Internship Report on Bank of Kathmandu (Nepal)

CHAPTER ONE

1. INTRODUCTION

1.1 Background of the Study

The bank has various departments which play their own distinctive and significant role. All the departments of the bank work together in order to fulfill the customers’ need and to achieve their common goal. The internship was allowed to obtain the various activities of remittance department.

Remittance is the process of sending money to remove an obligation. This is most often done through an electronic network, wire transfer or mail. The term also refers to the amount of money being sent to remove the obligation. Remittance department is one of the most important departments of a bank. It is created for providing better services of the customers. The services include providing all required information on money transfer, visa payment, the issue of a draft, swift transfer, agency payment etc.

This report is based on remittance, which is the most important aspect of the banking industry. Since, the areas of internship are concerned with remittance department, maximum effort is applied to clearly define remittance department in the simplest way, its functions, and all the terminologies associated with remittance department. The report primarily focuses on the remittance department operation at B.O.K and its functions. Customer analysis has also been done with the help of the questionnaires.

1.2 Objectives of the Study

The objectives of this study are:

• To present the understandings of internee about the Nepalese banking industry and the banking organization in Nepal.

• To present the understandings of internee about the working process in remittance department of BOK.

• To demonstrate the relationship between the understandings from a book with real world situations.

1.3 Methodology of the Study

The methodology of the study can be further explained as:

1.3.1 Organization Selection

As the major subject of the internee is banking and finance, the internship program should be completed from the banking institution itself. The selection of the bank should be made in such a way that the internee could learn various aspects of the working environment and techniques of the bank and also which can help in building up the confidence as well as interpersonal skills. Hence, the best alternative was figured put as “Bank of Kathmandu”. The bank provides a good learning environment and supervision to the internee. The personal reference made the selection of organization possible.

1.3.2 Placement

The placement was made in the Head Office; Kamalpokhari of the BOK, as the internee was familiar to that locality. Generally, the bank tries to make the placement of the internee as per the preference of the internee, so as to make the internship period easier to him/her. The main focus of the study was remittance department.

1.3.3 Duration

The duration of internship period has been defined for eight weeks by the Faculty of Management, Tribhuvan University. Therefore, to fulfill this requirement, the internship was done for two months starting from 17th June 2012 to 12th August 2012. It was an adequate duration designed for a bachelors’ level student to understand the future workplace environment. This golden opportunity helped internee a lot to learn and understand the duties and responsibilities of various departments as well as developing the managerial and interpersonal skills. This productive eight weeks also helped internee to learn the organizational behavior and the corporate culture.

1.3.4 Data Collection

Data required for the preparation of this report are collected by using both primary and secondary sources:

• Primary sources: Primary data has been collected through direct queries, observation during the internship period, informal discussion and interaction with the staff of the bank.

• Secondary sources: Secondary data has been collected from bank’s website, annual report and instruction of supervisor, publications & journals.

1.4 Limitations

The major limitations of the study are:

• Due to the insufficient period of time, it was not possible to learn all the activities held in the bank.

• The study is for a single firm and thus cannot be generalized.

• The report is prepared for an academic purpose only.

• The deep analysis and study couldn’t be done due to time limitation.

• The bank’s policy on keeping some matters confidential as a matter of secrecy requirement that prevented the internee’s curiosity to know and develop analyzing different bank activities.

CHAPTER TWO

2. INTRODUCTION OF THE INDUSTRY

2.1 Meanings and Definitions of Bank

Bank is a financial institution that deals with the monetary transaction. It is a financial intermediary between depositor and entrepreneurs. The main function of a bank is accepting deposits and advancing loans. The intermediation takes place when they accept deposits from the general public, corporate bodies and private organization and invest those deposits for profitable purpose in the form of loan and advances.

Bank is a financial institution whose essential operation is to take the deposit from public and lend money towards different productive sectors. It creates credit and also provides exchange facilities to the public. So, the bank is also known as the factory of credit production. Banks collect money from public in the form of deposit by providing certain interest rates and repackages the collected money and provides it to the people in need, in the form of the loan by charging higher interest rates. Bank can also be termed as an intermediary who bridges the gap between the saver of funds and user of funds. Nowadays, banks provide both financial and non-financial service to the customers.

“Bank is a financial institution, which provides financial services that may be in the form of accepting deposits, advancing the loan, providing necessary technical advice, dealing over foreign currencies, remitting funds, etc.”

-Nepal Rastra Bank Act 2002

“Bank is an establishment for the custody of money from or on behalf of its customers its essential duty to pay their draft on it, its profit arises from its uses of the money left unemployed by them”

-The Shorter English Dictionary

“Banking means the accepting for the purpose of lending or investment of deposit of money from the public, repayable on demand or otherwise and withdrawal by cheque, draft order or otherwise.”

-Indian Banking Company Act 1949

“A commercial bank refers to such type of bank which operates currency exchange transactions, accepts deposits, advances loans, performs dealing relating to commerce except the banks which been specified for the cooperative, agricultural, industry of the similar other specific objectives.”

- Commercial Bank Act 2031 B.S

A commercial bank is a type of financial intermediary. It is the oldest form of bank. Commercial banking is also known as business banking. A commercial bank is a term used for a normal bank to distinguish it from an investment bank. It raises funds by collecting deposits from businesses and consumers. It provides loans to businesses and consumers. It also buys corporate bonds and government bonds. Its primary liabilities are deposits and primary assets are loans and bonds.

Commercial banks are those types of the bank which are established with a view to financing and help in developing trade, commercial and industry. Commercial banking can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to normal individual members of the public (retail banking).

The bank which performs all kinds of banking business and generally finances trade and commerce are called the commercial bank. It occupies an important place in the framework of every economy. The commercial bank pool together the scattered savings of community and arrange for their productive use and generate profit. They accept deposits from the public on the condition that they are repayable on demand on short notice. The main aim of the commercial bank is to earn the profit like any other business entity. We can conclude that commercial bank is merely a business firm engaged in financial inter-mediation as well as performs additional functions under strict supervision and control of central bank intending to earn profit from each transaction as other business firms. The lists of commercial banks of Nepal have been shown in Appendix 1.

2.2 Evolution of Bank

The word “bank” is derived from the Italian word "banco", Latin word "bancus" and the French word "banquet” which means bench on which the bankers would keep money and its records. Bank is the financial institution which deals with monetary transactions, accept deposits from public and institutions and provide loans.

Banks were first introduced in Rome with its vast trade networks that extended throughout the Europe, Asia and much of Africa. "BANK OF VENICE" was the first bank established in Italy in1157 A.D. Modern banking began to develop in Italy between 1200's and 1600's. In between this period many banks were established such as Bank of Barcelona (`1401), Bank of Genoa (1407), Bank of England (1594) and Bank of Amsterdam (1609). Likewise, India established its first bank, “Bank of Hindustan" in 1770. These modern banks gradually replaced the merchants, goldsmith and money lenders. In 1960's, banking was introduced to the world because of increase in their worldwide operations and increase in multinational companies.

Nowadays, banks are referred to as lifeblood for business houses as they offer many facilities like travelers’ cheques, insurance services, pension services and other investments. Some of the oldest private banks are Barclays, Hope & Co. Barings Bank, etc. Till date, the banks that came under the list of the world’s largest bank that have been able to maintain international standards are Bank of America, Citicorp, Lloyds, Midland, Barclays, Credit Agricole, Fuzi, Mitsubishi, etc. All these banks had one main purpose that is to safeguard people’s money as well as provide various services such as accepting deposits, providing loans, providing means of payment, e-banking, and many other services.

2.3 History of Nepalese Banking System

The initiation of the formal banking system in Nepal started with the establishment of Nepal Bank Limited in 1937, the first Nepalese commercial bank. The country's central bank, Nepal Rastra Bank (NRB) was established in 1956 by the Act of 1955, after nearly two decades of Nepal Bank Limited having been in existence. A decade after the establishment of NRB, Rastriya Banijya Bank (RBB), a commercial bank under the ownership of His Majesty’s Government of Nepal (HMG/N) was established. Thereafter, HMG/N adopted open and liberalized policies in the mid-1980s reflected by the structural adjustment process, which included privatization, tariff adjustments, liberalization of industrial licensing, easing of terms of foreign investment and more liberal trade and foreign exchange regime was initiated. With the adoption of liberalization policy, there has been the rapid development of the domestic financial system both in terms of a number of financial institutions and as the ratio of financial assets to the GDP. As of July 2005, the number of commercial banks has reached 17 and their branches numbered 375. A total of 60 finance companies and other development Banks and numerous credit cooperatives have also been established.

In the context of banking development, the 1980s saw a major structural change in financial sector policies, regulations, and institutional developments. HMG/N emphasized the role of the private sector for the investment in the financial sector. The financial sector liberalization started in the early eighties. With the liberalization, deregulation of interest rates, relaxation of entry barriers for domestic and foreign banks, restructuring of public sector commercial banks and withdrawal of central bank control over their portfolio management came into practice. These policies opened the doors for foreigners to enter into banking sector under a joint venture. Consequently, the third commercial bank in Nepal, or the first foreign joint venture bank, was set up as Nepal Arab Bank Ltd (now called as NABIL Bank Ltd) in 1984.

Thereafter, two foreign joint venture banks, Nepal Indosuez Bank Ltd. (now called as Nepal Investment Bank) and Nepal Grindlays Bank Ltd (now called as Standard Chartered Bank Nepal Ltd.) was established in 1986 and 1987 respectively. Thereafter, another 12 commercial banks have been established within the period of 12 years. Nepalese banking system has now a wide geographic reach and institutional diversification. Although, Nepalese financial sector is dynamic, a lot of scope for development of this sector exists. This is because the banking and non-banking sectors have not been able to capture all the potentialities of business till this time. The commercial banks, domestic or joint venture have shown little innovation and positive attitude in identifying new areas of saving and investment opportunities.

For the purpose of regulation and controlled NRB had divided the depository financial institutions into four classes on the basis of minimum paid up capital requirement and functions. This classification is a unique feature of Nepalese banking industry only and there is no such classification globally. The Nepalese version of classification of depository financial institutions according to the Nepal Rastra Bank and their present number, the central bank of Nepal is shown in table 2.

Table 2.1 Nepalese Financial Institutions

Class	Component	Minimum Paid up capital requirement	Number
A	Commercial Banks	2000 million	32
B	Development Banks	640 million	88
C	Finance Companies	200 million	78
D	Micro Credit institutions	10 million	21

2.4 Role of Commercial Banks

Commercial banks engage in the following activities:

• Processing of payments by way of telegraphic transfer, EFTPOS (Electronic Fund Transfer at Point of Sales), internet banking, or other means.

• Issuing bank drafts and bank cheques.

• Accepting money on term deposit.

• Lending money by overdraft, installment loan, or other means.

• Providing documentary and standby letter of credit, guarantees, performance bonds, securities underwriting commitments and other forms of off-balance sheet exposures.

• Safekeeping of documents and other items in safe deposit boxes

• Sale, distribution or brokerage, with or without advice, of insurance, unit trusts and similar financial products as a “financial supermarket”

• Traditionally, large commercial banks also underwrite bonds, and make markets in currency, interest rates, and credit-related securities, but today large commercial banks usually have an investment bank arm that is involved in the mentioned activities.

CHAPTER THREE

3. INTRODUCTION TO THE ORGANIZATION

3.1 Background

Bank of Kathmandu Limited (Bank of the year 2011) is registered under the “Banks and Financial Institutions Act” of Nepal as an “A” grade commercial bank which was incorporated in March 1995. It is the 11th commercial bank of Nepal which has been established by prominent and highly experienced business personnel and professional from diversified areas with a slogan ‘We make your life easier’ in the country where still a large number of the population are deprived of banking Services.

Bank of Kathmandu Limited (BOK) has today become a landmark in the Nepalese banking sector by being among the few commercial banks which is entirely managed by Nepalese professionals and owned by the general public. BOK also aims to facilitate the nation's economy and to become more competitive globally. Policies formulated by Nepal Government and Nepal Rastra Bank’s rules and regulations preside over Bank of Kathmandu (BOK).

BOK has a perfect horizontal structure. There are altogether 21 different departments, who have their own department heads. The organizational structure of BOK is shown in Appendix 2.

3.2 Objectives

The major objectives of the bank are listed as follows:

a. Promote economic growth and becoming a caring corporate citizen.

b. Provide excellent customer services by offering personalized quality services and products.

c. Include modern technologies of banking that add value to customer services.

d. Follow strict risk control mechanisms.

e. Enhance shareholders value.

f. Provide challenging career and learning opportunities for our employees.

3.3 Vision

To become a significant contributor to the economic development of Nepal, by distinguishing itself as an effective, competitive, safe and top-quality financial institution.

3.4 Mission

To offer financial services and become the “Bank of Choice” by dedicating the progress and growth of the institution to the community, customers, employees, and stockholders by:

• Promoting economic growth and becoming a caring corporate citizen.

• Providing excellent customer services by offering personalized quality services and products.

• Including modern technologies of banking that add value to customer services.

• Following strict risk control mechanisms.

• Enhancing shareholders value.

• Providing challenging career and learning opportunities for our employees.

3.5 Core Values

The bank has defined following core values for achieving its vision and mission:

• Embrace a commitment to excellence.

• Develop knowledgeable, competent and professional employees.

• Deliver quality services.

• Provide value to the stockholders.

• Be accountable for delivering what we promise.

• Demonstrate honesty and integrity in all actions.

• Be balanced in customer orientation and risk consciousness.

• Be efficient and technology oriented.

3.6 Capital Structure

The capital structure of Bank of Kathmandu According to the year 2010/2011 is presented below:

Figure 3.1 Capital Structure of BOK

The authorized capital of a company is the maximum amount of share capital that the company is authorized by its constitutional documents to issue to shareholders. BOK’s authorized share capital is Rs.2000 million on the year 2010/2011, along with issued share capital as well as paid up capital of Rs.1359 million.

3.7 Financial Status

The financial status of a company can be determined by observing various financial statements which show the actual financial position and profitability of the company. The financial statements include Balance Sheet, Income Statement, and Cashflow Statement. The financial statements of BOK are shown in Appendix 3.

3.7.1 Balance Sheet

Balance Sheet shows the actual financial position of the organization. It shows the true financial structure of the company with reference to the capital, liabilities, and assets. The main features of the balance sheet of commercial banks are:

• Paid-Up Capital

It is the amount of company’s capital that has been funded by shareholders. Paid-up capital reflects the equity financing of the company. The paid up capital of BOK for the year 2010/11 was Rs 1359 million.

• Deposits

Deposit is the amount taken by the bank from individuals and organizations, for which they pay a certain rate of interest over a period of time. Full access is given to the account holders of deposits with some obligations. In year 2010/11, the total deposit of BOK was Rs 21018 million.

• Loans:

Loans are the major items of banks' balance sheet which generate the largest flow of revenue income. However, they are the least liquid assets and the major source of credit and liquidity risks for the bank. The loans and advances amount of BOK was Rs. 17957 million in the year 2010/11.

• Borrowings:

Borrowings are the short-term loans borrowed in order to maintain cash availability and liquidity in the bank. The funds are borrowed from other institutions on a bargained interest rate. The Borrowing of BOK for the year 2010/11 was Rs 465 million.

3.7.2 Income Statement

Income Statement provides about the actually profitable situation of the organization. It provides the calculation of after-tax net profit. Net profit is the difference between the income and expenses of the organization. The main features of Income statement of commercial banks are:

• Interest Incomes:

Interest incomes refer to those incomes which generate from providing loans to the deficit unit. The interest income depends on the charged interest rate on loans, which is generally more than the offered interest rate on deposits. In the year 2010/2011 the interest income of BOK was Rs 2387 million.

• Interest Expenses:

Interest expenses refer to those expenses which are paid for accepting deposits from the saving units. The interest expense depends on the offered interest rate on deposits, which is generally less than the charged interest rate on loans. The interest income of BOK was Rs 1219 million in the year 2010/2011.

The difference between the interest rates of buying and selling cash is the spread of the organization.

3.7.3 Cash Flow Statement

Cash Flow Statement is that financial statement that is designed to track the flow of cash through the organization. It shows the net cash flow of the firm which is the difference between the cash inflows and cash outflows. The cash flow statement includes:

• Cash flow from operating activities.

• Cash flow from investing activities.

• Cash flow from financing activities.

3.8 Financial Highlights

Financial highlights include all those indicators, which show the actual performance of the organization over a certain period of time. The improvement in performance can be observed through different indicators shown in the financial statements of the company. Those indicators describe the actual performance in long run. The comparative financial highlights of BOK for last 5 years are shown in Figure 3.2.

Figure 3.2 Comparative Financial Highlights

Source: BOK Annual Report 2010/11

In Figure 3.2, the major achievements and results of BOK are presented in the detailed form. The net profit has increased by 18.86% in comparison to last year. Similarly, the key portfolio indicators like capital, deposits, loans and advances show a significant increase of 15%, 3.46% and 5.36% respectively, with respect to last year. The other key indicators also show an increasing trend over the last five years, which indicates that the organization has been performing well. The indicators play a major role in accessing the business performance.

We know that the major indicators of financial status are:

• Net Income/ Operating income: It is the ratio of net income with operating income. It indicates the percentage value of net income in operating income.

• Return on Assets (ROA): It is the ratio of net income with the total assets of the organization. It shows the actual return of the organization earned from the total assets.

• Return on Equity (ROE): It is the ratio of net income with the total equity. It shows the actual return for the financing done in the organization.

The mentioned indicators show the actual performance of the organization. The following graph shows the major indicators which represent the healthy status of BOK.

Figure 3.3 Major Indicators of Financial Performance

In Figure 3.6, the major indicators ROE, ROA and Net Profit/Operating Income all show a similar trend for the last 5 years. The fluctuation Net profit/operating Income Curve is more, whereas the fluctuation of ROA curve is less. Similarly, the fluctuation of ROE curve is moderate. This fluctuation difference in Curves occurs due to the difference in Net earnings of profit over the period.

3.9 Net Profit Evaluation

We all know that net profit is the difference between all incomes and expenses of an organization. Banks, in particular, have a huge amount of interest income and interest expenses, whose difference is termed as net interest income.The trend of increment in net profit figures of BOK is depicted in Figure 3.4.

Figure 3.4 Net Profit Status of BOK

Source: BOK Annual Report 2010/11

The net profit figure in financial year 2011/2012 is a provisional data. Bank of Kathmandu earned NRs. 607 million net profits in Financial Year 2011/2012. BOK achieved growths of about 0.4% on net profits, that is, NRs. 607 million.

Figure 3.7 shows a substantial increase in net profit over a period of time. This increasing trend shows the Profitability position of BOK is strong.

3.10 Services Provided by BOK

Service is the main product of a bank. Different banks provide different services as per their strategies. BOK also provides general services like deposits, loans and specific services like BOK click. The different services provided by BOK are:

3.10.1 Deposits

Bank of Kathmandu provides following types of deposits:

• Chetansil Yuwa Bachat Yojana

• Ladder Savings

• General Savings

• Sajilo Bachat Yojana

• Griha Laxmi Bachat

• Laghu Bachat Khata

• My Choice Women’s Savings

• Nava Kopila Bachat Khata

• Gramin Mahila Bachat Khata

• BOK Pokhara Bachat Khata

• BOK Premium Savings

• FCY Saving Deposits

3.10.2 Loans

The loan facilities provided by Bank of Kathmandu are:

• Working Capital Finance Overdraft

• Demand / Short-term loan (Trade Finance)

• Trust Receipt/ Importers Loan (Trade Finance)

• Export Loan

• Loan against Fixed Deposit

• Loan against Govt. Bond / 1st Class Bank Guarantee

• Priority Sector/ Deprived Sector Loan

• Consortium Financing

• Housing Loan

• Car4U Loan

• Car4U Refinancing Loan

• LCV Loan

• Education Loan

• Personal Loan

• General Micro Finance

• Agriculture and Forest-Based Product Loan

• Equipment Finance

• Vehicle and Accessories Finance

3.10.3 Locker Services

For the persons having valuables like gold, silver, documents etc, BOK provides locker facilities with special code number keys for the safety with ample parking space, strategic location and choice of sizes.

3.10.4 Card Services

BOK provides card services too. The SCT/ VISA/ATM / Debit Cards are some of its card services. The ATM services provided by the bank are cash withdrawal, fast cash, statement or balance inquiry, and pin code change for the customers.

BOK Debit Card: Debit card is the most convenient way of making payment of goods, safe and easy to carry, withdraw cash from ATM’s, used within Nepal and India, get replacement if lost or stolen. It is the card of the international brand. BOK also issues the FCY debit card for those who want to use their money through the card in various international trips. This card is more secure in nature. Currently, only dollar debit cards are being issued from the bank.

3.10.5 Remittance

The fund can be transferred from one place to another, both domestic and international. This facility is used for import/export trade. The payment and receipt in Nepalese and foreign currency can be performed.

3.10.6 Bills Purchase

When exporter receives cheques from the importer, which is to be paid only after the certain time duration, then importer in need of money requests the bank to accept the cheques like security and give him the money. The bank after completion of the time period receives the amount from the importer through cheques.

3.10.7 Clearing / Collections

BOK provides the services of the inter-banking transaction. Cheques of various other banks are accepted and cleared, as it is also the member of clearing house of NRB.

3.10.8 BOK Click

BOK Click is one of the finest facilities provided by BOK itself.

Features of BOK Click:

• Can get Pre-Paid Mobile Re-Charge Pin through Bok Click

• Transfer of Funds To Anyone Who Can Get Cash Based On Secret Code

BOK Click helps through:

• Viewing your Account Balance and the status of the account.

• Viewing the last 6-month history of your transactions.

• Transfer of funds between your own accounts.

• Transfer funds from your account to selected beneficiaries

• Transfer funds to any account maintained with BOK if you know the account number of your beneficiary.

• Pay the bill of your landline telephone or post-paid mobile phones of NTC.

• Send money to anyone for whom you will be given a secret code that you need to pass on to your beneficiary who then has to go to the nearest branch or the Agent of BOK with the ID for getting cash.

• Get the recharge PIN for your pre-paid mobile phones of Nepal Telecom.

3.10.9 Export Credit

This service is provided to the exporter who needs to export goods both at national and international level.

3.10.10 Trade Finance

This department is responsible for opening letter of credit for those people who are involved in trading activities by issuing the letter of credit as an issuing bank to advising bank in case of import and vice-versa for export. The contents required request letter, proforma invoice, packing list, and certificate of origin, insurance, and transport document.

3.10.11 Bank Guarantee

It is a non-funded facility provided by the bank for its valued clients. There are bank guarantees such as bid bonds, performance bond, advance payment guarantee, custom guarantee, back-to-back letter of credit and credit guarantee.

3.10.12 Any Branch Banking Services (ABBS)

This facility enables customers of BOK to deposit or withdraw money and acquire any information from any branch of BOK.

3.10.13 NTC Mobile Bill Payment

This facility provided by the bank will be started shortly. It enables Nepal Telecommunication Corporation (NTC) mobile phone owners to make payment through the bank in the following modes.

• Full or partial payment by cash.

• Full or partial payment by account transfer.

3.10.14 E-Banking services

This facility provides customers of BOK for viewing and check their statement of account from any part of the country or the world, requesting cheque pad. They need not personally approach to the bank. They can also change the password for the means of safety.

3.10.15 SMS Banking

This facility provides customers of BOK to check their balance of account through their cellular phones. They also get alert messages if any changes occur in their account.

3.11 Branches of BOK

The BOK has its various branches running inside and outside the Kathmandu Valley. The list of Branches of BOK is shown in Appendix 4. The following figure tells about the no of branches expansion over the last few years:

Figure 3.5 Branches expansion of BOK for last five years.

Source: BOK Annual Report 2010/11

3.12 SWOT Analysis

SWOT analysis is a strategic planning method used to evaluate the Strengths, Weakness, Opportunities, and Threats involved in a project or in a business. This analysis helps in identifying the internal and external factors which are favorable and unfavorable to achieve the objective of the organization.

During the internship period, various strength and weakness of the concerned Remittance department were figured. They are:

Strengths

• High convincing power and self-motivated staff of the bank.

• The staff is well educated and trained which makes hem alert and aware towards their duty and responsibilities.

• Well knowledge of computer and other programs which make them use of banking software easier to use.

• Use of advanced technologies.

Weakness

• Limited number of staffs.

• No facility of parking.

• Customer’s complaints and grievances should be given serious concern in today’s cut-throat competition.

Opportunities

• Still a large number of the population has been deprived of banking facility.

• Development of sophisticated technology to enhance the effectiveness of industry.

Threats

• Increasing numbers of competitors.

• Outrageous performance by some other bank may make the customer lose faith in the whole banking industry.

CHAPTER FOUR

4. ANALYSIS OF ACTIVITIES DONE AND PROBLEM SOLVED

4.1 Functions of Remittance Department

Remittance department is the core of the foreign trade. The remittance department of BOK performs following functions. Internee came to know about the following functions performed by remittance department of BOK:

a. Thailand Visa Manager’s Cheque

b. Issuance of Manager’s Cheque (Normal MC)

c. Foreign Currency Exchange

d. Travelers’ Cheque (FCY TC)

e. Agency paymentBOK Click

f. Demand Draft and Swift /Telegraphic Transfer

g. Foreign Currency Deposit

h. Fax Payment System

i. BOK Online Payment

4.2 Activities performed in Remittance Department

Remittance department is the one of the most important department in any bank. The remittance department deals with the transfer of money from one place to another. Funds transfer facility or remittance of funds is one of the key functions of the banks all over the world. Remittances through banking channels save time, costs and eliminate the risks involved in the physical transportation of money from one place to another Hence, it should be handled with the self-motivated and technically sound employee of the bank. The remittance department should always remain clean and impressive to all. The functions are briefly explained below:

4.2.1 Thailand Visa Manager’s Cheque

B.O.K (Bank of Kathmandu) is only the bank in Nepal which receives the payment for the Thailand Visa fee. A Thai MC consists of three leaflets. The first copy is presented to the Thai Embassy by the customers, the second copy is kept by the customers, and the third copy is kept by the bank for reference. A valid passport should be shown from which the Thai visa is applied. There are different categories of visas. The types of visas with their respective amount are shown in table 4.1:

Table 4.1 Amount for various visa categories (per entry)

Visa Categories	Amount (NRS)
Tourist (single-entry)	2500/-
Tourist (double-entry)	5000/-
Transit (single-entry)	2000/-
Transit (double-entry)	4000/-
Non-Immigrant	5000/-
Multiple-Entry	****
Diplomatic	****
Official	****
Student	****
Courtesy	****

**** Determined by the Thailand Embassy

The bank charges NRS 50 per Thai MC Leaflet, irrespective of any amount of the managers’ cheque. The specimens of various Thai visa MCs are shown in Appendix 5.

4.2.2 Issuance of Manager’s Cheque (Normal MC)

Manager’s cheque is that type of cheque which is issued by the Remittance department for the payment of the office expense which may include miscellaneous expenses of the bank such as Telephone bill, Internet bill, stationery items, advertisement expenses etc. This function is performed by accounts department in other organizations, but in the case of BOK, it is performed by the remittance department. The remittance department of BOK issues manager’s cheque on behalf of Accounts department, Human Resource department, CPU front office etc.

Manager’s cheque also acts as a normal draft. The request of manager’s cheque is generally made by the accounts department since it looks after all the expenses made by the office. Based upon the expenses, the accounting department requests for the manager’s cheques and the remittance department issues them. The remittance department also issues the normal MC as per the requirements of the customers, which functions as bank draft in trade and other remittance activities.The beneficiary cannot encash the cheque but must deposit the mentioned amount into his/her account or the company’s account.

4.2.3 Foreign Currency Exchange

Foreign currency simply means buying and selling of the currency. Remittance department has the facilities to exchange the foreign currency to domestic currency and domestic currency to foreign currency. The foreign currency exchange is made based upon the BLB rate and BLS rate (current exchange rate). NRB (Nepal Rastra Bank) has made some restriction to sell and buy the foreign currencies in one fiscal year. No separate bcnk charge is charged in buying and selling of the foreign currencies. Generally the difference between the BLS rate and BLB rate is sixty paisa, which is the spread of the bank.

Foreign currency exchange includes:

• Encashment of foreign currency (FEER)

• FCY (foreign currency) sale

For the purchase of foreign currencies, the costumers need to have their passport, visa of the destination and confirm ticket. A costumer can buy any FCY amounting equivalent to USD 2500 only, per visit. It means a same customer can buy FCY equivalent to USD 2500/- every time s/he goes in foreign currency. Those people, who travel by land, can get any FCY equivalent to USD 1000/- only.

4.2.4 Travelers’ Cheque (FCY TC)

A traveler's cheque is a pre-printed, fixed-amount cheque designed to allow the person signing it to make an unconditional payment to someone else as a result of having paid the issuer for that privilege. Its issuance is like the same process of foreign currency exchange, but BOK charge some commission into it. A travelers’ cheque has the benifits of a foreign currency but eliminates the risk of carring foreign currency. Various FCY TCs are shown in Appendix6. It is beneficial to carry a travelers’ cheque than currency by following ways:

• Its function is similar to a currency note.

• In the case of theft or lost, it can be cancelled.

• It is more secure, as signature and passport is required for the encashment of a TC.

The bank charges on Foreign Currency Travellers’ Cheque are:

Table 4.2 Bank Charge for TC

BOK Staff	0.5 %
Student	0.75%
A/c holder	1%
Non A/c holder	1.5%

4.2.5 Agency payment

BOK works as a paying agent for various domestic or foreign money transfer company. BOK pays the beneficiary the amount send by the remitter from the foreign country to the domestic country. The person (remitter) who sends the money to the beneficiary needs to fill of the form details (Name, Citizenship number, Driver license) about the beneficiary. So that when the beneficiary wants to receive it, the agent company can confirm that he is the right person to receive. The specimens of various payment agency forms are shown in Appendix 7. The names of various domestic and foreign agency payment companies are listed in Appendix 8.

4.2.6 BOK Click

BOK click is one of the finest facilities provided by BOK itself. BOK click has following functions:

• Transfer of funds to anyone who can get cash based on secret code.

• Transfer of funds between your own accounts.

• Transfer funds from your account to selected beneficiaries.

• Transfer funds to any account maintained with BOK if you know the account number of your beneficiary.

• Send money to anyone for whom you will be given a secret code that you need to pass on to your beneficiary who then has to go to the nearest branch or the agent of BOK with the ID for getting cash.

• .Communicate securely with the bank through messages menu.

4.2.7 Demand Draft and Swift /Telegraphic Transfer

A bank draft is a cheque drawn from bank funds. The term ‘bank draft’ is sometimes used to refer to an automatic transfer from your bank account to your service provider. Bank drafts are used to pay people or institutions with guaranteed funds. These drafts are also used in international trade. Bank drafts are more secure for sellers because the funds are guaranteed by the bank that issued the draft. Bank of Kathmandu also issue bank drafts. It issues bank draft for various international banks across the world.

SWIFT is a worldwide network for financial messages through which its members (i.e. financial institutions such as banks) can exchange messages, related to money transfer for their customers. The messages are sent securely and reliably to the target member financial institution of SWIFT.

BOK maintains international swift transactions with the above mentioned international banks. Both Drafts and swifts are substituted. They are both used for the same kind of work in remittance. BOK issues both draft and SWIFT with the preference of the customers. The specimen of TT/ Draft application form and bi.bi.ni forms are shown in Appendix 9.

Table 4.3 Advantages of SWIFT over Draft

Speed	TT payment is fast then DD
Safety	DD can be lost
Convenience	TT payment is directly deposited in beneficiary’s account

Table 4.4 Advantages of Draft over SWIFT

Cost	Cheaper than SWIFT
Evidence	Provides more reliable evidence

The Bank Draft and SWIFT is done mainly to facilitate following purposes:

I. For educational purposes

Several students try for foreign colleges for their higher education. For this, they apply to innumerable colleges all over the world. Remittance fulfills such functions on behalf of those students. Bank drafts and SWIFTs are widely used for such payments.

• Payment of Application Fee

• Payment of College Fee

II. For the import of goods from foreign countries

Nepal imports the goods from various countries, they need to follow certain rules and regulations while importing the goods from various countries and they are as follows:

• To import goods from any country.

• To import good from India in advance.

• To import goods from Tibet in advance.

• To import goods from third country (other than China and India) in advance.

4.2.8 Foreign Currency Deposit

As we know, one of the main functions of the bank is to receive the deposit from the customer. The various deposits are done through the cash department (saving, current etc.). But the FCY deposits are done through the remittance department of BOK. The FCY deposit can be done with US Dollar, AUD, Euro, GB pounds etc. The main customers of BOK for FCY deposits are Royal Singhe Hotel, IME, Himali Express Money and other money exchange outlets etc.

4.2.9 Fax Payment System

Fax Payment System (FPS) allows the customers to execute banking transactions by sending payment documents to the bank by fax. Independent of their location, customers who have accounts opened with the bank, with the help of FPS may affect domestic and international transfers and currency conversion. To use FPS, there are security code tables issued to customers. To perform the transaction, the customer sends a special payment order to the bank by fax. The bank verifies the order against the security codes and signatures. The specimen of fax payout order form is shown in Appendix 10.

4.2.10 BOK Online Payment

BOK online payment is that type of payment which is done for the online exam such as TOEFL, IELTS, SAT, GRE, GMAT etc. The customer simply needs to give the username and password for online payment of website of ets.org .The charge for this type of online payment is shown in Table 4.5. The specimen of BOK online payment form is shown in Appendix 11.

Table 4.5 Bank Charge for Online Payment

Exam	Fees
TOEFL	$ 160
GRE	$ 190
GMAT	$ 250

The functions of remittance department of BOK were thoroughly observed by the internee. The internee worked as a temporary staff for two months and hence was able to perform all the activities performed by the bank’s staff. Following were the works assigned to the internee. The assigned works are described below with relations to the functions of remittance department:

a. Customer Counseling

The internee worked in the front office of remittance department for the whole internship; hence he had to handle all types of customer. Special attention was given to foreign customers because they were unable to understand the local language. Customers from China couldn’t speak English; therefore handling them was very tough. Similarly, uneducated customers were also helped by the internee to fill up various request forms for Thai managers’ cheque and agency payments.

b. Keeping Records of Activities Performed

Remittance department needs to be updated daily. All the activities performed throughout the day are recorded and saved for future reference. The internee was assigned to make those records at the end of every day. The record included:

• The no of FCY sales and encashment made in the day.

• The no of different foreign travelers’ cheques sold in the day

• The no of Thai MC’s sold in the day

• The no of SWIFTs and drafts made in the day

• The list of names and passport no of customers to whom FCY sales are made.

c. Use of System Software

Bank of Kathmandu uses FINNACLE software for its day to day operations. The internee was assigned to do limited works in the system software. The system functions related to Thai MC’s issue and settlements were performed by the internee on the daily basis. Similarly, other different functions were assigned to the internee too. The key functions used in remittance department are:

• ORM: Outward Remittance Management

• ACLI: Account Ledger Inquiry

• TM: Transaction Management

d. Making Note lists of Various Foreign Currencies

One of the major functions of remittance department is to encash foreign currencies. In this process, the department receives huge amount of foreign currencies daily. The note list of those currencies should be made and filed for future references. The internee was assigned to prepare the note lists and file them daily.

e. Handling Machines

Machinery plays a major role in the smooth operation of the department. The office was well equiped by various machines. The internee had full access to all the machines and had to perform all the related activities. The internee had to handle the following machines:

• Photocopy

Photocopying was the main activity performed by the internee. He had to photocopy huge amount of legal documents daily. The main documents which were photocopied by the internee were:

• Legal documents of trade.

• Legal documents of students applying for foreign countries.

• Passport, visas and confirmed tickets.

• Customer identification cards (eg. citizenship card, driving license, voters’ identification card etc).

• Rate list of different foreign currencies.

• Computer

The internee was also assigned to use computers. Ms-word, Ms-excel, and internet was widely used by the internee to perform different document related activities. The internee was able to learn the different calculation techniques in ms-excel. Similarly the daily records were stored in the server network of BOK through local computers.

• Printer

Internee was made familiar with the working process of the printer in the remittance department. There were two printers; local printer and central printer. The local printer was used to print on cheques and drafts, and the central printer was used for general purpose.

• Telephone

One of the main jobs assigned to internee was handling telephone calls. Various calls inquiring the rate list, the SWIFT code, the availability of foreign currencies were handled by the internee. Calls related to delicate matters were transferred to the assigned authority.

• Scanner

Different legal documents were needed to be sent through mails. Fax payout order was sent through mails. For those purposes, scanner was widely used. The internee used scanner for 2 times only during this period.

• Cheque Writer

The main task performed by the internee was cheque writing. The cheque writer was used in all the manager’s cheques, drafts, Thai MCs, fax pay order, NRB cheques etc. cheque writing needed more caution since a small mistake may ruin the whole document. The cheque writing included a certain pattern” A/C Payee Rs 2000 only. ”

• Fax

The internee was also made familiar to the use of fax. Fax was widely use in remittance department to receive and send SWIFT messages.

f. Filing Legal Documents

The Internee was assigned to make the filing of the different documents for future references. The documents play a huge role in this department as they need to be submitted to the audit department for cross-checking. The internee had to file following documents:

• Photocopies of passports, visas and tickets.

• Bank’s copy of Thai MCs.

• Photo-copies of legal documents associated with trade attached with application Form (bank’s copy), bi.bi.ni (if required) and other documents.

• Photocopies of legal documents of the students’ studying abroad attached with the application form (bank’s copy), bank’s copy of MOE letters and other documents.

• Photocopies of various agency payment forms with customers ID.

g. Endorsement of Legal Documents

The endorsement of the legal document is one of the important functions of remittance department. It makes the document valid. Endorsement procedure includes the different modes along with the stamp of BOK and the signature of the designated authority. The internee was assigned to make the endorsement. Endorsement was done in following documents:

• The voucher receipts of customs and pragapan-patra of foreign trade.

• The pro-forma invoice and transportation documents related to foreign trade.

• The MOE letters of the students’ going abroad.

• The legal documents of the student going abroad.

• The passport and original tickets of the customers going abroad.

h. Filling Various Forms

The internee had to fill various forms related to the remittance department. Uneducated customers’ forms were filled by the internee. The bi.bi.ni forms for the advance payments in foreign trade were also filled by the internee. The Thai MC was also filled by the internee and cross check was done by the authorized person.

i. Currency Handling

Remittance front office had to deal with several currencies. The internee was assigned to handle those currencies in a systematic manner. The Nepalese currencies were bound separately with the assigned tags under the same denomination. The foreign currencies were kept separately so that no misplacement would occur.

j. Other Small Activities

The internee was also assigned to perform other different fringe tasks during this internship period. Following are the other tasks performed by internee:

• Signatures: The internee had to take signatures of the branch manager in the legal documents.

• Stamping: The internee was also assigned to take stamps on various legal documents related to trade and remittance.

• Marketing: The internee also did some marketing as he had to interact directly with the customers.

4.3 Problems solved

The remittance department has to deal with various customers. During dealing with various customer and performing different activities, various type of problem arises. Some of the problems that are solved during the internship period are:

• Correcting improperly filled forms.

• Dealing with the customer of rude nature.

• Giving detail knowledge about the product.

• Dealing with foreign customers.

• Problems that come with handling different machines.

CHAPTER FIVE

5. CONCLUSIONS AND LESSON LEARNT

5.1 Conclusions

Bank of Kathmandu is one of the growing commercial banks of Nepal. Bank of Kathmandu has been playing a significant role in the development of the Nepalese economy. The bank aims to touch the life of each and every individual, by providing quality and prompt services. The main focus of bank always has been on quality service and the competitive pricing.

This report is prepared on the basis of the eight weeks internship program done in the Kamalpokhari, the head office of the Bank of Kathmandu. The theoretical and the practical knowledge was integrated through this internship program

In any bank, there are various departments among which the remittance department is one of the most important departments. Remittances are playing an increasingly large role in the economies of many countries, contributing to economic growth and to the livelihoods of less prosperous people (though generally not the poorest of the poor). The remittance department has been helping the customer regarding the various means of transfer of the money. The main function of remittance department are Thailand visa managers cheque fee payment, issuance of manager’s cheque, foreign currency exchange, travelers’ cheque buy/sell, agency payment, BOK click, demand draft, NRB draft/ cheque, swift/ telegraphic transfer, foreign currency deposit, fax pay out, BOK online payment and also providing the information to the customer about bank product and services.

This report explains the Nepalese banking industry and the banking organization. Similarly, the whole remittance department’s working process, its’ functions and its contributions to the bank has been clearly explained and analyzed to draw certain conclusions. This report was able to fulfill all the objectives as presented in the beginning chapter.

5.2 Lessons Learnt

The eight weeks of internship program proved very much productive and worthy to the internee. It was an opportunity to experience various types of situations and learn the proper way to deal with them. The internee got the idea regarding the working procedures in the bank as well. Although the duration of eight weeks was not sufficient enough to understand the banking system in detail, it gave the general concept about the remittance department in the banks.

The major lessons learned during internship period are as follows:

• Dealing and interacting with the customers and providing right solutions and guidance to their problems.

• Making Xerox of the various documents

• Knowing about the documents required and other criteria for various product and services of remittance department.

• Convincing the customer.

• Printing various document regarding the remittance department.

• Knowing about FCY/TC exchange.

• Filling the various document for customers.

• Knowing how to use bank software.

• Endorsement in various legal documents.

• Knowing about drafts and SWIFTs.

• Handling the telephone calls.