Janata Bank LC operation.doc

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 Manaement !nformation S"stems #ni$ersit" of Dhaka Dhaka

Prepared b" Mohammad Mohiuddin SL %o&'( MBA )nd Bat*h Department of Manaement !nformation S"stems #ni$ersit" of Dhaka

Date of Submission +,th September ),,-

L/C Operation of Janata Bank

2

Letter of Transmittal

+,th September ),,Moqbul Ahmed Assistant Professor Department of Manaement !nformation S"stems #ni$ersit" of Dhaka Dhaka

Dear Sir ! hereb" present the internship report entitled Career Plan and De$elopment0 1hi*h is an interal part of the MBA proram.

! ha$e tried m" best to ather the most *omplete information a$ailable in order to prepare this report. ! ha$e prepared this report usin the e2perien*e e2perien*e that ! ha$e ained durin m" internship. As "ou 1ill see m" obser$ations pointed out to the rele$ant information about 3orein 4rade espe*iall" Letter of Credit.

! appre*iate ha$in this task. !f "ou need an" kind of assistan*e assistan*e in interpretin this report or further e2planation ! 1ill be lad to pro$ide it a**ordinl".

Sin*erel" "ours

Mohammad Mohiuddin Sl %o & '( MBA Proram )nd Bat*h Department of Manaement !nformation S"stems #ni$ersit" of Dhaka

Table of Contents


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Contents

Page o!

52e*uti$e Summar"

6!!!

ITRO"#CTIO TO T$% IT%R&$IP R%PORT Oriin of the 7eport Ob8e*ti$e S*ope Limitation 7esear*h Desin 7eport Orani9ation

)3 ) ) ) ) + +

C$'PT%R ( ) * +LOB'L '" B'+L'"%&$ %COO,:lobal 5*onom" Banladesh 5*onom" Bankin Se*tor

4 ( ( -

C$'PT%R ( 2 * O.%R.I% O0 T$% J''T' B'1 ;istor" of the Bank 3un*tions of the Bank Bran*h net1ork Manaement s"stem Produ*ts and Ser$i*es !mport&52port Business

5)6 = = = = = >

C$'PT%R ( 3 * L/C OP%R'TIO * ' T$%ORITIC'L R%.I% Letter of Credit < Definition Ad$antaes of L/C Parties to a Letter of Credit #niform Customs and Pra*ti*es of L/C 7eulator" Pro$isions 7eardin L/C

)))4 ') '+ '+ '? '( '-

BIBLIO+R'P$-




List of o f Tables Tables Contents

Page o!

4able&' < !nformation of !CC@ #CPDC 4able&) < Ma8or *hares in different steps for L/C pro*essin 4able&+ < A$. 4ime requirement for the basi* a*ti$ities of L/C issuin 4able&? < Month&1ise in*ome from !mport L/C 4able&( < Month&1ise in*ome from B4B 52port L/C 4able&- < Ma8or *hares for L/C pro*essin in different Banks 4able& 4able& < A$. 4ime 4ime requirement requiremen t in different Banks 4able&= < %umber of !mport L/C !ssued Per Month 4able&> < %umber of B4B 52port L/C !ssued Per Month 4able&',< %umber of !mport L/C !ssued Per Countr" 4able&''< %umber of !mport L/C !ssued Per !tem 4able ')< !mport 52port and Profit of ),,' to ),,(

'( )= )> +) +) ++ +? +( +( +++=

List of Charts Contents

Page o!

Chart&' < Operational 3lo1 of the !mport&52port Pro*ess Chart&) < 3lo1 Chart mentionin Steps in issuin an L/C in Janata Bank Chart&+ < Comparison of Sour*es of !n*ome from !mport L/C Chart&? < Comparison of Sour*es of !n*ome from B4B 52port L/C Chart&( < Month&1ise in*ome from !mport L/C Chart&- < Month&1ise in*ome from B4B 52port L/C :raph < %umber of !mport L/C !ssued Per Month :raph =< %umber of B4B 52port L/C !ssued Per Month :raph >< %umber of !mport L/C !ssued Per *ountr" :raph ',< %umber of !mport L/C !ssued Per !tem :raph ''< !mport 52port and Profit of ),,' to ),,(


')) +' +' +) +) +( +( +++=

7

Prefa8e

An indi$idual *an e2pe*t to ha$e a ood understandin and kno1lede on the $arious methods of operations performed b" the Janata Bank in *ase of 4rade 3inan*e operations i.e. !mport and 52port  oin throuh this report. 5$er"thin is tried to in*lude here in pre*ise form. 4his report repo rt is to be used onl" for the a*ademi* purpose. p urpose. ! ha$e *olle*ted *o lle*ted all the ne*essar" and rele$ant data and information from $arious primar" and se*ondar" sour*es. 4he data and information information is trul" and stri*tl" stri*tl" *onfidential and no one *an use its *omponents *omponents in full or partial. ! 1ould like to i$e thanks to e$er"one e$er"one 1ho has helped and en*ouraed me in the pro*ess of preparation of this report.


4

'8kno9ledgement

3irst of all ! 1ould like to thanks to the all miht" for spe*ial blessin in *ompletin the report. 4his pro8e*t 1ork is an a**umulation of man" peoples effort. So 1ith m" honest" ! 1oul 1ould d like like to sho1 sho1 m" rat ratit itud udee to them them 1ho 1ho help helped ed me thro throu uh h kind kind ad$i ad$i*e *e suestions dire*tions and *o&operations in preparin this report.

! am thankful to the Department of Mis #ni$ersit" of Dhaka for i$in me su*h e2posure to the pra*t pra*ti* i*al al busin business ess 1orld 1orld.. M" 1arm 1armest est thank thankss o to Mr. Mr. Md Md.. Abul ashe ashem m Assistant Professor of Dhaka #ni$ersit".

! am thankful also to m" *lass&mates for their help in preparin this report.

3inal 3inall" l" ! am thankf thankful ul to m" inter internal nal super super$is $isor or Mr. Mr. Md Md.. Abul ashe ashem m Assist ssistant ant Professo Professorr of Dhaka Dhaka #ni$ers #ni$ersit" it" for his appropri appropriate ate su suesti estions ons moral supp support ort and in$aluable *o&operation from time to time in *ompletin the internship proram and submittin the report. ;o1e$er the responsibilities of errors and omissions in the report if an" lie 1ith me.

Md. Ma8idul ;osain


5

%:e8;tive &;mmar<

4his internship report is prepared on the basis of one "ear lon theoreti*al kno1lede and one months lon pra*ti*al e2perien*e at the Dilkusha Corp. Bran*h of Janata Bank. 4his internship proram and preparation of this report report helped me a lot to learn about the pra*ti*al pra*ti*al en$ironment and situation of a finan*ial institution and also make up a bride bet1een the theoreti*al and pra*ti*al aspe*ts. Bank pro$ides the means and me*hanisms of transferrin resour*es o$er the *ountr". *ountr". Currentl" it is pla"in an important i mportant role in 3orein 4rade. ;iher import demands in *hina and *ontinued hiher domesti* *onsumption in #SA sustained the ro1th momentum resultin ',.)  in*rease in 1orld trade $olume. Janata Bank has alread" established a 1orld 1ide net1ork and relationship in international Bankin throuh its ? EfourF o$erseas bran*hes and '))' forein *orrespondents. 4he Bank has earned an e2*ellent business reputation in handlin and fundin international trade parti*ularl" in boostin e2port @ import of the *ountr". *ountr". 4he Bank finan*es e2ports e2ports 1ithin the frame&1ork of the e2port poli*" of the *ountr". *ountr". !t is one of the pioneers in promotin ba*k to ba*k Letter of Credit for the 7M: E7ead" Made :armentsF se*tor. !n order to a$oid differen*es in interpretation of letter of *redit terms the !nternational Chamber of Commer*e has formulated a set of rules to uide banks in the use of do*umentar" letter of *redit althouh the first attempt in this dire*tion 1as made as earl" as '>++ the latest $ersion is *ontained in publi*ation %o. )>, 1hi*h has *ome into operation from O*tober ' '>(. !n pro*essin L/C Janata Bank earns in*ome throuh *harin $arious a*ti$ities relatin to it su*h as L/C openin *hare postae *hare in*ludin 4ele2 4ele2 and SG!34 amendment *hare and mis*ellaneous *hares 1hi*h in*lude issuan*e of Bank Certifi*ate ad$i*e et*. L/C openin *hare a*ts as the ma8or sour*e of in*ome from import L/C. !n 3ebruar" the in*ome from import L/C 1as hihest and after1ards the in*ome is de*reasin raduall". raduall". And aain in O*tober the in*ome raises suddenl". suddenl". !n April the in*ome i n*ome from B4B 52port L/C is hihest and after1ards the in*ome is de*reasin raduall". raduall". 4he *hares *hared b" Sonali and Janata Bank are almost the same in most ser$i*es but PCB *hares more than %CB. 4he hihest no. of import L/C opened in the month mar*h and most of the L/C is opened durin month 3ebruar" to June. 4he hihest no. of B4B 52port L/C opened in the month 3ebruar" and most of the L/C L/ C is opened durin month Januar" to Ma". China and !ndia dominate the import market. A**essories dominate the import market. Correlation anal"sis sho1s that there is a hih deree of neati$e *orrelation e2ists bet1een !mport and ProfitH a lo1 deree of positi$e *orrelation e2ists bet1een 52port and Profit and a $er" lo1 deree of neati$e *orrelation e2ists bet1een 3orein 4rade and Profit. 4he initial part of the report *ontains the lobal @ Banladeshs e*onom" e*onom" Janata Banks histor" histor" operations @ a*ti$ities finan*ial *ondition and ser$i*es. 4he main part of the report in*ludes theoreti*al o$er$ie1 of L/C L/C related operations pra*ti*ed in Janata Bank anal"sis of athered information and finall" re*ommendations dependin on anal"sis.


=

INTRODUCTIO N

R EPORT INTRODUCTION TO THE INTERNSHIP REPORT

Chapter Hints…

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.

Origin of the Report Objective Scope imitation Research !esign Report Organi"ation


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ITRO"#CTIO TO T$% IT%R&$IP R%PORT

Origin of the Report* As a mandator" part the MBA Proram all the students of the fa*ult" of Business Studies #ni$ersit" of Dhaka ha$e to undero a three month lon internship proram 1ith an ob8e*ti$e of ainin pra*ti*al kno1lede about *urrent business 1orld. After this inter internsh nship ip prora proram m ea*h ea*h and e$er" e$er" studen students ts ha$e ha$e to sub submi mitt an inter internsh nship ip repor reportt mentionin their a*ti$ities durin the internship proram.

!$e started m" internship at the Janata Bank Dilkusha *orporate bran*h Dilkusha on +rd Januar" ),,- and at the end of the proram ! am submittin m" internship report fo*usin on the the *ontr *ontribu ibuti tion on of 52 52por port&! t&!mp mport ort Busin Business ess to the the o$eral o$eralll perfo perform rman* an*ee of bank bank espe*iall" on profitabilit" perspe*ti$e.

Ob?e8tive* 4he main ob8e*ti$e of this report is to refle*t the pra*ti*al kno1lede that the author ained durin his internship and to relate the one "ear lon theoreti*al learnin of MBA Proram. Besides this broad ob8e*ti$e the follo1ins 1ere i$en emphasis& Define Letter of Credit and different staes of L/C pro*essin • Anal"9e the entire pro*ess of L/C issuin in Janata Bank • !dentif" the sour*es of in*ome from L/C operations in Janata Bank • !dentif" the eneral beha$ior of the L/C issuan*e •

&8ope* A *omprehens *omprehensi$e i$e kno kno1led 1lede e on the orani9 orani9ati ation on and a thorouh thorouh kno1lede kno1lede on the 52port&!mport operation of the orani9ation ha$e *ome under the s*ope of the report.

4he report is limited limited onl" to !mport&52port !mport&52port Business of the Janata Bank Dilkusha Corp. Bran*h in last ? "ears and L/C operations durin Januar" ),,( to De*ember ),,(.

Limitation* 4he orani9ation maintains *onfidentialit" in pro$idin some rele$ant information so the author *ould not in*orporate those.

!nformation reardin L/C is not maintained in a stru*tured manner and the" are so thouh to ather. 4he pro8e*t *o$ers onl" ') months data athered from the Dilkusha Corp. Br. of the Janata Bank. !t ma" not represent the o$erall s*enario.


)6

Resear8h "esign* "ata 8olle8tion* Both primar" and se*ondar" data is used for this report 1ritin. Primar< "ata* Most of the information 1as *olle*ted from primar" sour*es. 4his in*ludes the inter$ie1s 1ith the manaers and offi*ials of the bank. &e8ondar< "ata* 4his in*ludes a number of books 8ournals handbooks annual report and 1ebsites. Resear8h 'pproa8h 'pproa8h and Instr;ment* Instr;ment* !n this resear*h informal questionnaire 1as used to inter$i inter$ie1 e1 the bank offi*ia offi*ials ls instead instead of stru*tu stru*tured red question questionnair naire. e. Obser$a Obser$ation tion and e2perien*e of month lon internship ser$ed as a ma8or sour*e of information. &le ;nit and sample si@e* Onl" the L/C issued from Januar" ),,( to De*ember ),,( in the Dilkusha Corp. Bran*h of Janata Bank is taken as the sample unit and the sample si9e in*ludes all those L/Cs.

Report Organi@atio Organi@ation* n* 4he report is orani9ed as follo1s<

4he initial part of the report in*ludes the lobal @ Banladesh e*onom" and o$eral o$eralll orani orani9a 9atio tionH nH 1hi* 1hi*h h des*ri des*ribe bess o$era o$erall ll loba loball and natio national nal situa situati tion on bankin se*tor as 1ell as the histor" ba*kround operations @ a*ti$ities finan*ial *onditions and the produ*ts @ ser$i*es offered b" the Janata Bank at a lan*e. 4he later part is the main pro8e*t part 1hi*h in*ludes fi$e *hapters des*ribin theoreti*al o$er$ie1 pra*ti*e in Janata Bank beha$ior anal"sis re*ommendations reardin L/C operation and o$erall profitabilit" point of $ie1. C;AP457 C;AP457 ' < :LOBAL :LOBAL A%D A%D BA%:LAD5 BA%:LAD5S; S; 5CO%OM 5CO%OMI I C;AP457 ) < O6576!5G O6576!5G O3 4;5 4;5 JA%A4 JA%A4A BA% C;AP457 + < L/C OP57A4 OP57A4!O% < A 4;5O7!4!CAL 756!5G C;AP457 ? < L/C OP57A OP57A4 4!O% < P7AC4!C5D P7AC4!C5D !% JA%A4 JA%A4A BA% C;AP457 ( < L/C OP57A4 OP57A4!O% < A%ALI A%ALIS!S C;AP457 - < 75COMM5%DA4 75COMM5%DA4!O% A%D CO%CL#S!O% APP5%D! A%D B!BL!O:7AP;I


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CHAPTER 1

GLOBAL AND BANGLADESH ECONOMY

Chapter Hints…

Chapter Contents…

This section is designed to introduce the overview scenario of the #lobal $conomy especially in %orld Trade. The later part is on &angladesh $conomy which includes the current situation and growth rate of overall #!', (ndustrial 'roduction, and (mport) $*port. +ajor changes in banking sector are e*plained here.

#lobal $conomy &angladesh $conomy &anking Sector


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+lobal %8onom< 4he "ear ),,?&),,( 1as e$entful in the 1orld s*enario. 5$ents like natural disaster politi*al instabilit" surin oil pri*e de*linin e2*hane $alue of #S Dollar had reat impa*t on 1orld e*onom". Despite these impediments 1orld e*onom" had ro1n b" ? durin the "ear of ),,?&),,(. Amon Amon the ma8or fa*tors in this ro1th 1ere the on oin e*onomi* boom in *hina sures in e*onomi* a*ti$ities in Japan and the #SA. Durin this period 5uropean hih in*ome *ountries e2perien*ed less ro1th rate and slo1er e*onomi e*onomi** re*o$er" re*o$er".. ;iher ;iher import import demands demands in *hina *hina and *ontinue *ontinued d hiher hiher dom domesti esti** *onsumption *onsumption in #SA sustained sustained the ro1th momentum resultin ',.)  in*rease in 1orld trade $olume.

A**ordin to the lobal outlook ),,( a report published b" Gorld Bank :DP ro1th rate 1as -.,,  in south Asian Asian *ountries e2*ept !ndia *ompared to (.- in the pre$ious "ear. Produ*ti$e ro1th in industrial se*tors of Banladesh @ Pakistan de$elopment of ser$i*es @ ari*ultural se*tor of %epal and Srilanka 1ere the ma8or *ontributors to su*h ro1th.

4he e2perts belie$e that lobal e*onomi* ro1th miht slo1 do1n in ),,- and ),,. Se$eral fa*tors ma" *ontribute to the e2pe*ted slo1er ro1th. Some of the notable *auses for slo1er 1ill be the in$estment *"*le in the #SA ma" rea*h its peak the 1orld demand ma" ro1 mu*h hiher than suppl" resultin in substantial in*rease in pri*es of oil and other essential *ommodities. *ommodities. As a result it ma" impl" a de*line in in*ome. Central banks around the 1orld ma" *ontinue to take more neutral stan*e in their monetar" poli*ies 1hi*h ma" hinder the in$estment. Besides this *hinas effort to a*hie$e a sustainable pa*e of ro1th should *ontribute to lesser demand in the medium term. Moreo$er predi*tions are that *hinas aressi$e presen*e in the 1orld trade ma" a *ontinuous opportunit" for impro$ement.

Bangladesh %8onom< Durin the "ear ),,?&),,( the ro1th rate of :DP 1as (.() as aainst (.), of pre$ious "ear. 7isin oil pri*e p ri*e and pri*e p ri*e hike in essential ess ential *ommodities *ould not 1eaken


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the ro1th rate. Stead" ro1th in the industrial and ser$i*e se*tor *ontributed to this a*hie$ement.

:ro1th rate in ari*ultural se*tor de*lined to ).?' in finan*ial "ear ),,? as aainst +.)> +.)> of pre$ious pre$ious "ear. "ear. Despite Despite fa$orabl fa$orablee 1eather 1eather *onditi *onditions ons there there 1as sinifi sinifi*ant *ant redu*tion of ro1th in *rops and horti*ulture sub se*tor. As a result in finan*ial "ear ),,? the ro1th ro1th of ari*ult ari*ulture ure se*tor se*tor 1as hampere hampered. d. 4he forestr" forestr" and fishin fishin sub&se*t sub&se*tor or marked a sharp ro1th due to in*rease in domesti* demand. Ghile ro1th rate remained un*haned in animal farmin se*tor. O$erall ro1th in the "ear ),,?&),,( 1as substantial. 52ports in*reased in*reased b" '-.' to #S K-,+ K-,+ millio million n aainst aainst #S K-(?= million million of finan*ia finan*iall "ear "ear ),,+&),, ),,+&),,?. ?. 7ead" 7ead" made made arments se*tor had substantial *ontribution to this ro1th. !mport in*rease b" ').> in finan*ial "ear ),,?&),,( o$er the pre$ious "ear. Suar import in*reased b" -.+ edible oil in*reased b" )>.' fertili9er b" +.= *apital oods b" (.' plasti* and rubber arti*les b" +,.(. Ghile import of ri*e de*lined sinifi*antl". At the same time 1ae earners remittan*e b" Banladeshis 1orkin abroad in*reased b" >. resultin *urrent a**ount surplus of ,.), billion. Consequentl" forein *urren*" reser$ reser$ee in*re in*rease ased d sini sinifi fi*an *antl" tl".. Anti nti mo mone" ne" laund launder erin in measu measures res also also *ontr *ontribu ibuted ted sinifi*ant in*rease in forein remittan*e and forein e2*hane reser$e. Broad mone" EM)F ro1th stood at '+.= in finan*ial "ear ),,?&),,( hiher than the pro8e*ted ro1th of ').) but lo1er than ),,+&),,? ro1th o f'(.-(. Despite Des pite $arious $ariou s ad$ersities e*onomi* ro1th 1as substantial.

Banking &e8tor* 4he bankin se*tor of Banladesh Banladesh pla"ed an important important role to1ards e*onomi* ro1th of Banladesh. Banladesh. 3rom the beinnin of finan*ial "ear ),,+ Banladesh Banladesh Bank took initiati$es initiati$es in reformin finan*ial se*tor. Steps for pre$ention of mone" launderin loan 1rite off poli*" and effe*ti$e measures to ain a**ountabilit" and transparen*" made bankin operations more a**eptable. As a result the imae of bankin se*tor has been ele$ated. Banladesh Bank also identified fi$e *ore risks areas for manaement of the banks and


)

pro$ided ne*essar" uidelines for implementation. 4hose are< 3orein 52*hane 7isk Manaement Asset Liabilit" Manaement Pre$ention of Mone" Launderin Credit 7isk Manae Manaeme ment nt !ntern !nternal al Cont Control rol and Comp Compli lian* an*e. e. 4h 4his is init initiat iati$e i$e 1ill 1ill brin brin o$era o$erall ll dis*ipline in the se*tor and enhan*e operational profit.


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CHAPTER 2

OVERVIEW OF THE ORGANIZATION : JANAT JANATA

BANK GLOBAL AND BANGLADESH ECONOMY

Chapter Hints…

Chapter Contents…

This section is designed to introduce the anata &ank at a glance. -ll about the bank is bring here together in a summary form. istory, function, management system, network of its &ranch, and the services it o/ered includes this chapter. The prospect of (mport)$*port &usiness of total &ank is also summari"ed here.

istory of the &ank 0unctions of the &ank &ranch network +anagement system 'roducts and Services (mport)$*port (mport)$*port &usiness


)4

$istor< of the Bank

111.8anatabank&

bd.*om Janata Bank established under Banladesh Bank E%ationali9ationF Order '>) is one of the the lead leadin in  :o$e :o$ern rnm ment ent O1ne O1ned d Comm Commer er*i *ial al Bank Bankss in Ban Banla lade desh sh.. 4h 4hee Bank Banks s Authori9ed Authori9ed and Paid&up Capital Capital as on +'st De*ember '>>? 1as 4k. =,,.,, *rore and 4k. )(>.?, *rore respe*ti$el". respe*ti$el". 7eser$e 3und of the Bank as on +'st De*ember De*ember '>>? 1as 4k. ').), *rore. 4he Bank is o$erned b" the Banladesh Banladesh Bank Enationali9ationF Enationali9ationF Order '>) and also b" its o1n internal reulations.

0;n8tions of the Bank Janata Bank pro$ides *omplete rane of ser$i*es to its *ustomers both domesti* and fore forei in. n. 7end 7ender erin in  of :ene :enera rall Bank Bankin in  3a*i 3a*ili liti ties es @ #til #tilit it" " Ser$ Ser$i* i*es es Depo Deposi sitt Mobili9ation pro$idin $arious Credit 3a*ilities in*ludin Gorkin Capital to !ndustries !n$estment Out1ard @ !n1ard 7emittan*es 3inan*in !mport @ 52port et*. are the ma8or fun*tions performed b" Janata Bank. !n order to pro$ide better ser$i*es to its Cust Custom omer erss and and Corr Corres espo pond nden ents ts Jana Janata ta Bank Bank is no1 no1 mo more re ora orani ni9e 9ed d to hand handle le sophisti*ated operations throuh a 1ell trained and effi*ient Manpo1er. 7e*entl" Janata Bank has entered into *omputer *omputer operations to pro$ide prompt and effi*ient ser$i*es to the Customers. Janata Bank has been in$ol$ed in Mi*ro finan*in sin*e '>+ throuh its $ast bran*h net1 net1or ork k spre spread ad all all o$er o$er the the *oun *ountr tr" ". Bank ank has has laun laun*h *hed ed thes thesee mi*ro i*ro *red *redit it prorams/pro8e*ts on its o1n initiati$e and also in *ollaboration 1ith lo*al and forein aen*ies.

Bran8h net9ork Janata Bank is one of the larest %ationali9ed Commer*ial Bank of Banladesh. Presentl" the bank has been fun*tionin 1ith a net1ork of total >,? bran*hes. 4he Bank has been fun*tionin 1ith a net 1ork of 4otal => Bran*hes in*ludin ? O$erseas Bran*hes in #.A.5. Besides Janata Bank has at present =, 3orein Correspondents abroad. !t has ?? Authori9ed Dealer Bran*hes and )> Bran*hes to deal 1ith Gae 5arners 7emittan*es.

,anagement s
Prod;8ts and &ervi8es 3inan*in !4 se*tor 3inan*in of industr" 7ead" *ash Gindo1s for SM5s Loan to tra$el aen*ies Loan to dianosti* *enter %7B es*ro1 a**ount L/C Operation of Janata Bank

)5

%7B ift *heque

Import%:port B;siness Jana Janata ta Bank Bank has has alre alread ad" " esta establ blis ishe hed d a 1orl 1orld d 1ide 1ide net1 net1or ork k and and rela relati tion onsh ship ip in inte intern rnat atio iona nall Bank Bankin in  thro throu uh h its its ? Efou EfourF rF o$er o$erse seas as bran bran*h *hes es and and '))' '))' fore forei in n *orrespondents. 4he Bank has earned an e2*ellent business reputation in handlin and fundin international trade parti*ularl" in boostin e2port @ import of the *ountr". 4he Bank finan*es e2ports 1ithin the frame&1ork of the e2port poli*" of the *ountr". !t is one of the pioneers in promotin ba*k to ba*k Letter of Credit for the 7M: E7ead" Made :armentsF se*tor. Janata Bank al1a"s aims to in*rease its forein e2*hane business. 4he Bank has been doin international bankin 1ith all ma8or Banks of the 1orld. !t has been ho1e$er handlin bulk of the international businesses 1ith the follo1in multinational Banks<  Citibank %. A.  Ameri*an 52press Bank Ltd.  Standard Chartered Bank  ;SBC.  4he Chase Manhattan Bank 4hrouh quite a ood number of Authori9ed Dealer Bran*hes and '))' nos. forein *orrespondents 1orld 1ide Janata Bank has been e2tendin full rane import and rele$ant finan*e fa*ilities. 4o boost up *ountr"s 52port Janata Bank has been pro$idin different kinds of assistan*e to e2porters. Some of 1hi*h are as under<&  

Pro$idin Pro$idin  Pre&Sh Pre&Shipm ipment ent and Post&Sh Post&Shipm ipment ent 3inan*e 3inan*e 52port 52port :uarant :uarantee ee and bondin fa*ilit" et*. et* . Con*essional rate of interest for e2ports 3inan*e.



Ba*k to Ba*k L/C under bonded Garehouse fa*ilit"



Siht @ #nasked L/C aainst 3irm Contra*t for import of ra1 materials.



Siht L/C under 5D3



52porters 7etention uota A/C both interest bearin and non&interest bearin.



52port in*enti$e Proram.



Bankin at 52port Pro*essin None



S*ope for establishment of e2port oriented industr" b" ',, forein in$estment and b" 8oint&$enture


)=



4he sole bank to disburse :o$ernment 52port Promotion 3und aainst e2port of Computer Soft1are @ Data 5ntr" Pro*essin



Pro$idin ser$i*es to the e2porter b" utili9in most moderni9ed te*hnolo" like S1ift 7euters !nternet 3a2 et*. An" latest business information 1ill be a$ailable at their 1ebsiteH http


Consultan*" and ad$isor" ser$i*es b" an e2pert roup of offi*ials.



Spe*ial Spe*ial e2port e2port finan*in finan*in  proram proram to1ards to1ards *ompute *omputerr soft1ar soft1are e data entr" entr" and ser$i*e.

0a8ilities Offered Offered** Openin of L/C at *ompetiti$e/ reasonable marin and *ommission • Con*essional rate of interests on import finan*e to the prime *ustomers @ interest • rebate fa*ilities. Import Items*  Capital Ma*hineries and !ndustrial ra1 materials.  3uel @ Lubri*ants.  !ntermediate oods.  Consumer durable spare parts and equipments.  Consumer oods< Bab" food Petroleum CDSO ECrude Deummed So"abean OilF Oilseeds Cement Constru*tion Materials 3ertili9er Chemi*als et*.

&alient 0eat;res*  

A 3irm or Compan" ha$in $alid 57C ne*essar" infrastru*tural and te*hni*al fa*ilities and suffi*ient skilled man po1er related *omputer. Member of BAS!S or BCS.



;a$in Computer Litera*" or related professional ba*kround.



Preferen*e to the firm/*ompan" ha$in prior e2perien*e



Satisfa*tor" performan*e Certifi*ate/A**eptan*e Letter from Counterpart abroad.



6alid 52port Orders are in hand.


)>

CHAPTER 3

L/C OPERATION OPERATION : A THEORITICAL REVIEW GLOBAL AND BANGLADESH ECONOMY

Chapter Hints…

This section is designed to review the theoretical understanding of the etter of 1redit. The relevant word about (11 2 31'!1 is included here in brief. ocal 2 (nternational rules currently in action and uniform process or operational 4ow in 51 processing is described brie4y with the help of a graph.

Chapter Contents…

etter of 1redit 6 !e7nition -dvantages of 51 'arties to a etter of 1redit 3niform 1ustoms and 'ractices of 51 Regulatory 'rovisions Regarding 51 Operational 0low of the 'rocess


26

Letter of Credit A lett letter er addr addres esse sed d b" a bank bank at the the insu insura ran* n*ee and and resp respon onsi sibi bili lit" t" of a bu"e bu"err of mer*handise to a seller authori9in him to dra1 drafts to a stipulated amount under spe*ifi spe*ified ed terms terms and underta undertakin kin *onditi *onditional onall" l" or un*ondit un*onditiona ionall" ll" to pro$ide pro$ide e$entual e$entual pa"ment for drafts. Letter of *redit is a do*umentar" *redit of a bank. 4his is a kind of pre&shipment finan*in. 4hrouh this letter bank assures the e2porter to i$e a**eptan*e of his/her bills or pa" the $alue of the bill 1hen importer fails to do so. !n international trade there is the pe*uliar of distan*e and unfamiliarit" bet1een parties *on*erned *on*ern ed e2porter and importer. !f the importer fails to pa" pri*e the e2porter 1ill find it diffi*ult or too *ostl" to re*o$er the amount. 4he importer is enerall" required to open a letter of *redit 1ith a *ertain bank ha$in bran*hes or aent thereto in both the importin and e2portin *ountries. 4hus the importer pro$es his *redit1orthiness to the forein e2porter b" obtainin a letter of *redit from the bank and sendin the same to the forein dealer. 4rade bet1een *ountries is mainl" finan*ed throuh letter of *redit. 4he international *hamber of *ommer*e has defined a letter of *redit as< An" arranement ho1e$er named or pres*ribed 1hereb" a bank Ethe issuin bankF a*tin at the request and in a**ordan*e 1ith the instru*tions of a *ustomer Ethe appli*ant of the *reditF is to make pa"ment to or to the order of a third part" Ethe benefi*iar" F or is to pa" a**ept a**ept or neotiate neotiate bills of e2*hane EdraftsF EdraftsF dra1n b" the benefi*iar" or authori9e su*h pa"ments to be made or su*h drafts to be paid a**epted or neotiated b" another bank aainst stipulated terms and *onditions.0 Letter of Credit is quite literall" a letter that e2tends a line of *redit to an indi$idual or business entit". A bank on behalf of one of its *ustomers 1rites it. A letter of *redit is a bankin me*hanism that tha t allo1s importers to offer se*ure terms te rms to e2porters. 5$er" Letters of Credit *ontain these elements<  A pa"ment undertakin i$en b" the bank Eissuin bankF  On behalf of the bu"er Eappli*ant i.e.H importerF  4o pa" a seller Ebenefi*iar" i.e.H e2porterF  A i$en amount of mone"  On presentation of spe*ified do*uments representin the suppl" of oods  Githin spe*ifi* time limit  4hese do*uments *onformin to terms and *onditions set out in the letter of *redit  Do*uments to be presented at a spe*ified pla*e. 4hus 1hen a stipulation is in*orporated in the sale *ontra*t that the oods shall be paid b" a bankers letter letter of *redit  the seller need not to 1orr" 1hether the oods 1ill be *leared b" the bu"er on arri$al at the destination and the bu"er need not blo*k up his funds b" makin pa"ment in ad$an*e. As a matter of fa*t a *ommer*ial *ommer*ial letter of *redit substitutes substitutes the *redit1orthiness of the banker issuin the letter of *redit sin*e it is a promise b" the bank to pa" or a**ept the bill pro$ided the e2porter Ethe benefi*iar"F fulfills the terms and *onditions set out in the *redit. L/C Operation of Janata Bank

2)

'dvantages of Letter of Credit L/C as a means of finan*e international trade pro$ides benefits to both the e2porter and the importer. 'dvantages of L/C to the e:porter * 5liminates *redit risk • 7edu*es ambiuit" reardin transa*tion be*ause terms are spe*ified • in the L/C 3a*ilitates pre&shipments finan*in throuh pa*kin *ash *redit or • Ba*k to Ba*k L/C 'dvantages of L/C to the importer* 5nsures that the oods sent b" the e2porter *ompl" 1ith the • spe*ifi*ations 3a*ilitates finan*in. •

Parties to a Letter of Credit* 4he bu"er the seller the issuin bank the notif"in bank the neotiatin bank the *onfirmin bank and the pa"in bank are the parties to a letter of *redit. •

• •

•

•

•

•

Bu"er/importer< the bu"er/importer 1ho is applies to the bank for the openin of a letter of *redit Seller/e2porter< the seller/e2porter is the benefi*iar" of the letter of *redit !ssuin Bank< the bank 1hi*h issues the letter if *redit at the request of the bu"er is the issuin bank. 4he bu"er i$es instru*tions reardin the terms and *onditions of the *redit. %otif"in Bank< the *orrespondent bank situated in the same pla*e as that of the seller 1hi*h ad$i*es the *redit to the benefi*iar". But the notif"in bank does not *ommit itself to an" liabilit" under the *redit. :enerall" :enerall" the ser$i*es of a notif"in bank are utili9ed 1hen the *redit is ad$ised to the seller throuh a *able messae. %eotiatin Bank< the bank 1hi*h 1h i*h neotiates the bills or drafts under the letter of *redit. :enerall" the same bank a*ts as the notif"in and the neotiatin bank. Confirmin Bank< usuall" the seller insists that a bank in his o1n *ountr" must *onfirm the *redit. Su*h a bank is kno1n as the *onfirmin bank. 4he ad$antae of this *onfirmation from the sellers point of $ie1 lies in the fa*t that he is assured of pa"ment as soon as the shipment do*uments are presented his o1n *entre. !t ma" be noted that the primar" liabilit" lies 1ith the *onfirmin *onfirmin bank on*e the *redit is *onfirmed *onfirmed b" it pro$ided the seller fulfills the terms and *onditions of the *redit. Pa"in Bank< the bank on 1hi*h the bill or draft is dra1n. !t *an be the issuin bank the notif"in bank ba nk or the *onfirmin bank. ban k. L/C Operation of Janata Bank

22

4he follo1in se*tion 1ill i$es a more detailed o$er$ie1 of ho1 these parties parti*ipate in the L/C operations. A Letter of Credit  simpl" defined is a 1ritten instrument issued b" a bank at the request of its *ustomer *ustomer the !mporter EAppli*antF EAppli*antF 1hereb" the bank promises promises to pa" the 52porter 52porter EBenefi*iar"F for oods or ser$i*es pro$ided that the 52porter presents all do*uments *alled for e2a*tl" as stipulated in the Letter of Credit and meets all other terms and *onditions *onditions set out in the Letter of Credit. A Letter of Credit is also *ommonl" referred to as a Do*umentar" Credit.

#niform C;stoms and Pra8ti8es of L/C !n order to a$oid differen*es in interpretation of letter of *redit terms the !nternational Chamber of Commer*e has formulated a set of rules to uide banks in the use of do*umentar" letter of *redit althouh the first attempt in this dire*tion 1as made as earl" as '>++ the latest $ersion is *ontained in publi*ation %o. )>, 1hi*h has *ome into operation from O*tober ' '>(. !t ma" ma" ho1e$e ho1e$er r be point pointed ed out here here that that the the unifor uniform m *usto *ustoms ms and pra*t pra*ti*e i*e for for do*umentar" do*umentar" *redits are not la1 as su*h. 4he parties ha$e $oluntaril" areed to appl" the set of rules. Banks in '(+ *ountries adhere *olle*ti$el" to the rules laid do1n in uniform *ustoms and pra*ti*e. Bank in another )+ *ountries adhere indi$iduall" to them. Banks in these *ountries e2pressl" state that the letters of *redit issued b" them are in a**ordan*e 1ith uniform *ustoms and pra*ti*e publi*ation no. )>,. #CPDC&(,, is a set of rules formulated b" !nternational Chamber of Commer*e E!CCF to appl" to all transa*tions in Letters of Credit *arried out b" banks. 4he purpose of the rules is to brin about uniformit" in the form of Letters of Credit and the pra*ti*e and Pro*edures adopted b" banks in handlin the instruments. Banks all o$er the 1orld handle letters of *redit and $ariations in forms and pro*edures and the *i$il and *ommer*ial la1s of different *ountries *ountries ma" *ause *onfusion in their dealins 1ith one another. !n order to pro$ide *ommon understandin about the interpretation of the terms and terminolo" a uniform uniform *ode is $er" essenti essential. al. 4herefo 4herefore re the !nternat !nternationa ionall Chambe Chamberr of Commer Commer*e *e formulated the #niform Customs and Pra*ti*e 1hi*h is uni$ersall" a**epted and Letters of Credit transa*tions e$er"1here are sub8e*t to this set of rules. 4hese uniform *ustoms *ustoms and pra*ti*e for do*umentar" do*umentar" *redit 1ere first published in '>++. 7e$ised $ersions 1ere issued in '>(' '>-) '>? and '>=+. 4he last $ersion of the #niform Customs and Pra*ti*e for do*umentar" *redits 1as adopted b" the !CC *oun*il in '>>+ and published as !CC publi*ation no. (,, in ma" '>>+.


23

4he follo1in table pro$ides brief information of !CC @ #CPDC&(,, Table ) * Information of ICCA #CP"C

!CC 3 o und ed Member Membershi ship p and Ass Asso*i o*iat atio ion n Purpose

E!nternational Chamber of Commer*eF 1orld business orani9ation ' >' > 4hous 4h ousan ands ds of mem member berss *ompan *ompanie iess and asso asso*i *iat ation ionss of o$er '(+ *ountries. 4o promote international trade in$estment s"stem and market e*onom" 1orld1ide.

!CC publi*ation

#CPDC&(,, #77&()( #7C&()) et*.

#CPDC Appli*ation

#niform Customs and Pra*ti*e for Do*umentar" Credits. !mport and e2port throuh L/C

'st publi*ation 7e$i 7e$ise sed d $ers $ersio ions ns 1er 1eree issu issued ed

' >+ + '>(' '>(' '>-) '>-) '>? '>? '>=+ '>=+ and and '>> '>>+ +

Latest $ersion

#CPDC E7e$. '>>+F

5ffe*ti$e from Ein for*eF

Januar" ,' '>>?

%umber of Arti*les

?>

#CPDC&(,, *ontains

Definition liabilities and responsibilities of all parties in$ol$ed in L/C 7ules and :uidelines for L/C operation Eissue ad$ise neotiation and reimbursementF. Sour*e < Se*ondar" Data

Reg;lator< Provisions Regarding L/C Lo8al R;les* :uidelines for forein e2*hane transa*tion reulation on import • Euideline&*hapter&6F 4he !mport/52port A*t '>(, • !mport poli*" for the *on*erned "ear • Customs dut" 6A4 S7O 4ariff • 7ate of e2*hane and its appli*ation • 3e Cir*ular !BD Cir*ular • Publi* noti*e issued b" CC!@5 Offi*e • #niform R;les*


2

• • • • •

#C#DC&!CC Publi*ation %o. (,, #7C&!CC Publi*ation %o.()) #77&!CC Publi*ation %o.()( !%CO457M&!CC Publi*ation %o.(-, ;armoni9ed Commodit" Des*ription @ Codin S"stem E;.S. CodeF


27

Operational 0lo9 of the Pro8ess* 4he *omplete !mport and 52port pro*ess in in*ludes the follo1in staes. Both the importer and e2porter are in$ol$ed in this flo1. Some tasks are done b" importers side and some are done b" e2porters side and some are done b" others. 4he pro*ess is $er" mu*h like the follo1in<

Chart)* Operational 0lo9 of the Import%:port Pro8ess

)

!mporter

52porter

4

2

)

>

Ship of the :oods

)7

!ssuin Bank

7

Ad$isin Bank )2

=

 5

7eimbursin Bank

))

%eotiatin Bank

)3 3

)6

Confirmin Bank

Des*ription of the 3lo1< '. 5stablish 5stablish a bu"in bu"in and sellin sellin *ontra*t *ontra*t bet1een bet1een the the bu"er bu"er and the seller. seller. ). Submission Submission of appli*ati appli*ation on 1ith ne*essar" do*uments do*uments to the the bank to to issue an L/C +. L/C issue issue and ad$ise ad$ise it to the the ad$isi ad$isin n bank bank ?. !ssue !ssue reimburs reimbursin in instru* instru*tion tion to the the reimburs reimbursin in bank (. Ad$ise the the L/C to the e2porter e2porter b" the ad$isin ad$isin bank after $erifi*ation $erifi*ation of the the L/C -. Askin Askin for the the *onfirm *onfirmatio ation n of the L/C L/C to the the importe importer r . !ssuin request request letter letter b" the issuin issuin bank to the *onfirm *onfirmin in bank Eas Eas per e2porters requirementF toe *onfirm the L/C =. !ssuin !ssuin *onfirm *onfirmati ation on b" *onfirm *onfirmin in bank bank >. Ship Shipme ment nt of the the oo oods ds ',. Submit required required do*ument to the neotiatin neotiatin bank for neotiation ''. %eotiate %eotiate the bill b" the neotiatin neotiatin bank and make pa"ment pa"ment to the e2porter '). Claim to the issuin issuin bank or reimbursin reimbursin bank for pa"ment '+. Pa"ment Pa"ment reimbursed b" the issuin issuin bank or reimbursin reimbursin bank '?. Ask the importer importer to *olle*t the do*uments do*uments from the bank '(. Colle*t do*uments do*uments from the issuin bank b" pa"in the banks dues. dues.


24

CHAPTER 

L/C OPERATION : PRACTICED IN JANATA BANK GLOBAL AND BANGLADESH ECONOMY

Chapter Hints…

This portion of the report is designed to describe all the matter about 51 processing, amendment, re8uired charges5time duration in di/erent stages. The re8uired 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 &ranch of anata &ank is presented here in details.

Chapter Contents…

1onsidered factors of the 51 -pplicant !ocuments re8uired for 51 0orms provided by anata &ank 1ommunication media 51 (ssuing 'rocess etter of 1redit in (mport 0inancing 51 in $*port 0inancing -mendments to etter of 1redit 1redit &ank charge in di/erent steps Re8uired Time duration in 51 'rocessing


25

Jana Janata ta Bank Bank has has alre alread ad" " esta establ blis ishe hed d a 1orl 1orld d 1ide 1ide net1 net1or ork k and and rela relati tion onsh ship ip in inte intern rnat atio iona nall Bank Bankin in  thro throu uh h its its ? Efou EfourF rF o$er o$erse seas as bran bran*h *hes es and and '))' '))' fore forei in n *orrespondents. 4he Bank has earned an e2*ellent business reputation in handlin and fundin international trade parti*ularl" in boostin e2port @ import of the *ountr". 4he Bank finan*es e2ports 1ithin the frame&1ork of the e2port poli*" of the *ountr". !t is one of the pioneers in promotin ba*k to ba*k Letter of Credit for the 7M: E7ead" Made :armentsF se*tor. !n Janata Bank onl" authori9ed bran*hes are allo1ed to open an L/C.

Considered 0a8tors of the L/C 'ppli8ant* •

•

•

•

•

•

A**ount holder of the bank< first of all L/C appli*ant must be a *lient of the bank. !f a ne1 *lient *omes in for openin L/C he/she has to open an a**ount 1ith Janata bank first. 4rust1orthiness< this is the $ital issue 1hile *onsiderin about openin the L/C. the past past e2per e2perie ien*e n*e of deali dealins ns 1ith 1ith that that perso person n is *onsi *onsider dered. ed. 3or a ne1 appli*ant his/her pre$ious dealins 1ith other banks are *onsidered. 6olum lume of busi busine ness ss<< the the $olu $olume me of busi busine ness ss is also also a ma8o ma8orr fa*t fa*tor or to be *onsidered. Post&import retirement< Post&import retirement is another fa*tor that 1ill ha$e to be *onsidered for openin o penin L/C. Detailed anal"sis of finan*ial *ondition< Detailed anal"sis of finan*ial *ondition of the appli*ant is required for the pro*ess espe*iall" for a ne1 appli*ant. And finall" the personal relationship of the appli*ant 1ith the bank or its hih offi*ials pla"s a $ital role in openin L/C.

"o8;ments re;ired 9hile appl
4rade Li*ense Eup to dateF !mport 7eistration Certifi*ate E!7CF Eup to dateF 4a2 !dentifi*ation %umber E4!%F Eup to dateF 6A4 7eistration Certifi*ate Eup to dateF Membership Certifi*ate of a bona fide trade bod" Eup to dateF Chamber Membership Certifi*ate L/C Appli*ation Ein letterhead pad of the *lientF LCA EL/C Appli*ationF form&dul" filled in and sined b" the importer !MP 3orm& dul" filled in and sined b" the importer Chare do*uments Suppliers Credit 7eport Appli*ants Credit 7eport Other ne*essar" papers dependin on the nature of import.


2=

0orms provided b< Janata Bank* After s*rutini9in the abo$e mentioned do*uments *arefull" the authori9ed offi*er deli$ers the follo1in forms to be filled in b" the appli*ant of L/C.

L/C 'ppli8ation 0orm* L/C Appli*ation 3orm is a sort of an areement bet1een the *ustomer and the bank on the basis of 1hi*h letter of *redit is opened. ope ned. Janata Jan ata bank pro$ides a printed form for openin of L/C to the importer. importer. A spe*ial adhesi$e stamp of $alue 4. '(, is affi2ed on the form in a**ordan*e 1ith the stamp a*t *urrentl" in for*e. #suall" the importer e2presses his de*ision to open the L/C quotin the amount of marin in per*entae. !n fillin up the form the importer has to pro$ide the follo1in information<                    

3ull name and address of the importer 3ull name and address of the benefi*iar" Draft amount 4ime bar 1ithin 1hi*h the do*uments should be presented Sales t"pe EC!3/3OB/C@3F Brief spe*ifi*ation of *ommodities pri*e quantit" indent %o. et*. Countr" of oriin !mport li*ense %o. !7C %o. A**ount %o. Do*uments %o. !nsuran*e Co$er %ote/Poli*" %o. date amount %ame and address of insuran*e insu ran*e *ompan" Ghether the partial shipment is allo1ed or not Ghether the transshipment is allo1ed or not Last date of shipment Last date of neotiation Other terms and *onditions Eit an"F Ghether the *onfirmation of the *redit is requested b" the benefi*iar" or not 4he L/C appli*ation must be *ompleted / filled in properl" and sined b" the authori9ed person of the importer before it is submitted the issuin bank.

L/C ';thori@ation 0orm* 4hee Lett 4h Letter er of Credi Creditt Authori uthori9a 9atio tion n 3orm 3orm ELAC ELAC3F 3F is the the form form pres* pres*rib ribed ed for the the authori9ation of openin Letter of Credit / pa"ment aainst import and used in lieu of impor importt li*e li*ense nse.. 4h 4hee autho authori9 ri9ed ed deale dealers rs are empo1 empo1ere ered d to issue issue LCA LCA 3orm 3ormss to the importers on the basis of li*ensin of the !mport Poli*" Order in for*e to allo1 import into Banladesh. Banladesh. !f forein e2*hane is intended to be bouht from the Banladesh Bank aainst an LCA3 it has to be reistered 1ith Banladesh Banks 7eistration #nit lo*ated in the *on*erned area offi*e of the CC!@5. 4he LCA 3orms a$ailable 1ith authori9ed dealers are issued in set of fi$e E(F *opies ea*h. 3irst *op" is e2*hane *ontrol *op" 1hi*h is used for openin of LC and effe*tin remittan*e. Se*ond *op" is the *ustom purpose *op" 1hi*h is used for *learan*e of o f imported oods from *ustom *us tom authorit". 4hird 4hird


2>

and fourth *opies of LCA3 are to be sent to *on*erned area of CC!@5 offi*e b" authori9ed dealer/7eistration #nit of Banladesh Bank. 3ifth *op" is kept as offi*e *op" b" authori9ed dealer/7eistration #nit. 4he Letter of Credit Authori9ation 3orm ELCA3F *ontains the follo1in&       

%ame and address of the importer importe r !7C %o. and the "ear of rene1al Amount of L/C applied for Eboth in fiure and in 1ordF Des*ription of itemEsF to be imported !4C number / ;S Code number Sinature of the importer 1ith seal List of oods to be imported

Import Permit 0orm !mport Permit 3orm *ontains the follo1in&  L/C authori9ation form no.  date  $alue in taka  reistration of LCA3  quantit" of oods  in$oi*e $alue  *ountr" of oriin  port of shipment  name of the steamer  indenters address

Comm;ni8ation media* Communi*ation bet1een the parties and bank in$ol$ed in the pro*ess is $er" important for the effi*ien*" of L/C operation. Janata Bank has the fa*ilit" to use the follo1in *ommuni*ation media<  postae for mailin  *ourier  *able / tele2

L/C Iss;ing Pro8ess* 4he enerali9ed pro*ess of L/C issuin in Janata Bank is e2plained belo1. 3or a business *ustomer approa*hed for the first time the pro*ess 1ill start 1ith openin an a**ount 1ith the bank.

&tep )* 'ppli8ation in 8ompan<s letterhead pad 3irst of all the person shall ha$e to submit an appli*ation 1ritten or printed in the *ompan"s letterhead pad. !n the appli*ation he/she 1ill ha$e to mention the name


36

of the produ*ts to be imported marin and so on. 4he appli*ant shall ha$e to appl" for the required forms of the bank.

&tep 2* "is8;ssion bet9een Janata Bank and the part<* After After re*ei re*ei$i $in n the the appli appli*a *atio tion n form form the the Bank Bank pa"s pa"s atte attenti ntion on to the the issues issues mentioned belo1. 4he produ*ts that are oin to be imported are *onsidered. Be*ause there • are restri*tions b" the o$ernment on some produ*ts. 4he quoted rates are spe*iall" anal"9ed as there also some restri*tions b" • the o$ernment.

&tep 3* Colle8ting forms and depositing those 9ith ne8essar< do8;ments* !n this step the appli*ant *olle*ts the L/C appli*ation form LCA 3orm and !MP 3orm from the bank. 4hese forms are to be filled up b" the *lient. 4he forms and all other ne*essar" do*uments are then deposited at the desk of the dealin offi*er.

&tep * Che8king "o8;ments* All the do*uments do*uments are *he*ked out b" the dealin offi*er. offi*er. ;e/she *he*ks spe*iall" the quoted rates the terms and *onditions of the indent or pro forma in$oi*e and the $alidit" of the do*uments. :enerall" the person from 1hom the forms are *olle*ted is enaed in *he*kin out the do*uments.

&tep 7* P;tting L/C o* After *he*kin the do*uments and L/C %o. is i$en. :enerall" the offi*er 1ho *he*ks the do*uments puts the L/C %o.

&tep 4* Preparing offering sheet* 4he offerin sheet is prepared b" the dealin offi*er. #suall" the offi*er 1ho *he*ks the do*uments prepares the offerin sheet.

&tep 5* &inging offering sheet* 4he offerin sheet is then sined b" the offi*er ha$in the authorit" to open the L/C of the spe*ified amount. !f it is 1ithin the ma2imum limit of the amount Efor 1hi*h the L/C is appliedF of the SA6P or bran*h manaer he *an sin it. But if it is be"ond his/her limit proposal must be sent to the head offi*e offi*e either for *ase&to& *ase san*tion or for *redit limit. :enerall" in Janata Bank SA6P or bran*h manaers are empo1ered to open an L/C 1ithout *ommuni*atin 1ith the head offi*e if the L/C amount is 1ithin his / her limit.

&tep =* T

3)

&tep >* Che8king the L/C* A final *he*k is done to find out an" dis*repan*ies after the t"pin is *ompleted. 4his is done b" the dealin offi*er 1ho is enerall" in *hare of the 1hole pro*ess. &tep )6* Crediting the a88o;nt of the 8;stomer* On the basis of *redit arranement 1ith the bank of r import finan*in the *ustomers a**ount is affe*ted 1ith *ertain *redit.

&tep ))* "ispat8hing L/C* At the final stae the L/C is dispat*hed throuh postae mail or tele2 or SG!34 or so forth.

Althouh this is the enerali9ed pro*ess for issuin L/C for the speed of the pro*ess sometimes the t"pin and *he*kin of do*uments are done before the offerin sheet is sined. 4hen after sinin the L/C it is dispat*hed.

Chart2* 0lo9 Chart mentioning &teps in iss;ing an L/C in Janata Bank

Appli*ation in *ompan"s letterhead pad

Dis*ussion bet1een the Bank and the part"

Colle*tin forms and depositin those

Preparin offerin sheet

Puttin L/C %o.

Che*kin Do*uments

Sinin offerin sheet

4"pin the L/C

Che*kin the L/C

Dispat*hin L/C

Creditin the a**ount


32


33

Letter of Credit in Import 0inan8ing One of the important fun*tions of the *ommer*ial banks in the 1orld is to undertake the import of mer*handise into the *ountr" and pa"ment of forein e2*hane to1ards the *ost of the mer*handise to forein suppliers. Banladeshs import poli*" requires letters of *redit *redit EL/C EL/CFF for all all impor imports ts of oo oods ds.. ;o1e ;o1e$er $er in *ert *ertain ain *ondit *onditio ion n oo oods ds *an *an be imported 1ithout L/C but 1ithin a limit of #S K)(,,, annuall" per importer. L/C as a tool tool of finan finan*i *in n pro$id pro$ides es benefi benefits ts to both both the impor importe terr and and the the e2port e2porter er.. !m !mpor portt finan*in b" Janata Bank *an be sho1n b" the diaram belo1<

Import 0inan8e Janata Bank

Pre Import 0inan8e '. L/C ELetter of CreditF

Post Import 0inan8e PAD PAD L!M Areement 3or*ed L!M L47 L47

;o1e$er post import finan*e is be"ond the s*ope of this report. 4hus the follo1in fe1 se*tions 1ill des*ribe the import L/C pro*essin of Janata Bank.

Import L/C ( The Pro8ess* 4he 1hole pro*ess of L/C in Janata Bank *ompletes in three staes< L/C issuan*e • Lodment • 7etirement • L/C Iss;an8e* 4his is the step 1here the importer opens an L/C 1ith the bank. 4his is the main part the report 1ill fo*us on and 1ill be dis*ussed in detail later. Lodgment* On re*eipt of the do*uments from the neotiatin bank the L/C issuin bank 1ill make entr" the parti*ulars of the do*uments in the !n1ard 3orei 3orein n Bill Billss 7eis 7eiste ter0 r0 and prepar preparee the $ou $ou*h *her er b" *on$er *on$erti tin n the forei forein n *urren*" into Banladeshi 4aka. 4his stae is kno1n as the Lodment of import bills.


3

importer 1ill Retirement* On re*eipt of the *op" of lodment from the bank the importer deposit the required amount and take deli$er" of the shippin do*uments. 4his stae is kno1n as the 7etirement of !mport Bills. Che8k list for Import L/C* Janata Bank uses a *he*klist to $erif" the o$erall issuin pro*ess of import L/C. 4he *he*k list *ontains the follo1in< • •

• •

• • •

• • •

• • • • • • •

•

•

•

•

Gritten request of importer for issuin L/C is obtained L/C appli*ation form dul" filled in sinature of importer / uarantor is taken and $erified affi2in adhesi$e stamp 1ith proper $alue @ defa*ed. !MD form obtained LCA3 dul" filled in sined b" the importer @ $erified b" Banks offi*ial 1ith proper seal Cop" of indent / pro forma in$oi*e is dul" sined @ a**epted !nsuran*e *o$er note obtained *o$erin minimum B0 *ateor" risk 5$iden*e of pa"ment of 6A4 6A4 reistration fee throuh 3orm&:a E6A4 E6A4 reistration *ertifi*ateF !7C / pass book is $alid Openin of L/C is dul" appro$ed b" *ompetent authorit" as per desinated po1er Marin *ommission and other *hares are reali9ed as per pres*ribed rates properl" and timel" Proof reardin obtainment of 4!% E4a2 identifi*ation %o.F 6alid membership *ertifi*ate issued b" member orani9ation of 3BCC! Contra liabilit" entries are passed on the same da" of openin of L/C Marin is reali9ed on the same da" of the openin of L/C Commission and other *hares are reali9ed on the same da" of the openin of L/C L/Cs is ad$ised promptl" 1ithin )? hours time Amendments of L/C in respe*t of time $alue or items are effe*ted in a**ordan*e 1ith 1ritten request of L/C openers and *hares thereof reali9ed L/C *op" alon 1ith LCA3 is sent to the offi*e of the CC!@5 1ithin fifth of e$er" month *o$erin the entire pre$ious month 7eistration of indenter is $alid. !ndenter must in*orporate Banladesh Bank permission no. in indent inden t 6A4 is bein dedu*ted on L/C *ommission and sent to *ompetent authorit" of Janata Bank Balan*in of liabilities and marin is done periodi*all"


37

Letter of Credit in %:port 0inan8ing 52port 52port business business *reates *reates in1ard in1ard remitta remittan*e. n*e. 3or that reason reason o$ernm o$ernment ent en*oura en*ouraes es in$estin in e2port business and offers in*enti$e like ta2 and dut" free entran*e of ra1 materials in 7M: business in our *ountr". As import of one part" is an e2port to the other L/C also pla"s a $ital role in finan*in e2ports. 3ollo1in diaram sho1s means of e2port finan*in that Janata Bank deals 1ith.

%:port 0inan8e Janata Bank

Pre &hipment 0inan8e '. Pa*kin Cash Credit EPCCF ). Ba*k to Ba*k L/C

Post &hipment 0inan8e %eotiation of 52port Bills DP/DA Colle*tion of 52port Bills

Post shipment finan*e has not been in*luded for dis*ussion in this report. 4hus the follo1in fe1 se*tions deal 1ith the means that Janata Bank uses for pre shipment finan*e i.e. PCC and B4B L/C.

Pa8king Cash Credit DPCCE* PCC is a short term *redit 1ith a fi2ed repa"ment repa"ment date ranted b" the bank to an eliible eliible e2porter. 4his loan is enerall" i$en on the basis of irre$o*able L/C but sometimes it *an be i$en 1ithout L/C on the basis of areement areement 1hi*h is i$en to $alued *onstituents or e2porters.

PCC is i$en for the follo1in purpose< 4o bu" ra1 materials 4o pro*ess ra1 materials 4o pa" freiht 4o pa" insuran*e 4o pa" inspe*tion fees 4o pa" pa*kin *hare • • • • • •

"o8;ments verified for granting PCC* After After the the L/C L/C is subm submit itted ted to the the bank bank *ount *ounter er the bank starts starts to pro*e pro*ess ss all the do*um do*umen ents ts as per per the the L/C L/C term termss and *ondit *onditio ions. ns. Befor Beforee san*t san*tion ionin in the PCC PCC the the follo1in points are $erified in Janata Bank< Che*k 1hether the L/C is issued b" the reputed bank E'st *lass bankF. •


34

•

• • •

Obtain the *redit report of importer espe*iall" 1hen the applied loan amount is lare. L/C e2pir" date is *he*ked and PCC is not allo1ed after that date. Sto*k report must be submitted reularl" to the bank Loans are i$en for the period from the time of pur*hasin ra1 materials up to shipment of oods.

Ba8k To Ba8k L/C* Ba*k to Ba*k L/C ma" be defined as an L/C 1hi*h is ba*ked b" another. !n Banladesh Banladesh this t"pe of L/C is bein used in the form of pre&shipment finan*e espe*iall" aainst e2port order of read"&made arments. B4B L/C is the hihest pro*essed L/C in Janata Bank. Due to e2tensi$e use of B4BLC Banladesh Bank has introdu*ed a spe*ial *hapter in its :uidelines for 3orein 52*hane 4ransa*tion0.

B4B L/C is opened aainst lien of another *redit. !t is an L/C 1here the benefi*iar" is pro*urin oods from suppliers and like the suppliers to et the benefit under the *redit. Benef Benefi* i*iar iar" " ma" ma" need need to pur*h pur*hase ase the the ra1 ra1 mate materia rials ls and and a**ess a**essori ories es and make make the the pa"ment b" openin a se*ond L/C fa$orin the ultimate supplier. 4o do this the benefi*iar" requires Janata Bank to open another L/C in fa$or of the supplier on the oriinal *redit. Su*h an an*illar" L/C is kno1n as Ba*k to Ba*k L/C. 4he oriinal or master L/C forms the se*urit" based on 1hi*h the bank undertakes the risk under B4B L/C. B4B L/C is issued in *onformit" of the terms and *onditions as stipulated in master L/C. !n our *ountr" B4B L/C is enerall" opened for repro*essin purpose to manufa*ture e2portable e2po rtable mer*handise. 4he $alue $ alue of B4B L/C is restri*ted restr i*ted up to a ma2imum amount of 3OB $alue of the master 52port L/C.

"o8;ments e8essar< for %:port L/C* As soon as the seller / e2porter re*ei$es the *redit and is satisfied that he *an meet its terms and *onditions he is in position to load the oods and dispat*h them. 4he seller then sends the do*uments e$iden*in the shipment to the bank. 52porter 1ill submit those do*uments in a**ordan*e 1ith the terms and *onditions as mentioned in L/C. enerall" the do*uments obser$ed b" the bank are as follo1s< • • • • • • • • • • •

Bill of 52*hane Commer*ial !n$oi*e Bill of Ladin Air Ga" Bill 7ail Ga" 7e*eipt !nsuran*e Poli*" Certifi*ate of Oriin Certifi*ate of Manufa*ture !nspe*tion Certifi*ate Pa*kin List Clean 7eport of 3indin EC73F


35

Che8k List for %:port L/C Like import L/C Janata Bank offi*ials use a *he*klist to make the L/C operation fla1less also for 52port L/C. 4he points of the 52port L/C *he*klist are as follo1s< Authenti*it" of 52port L/C established • !f ad$ised b" another lo*al bank bona fide of L/C established throuh paper • *ommuni*ation 1hi*h is do*umented !n *ase of )nd benefi benefi*i *iar" ar" L/C L/C IC IC of both both benef benefi*i i*iar" ar" establ establis ished hed and and • do*umented B4B L/C pro forma in$oi*e apparent leitima*" established b" *onne*ted papers • Possible in&house L/C or B4B L/C transa*tion eliminated • 52porter or B4B L/C opener is not a first time *lient • L/C opener has established adequate *ollateral se*urit" 1ith the bank • Present L/C $alue is not disproportionate to past business re*ord of the *lient • C!B report is *lean • Market report is ood • B4B L/C is 1ithin the produ*tion *apa*it" of the 7M: unit/e2porters unit • uota a$ailabilit" and $alidit" • Suffi*ient lead time is a$ailable to ensure e2port in time • %o tra*k re*ord of for*ed for*e d pa"ment of B4B L/C due to shortae of funds fu nds • 6alue addition requirement as per !PO in for*e. •

Sour*e< Primar" Data

'mendments to Letter of Credit* An amendment to L/C means to make a *hane to the terms of the *redit. After openin a L/C either benefi*iar" or appli*ant sometimes obser$es that the terms and *onditions laid do1n in the *redit are not *omplete to ser$e their purpose. 4he" need some *hanes or alteration to the *redit to make it 1orkable. 4his is done b" the 1a" of issuan*e of amendment to the L/C. At the request of the appli*ant as the issuin bank Janata Bank onl" *an issue amendment to the L/C. there *an be more than one amendment to a *redit. All the amendments form an interal part of the oriinal *redit. L/C amendments are to be *ommuni*ated b" authenti*ated tele2 SG!34 or mail. !f there is more than one amendment to a *redit all the amendments must bear the *onse*uti$e serial number so that the missin of an" amendment *an be identified b" the ad$isin bank or the benefi*iar". !f the L/C is an irre$o*able one the amendment *an not be done 1ithout the *onsent of both the partiedH par tiedH i.e. he benefi*iar" ben efi*iar" and the th e appli*ant. Janata Jan ata Bank as the th e issuin bank *an make amendments but if the benefi*iar" does not a**ept the amendment it 1ill not be effe*ti$e. !f the L/C is re$o*able the appli*ant *an make an" amendment to the L/C at an" time he desires and su*h amendment 1ill be effe*ti$e if the *redit is not e2e*uted. Janata Bank enerall" asks for amendment on the follo1in points< 52tension of shippin date 52tension of e2pir" date • •


3=

• • • • • • • • • •

!n*rease or de*rease of L/C $alue !n*rease or de*rease of quantit" of oods Chane in des*ription of mer*handise %ame and address of the benefi*iar" ben efi*iar" !nsertin of ne1 *lause Chane the mode of transport Chane of the loadin port or destination Chane of *ertain terms and *onditions of L/C 4erms of deli$er"H i.e. 3OB C37 C!B !nspe*tion *lause

Bank 8harge in different steps d;ring L/C pro8essing* 4he follo1in table sho1s the ma8or *ost a**ounts that the bank *hares for different steps in L/C pro*essin< Table2* ,a?or 8harges in different steps for L/C pro8essing L/C opening 8harges

Ca s h

'st uarter Subsequent tr. Minimum B4B 'st uarter Subsequent tr. Minimum Deferred 'st uarter Subsequent tr. Minimum !nland 'st uarter Subsequent tr. Minimum Postage 8harges

.( .)( 4aka )(, .( .( 4aka +,, .= .? 4aka +,, .( .)( 4aka )(,

Mail Courier 4ele2 SG!34 'mendment Charges

4aka ',, At a*tual Min. 4aka '(,, At a*tual Min. 4aka '(,, At a*tual Min. 4aka '(,,

6alue in*reased / de*reased

4aka )(,

Maturit" e2tension Others Other Charges L/C *an*ellation

4aka )(, 4aka 4aka ',,

52port L/C ad$isin *hare

O1n part"< 4aka )(, Other Bank part"< 4aka (,, 4aka (,,  A*tual 4ele2 Chare 4aka ',,

L/C transfer !ssuan*e of Bank Certifi*ate

4aka (,,


3>

Stamp

4aka 4aka '(, Sour*e< Primar" Data

Re;ired Time Time d;ration in L/C Pro8essing* !n most *ases the L/C *lients of the banks are reular and old. 3or that reason the bank enerall" has all the required do*uments for openin L/C of the *lients. Ghen a reular *lient applies to open another L/C the" 8ust pro$ide photo*opies of most do*uments and the bank offi*i offi*ials als do not take mu*h mu*h lon time to *he*k *he*k those those do*umen do*uments. ts. 5$en often a reular *lient first informs his intention to open another b" phone and Banks offi*ials start the pro*essH althouh this hihl" depends on nature of personal relationship of the *lient 1ith the ba*k. 3or a reular *lient it enerall" lakes less than an hour to open another L/C. ho1e$er in *ase of ne1 *lient banks offi*ials enaed in L/C issuin pro*ess *he*k the do*uments thorouhl" and often it takes time to make the *lient understand the banks requirements. ;o1e$er it enerall" does not take more than t1o da"s e$en for a ne1 *lient appl"in to open an L/C.

Table3* 'verage Time re;irement for the basi8 a8tivities of L/C iss;ing pro8ess '8tivit< Che*kin Do*uments Puttin L/C %o. Preparin Offerin Sheet Sinin Offerin Sheet 4"pin the L/C Che*kin the L/C Creditin the a**ount of the *ustomer Total TimeF

'verage Re;ired Time Din min;tesE ', ) ') '( '( ', '( >6)26

Sour*e< Primar" Data 4otal time mentioned here is not simple addition of the time required for basi* a*ti$ities. 7ather it is pro$ided from the inter$ie1 1ith the bank offi*ials. Relevant a8tivities that affe8t the time str;8t;re* Appli*ation for forms in *ompan" letterhead pad • Dis*ussion bet1een bank and the appli*ant • 3illin in the forms • Dispat*hin the L/C •


6

CHAPTER !

L/C OPERATION : ANALYSIS GLOBAL AND BANGLADESH ECONOMY

Chapter Hints…

This portion of the report includes all the analysis, has performed from the collected information. (ncome of the &ank, 1harges of 51 processing and Time Re8uirement considering that of other &anks is analy"ed here. 'erformance is analy"ed using some statistical tools such as, Standard !eviation, 1orrelation, Regression and #rowth Rate.

Chapter Contents…

-nalysis of (ncome from 51 -nalysis of 1harges 1harges with !i/erent &anks -nalysis of Time Re8uirement Re8uirement of !i/erent &anks in 51 'rocessing -nalysis of &ehavior &ehavior or Trend -nalysis of Stability Stability of $*port) $*port) (mport 'erformance analysis 1orrelation 1alculation Regression -nalysis


)

'nal
Comparison of &o;r8es of In8ome from Import L/C* 4he follo1in *hart e2hibits a *omparison of in*ome at Janata Bank Dilkusha Corp. Bran*h from different a*ti$ities relatin L/C pro*essin 1ithout mentionin the *onfidential in*ome amounts durin the period of Januar" to De*ember ),,(.

Chart3* Comparison of &o;r8es of In8ome from Import L/C

Opening Charge Postage Income

Amendments Amendments

Miscellaneous

4he diaram sho1s that L/C openin *hare a*ts as the ma8or sour*e of in*ome from import L/C as it pro$ides more than half of the total. 5arni rnins ns form orm mis*el s*elllaneou neouss *har hares *onstitutes 8ust belo1 one fifth of the banks total in*ome 1hereas in*ome from amendment amendment and and pos posta tae e *har *hares es are 8ust mo more re than than one tenth of the banks total in*ome.

Comparison of &o;r8es of In8ome from BTB %:port L/C* 4he follo1in *hart e2hibits a *omparison of in*ome at Janata Bank Dilkusha Corp. Bran* Bran*h h from from diff differ erent ent a*ti a*ti$it $ities ies relat relatin in  L/C L/C pro*e pro*essi ssin n 1itho 1ithout ut menti mentioni onin n the the *onfidential in*ome amounts durin the period of Januar" to De*ember ),,(. Chart* Comparison of &o;r8es of In8ome from BTB %:port L/C Opening Charge Postage Income

Amendments Amendments

Miscellaneous

4he diaram sho1s that L/C openin *hare a*ts as the ma8or sour*e of in*ome from B4B 52port L/C as it pro$ides more than half of the tota total. l. 5arn 5arnin ins s form form amen amendm dmen entt *har *hare ess *onstitutes 8ust belo1 one fifth of the banks total in*ome 1hereas in*ome fr o m mis*e mis*ella llaneo neous us and posta postae e *har *hare ess are 8ust 8ust more than one tenth of the banks total in*ome.


2

,onth9ise In8ome from Import L/C* 4hee follo1 4h follo1in in  *hart *hart e2hib e2hibit itss a *ompar *omparis ison on of mo mont nth&1 h&1ise ise in*om in*omee at Janat Janataa Bank Bank Dilkush Dilkushaa Corp. Corp. Bran*h Bran*h from !mport L/C 1ith 1ith mention mentionin in the *onfiden *onfidential tial in*ome in*ome amounts durin the period of Januar" to De*ember ),,(. Chart-5: Month-wise income from Import L/C .+'-.-'-(+'-(-'-%+'-%-'-&+'-&-'-+'--'-&

%

(

.

+

/

3

,

1

&&-

&&

&%

Month

4he *hart sho1s that in 3ebruar" the in*ome 1as hihest and after1ards the in*ome is de*reasin raduall". And aain in O*tober the in*ome raises suddenl".

,onth9ise In8ome from BTB %:port L/C* 4he follo1in *hart e2hibits a *omparison of month&1ise in*ome at Janata Bank Dilkusha Corp. Bran*h from B4B 52port L/C 1ith mentionin the *onfidential in*ome amounts durin the period of Januar" to De*ember ),,(.

Chart-6: Month-w ise income fr om BTB Export L/C

.'

th

(+'

n

(' %+' %' &+' &' +' '

l g p t 5 c n * r r 0 n u $ a ) e M a A p M a $ u $ A u 2 e O c 4 o 6 e

Ta! a "in Lac # %&' (( &&+',, %.'+& ((/'%& &((' /1'+ &&1'% &1,'11 &(&'(3 '

4he *hart sho1s that in*ome is in*reasin and de*reasin raduall" in 1a$e form. !n April the in*ome is hihest and after1ards the in*ome is de*reasin raduall".


3

'nal
4he follo1in table sho1s the ma8or *ost that the different bank *hares for different steps in L/C pro*essin< Table4* ,a?or 8harges for L/C pro8essing in different Banks L/C opening 8harges

Janata Bank

&onali Bank

Cit< Bank Ltd!

Ca s h

'st uarter Subsequent tr. Minimum B4B 'st uarter Subsequent tr. Minimum Deferred 'st uarter Subsequent tr. Minimum !nland 'st uarter Subsequent tr. Minimum Postage 8harges

.( .)( 4aka )(, .( .( 4aka +,, .= .? 4aka +,, .( .)( 4aka )(,

.( .)( 4aka )(, .( .( 4aka +,, .= .( 4aka +,, .( .)( 4aka )(,

.( .+ 4aka ?,, .- .? 4aka (,, .- .+ 4aka ?,, .- .+( 4aka ?,,

Mail

4aka ',,

4aka ',,

Courier

At a*tual Min. 4k.'(,, At a*tual Min. 4k.'(,, At a*tual Min. 4k.'(,,

At a*tual Min. 4aka '(,, At a*tual Min. 4aka '(,, At a*tual Min. 4aka '(,,

4k.',,ELo*alF 4k.+,,E3oreinF At a*tual Min. 4aka '(,, At a*tual Min. 4aka +(,, At a*tual Min. 4aka +(,,

6alue in*reased / de*reased

4aka )(,

4aka )(,

4aka (,,

Maturit" e2tension Others Other Charges L/C *an*ellation

4aka )(, 4aka ',,

4aka )(, 4aka ',,

4aka (,, 4aka (,,

4aka (,,

4aka (,,

4aka (,,

4aka )(, 4aka (,, 4aka (,,

4aka (, 4aka ',,, 4aka ',,,

!ssuan*e of Bank Certifi*ate

4aka )(, 4aka (,, 4aka (,,  A*tual 4ele2 4ele2 Chare 4aka ',,

4aka ',,

4aka ),,

Stamp

4aka '(,

4aka '(,

4aka '(,

4ele2 SG!34 'mendment Charges

52port L/C ad$isin *hare O1n part"< Other Bank part"< L/C transfer

Sour*e< Primar" Data 4he abo$e table sho1s that the *hares *hared b" Sonali and Janata Bank are almost the same in most ser$i*es. But the *osts *hared b" CBL $ar" $ar" in most *ases from these t1o L/C Operation of Janata Bank



althouh not a reat deree. !n almost all *ases CBL *hares *hares hiher than the t1o %CBs. A**ordin to bank offi*ials inter$ie1s this is due to CBL bein a PCB and Sonali and Janata Bank bein %CBs. the offi*ials of CBL also *laim that the" pro$ide mu*h better and faster ser$i*e  1hi*h 8ustifies *harin hiher *osts.

'nal
Table5* 'verage Time re;irement for the basi8 a8tivities of L/C iss;ing pro8ess '8tivit<

Che*kin Do*uments Puttin L/C %o. Preparin Offerin Sheet Sinin Offerin Sheet 4"pin the L/C Che*kin the L/C Creditin the a**ount of the *ustomer Total TimeF

'verage Re;ired Time Din min;tesE Janata Bank

&onali Bank

Cit< Bank Ltd!

', ) ') '( '( = '(

', ) ', '( '( = '(

( ' ', ( '( ( ',

>6)26

>6)26

7646 Sour*e< Primar" Data

4otal time mentioned here is not simple addition of the time required for basi* a*ti$ities. 4otal a*ti$ities. 7ather it is pro$ided from the inter$ie1 1ith the bank offi*ials. 3rom the table the follo1in de*ision *an be made< Cit" Bank Ltd. as PCB 1orks mu*h faster than the t1o %CB mentioned Puttin L/C no. is the least time *onsumin a*ti$it" in the pro*ess 4"pin the L/C and *he*kin the L/C are the a*ti$ities that do not $ar" mu*h from bank to bank in terms of o f time 4"pin the L/C is the most time *onsumin a*ti$it" amon the mentioned. • • •

•

Relevant a8tivities that affe8t the time str;8t;re* Appli*ation for forms in *ompan" letterhead pad • Dis*ussion bet1een bank and the appli*ant • 3illin in the forms • Dispat*hin the L/C •


7

'nal
4able&=< %umber of !mport L/C !ssued Per Month ,onth o! of L/C iss;ed = Januar" )) 3ebruar" )Mar*h )+ April ' Ma" ') June = Jul"  Auust = September ', O*tober > %o$ember ', De*ember :raph < %umber of !mport L/C !ssued Per Month '-, 4otal 4he table and *hart sho1s that the hihest no. of import L/C opened in the month mar*h and most of the L/C is opened durin month 3ebruar" to June. And the lo1est no. of L/C is opened in month Auust.

;mber of BTB %:port L/C Iss;ed Per ,onth 4he follo1in table sho1s the number of B4B 52port L/C issued per month at Janata bank Dilkusha Corp. Bran*h Bran*h  durin the period of Januar" Ja nuar" to De*ember ),,(.

4able&>< %umber of B4B 52port L/C !ssued Per Month ,onth o! of L/C iss;ed ', Januar" +, 3ebruar" )' Mar*h )) April '( Ma" ( June > Jul" ') Auust '? September 'O*tober = %o$ember  De*ember :raph =< %umber of B4B 52port L/C !ssued Per Month '-> 4otal 4he table and *hart sho1s that the hihest no. of B4B 52port L/C opened in the month 3ebruar" and most of the L/C is opened durin month Januar" to Ma". And the lo1est no. of L/C is opened in month June.


4

;mber of Import L/C iss;ed per Co;ntr< 4he follo1in table sho1s the number of !mport L/C issued to different *ountries at Janata bank Dilkusha Corp. Bran*h durin the period of Januar" to De*ember ),,(.

4able&',< %umber of !mport L/C !ssued Per Countr" Co;ntr< o! of L/C iss;ed !ndia China Sinapore %etherlands 4hailand !ndonesia S1it9erland S. orea Other 4otal

?) +' ') > +  ? '? += '-,

:raph >< %umber of !mport L/C !ssued Per *ountr" *ountr" 4he table and *hart sho1s that China and !ndia dominate the import market. 4he hihest no. of import L/C opened the benefi*iar" *ountr" !ndia.

Item9ise BTB %:port L/C 4he follo1in table sho1s the number of B4B 52port L/C issued to different items at Janata bank Dilkusha Corp. Bran*h durin the period of Januar" to De*ember ),,(.

4able&''< %umber of !mport L/C !ssued Per !tem Item 3abri*s Iarn A**essories others 4otal

o! of L/C iss;ed +? += >) ( '->

:raph ',< %umber of !mport L/C !ssued Per !tem 4he table and *hart sho1s that a**essories dominate the import market.


5

'nal
!mport '>).?+ ),+.-> ').(? '>.), '((.,' >),.= '=?.' '.>' +),.>)

52port )(,.(? )=+.=' ?+-.,)-.(+ +)(.,, '(-).>? +').(> --.?> ??)'.((

3rn4rd ??).> ?=.(, -,=.-, ?-?.+ ?=,.,' )?=+.=' ?>-.(.>( ++(=.-

Profit ?.(, ?..?> (.=, ))., ?(.)( >.,( -.>' ?.->

Co&effi*ient of 6ariation

>.+

)'.)

''.-

-.+,

+ro9th Rate Import Iear ),, ' ),, ) ),, + ),, ? ),, ( &"

!mport '>).?+ ),+.-> ').(? '>.), '((.,' '.>'

!mport :ro1th 7ate (.=( &'(.)> '?.)> &)'.+> '?.-=

+ro9th Rate %:port Iear ),, ' ),, ) ),, + ),, ? ),, ( &"

52port )(,.(? )=+.=' ?+-.,)-.(+ +)(.,, --.?>

52port :ro1th 7ate '+.)= (+.-( &+=.-( )'.?= ++.'+

+ro9th Rate 0oreign Trade Iear ),, ' ),, ) ),, + ),, ? ),, ( &"

34 ??).> ?=.(, -,=.-, ?-?.+ ?=,.,' (.>(

34 :ro1th 7ate ',.,( )?.=? &)+.-? +.)> '.(


=

Performan8e anal
4able ')< !mport 52port and Profit of ),,' to ),,( Amount in Crore Cro re 4aka 4aka

4he performan*e of the Janata Bank in the last fi$e E(F "ears espe*iall" in the se*tor of import and 52port and *omparison of the data 1ith the net profit of the bran*h is sho1n abo$e and raphi*all" presented belo1< +raph ))* ImportG %:port and Profit of 266) to 2667

A statisti*al tool like *orrelation anal"sis is done here to determine the relationship bet1een the follo1in< !mport business and profitabilit" 52port business and profitabilit" 3orein 4rade business and profitabilit" • • •


>

Correlation 'nal
Import  '>). '>).?+ ?+ ),+. ),+.-> -> ').(? '>. '>.), ), '((. '((.,' ,' '=?.'

E&

X

F

2 =.)=.)'>. '>.() () E''.-+F '+. '+.,+ ,+ E)>. E)>.''-FF

Co&effi*ient of Correlation<

Profit I ?.(, .(, ?...?> (.=, .=, )). ))., , >.,(

)

2 -=.' -=.'+=,. +=,.= = '+(.+( '->. '->.-= =(,. =(,.(? (? '-,?.-,

r =

∑ xy ∑ x P∑ y )

EI& Y F " E?.( E?.((F (F E?.) E?.)>F >F E'.(-F E+.) E+.)(F (F '+.'+.-( (

") ),. ),., , '=.? '=.?, , ).?+ ',.( ',.('=-. '=-.+) +) )+=.?+

−

r

=

2" E+. E+.((-FF E=+. E=+.) )FF '=.'( E?). E?).++ ++FF E+>= E+>=., .,>F >F E(?+.(-F

(?+.(-

'-,?.-, P )+=.?+

)

r Q &,.==>>(+ Co&effi*ient of determination r ) Q ,.))=>

Correlation bet1een %:port and Profit< Amount in Crore 4aka 4aka %:port Iear ),,' ),,) ),,+ ),,? ),,( Sum/A$.

 )(,.(? )=+.=' ?+-.,)-.(+ +)( +)( +'). +').( (>

E&

X

F

2 E-).,(F E)=.=F ')+.? E?(.,-F ').? ').?' '


2 +=?>.>( =)=.' '()?(.++ ),+,.)) '(?. '(?.,,))', ))',. .? ?

r =

EI& Y F " E?.((F E?.)>F E'.(-F E+.)(F '+.'+.-( (

Profit I ?.(, ?..?> (.=, )). ))., , >.,( >.,(

)

∑ xy ∑ x P∑ y )

r

)

=

") ),., '=.?, ).?+ ',.('=-. '=-.+) +) )+=. )+=.?+ ?+

2" )=).+) ')+.?E'>).-)F '?-.?? '->. '->.?) ?) ()>. ()>.,) ,)

()>.,) ))',A.A? P )+=.?+

r Q ,.)+,?))>> Co&effi*ient of determination r ) Q ,.,(+,>(


76

Correlation bet1een 0oreign Tr Trade ade and Profit< Amount in Crore 4aka 4aka 0r!Trd Iear ),,' ),,) ),,+ ),,? ),,( Sum/A$.

 ??).> ?=.(, -,=. -,=.-, -, ?-?.+ ?=,. ?=,.,' ,' ?>-.-

E&

X

F

2 E(+.>F E>.)-F '''.=? .=? E+).,+F E'-. E'-.( (FF


Profit I ?.(, ?..?> .?> (.=, )). ))., , >.,(

)

2 )=>+.(= =(.= ')(, ')(, .? .? ',)-.,( )=,. )=,.-+ -+ '->+.=

r =

∑ xy ∑ x P∑ y )

EI& Y F " E? E?.((F E?.)>F E'.( E'.(-F -F E+ E+.)(F '+.'+.-( (

") ),., '=.?, ).?+ ).?+ ',.('=-. '=-.+) +) )+=.?+

−

r

)

=

2" )??.( +>.+ E'? E'?.? .?F F ',?.', E))= E))=..--F -F E'?.(?F

'?.(?

'-A>+.A= P )+=.?+

r Q &,.,,)--(-+ Co&effi*ient of determination r ) Q (.)=,)>5&,(


7)

Regression 'nal
Slop

b

Impo Import rtDH DHEE Prof Profit itDD-EE '>).?+ ?.(, ),+.-> ?.').(? .?> '>.), (.=, '((.,' ))., >),.= ?(.)( '=?.' >.,(

∑ XY n X Y ∑ X n X −

=

b

)

)

) +,)>.+, ?'?=>.-) )>,.,( +===.=? )?,)=.', ''),?.>'

I =-(.>? >->.(')>).+) ''?+.+('=.+ >,.+'

AA>, .+' =

−

( P '=? .'A P >.,(

'A'),?.>'

−

!nter*ept

a

=

Y

−

b X

a

=

>.,(

−

7eression 5quation of ImportG ProfitE
−

( P '=? .'A

b

=

&,.++=A(

a

=

A'.?+>+=

)

E&,.++=A(F P '=?.'A

Q a  b Q '.?+>+=  E&,.++=(F

Cal*ulation of 7eression 3un*tion of %:port Amount in Crore Cro re 4aka 4aka Iear ), ,' ), ,) ), ,+ ), ,? ), ,( &;m 'vg!

Slop

b

%:po %:port rtDH DHEE Prof Profit itDD-EE )(,.(? ?.(, )=+.=' ?.?+-.,.?> )-.(+ (.=, +)(.,, ))., '(-).>? ?(.)( +').(> >.,(


=

b

)

)

) -),.)> =,(?=.') '>,'?=.+) '().+, ',(-)(.,, (',--?.,+

I '').?+ '+(,.>? +)--.,> '(('.- +.(, '?-+.-+

'?-A+ .-+ =

a

=

Y

−

b X

a

=

( P +') .(> P >.,(

(',--? .,+

−

!nter*ept

−

>.,(

−

7eression 5quation of %:portG ProfitE
−

( P +') .(>

,.,)+>)> P +') .(>

b

=

,.,)+>)>

a

=

'.(A,,,,

)

Q a  b Q '.(,,,,  ,.,)+>)>

Cal*ulation of 7eression 3un*tion of 0oreign Tr Trade ade L/C Operation of Janata Bank

72

Amount in Crore Cro re 4aka 4aka Iear ), ,' ), ,) ), ,+ ), ,? ), ,( &;m 'vg!

Slop

0rnTr 0rnTrdDH dDHEE Profi ProfitDtD-EE ??).> ?.(, ?=.(, ?.-,=.-, .?> ?-?.+ (.=, ?=,.,' ))., )?=+.=' ?(.)( ?>-.>.,(

b


=

I '>>+.+ )+),.(, ?((=.?' )->(.?+ ',=>-.)+ ))?-+.>?

b

))?-+.>? =

)

)

) '>-))).?) )+-(-.)( +,+>+.>)'(>+.> )+,?,>.-, ')(,-(-.),

−

( P ?>- .A- P >.,(

')(,-(-.),

−

( P ?>- .A-

)

b

=

&,.,,,=A

a

=

>.?=,''

−

!nter*ept

a

=

Y

−

b X

a

=

>.,(

−

E&,.,,,=AF P ?>-.A-

7eression 5quation of 0oreign TradeG ProfitE
Q a  b Q >.?=,''  E&,.,,,=F

So if the bank has a profit taret of 4k. ),.,, *rore in ne2t "ear 4he bank is required to enerate the follo1in< 7eression 5quation of ImportG ProfitE
Q '. '.?+ ?+>+ >+= =  E&,.+ ,.++=( +=(FF Q '.(,,,,  ,.,)+>)>

4aret !mport

), Q '.?+>+=  E&,.++=(F  Q ('.?+>+= / ,.++=(  Q '('.=( Crore

Or 4aret 52port

), Q '.(,,,,  ,.,)+>)>  Q E&'=.?+F / E&,.,)+>)>F  Q ,.'>( Crore

Or the *ombination of !mport and 52port !nstead of a*hie$in onl" !mport 4aret or onl" 52port 52p ort 4aret. 4aret.


73

CHAPTER "

RECOMMENDATION AND CONCLUSION

Chapter Hints…

Chapter Contents…

This section is designed to conclude the report reviewing the 0indings, giving relevant Recommendations. The 7ndings are accumulated here in a short place. The Tips that can the &ank follows to improve their performance is included in Recommendation page and the report is concludes by conclusion.

Overview of 0indings Recommendations 1onclusion


7


77

Overvie9 of 0indings* •

•

•

•

•

•

•

•

•

•

•

•

•

4he 1hole pro*ess of Letter of Credit is hihl" dependable on the personal skills of the offi*ers enaed in the pro*ess. !n pro*essin Letter of Credit almost all a*ti$ities *hares lo1er than the pri$ate *ommer*ial banks. 3or reular and old *lient Letter of Credit issuan*e does not take more than an hour. But for ne1 *lients it enerall" takes around one to t1o hours pro$ided no dis*repan*" found in do*uments deposited. 7elationship and introdu*tion 1ith the *lient pla"s a $ital role in pro*essin Letter of Credit espe*iall" the time fa*tor. Janata bank takes more time in issuin Letter of Credit in *omparison 1ith the PCBs. More than half of the total 3orein 4rades 4rades in*ome in*ome is *ome from openin *hares of Letter of Credit. Other sour*es of in*ome from Letter of Credit in*ludes< postae *hares amendments *hares * hares ad$ise *hares et*. Of the ') months of obser$ation ma2imum numbers of !mport L/C issued in Mar*h Mar*h ),, ),,( ( mini minimu mum m num numbe bers rs of !m !mpor portt L/C L/C issued issued in Auu uust st ),, ),,( ( and ma2imu ma2imum m num numbers bers of B4B 52port L/C issued issued in 3ebruar 3ebruar" " ),,( ),,( minimu minimum m numbers of B4B 52port L/C issued in June ),,(. Of the ') months of obser$ation ma2imum amounts of in*ome from !mport L/C *omes in 3ebruar" ),,( minimum amounts of in*ome from !mport L/C *omes in Auust ),,( and ma2imum amounts of in*ome from B4B 52port L/C *omes in April April ),, ),,( ( minim minimum um amoun amounts ts of in*om in*omee from from B4B B4B 52 52por portt L/C L/C *omes *omes in Januar" ),,(. China and !ndia are the ma8or *ountries from 1here e2ports *ome aainst the !mport L/C. Most of the L/Cs are opened for a**essories. Stabilit" anal"sis sho1s that there is a hih deree of ups and do1ns in $olumes of e2port and import. :ro1th rate of 3orein 4rade is not in*reasin at a desirable rate. !t flu*tuates "ear to "ear. Performan*e anal"sis sho1s that profit is in*reasin due to in*rease in e2port. !n the "ear ),,( this bran*h rea*hes its hihest profit of 4aka )). *rore. And the hihest amount of e2port rea*hes in the "ear ),,+ of 4aka ?+-.,- *rore. Correlation anal"sis sho1s that there is a hih deree of neati$e *orrelation e2ists bet1een !mport and ProfitH a lo1 deree of positi$e *orrelation e2ists L/C Operation of Janata Bank

74

bet1een 52port and Profit and a $er" lo1 deree of neati$e *orrelation e2ists bet1een 3orein 4rade and Profit.


75

Re8ommendations* 3rom the anal"sis and obser$ation of the author follo1in re*ommendations ha$e been formulated in order to smooth operation of !mport&52port Business and to make the L/C pro*essin more effi*ient< Sin*e the import&e2port business ha$e the hihest *ontribution to the profitabilit" of the bank it should take spe*ial attention. •

•

•

•

•

•

•

•

•

•

•

•

Skilled manpo1er in the line of import&e2port business must be a**omplished throuh proper trainin remuneration and 8ob satisfa*tion. Latest de$elopment in the business should be introdu*ed a**ordinl". Sin*e the 1hole pro*ess is larel" depend on human skill properl" planned trainin proram should be arraned and implemented for the impro$ement of te*hni*al and *on*eptual skills of the dealin offi*ers. 4he time requirements in the pro*essin of L/C ha$e to be minimi9ed. Steps should be taken to impro$e the *oordination bet1een the offi*ers in$ol$ed in the L/C issuin pro*ess. Consumers should be *lassified based on their trust1orthiness $olume of business and relationship 1ith the bank. Performan*e measurement prorams *an be introdu*ed to measure the performan*e of the offi*ers in$ol$ed in the pro*ess. pro*e ss. 4he sour*es of *ost espe*iall" on *ommuni*ation purposes should be measured and tried to be minimi9ed. L/C information should be kept in proper and orani9ed manner. Most of the fun*tions are still done manuall". !nterated soft1are *an be introdu*ed for this purpose. As the kno1lede of 5nlish lanuae *omputer skills and eoraph" is mandator" for trade finan*e business the bank authorit" should *onsider the *riteria durin re*ruitment of its emplo"ee. S*ope of further e2pansion< Soft1are Je1ellar" 3ro9en fish Dr" @ deh"drated fish 5le*tri*al and ele*troni*s item 4o"s 4o "s and Luae Lu ae 3ashion item Leather oods

• • • • • • • •


7=

•

Stationar" oods

Con8l;sion L/C as a mode of finan*in in forein trade a*ts as a pre&import finan*in tool for the importer and a pre&shipment finan*in tool for the e2porter. Like all other *ommer*ial banks L/C issuan*e is a $er" important fun*tion that Janata Banks offers. Presentl" the bank has been fun*tionin 1ith a net1ork of total >,? bran*hes. 4he Bank has been fun*tionin 1ith a net 1ork of 4otal => Bran*hes in*ludin ? O$erseas Bran*hes in #.A.5. Besides Janata Bank has at present =, 3orein Correspondents abroad. !t has ?? Authori9ed Dealer Bran*hes and )> Bran*hes to deal 1ith Gae 5arners 7emittan*es. 4he most 1idel" used L/C in all bra*hes is irre$o*able do*umentar" do*umentar" L/C and the hihest number of L/C opened is under Ba*k to Ba*k L/C espe*iall" for 7M: se*tor. Openin *hare for L/C pro*essin pro*essin *onstitutes hihest portion of Janata Banks Banks in*ome from L/C. there is mu*h s*ope for Janata Banks Dilkusha Bran*h to impro$e its *urrent L/C pro*essin s"stem to make it more effi*ient.


7>

'PP%"IH

"etails of Import In8ome from Jan;ar<67 to "e8ember67 Amount in Crore 4aka 4aka Month Jan 3eb Mar Apr Ma" Jun Jul Au Sep O*t %o$ De* Total

Commission ?.+=.= ',.? '+.+) .>? '+.,= (.(= +.(= ?.> (.)' ,.?) ?.)= =)!54

PAD '.,)(., '(.-).)? '.+) ,.+= ,.,.)( ,.?) '?.'? ').-( ?.-' 5=!

52. 5arnin ,.)( ,.= ,.( ,.? ,.,.++ ,.+ ,.,,.)) '.-= '.)( ,.?( 4!>)

Other -.'> . '.+).(? ?.,) ?.,' (.'+ '.+'.( '-.(+ ,.+' ).= 73!=

Total In8ome ))!=4 2! 25!>> )=!7 )3!== )5!= ))!4) 7!27 5!)= 35!74 )!43 )2!2) 226!>)

"etails of Import %:port and 0oreign Trade from
!mport '>).?+ ),+.-> ').(? '>.), '((.,' >),.=

52port )(,.(? )=+.=' ?+-.,)-.(+ +)(.,, '(-).>?

34 ??).> ?=.(, -,=.-, ?-?.+ ?=,.,' )?=+.='

Profit ?.(, ?..?> (.=, ))., ?(.)(


46

BIBLIO+R'P$-

Books* • • • • •

Annual report ),,'&),,( Janata Bank Bran*h Performan*e 7eport ),,'&),,( Janata Bank Dilkusha Bran*h !mport @52port Poli*" ),,+&),,:upta S.P. S.P. :upta Business Busin ess Statisti*s ')th re$ised edition Shekhar .C. @ Lekshm" Shekhar Bankin theor" and pra*ti*e '=th 5d.

ebsites* •

111.8anatabank&bd.*om

•

111.td*ommer*ialbankin.*om


4)

Janata Bank LC operation.doc

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