A research program is very important & essential for acquiring experience through learning and spreading the scope of Knowledge. I have done my research program in National Bank Limited, Foreign Exchange Branch. This research report is aimed at providing a comprehensive picture to the areas of Foreign Exchange operation of National Bank Limited. The report has been divided into twelve parts. These are- Introduction, Brief History of Banking Sector of Bangladesh, Corporate review of NBL, Foreign Exchange, Documents Used in Foreign Exchange Business, Letter of Credit (L/C), Import, Export, Foreign Remittance, Findings and Analysis, References. National Bank Limited is one of the largest commercial Bank of Bangladesh. The main objective of the Bank is to provide all of banking services at the doorsteps of the people. The Bank also participates in various social and development programs and takes part in implementation of various policies and promises made by the Government.
National Bank Limited plays a pioneering role in handling foreign trade and foreign exchange transactions. With wide network of branches at home and a large number of correspondent banks worldwide, it is handling the largest volume of export-import business including homebound remittances. For this reason, Foreign Exchange of the Bank is very much essential. But now a day’s banking sector of Bangladesh is suffering the disease of default culture which is the consequence or result of bad performance of most banks. There are three types of modes of foreign exchange market, which are- Export Financing, Import Financing and Foreign Remittance.
Foreign Exchange Branch does these foreign exchange activities vastly. In this report, I mention the overall operating procedure of foreign exchange transaction of National Bank Limited. I also mention the findings of my report and describe the recommendation to overcome the limitation. I have taken all the reasonable care to ensure the accuracy and quality to make the report standard. And I believe that it has included all the necessary information to be relevant.
ORIGIN OF THE REPORT
As a mandatory part the BBA Program, all the students of the faculty of Business Studies, Premier University, Chittagong have to undergo a three month long research program with an objective of gaining practical knowledge about current business world. After this research program each and every students have to submit a research report mentioning their activities during the research program. I’ve started my research at the National Bank Limited, Foreign Exchange Branch. At the end of the research program I am submitting my research report focusing on the contribution of Foreign Exchange operation to the overall performance of bank especially on profitability perspective under the supervision of Tasnim Uddin Chowdhury, Lecturer, Department of Finance, in Premier University, Chittagong.
OBJECTIVES OF THE STUDY
The general objective of the study is to gather practical knowledge regarding banking system and operation. The research gives us a chance to relate the four year long theoretical learning of BBA Program with the reserch experience. This consists the following:
To get an overall idea about the Foreign exchange Business of National Bank Limited. To apply theoretical knowledge in the practical field.
To describe the organizational structure, management, background, functions and objectives of the bank and its contribution to the national economy. To achieve overall understanding of National Bank Limited.
To analyze the financing systems of the bank to find out any contributing field. To examine the profitability and productivity of the bank.
To acquire knowledge about the everyday banking operation of National Bank Limited.
To evaluate the effect of world recession on foreign exchange income of NBL, Foreign Exchange Branch.
To understand the real management situation and try to recommend for improving existing problems.
SCOPE OF THE STUDY
This study provides those scopes of knowing are the following: History and performance of National Bank Limited.
Terms used in foreign exchange operations
Foreign exchange operations of National Bank Limited
Total concept of Foreign Exchange Operation.
METHODOLOGY OF THE STUDY
The report is prepared on the basic of foreign Exchange of National Bank Limited. To conduct the overall study, at first I explored the sources of Primary and Secondary information and data. Different files of the department and statement prepared by FED helped me to prepare this report. To present numerical data, I used the Annual Report of 2008 and monthly statement of January to October 2009 of National Bank Limited, Foreign Exchange Branch. For preparing this report I have used some graphical representation to find out different types of analytical and interpretation.
SOURCES OF DATA
As mentioned earlier, mainly primary and secondary data has been used. Sometimes the customers gave some important information regarding the services of the Bank:
Official records of National Bank Limited (NBL)..
Monthly Statement of NBL.
Annual Report of NBL.
Other manual information.
Various publications on the Bangladesh Bank.
Newspaper reports in this concern.
DATA ANALYSIS AND INTERPRETATION
Both quantitative and qualitative analysis will be performed on the findings. The quantitative analysis will be done on the trend of export- import, growth pattern of export-import, pre and post facilities provided for easing the export-import operations. Qualitative analyses will be based on the macroeconomic variables and foreign exchange policy provided by Bangladesh bank, the central bank of Bangladesh. Different statistical tools will be used for the analysis of the findings.
LIMITATIONS OF THE STUDY
To provide current information and to make the report read-worthy, support from various sources is essential. In spite of having my wholehearted effort, I could not collect some information required at the time of the study. So this study is not free from the following limitation: Due to unavailability of latest annual report (Annual report 2009), I have to prepare the report on the basis of annual report 2008. As a result, analysis, presentation of data may not show the existing position/present condition of National Bank Limited. For the whole research I had only 90 days, out of which I get 61 days because of late commencement of research program, which were totally insufficient. So I faced time shortage extremely. Lack of previous experience to prepare this type of report and it is totally new to me as an intern.
Foreign exchange division follows Uniform Customs and Practice for Documentary Credits (UCPDC), but within this short period, I was totally stunned to understand. Learning all the banking functions within just two months was really difficult. Sometimes the officers of National Bank Limited were very busy. For this reason the personal did not co-operate me. National Bank Limited did not give me any kind of monetary support for this research program Most of the working days in NBL, I have to work in cash department to help in IPO subscription collection, so I get limited time work in other departments to have practical knowledge Another limitation of this report is Bank’s policy of not disclosing some data and information for obvious reason, which could be very much helpful.
BRIEF HITORY OF BANKING SECTOR OF BD
EVOLUTION OF THE WORD ‘BANK’
The word bank originated from Italian word “Banca”. Banca means long tool. In ancient time Italian Jews merchant used to do business of lending money by sitting on the tools. It is assumed that the word “bank” derived from the word Banca. To meet the expense of war of 1171 one type credit certificate was launched in Italy at an interest rate of 5% it was called as Monte in Italian language and Bank in German language then German language was widely used in Italy. As a result the word Bank gradually changed to the word Banca from which the word Bank originated.
THE EMERGENCE OF MODERN BANKING
The linguistics and etymologists suggests an interesting story about banking origins. Both the old French word “Banque” and the Italian word Banca were used centuries ago to mean a bench or moneychangers table. This describes quite well what historians have observed concerning the first bankers, who lived more than 2000 years ago. They were money changers, situated usually at table or in a small shop in the commercial district, aiding travelers who came to town by exchanging foreign coins for local money or discounting commercial notes for a fee in order to supply merchants with working capital. The first bankers probably used their own capital to fund their activities, but it was not long before the idea of attracting deposit and securing temporary loans from wealthy customers became a source of bank funding.
Loans were then made to merchant’s shippers and landowners at rates of interests low as 6 percent per annum to as high as 48 percent a month for the riskiest ventures. Most of the early bank was Greek in origin. The banking industry gradually spread outward from the classical civilizations of Greece and Rome into northern and western Europe. The early bank in Europe was places for safe keeping of valuable items (such as gold and silver bullion) as people came to fear loss of their asset due to war, theft, or expropriation by government. When colonies were established in North and South America, old world banking practice were transferred .
DEVELOPMENT OF BANKING IN BANGLADESH
Since early British rule, the history of banking in Bangladesh territory shows that the traditional trade-networks developed before the banks invaded rural areas. And the banking services have slowly flourished in Bangladesh territory. Even today, in many places, moneylenders provide credit services. Small shopkeepers and businessman use informal credit at high interest rate. Traditional mahjong’s money lending business gradually declined due to expansion of bank and the micro credit programs of NGOs, cooperative banks and government agencies.
PUBLIC SECTOR BANKS
During the liberation war in 1971, the economic, political, and social system including the banking system was severally damaged. At that time, all big and medium financial institutions except two small banks had their head office in the West Pakistan. The non-beagle owners and managers of the financial establishments that operated in East Pakistan had abandoned them. After independence in 1971, the new government had to take over management and ownership of all such institutions. The banks Nationalization Order 1972 was issued to nationalize banks and financial institutions (except those incorporated abroad) in order to control chaos in the field of ownership, party bureaucracy, the intelligentsia, and pressure group. By several orders the government of Peoples Republic of Bangladesh created- Six nationalized commercial banks (NCBs):
1. Sonali Bank
2. Agrani Bank
3. Janata Bank
4. Rupali Bank
5. Pubali Bank
6. Uttra Bank
One industrial bank (BSB)
One agricultural bank (BKB)
One industrial development financial institution (BSRS) The bank and financial institutions which originated during the Pakistan period and were merged, and renamed and functioning after independence of Bangladesh. In the year 1983, the government allowed private sector to participate in the banking business. The Publi Bank and the Uttara Bank were denationalized in 1985, due to non profitability. This action reduced the number of NCBs to four. Such restructuring of public sector banks was in order to play their role in industry, agriculture, export, self –employment etc.
PRIVATE COMMERCIAL BANKS
Taking advantage of the liberalization policy of the government regarding participation of private sector in the banking business, a number of private banks were established in –and –after 1983. With the emergence of private banks in Bangladesh, a competitive situation in the sector has been created. Now there are 48 commercial banks in Bangladesh which are enlisted with Bangladesh Bank, among them four (4) are NCBs, five (5) are specialized banks, twenty nine (29) are private commercial banks and ten (10) are foreign commercial banks. The emergence of private banks has added a new dimension to the banking system in Bangladesh. The private commercial banks show a steady growth in terms of number of branches, deposit and advances.
CORPORATE REVIEW OF NATIONAL BANK
History of National Bank Limited
National Bank Limited has its prosperous past, glorious present, prospective future and under processing projects and activities. Established as the first private sector Bank fully owned by Bangladeshi entrepreneurs, NBL has been flourishing as the largest private sector bank with the passage of time after facing many stress and strain. The member of the board of directors is creative businessman and international economist. For rendering all modern services, NBL, as a financial institution automated all it’s branches with computer network in accordance with the competitive commercial demand of time. Moreover, considering it’s forth- coming future the infrastructure of the Bank has been much more to NBL. Keeping the target in mind NBL has taken preparation branches by the wear 2000-2001. The emergence of National Bank Limited in the private sector is an important event in the banking area of Bangladesh. When the national was in the grip of severe recession, Govt. took the farsighted decision to allow in the private sector to revive the economy of the country.
Several dynamic entrepreneurs came forward for establishing a bank with a motto to revitalize the economy of the country. National Bank Limited was born as the first hundred percent Bangladesh owned Bank in the private sector. From the very inception it is the firm determination of National Bank Limited to play a vital role in the national economy. We are determined to bring back the long forgotten taste of banking services and flavors. We want to serve each one promptly and with a sense of dedication and dignity. The President of the People’s Republic of Bangladesh Justice Ahsanuddin Chowdhury inaugurated the bank formally on March 28, 1983 but the first branch at 48, Dilkusha Commercial Area, Dhaka started functioning on March 23, 1983. The 2nd Branch was opened on 11th May 1983 at Khatungonj, Chittagong. Today we have total 103 Branches all over Bangladesh. A representative office was established in Yangon, Myanmar in October, 1996 by our bank and obtained permission from the government of Bangladesh to handle border trade with Myanmar .opportunities is being explored for further business avenues there.
Now NBL is on line to establish trade and communication with the prime international banking companies of the world. As a result NBL will be able to build a strong root in international banking horizon .Bank has been drawing arrangement with well conversant money transfer service agency “Western union”. It has full time arrangement for speedy transfer of money all over the world. Banking is not only a profit – oriented commercial institution but it has a public bas and social commitment admitting this true NBL is going on with its diversified banking activities NBL introduced monthly Savings Scheme, special Deposit Scheme, and Consumers. Credit Scheme and savings Insurance scheme etc. To combine the people of lower and middle income group. A team of highly qualified and experiment professional headed by the managing Director of the bank who has vast banking experience operates bank and at the top three is an efficient Board of Directors for making policies.
Vision of National Bank Limited
Establishing as a top grade efficient bank through best application of modern information technology and business activities, offering high standard client services and Proper coordination of foreign trade business in the core of their vision.
Mission of national bank Limited
With a view to achieving commercial objective of the bank, their sincere and all out efforts stay put unabated. Respected client and shareholders are attracted to us for our transparency, accountability, social communities, and high quality of clientele services.
Objective of national Bank Limited
Bring modern banking facilities to the doorsteps of general public through diversification of services, thereby arousing saving propensity among the people. Foreign a cordial, deep rooted and farm banker customer relationship by dispensing prompt and improved clientele services. Taking part in the development of the national economy through productive development of the banks resources as well as patronizing different social activities. Connecting clients to modern banking practices by the best application of improved information technology, so that they get encouraged to continue and feel proud of banking with NBL. Responding to the need of the time by participating in the syndicated large loan financing with like-minded banks of the country, thereby expanding the area of investment Elevating the image of the bank at home and abroad by sustained expansion of its activities.
Strategies of National Bank Limited
To manage and operate the bank in the most efficient manner to enhance financial performance and to control cost of fund. To strive for customer satisfaction through quality control and delivery of timely services. To identify customer credit and other banking needs and monitor their perception towards our performance in meeting those and update requirement. To review and update policies procedures and practices to enhance the ability to extend better services to customer. To train and develop all employs and provide them adequate resources so that customer needs can responsibility addressed. To promote organizational effectiveness by openly communicating company plans, policies, practices and procedures to all employers in a timely fashion To cultivate a working environment that fosters positive motivation for improved performance To diversify portfolio both in the retail and whole sale market. To increase direct contact with customer in order o cultivate a closer relationship Business Goal
To patronize, sponsor and encouraged games and sports, entertainment and other socio-economic activities alongside providing the best services to the client.
The Future thrust
Full duplex on-line Banking
Introducing more innovative products and services Opening new branches
Expansion of business network at home and abroad SMS Banking
Introduction of new liability / Asset products
Employees of NBL share certain common values, which helps to create a NBL culture.
The client comes first
Search for professional excellence
Openness to new ideas& new methods to encourage creativity Quick decision making
Flexibility and prompt response
A sense of professional ethics
Growth and Development of NBL
The NBL carries out all traditional functions, which a commercial bank performs such as mobilization of the deposit, investment of funds, financing export and import business, trade and commerce and industry. The banking sector in the country faced different problems thought the year. Even through the board and management never stopped its effort to maximize wealth, which is reflected by 143.97percent profit growth in 2007, highest ever in the last 15 years. The bank earned the 676.45 core revenue in 2007 as interest, income from investment and commission & exchange earning, which who Tk. 530:69 corer in the provision year. As a result the total operating profit rode to Tk. 221.51 corer in 2007 from Tk.114.68 corer in the previous year.
Branches of NBL
NBL, which was started at Dilkusha Branch on March 23rd, 1983, was the first major commercial Bank. In Bangladesh operating throughout the country as well as the age of the bank is only 25 years .During this period it has established total 112 branches over the country and made smooth network inside the country as well as thought the world. The number of branches as well as territory wise is mentioned in the table.