12 months of observation, maximum amounts of income from Import
L/C comes in February, 2005, minimum amounts of income from Import L/C
comes in August, 2005 and maximum amounts of income from BTB Export
L/C comes in April, 2005, minimum amounts of income from BTB Export
L/C comes in January, 2005.

China and India are the major countries from where exports come
against the Import L/C.

Most of the L/Cs are opened for accessories.

Stability analysis shows that there is a high degree of ups and downs
in volumes of export and import. Growth rate of Foreign Trade is not
increasing at a desirable rate. It fluctuates year to year.

Performance analysis shows that profit is increasing due to increase
in export. In the year 2005 this branch reaches its highest profit of
Taka 22.7 crore. And the highest amount of export reaches in the year
2003 of Taka 436.06 crore.

Correlation analysis shows that there is a high degree of negative
correlation exists between Import and Profit; a low degree of positive
correlation exists between Export and Profit, and a very low degree of
negative correlation exists between Foreign Trade and Profit.
Recommendations:
From the analysis and observation of the author, following recommendations
have been formulated in order to smooth operation of Import-Export Business
and to make the L/C processing more efficient:
Since the import-export business have the highest contribution to the
profitability of the bank, it should take special attention.

Skilled manpower in the line of import-export business must be
accomplished through proper training, remuneration and job
satisfaction.

Latest development in the business should be introduced accordingly.

Since the whole process is largely depend on human skill, properly
planned training program should be arranged and implemented for the
improvement of technical and conceptual skills of the dealing
officers.

The time requirements in the processing of L/C have to be minimized.

Steps should be taken to improve the coordination between the officers
involved in the L/C issuing process.

Consumers should be classified based on their trustworthiness, volume
of business and relationship with the bank.

Performance measurement programs can be introduced to measure the
performance of the officers involved in the process.

The sources of cost especially on communication purposes should be
measured and tried to be minimized.

L/C information should be kept in proper and organized manner. Most of
the functions are still done manually. Integrated software can be
introduced for this purpose.

As the knowledge of English language, computer skills and geography is
mandatory for trade finance business, the bank authority should
consider the criteria during recruitment of its employee.

Scope of further expansion:
Software
Jewellary
Frozen fish
Dry & dehydrated fish
Electrical and electronics item
Toys and Luggage
Fashion item
Leather goods
Stationary goods
Conclusion
L/C as a mode of financing in foreign trade acts as a pre-import financing
tool for the importer and a pre-shipment financing tool for the exporter.
Like all other commercial banks, L/C issuance is a very important function
that Janata Banks offers. Presently the bank has been functioning with a
network of total 904 branches. The Bank has been functioning with a net
work of Total 897 Branches including 4 Overseas Branches in U.A.E. Besides
Janata Bank, has, at present 780 Foreign Correspondents abroad. It has 44
Authorized Dealer Branches and 29 Branches to deal with Wage Earners'
Remittances. The most widely used L/C in all braches is irrevocable
documentary L/C and the highest number of L/C opened is under Back to Back
L/C, especially for RMG sector. Opening charge for L/C processing
constitutes highest portion of Janata Bank's income from L/C. there is much
scope for Janata Bank's Dilkusha Branch to improve its current L/C
processing system to make it more efficient.
APPENDIX

Details of Import Income from January'05 to December'05
"Month "Commissio"PAD "Ex. "Other "Total "
" "n " "Earning " "Income "
"Jan "4.36 "1.06 "0.25 "6.19 "11.86 "
"Feb "8.8 "25.07 "0.8 "7.77 "42.44 "
"Mar "10.4 "15.66 "0.57 "1.36 "27.99 "
"Apr "13.32 "2.24 "0.4 "2.54 "18.5 "
"May "7.94 "1.32 "0.6 "4.02 "13.88 "
"Jun "13.08 "0.38 "0.33 "4.01 "17.8 "
"Jul "5.58 "0.6 "0.3 "5.13 "11.61 "
"Aug "3.58 "0.25 "0.06 "1.36 "5.25 "
"Sep "4.79 "0.42 "0.22 "1.75 "7.18 "
"Oct "5.21 "14.14 "1.68 "16.53 "37.56 "
"Nov "0.42 "12.65 "1.25 "0.31 "14.63 "
"Dec "4.28 "4.61 "0.45 "2.87 "12.21 "
"Total "81.76 "78.4 "6.91 "53.84 "220.91 "

Details of Import Export and Foreign Trade from year 2001-2005
"Year "Import "Export "FT "Profit "
"2001 "192.43 "250.54 "442.97 "4.50 "
"2002 "203.69 "283.81 "487.50 "4.76 "
"2003 "172.54 "436.06 "608.60 "7.49 "
"2004 "197.20 "267.53 "464.73 "5.80 "
"2005 "155.01 "325.00 "480.01 "22.70 "
"Total "920.87 "1562.94"2483.81"45.25 "

BIBLIOGRAPHY

Books:
Annual report 2001-2005, Janata Bank
Branch Performance Report 2001-2005, Janata Bank, Dilkusha Branch
Import &Export Policy, 2003-2006
Gupta, S.P., Gupta, Business Statistics, 12th revised edition
Shekhar, K.C. & Lekshmy Shekhar, Banking theory and practice, 18th Ed.

Websites:
www.janatabank-bd.com
www.tdcommercialbanking.com
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Importer

Exporter

Issuing Bank

Reimbursing Bank

Negotiating Bank

Confirming Bank

Ship of the Goods

Advising Bank

1

2

3

4

5

6

7

8

9

10

11

14

15

12

13

Import Finance
Janata Bank

Pre Import Finance
1. L/C (Letter of Credit)

Post Import Finance
1. PAD
2. LIM Agreement
3. Forced LIM
4. LTR

Dispatching L/C

Crediting the account

Checking the L/C

Typing the L/C

Singing offering sheet

Checking Documents

Putting L/C No.

Preparing offering sheet

Collecting forms and depositing those

Discussion between the Bank and the party

Application in company's letterhead pad

Post Shipment Finance
1. Negotiation of Export Bills
2. DP/DA
3. Collection of Export Bills

Pre Shipment Finance
1. Packing Cash Credit (PCC)
2. Back to Back L/C

Export Finance
Janata Bank

Letter of Credit : Definition
Advantages of L/C
Parties to a Letter of Credit
Uniform Customs and Practices of L/C
Regulatory Provisions Regarding L/C
Operational Flow of the Process

Chapter Contents…

This section is designed to review the theoretical understanding of the
Letter of Credit. The relevant word about ICC & UCPDC is included here in
brief. Local & International rules currently in action and uniform process
or operational flow in L/C processing is described briefly with the help of
a graph.

L/C OPERATION : A THEORITICAL REVIEW

GLOBAL AND BANGLADESH ECONOMY

CHAPTER - 3

Chapter Hints…

History of the Bank
Functions of the Bank
Branch network
Management system
Products and Services

Origin of the Report
Objective
Scope
Limitation
Research Design
Report Organization

Chapter Contents…

This section is designed to introduce you with the report. You will learn
here the origin, objective, and scope of the report. The limitation the
author faces are included here also. You will know in this section, how the
research is performed and how they are described.

INTRODUCTION TO THE INTERNSHIP REPORT

INTRODUCTION

Chapter Hints…

Global Economy
Bangladesh Economy
Banking Sector

Chapter Contents…

This section is designed to introduce the overview scenario of the Global
Economy especially in World Trade. The later part is on Bangladesh Economy
which includes the current situation and growth rate of overall GDP,
Industrial Production, and Import-Export. Major changes in banking sector
are explained here.


CHAPTER - 1

Chapter Hints…

Chapter Contents…

This section is designed to introduce the Janata Bank at a glance. All
about the bank is bring here together in a summary form. History, function,
management system, network of its Branch, and the services it offered
includes this chapter. The prospect of Import-Export Business of total Bank
is also summarized here.

OVERVIEW OF THE ORGANIZATION : JANATA BANK


CHAPTER - 2

Chapter Hints…

Considered factors of the L/C Applicant
Documents required for L/C
Forms provided by Janata Bank
Communication media
L/C Issuing Process
Letter of Credit in Import Financing
L/C in Export Financing
Amendments to Letter of Credit
Bank charge in different steps
Required Time duration in L/C Processing

Chapter Contents…

This portion of the report is designed to describe all the matter about L/C
processing, amendment, required charges/time duration in different stages.
The required documents have to be deposited by the clients and the forms to
be provided to the client and the communication media is being used
currently in this Branch of Janata Bank is presented here in details.

L/C OPERATION : PRACTICED IN JANATA BANK


CHAPTER - 4

Chapter Hints…

Analysis of Income from L/C
Analysis of Charges with Different Banks
Analysis of Time Requirement of Different Banks in L/C Processing
Analysis of Behavior or Trend
Analysis of Stability of Export-Import
Performance analysis
Correlation Calculation
Regression Analysis

Chapter Contents…

This portion of the report includes all the analysis, has performed from
the collected information. Income of the Bank, Charges of L/C processing
and Time Requirement considering that of other Banks is analyzed here.
Performance is analyzed using some statistical tools such as, Standard
Deviation, Correlation, Regression and Growth Rate.

L/C OPERATION : ANALYSIS


CHAPTER - 5

Chapter Hints…

Overview of Findings
Recommendations
Conclusion

Chapter Contents…

This section is designed to conclude the report reviewing the Findings,
giving relevant Recommendations. The findings are accumulated here in a
short place. The Tips that can the Bank follows to improve their
performance is included in Recommendation page and the report is concludes
by conclusion.

RECOMMENDATION AND CONCLUSION

CHAPTER - 6

Chapter Hints…

-----------------------
L/C Operation of Janata Bank

Internship Report on L/C Operation of Janata Bank Internship Report on Career Plan and development Importer

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