Internship Report on Mega Bank Limited (MBL), Nepal

Internship Report on Mega Bank Limited (MBL), Nepal

CHAPTER ONE

INTRODUCTION

1.1 Background

Tribhuvan University (TU) is the largest and the oldest university of Nepal. Bachelor in Business Administration (BBA) program is the undergraduate level program of Tribhuvan University (T.U). It is a four-year course with 120 credit hours comprehensive bachelor degree program. The program is further divided into eight semesters (two semesters in each year). It is committed in imparting the students with practical knowledge. It aims to prepare students to become competent, confident, skilled and socially-responsive professional who can effectively support managerial, entrepreneurial and leadership role in business and other social organizations. It is totally student-oriented course where students have an active participation. Its syllabus has been designed in such a way that it has tried to give the students knowledge from almost every field like Psychology, Sociology, Business Law, Information Technology(IT) etc. It has got grade system of marking in GPA. Due to this distinctiveness, BBA program is getting popular among the students and is becoming the first choice of every graduate level students of management.

Internship Programme is a feature of TU BBA Programme that is compulsory to fulfill the partial requirement for the degree of BBA, which provides the perfect platform for the students to utilize their theoretical knowledge in real life situations. It helps them to observe, study and explore new facts and understand how an organization actually functions. In simple words, the internship programme is designed with opportunity of learning how to translate the theoretical knowledge into wise actions through exposure to a real organizational environment. Summing up, internship is simply the applied form of knowledge. It is relatively short-term in nature with the primary focus of getting on-the-job training.

As per the requirement of Faculty of Management (FoM) of TU, the students of BBA should perform internship in any organization for eight weeks in the 8^th semester in their subject of specialization. This report is all about the internship programme attended by the internee in Mega Bank Nepal Limited (MBNL), Kantipath Head Office in the Trade Finance Department.

1.2 Objectives of Study

The internship programme in BBA is primarily designed to the students to enable them as grounded career persons who already know the real-life working situations and who have already felt the pressure of the job place environment. It helps the students to be prepared for the future with the help of the little knowledge gained from the two months of the job-like experience. It is also a platform to show the ability to mould the theoretical knowledge learnt throughout the BBA program as per the requirement of the job placement.

The main objectives of this report are jotted below:-

· To examine different activities performed in Trade Finance Department.
· To know the different procedure of Letter of Credit (LC), Telex Transfer (TT) and Guarantee.
· To explore the applicability of theoretical knowledge in practical workplace and know the gap between the theoretical knowledge and practical work.
· To develop the managerial and communication skills to tackle the real life situations.
· To get the practical exposure and understand the institutional cultures and value system of the corporate world.

1.3 Methodology of the study

Following methodologies are used to study the organization:

1.3.1 Organization Selection:

Selection of the organization tends to be the most crucial part of the internship because success in the fulfillment of the objectives of the internship completely depends on the type of the organization that has been selected. It is the basis from which interns get the platform to learn something and analyze the practical implication of the theoretical aspects learnt in the academic session. So, the internee initiated her action in doing the internship in Mega bank Nepal Limited, which is Nepal's one of the largest A class commercial bank having innovative tagline of the bank “Halo dekhi Hydro samma”, and working with strong leadership of Mr. Anil Keshary Shah.

The campus provided recommendation letter which the internee dropped in the Human Resource Department (HRD) of Mega bank Nepal Limited’s Head Office, Kantipath, along with the CV. There were other numerous applicants applying for their internship. So it was a tough job for HRD Head to select few amongst all. There was regular follow up calls to the HRD which revealed the interest and enthusiasm of the internee to work in MBNL. After a week, the internee was informed that she was selected and could start internship period right from tomorrow. Finally, the internee joined the bank from June 18, 2012.

1.3.2 Placement:

On June 18, 2012, the internee went to MBNL, Kantipath (Head Office) to start her internship. The internee was placed in the Trade Finance Department for complete 8 weeks under the supervision of Mr. Ashok Budathoki.

1.3.3 Duration of Internship:

The duration of internship has been defined for 2 month or 6 credit hours of working time at the organization by Tribhuvan University (T.U.), Faculty of Management (FOM). So, in order to fulfill this requirement, internship was done for two months starting from 18^th June 2012 to 18^th August 2012. The internee felt those 2 months (9 weeks) were really fruitful and it will definitely help in upcoming days.

Table: 1.1 Internship Placement

Activities/ Working period	1	2	3	4	5	6	7	8	9
Core Function learning	Trade Finance Department
Implementation/ documentation									Information collection

1.4 Activities performed during internship period

The internee spent the two months internship period in the Trade Finance Department of Mega bank Nepal Limited, Kantipath branch. All the tasks that the officer and the associates of Trade Finance Department ordered had been performed by the internee. Listing out the major tasks in the bulleted form would be as below:

· Preparing forms of Letter of Credit.
· Preparing Bi Bi Ni forms.
· Preparing Work Sheet, L/C Application Checklist, Letter of Indemnity and Arrival Advice.
· Checking the discrepancies in the documents presented for the negotiation.
· Keeping records of documents received manually.

· Chronological filing of the trade related documents.

·         Updating files.
·         Preparing NRB cheques.
·         Recording of copy returned.
·         Forwarding approval sheet to the Customer Administration Department.
·         Sending letters to other organization.
·         Photocopying, scanning and faxing of necessary documents.

1.5 Limitations of the study

Every field of study has some or the other limitations and so in the case of internship report as well .There is some limitations that are faced at the time of this report preparation and they are listed below:

This report cannot be generalized to entire banking industry.
It does not provide the detail view of overall functioning of the bank.
Time and resource constraints has prohibited in conducting in-depth study of everything.

· It is based on the personal understanding of the internee regarding the bank’s operation during the internship period.

· Despite the sincere effort and willingness, the bank staffs could not provide as much help as required by the internee for report preparation.

· Due to confidentiality maintained by the bank some of the information regarding bank weren’t available in detail.

· To understand the detail process of LC, TT and Bank Guarantee, it is necessary to be updated with NRB circulars and policies which lacked due to limited knowledge.

CHAPTER TWO

INTRODUCTION TO THE BANKING INDUSTRY

2.1 Background

Bank is a financial institution that deals with monetary transaction. It accepts deposits from surplus unit and provide loan to deficit units. It collects scattered money from public in the form of deposit by providing them certain percent of interest and distributes the accumulated fund to others, who are in need of money by charging certain percent of interest, which is usually than it gives to the depositors. Bank can also be taken as an intermediary, which bridges the gap between the savers of fund and users of fund.

Some definitions of banks are as follows:

According to Nepal Rastra Bank Act 2002

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

According to Indian Banking Company Act 1949

“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.”

According to Commercial Bank Act 2031 B.S

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

A commercial bank is a financial intermediary. Commercial bank is the 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. Commercial banks are the banks which are established with a view to finance 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.

2.2 Origin of Bank

The concept of banking is not a modern concept. This concept had started to evolve in the brilliant human mind immediately after the humans were able to realize and develop money. Though money had made the human life much easier than before but ancient humans started to realize the complexities that evolution of money had created in their life. So, in order to overcome these complexities and the difficulties that were attached with the benefit of money the concept of banking emerged in the human mind. Earlier the moneylenders and the landlords perform the banking activities as the informal banks but later the activities of these people are formalized and the concept of bank as an institution had emerged.

Moving towards the word “Bank”, it is thought to be derived from the Italian word “Banco”, Latin word “Bancus” and French word “Banque” because all meant the bench in which the bankers would keep money and its records. The Jews of Lambardy were thought to be the early bankers who transacted third business at the benches in the marketplace and when they were unable to meet their liabilities, the depositors used to break their benches and this tradition had given birth to a banking term “Bankrupt”. The first ancient Bank of the world is supposed to be the Bank of Venice which was established in 1157 A.D. Following the footsteps of this bank, other two banks were established in 1401 and 1407 named Bank of Barcelona and Bank of Geneva, respectively. The crucial breakthrough in the modern banking history was made in 1694 A.D when the first modern bank “The Bank of England” was established. After the establishment of this first English Bank, Banking sector had experienced various ups and downs but still they persisted and because of that persistence they are now able to exist in this 21st century world as one of the essential element of human life.

Presently, banks are not only the deposits collecting and loan lending institutions but also the institutions which helps its customers from various ways as per their convenience and ability with full security. They had been developed as the essential service providing institutions in this rushing world. The banks had start affecting the lifestyle of the citizens as well as the economy of the country as well. The recent recession of 2008 is the outcome of the inefficient banking practice and the world had to suffer much only because of the inefficiency and negligence of a single banking sector. Hence, banking had become an important element of the world economy in the present time.

2.3 Banking Industry in Nepal

Tejarath Adda established during the tenure of the Prime Minister Ranoddip Singh (1993 B.S) this was the first step towards the institutional development of banking in Nepal. It tendered a good service to give loans to government employees and public against bullion.

Banking in modern sense started with the inception of Nepal Bank Limited (NBL).Nepal Bank Limited was established in 1994 B.S, as a semi-government organization without existence of a central bank in the country under special Banking Act 1936, having elementary functions of a commercial bank. 51% of the paid up capital of Nepal Bank Limited is owned by the Government and 49% owned by the public. Later, on Nepal Rastra Bank was set up on 2013 B.S. as the first central bank under Nepal Rastra Bank Act 2012 B.S with an objective of supervising, protecting and directing the functions of commercial banking activities. Another commercial bank fully owned by the government, ”Rastriya Banijya Bank”, was established in 1996, which made it possible for the Nepal Rastra Bank to devote more attention to the important aspects of economic, monetary and fiscal development. Industrial development center was set up in 2013 B.S it was converted into Nepal Industrial Development Corporation. Agricultural Development Bank established in 2024 to finance agricultural produces.

Joint venture banks in Nepal gave a new horizon to the financial sector of the country. Nepal Arab Bank Limited later renamed as Nabil Bank Limited in 2041 B.S as a first joint venture bank to be a milestone in the history of banking which gave hope to the sluggish financial sector.

After the restoration of democracy in Nepal there has been tremendous development in banking sector. The economic and financial reform policies undertaken by the government have increased both number of banks and the types of services offered. For the purpose of regulation and control, NRB have divided the depository financial institutions into four classes on the basis of minimum paid up capital requirement and functions. This classification is 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, the central bank of Nepal is shown in table 2.1.

Table: 2.1 Nepalese Financial Institutions

Category	Component	Minimum Paid up capital requirement	Number
KA	Commercial Banks	2 Billion	32
KHA	Development Banks	64 crore	87
GA	Finance Companies	20 crore	79
GHA	Micro Credit institutions, Co-operatives	1 crore	28

Since the internee had completed the internship in one of the commercial banks of Nepal, the analysis is specifically focused on the “A” category depository institutions i.e. the Commercial Banks.

2.4 Concept of Commercial Banks

Commercial Banks are the heart of our financial system. A commercial bank (or business bank) is a type of financial institution and intermediary. It is a bank that provides transactional, savings, and money market accounts and that accepts time deposits. They hold the deposits of millions of persons, governments and business units. They make funds, available through their lending and investing activities to borrowers, individual business firms and government. Therefore the task of commercial banks in an under developed countries is almost self-evident. Their purpose is to provide a collecting point for savings of a relatively small average amount from a large number if individual source so long as the to utilize savings safely and profitably.

Hence, commercial bank is the financial institution authorized to receive both time and demand, to make loans of various types, to engage in trust services, to issue letters of credit, to accept and pay drafts, to rent safety deposit boxes, and to engage in similar activities and ventures.

2.4.1 Functions of Commercial Banks

The functions of commercial banks are divided into two categories:

1. Primary functions

The primary functions of a commercial bank include:

A. Acceptance of Deposits

v Currents deposits (demand deposits)

v Savings deposits

v Fixed deposits

v Recurring deposit

v Miscellaneous deposits (Home construction deposit scheme, Sickness benefit scheme, Children plan, Old age pension scheme, etc)

B. Granting loans and advances

v Loans (Credit facility for more than 1 year)

i. Demand loan

ii. Term loan

v Advances (Short-term financial assistance)

i. Cash Credit

ii. Bank Overdraft

iii. Discounting of Bill

2. Secondary functions including agency functions.

· Issuing letters of credit, travelers' cheques, circular notes etc.

· Undertaking safe custody of valuables, important documents, and securities by providing safe deposit vaults or lockers

· Providing customers with facilities of foreign exchange.

· Transferring money from one place to another and from one branch to another branch of the bank.

· Standing guarantee on behalf of its customers, for making payments for purchase of goods, machinery, vehicles etc.

· Collecting and supplying business information.

· Issuing demand drafts and pay orders and

· Providing reports on the credit worthiness of customers.

2.4.2 Agency and General Utility Services provided by Modern Commercial Banks

Besides these two main activities, commercial banks also render a number of ancillary services. These services supplement the main activities of the banks. They are essentially non-banking in nature and broadly fall under two categories:

I) Agency Services

Agency services are those services which are rendered by commercial banks as agents of their customers. They include:

Ø Collection and payment of cheques and bills on behalf of the customers;

Ø Collection of dividends, interest and rent, etc. on behalf of customers, if instructed by them.

Ø Purchase and sale of shares and securities on behalf of customers

Ø Payment of rent, interest, insurance premium, etc. on behalf of customers, if instructed.

II) General utility services

General utility services are those services which are rendered by commercial banks not only to the customers but also to the general public. These are available to the public on payment of a fee or charge.

They include:

Ø Issuing letters of credit and travelers' cheques;

Ø Underwriting of shares, debentures, etc.

Ø Safe-keeping of valuables in safe deposit locker.

Ø Supplying trade information and statistical data useful to customers.

Ø Undertaking foreign exchange business.

2.4.3 Commercial Bank at a Glance

The internee made an overview on the commercial banks and found the following information:-

Table: 2.2 Commercial Banks at a Glance

Year	Net Profit (in million)	Deposit (in million)	Lending (in million)	Cost of Fund	NPL	Provisioning
2010-11	Rs.10.79	Rs.647.35	Rs.514.31	8.14%	2.63%	4.11
2009-10	Rs.10.31	Rs.586	Rs.466.77	5.13%	2.09%	3.69

Development of commercial bank is in increasing trend. From above table only we can get an idea. It shows that there is growth in net profit by 4.65%, growth in Deposit by 10.46% and growth of Lending by 10.18%. Growing privatization and international trade has increased the competition among commercial bank. Due to this competitions commercial bank are serving much more facilities to compete with each other.

2.4.4 Commercial Banks in Nepal

In the year 1934 AD, the establishment of Nepal Bank Ltd. with the Imperial Bank of India came into existence under “Nepal Bank Act, 1937” as the first commercial bank of Nepal, inaugurated by His Majesty King Tribhuvan on November 1937. Rastriya Banijya Bank, the second commercial bank was established in the year 1965.

With the opening of NABIL Bank in 1985 the door of opening commercial bank was opened to the private sector. Then whole lot of commercial banks was opened in Nepal. There are altogether 32 commercial banks opened till now. List of commercial banks are listed as:

Table: 2.3 List of Commercial Banks in Nepal

S.N.	NnName Name of the Bank	Operation Date (A.D.)	Head Office
1	Nepal Bank Limited	1937/11/15	Kathmandu
2	Rastriya Banijya Bank	1966/01/23	Kathmandu
3	Agriculture Development Bank Ltd.	1968/01/02	Kathmandu
4	NABIL Bank Limited	1984/07/16	Kathmandu
5	Nepal Investment Bank Limited	1986/02/27	Kathmandu
6	Standard Chartered Bank Nepal Limited.	1987/01/30	Kathmandu
7	Himalayan Bank Limited	1993/01/18	Kathmandu
8	Nepal SBI Bank Limited	1993/07/07	Kathmandu
9	Nepal Bangladesh Bank Limited	05/06/1994	Kathmandu
10	Everest Bank Limited	1994/10/18	Kathmandu
11	Bank of Kathmandu Limited	1995/03/12	Kathmandu
12	Nepal Credit and Commerce Bank Ltd.	1996/10/14	Rupendehi
13	Lumbini Bank Limited	1998/07/17	Chitawan
14	Nepal Industrial & Commercial Bank Ltd.	1998/07/21	Morang
15	Machhapuchhre Bank Limited	2000/10/03	Pokhara
16	Kumari Bank Limited	2001/04/03	Kathmandu
17	Laxmi Bank Limited	2002/04/03	Birgunj, Parsa
18	Siddhartha Bank Limited	2002/12/24	Kathmandu
19	Global Bank Ltd.	2007/01/02	Birgunj, Parsa
20	Citizens Bank International Ltd.	2007/6/21	Kathmandu
21	Prime Commercial Bank Ltd	2007/9/24	Kathmandu
22	Sunrise Bank Ltd.	2007/10/12	Kathmandu
23	Bank of Asia Nepal Ltd.	2007/10/12	Kathmandu
24	DCBL Bank Ltd.	2008/05/25	Kamaladi
25	NMB Bank Ltd.	1996/11/26	Babarmahal
26	Kist Merchant Banking & Finance Ltd.	2003/02/21	Kamalpokhari,
27	Janata Bank Nepal Ltd	2010/04/28	New Baneshwor
28	Mega Bank Nepal Limited	2010/07/23	Kantipath,Ktm
29	Commerz & Trust Bank Limited	2010/09/20	Kamaladi
30	Civil Bank Ltd	2010/11/26	Kamaladi
31	Century Bank Ltd	2011/03/10	Putalisadak
32	Sanima Bank limited	2012/02/28	Kathmandu

(Source: www.nrb.org.np)

CHAPTER THREE

INTRODUCTION TO MEGA BANK NEPAL LIMITED

3.1 Introduction

The initial concept of establishing a truly inclusive MEGA bank was invisioned by a group of individuals from a diverse range of backgrounds two years to the formal inauguration of the Bank. These individuals who initially conceptualized the establishment of this institution were propelled by their vision to establish a national level banking institution that would provide the highest levels of professional banking service with a personal touch, throughout the nation, to all Nepalese.

It is the realization of this aspiration that lead to the incorporation of Mega Bank Nepal Limited as Nepal's largest A class commercial bank with an authorized capital of Rs.4 billion and an issued capital of Rs.2.33 billion.

Recognizing that banking activity has been limited to the urban and semi-urban areas of Nepal, Mega bank has been set up not only to provide better products and services that are currently on offer in the financial sector but also to penetrate and tap the virgin rural market. The promoters shared a vision to make Mega Bank a catalyst for the promotion of financial inclusion in Nepal.

The Bank is inclusive right from its roots, having been promoted by 1219 promoters spread across 63 of Nepal's 75 districts. The promoters are divided into 6 clusters, with each cluster being represented by one seat on the Bank's Board; Professor Dr. Madan Kumar Dahal is the Chairman of Mega Bank Nepal Limited's Board. A senior economist of Nepal holding a Doctorate Degree in Economics, Dr. Dahal is a respected personality in the South Asian region for his insightful contributions and analytical papers on national, regional and international economic issues. The promoters are represented in the Board of Directors, comprising of accomplished personalities from the field of tourism, development, academicians, economists and businessmen.

3.2 VISION - MISSION – VALUES

3.2.1 Vision

The seed planted by the Bank's Promoters in their initial deliberations is today the core of Mega Bank's Vision - to be the banker to every Nepali, delivering five star quality services to all its customers. Mega’s Vision is who they want to be, and everything they have done to date, and everything they will do as we build the Bank going forward will be centered around ensuring Mega Bank works towards becoming the 'Banker of every Nepali from Plough to Power - Halo to Hydro'.

3.2.2 Mission

In order to move towards the realization of their Vision, which enlightens them on 'Who they want to be', they have articulated a statement of Mission to clearly state 'Where they want to be'. Mega Mission is to consistently deliver 'Service Excellence to Create Mutually Beneficial Relationships' with all our stakeholders.

3.2.3 Values

Each and every member of the Mega Team is committed to delivering service excellence and working towards providing five star quality banking to Customers, Shareholders, Regulators, Community, and Staff, creating, building and strengthening relationships of mutual benefit. In order to achieve our Mission all of us are committed to our Mega Values of being Service Centric, Transformational, Action Oriented, Result Focused, Synergistic, everyday in everything we do. The acronym of our Values is S.T.A.R.S. reflecting our commitment to the Mega Service culture.

3.3 The products of Mega Bank Nepal Limited

Mega Bank has offered different types of products to the general public as well as big corporate houses and big businesses. The wide range of product is injected in the market in order to provide diversified products to the consumers.

3.3.1 Consumer Banking Products

The Consumer Banking Products of Mega Bank are as follows:

3.3.1.1 Account and Deposit

LCY Denominated Account

v Mega Lokapriya Bachat Khata

v Mega Subharambha Bachat Khata

v Mega Current Deposit Account

v Mega Byapar Bachat Khata

v Mega Fixed Deposit Account

v Mega Dhamaka Mudhati Khata

v Mega Swabhiman Bachat Khata

v Mega Nari Special Account

v Mega Young Star Saving Account

v Mega Youth - MY Bank@ Campus Account

v Mega Karmachari Bachat Khata

Mega has offered different types of schemes in order to attract the consumers. In order to attract the pool of saving, different diversified products have been launched. The different types of deposit based products launched by Mega Bank are as follows:

FCY Denominated Account

v Special Current Account

v FX Current Account

v FCY Call Account

v FCY Current Convertible Account

v Saving Account

v FCY Fixed Deposit Account

v Mega Dollar Savings Account

Source: www.megabanknepal.com

3.3.1.2 Lending Based products

There are different types of products that fulfill the individual’s credit requirements. Various lending based products are available to both retail and corporate customers which are listed as under:

Consumer Lending

v Mega Auto Loan

v Mega Home Loan

v Mega Mortgage Loan

v Mega Mortgage Overdraft

v Mega Personal Loan

v Mega Education Loan

v Mega Margin Lending

v Mega Loan Against Fixed Deposit

v Mega Loan Against Govt. Securities

Source: www.megabanknepal.com

3.3.1.3 Remittance

Remittance

v Mega Remit

In order to facilitate the consumers, Mega Bank has launched its own product known as Mega Remit which helps to get the fund easily from one place to another.

Source: www.megabanknepal.com

3.3.1.4 Card

Mega Bank has launched its ATM card in order facilitate its customers. With Mega Card, one can have access to his/her account, 24 hours a day, 365 days a year through a wide network of ATM and “Point of sales (POS)” terminal deployed by Smart Choice Technology (SCT) all over the country.

3.3.2 Corporate Banking

Corporate Banking reflects Mega Bank's strengths in providing corporate clients in Nepal a wide array of commercial, transactional and electronic banking products. Mega Bank offers a full range of client-focused corporate banking services, including trade finance, working capital finance, project finance, foreign exchange and cash management and other non-funded facilities such as remittance, guarantee etc.

3.3.2.1 Corporate Lending

MEGA Corporate Lending is solely targeted to meet the requirements of corporate entities of Nepalese market. Corporate lending includes both funded and non-funded facilities as per the requirement of corporate entities. Some of the products offered are Overdraft, Demand Loan, Term Loan, Project Finance and so on. The credit facilities exceeding NPR.30millions falls under corporate lending.

3.3.2.2 Trade Finance

Trade Finance

v Letter of Credit

v Bank Guarantee

3.3.3 SME Banking

SME is an abbreviated form of Small and Medium Enterprises which refers to a certain class/segment of customer/clients based on their size of company/business or size of their balance sheet and turnover. Hence, "SME Banking" is a business relationship with small and medium scale enterprises by segmenting them into a special category and offering them a complete package of banking products and services in holistic approach.

3.3.4 Micro Banking

Mega Micro Banking is an initiative for catering '5 Star' banking services to the poor and economically marginalized people of the nation. It is characterized by small size of loan and small saving mobilization among the small entrepreneurs and low income groups. In recent years, micro finance is emerging globally as an effective and popular measure in ongoing struggle against poverty. It lies on the principles of client friendly procedure, highly disciplined clientele and workforce, service delivery as per clients' business model and banking services at the client's door step.

Mega Micro Compulsory Lending

3.3.4.1 Account and Deposit

3.3.4.2 Micro Lending

Micro Lending covers various credits to micro entrepreneurs in individual or group basis.

3.3.5 Direct Banking

MEGA Bank Direct Internet Banking offers the clients convenience to manage and control their banking and finances - when they want to, where they want to.

3.4 Departments in Kantipath, Head office of MBNL

The Head office of Mega Bank Nepal Limited is located at Kantipath, around which the majority of business complex and financial institutions are clustered. Within the short span of 2 years, the bank has significantly improved and increased its performance by focusing on customer-oriented banking products and services. Due to its excellent banking services and aggressive marketing strategy, the bank is popular with a large number of customers ranging from elite business entities to educational institution. The head office offers complete banking services to its customers. It has been providing Automated Teller Machine (ATM) and locker facilities. The success and growth of the bank has inculcated a feeling of enthusiasm and synergy in the staff members. There are all together eight departments prevailing in Kantipath (Head\Branch office). They are:

(a) Customer Service Department (CSD):-

Customer service department provides different services to its customer, such as:

i. Account Opening

ii. Account Closing

iii. Providing Bank Statement\Balance Certificate

iv. Providing Cheque Books

v. Providing locker Facilities

(b) Cash Department:

Cash department performs different activities like:

i. Cash Withdrawal

ii. Cash Deposit

(c) Remittance Department:

This department performs all the activities related to clearing of cheques of different financial institutions. Clearing includes inward and outward clearing of cheques. This department also receives remittances from abroad and outside the Kathmandu valley. Similarly, it endorses the remittance from Nepal to abroad in different countries in various hard currencies. This department also handles traveler’s cheques, fax transfer, telex\Swift transfer and drafts.

(d) Trade Finance Department:

This department has three services for the customers:-

i. Letter of Credit (LC)

ii. Telex Transfer (TT)

iii. Guarantee

(e) Credit Department:

Credit department is the core department of any commercial bank. Interest earned from disbursed loan is the prime source of income of any bank. Success of any bank depends upon its ability to provide loan that do not fall overdue and untimely convert into non- performing assets.

The activities performed by this department starts after the receipt of credit application from credit and marketing department. The activities performed at this department are:

i. Preparation and execution of security documents based on credit facility offer letter like loan deed, pledge deed, letter of lien, hypothecation, mortgage deed, etc (signing in all documents by customer and verification of signatures).

ii. Execution of mortgage at land registration office or registration of vehicle in bank’s name at transportation office or pledging of stocks according to loan type

iii. Ensure that the entire document are obtained and verified with checklist.

iv. Maintain rate limit input and register the loan, into the system.

v. Generate repayment schedule.

vi. Disburse loan.

vii. Keep security document.

viii. Maintain proper record of all security documents.

ix. Monitoring and inspection of stock and inventory and observation of books of customer’s accounts on a periodic basis according to the nature of loan provided.

x. Monitoring of insurance of securities on a regular basis.

xi. Release of securities after full and final settlement of loan.

xii. Follow recovery processes if the principal or interests on loan aren’t paid on time.

f) General Service Department:

This department keeps record regarding receipt and payment of the things which are necessary to run bank. It also receives letter from the employees of various department regarding requirements, stationery and other necessities. This department also keep the bird eye view on goods they have received as per their order like whether the goods they have received are in right condition or not.

g) Human Resource Department:

HRD involves hiring, promoting and firing of employees. Under the supervision of this department various training programs for employees are also launched.

h) Finance and Treasury department:

This department comprises of two independent units:-

· Treasury Front Office (TFO)/Dealing Room:-

It performs activities like:

Ø Managing overall liquidity of the Bank.

Ø Ensure the Cash Reserve Ratio (CRR) is maintained within NRB directives

Ø Lending/Borrowing of Currency Local/Foreign at local and international bank and financial institutions within the approved limit.

Ø Deals in Treasury Bills and Bonds.

Ø Manage Foreign Currency (FCY) as required by the Bank.

Ø Assist Assets Liability Management Committee (ALCO) for information.

· Treasury Back Office (TBO):-

TBO processes all deals resulting out of the dealing activities and performs related tasks, which include:

Ø Input, verification and settlement of deals.

Ø Advising Confirmation of deals.

Ø Nostro Account Reconciliation.

Ø Monitoring Nostro Account movements.

3.5 Capital Structure

The capital structure of Mega Bank Nepal Limited is as:

Fig 3.2: Capital Structure of MBNL

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 the share holders. MBNL’s authorized share capital is NRs. 4 Billion in the year 2010/11, along with issued share capital NRs. 2.33 Billion and paid-up capital NRs. 1.67 Billion.

3.6 Ownership Structure

Fig: 3.3 Ownership Structure

Ownership of Mega Bank Nepal Limited is totally owned by the promoters. It has not issued its shares to the general public.

3.7 Organizational Structure of MBNL

Organization Structure of MBNL presented in the previous page shows the various departments. All these departments are interlinked with each other for operations. As shown in the figure, at top there is Board of Directors (BOD) followed by Chief Executive Officer (CEO). Chief Consumer Banking; Chief Corporate Banking; Chief Operating Officer; Risk, Compliance & Support; Company Secretary & Chief Internal Audit report to CEO Mr. Anil Keshary Shah, while Company Secretary & Chief Internal Audit report to BOD as well.

Chiefs of Deposit Marketing, Remittance, Card, POS, Consumer Lending, Corporate Affairs, SMS Banking, Direct Banking, ATM Cell, and Website report to Chief Consumer Banking Ms. Raveena Joshi. While, Chiefs of SME Banking, Corporate Credit, Micro Banking report to Chief Corporate Banking Mr. Govinda Gurung. And Chiefs of Human Resources, Admin & Network Expansion, Leagal & Shares, Trade Finance, Operations & Shared Distribution, Finance & Planning, IT & SWIFT, Main Branch report to Chief Operating Officer Ms. Anupama Khunjeli.

Fig 3.1: Organizational Structure of Mega Bank Nepal Limited

CHAPTER FOUR

ANALYSIS OF ACTIVITIES DONE AND PROBLEM SOLVED

In the entire period of internship, the internee was placed in Trade Finance Department for two months and tackled with the different issues related with LC, TT and Guarantee. In MBNL, TT and Guarantee were issued comparatively less in number than LC. So, basically, the internee’s activities were focus on LC.

4.1 Introduction of Letter of Credit

A letter of credit (LC), simply defined, is a written instrument issued by a bank at the request of its customer, the importer (Buyer), whereby the bank promises to pay the Exporter (Beneficiary) for goods or services, provided that the Exporter presents all documents called for, exactly as stipulated in the Letter of Credit, and meet all other terms and conditions set out in the Letter of Credit.

As per UCPDC 600 Article 2

“Letter of Credit mean any arrangement ,however named or described, whereby a bank (issuing bank)acting at the request and on the instructions of customer (the applicant)or on its own behalf, is to make payment or to the order of a third party(the beneficiary),or is to accept and pay bills of exchange drawn by the beneficiary”.

Letter of Credit is also known as Documentary Credits. It is used as an instrument for settlement of payment arising out of commercial transactions like sales/purchase. In such credit, payment obligation arises only upon fulfillment of specified conditions. The bank of importer (not the exporter) normally establishes a letter of credit. Hence, it is known as import letter of credit. However, the same import LC is known as export LC for the bank of exporter both do not open separate LCs for one particular deal.

4.1.1 Need of Letter of Credit

The rapidly changing world of today is becoming progressively more dependable on technology and networking. Considering the fact, trades between two parties (buyer and seller) are made secured by going through the authorized intermediaries i.e. banking institutions.

International trade is defined as exchange of goods and services between two or more parties from different countries (an exporter and an importer). Because no country is self-sufficient and international trade helps in getting comparative cost advantage.

The buyer's objectives are:

· To receive the correct quantity and quality of the goods purchased or services required.

· To receive goods purchased or services required in a timely manner and at the correct place.

· Assurance that he does not have to disburse the seller until he is certain that the seller has fulfilled his obligations properly.

The seller's objectives are:

· Assurances that he will be paid in full within the agreed time limit.

· To deliver the contracted goods or services as quickly as possible.

4.1.2 Advantages of LC

· LC provides a specific transaction with an independent credit backing and a clear cut promise of payment.

· Reduces or eliminates the commercial credit risk since payment is assured by the bank which issues an irrevocable LC . The seller no longer needs to rely on the willingness and capability of the buyer to make payment.

· Reduces certain exchange and political risks while not necessarily eliminating them.

· LCs is usually governed by International Chamber of Commerce's Uniform Customs and Practices for LC. These rules which are periodically have been in effect since 1933 and are the set of universally recognized rules governing LC operations.

· The buyer is assured that the documents presented will be examined by banking personnel knowledgeable in LC operations.

· The buyer is confident that the payment will only be made to the seller after the terms and conditions of the LC and UCP rules are complied with.

4.1.3 Parties involved in Letter of Credit

a. Applicant (Buyer/Opener)

The applicant is the buyer/importer of the goods who asks his bank, the Issuing bank, to issue a LC. In almost all cases, the applicant maintains an account relationship with issuing bank and is also called Accountee.

b. Beneficiary (Seller)

The beneficiary is the seller/exporter in whose favor the letter of credit will be opened /issued. He can provide the documentary evidence required by the letter of credit.

c. Issuing Bank

The applicant is the customer of the issuing bank, and it is the issuing bank which gives the written undertaking in form of a documentary credit in favor of the exporter. The issuing bank’s role is to provide a guarantee to the seller that if compliant documents are presented, the bank will par the seller the amount due and to examine the documents, and only pay if these documents comply with the terms and conditions set out in the letter of credit.

d. Negotiating Bank

A bank which under a documentary credit purchases bills of exchange drawn by the exporter payable at another bank, thus making available the funds to the beneficiary before the documents are made available to the issuing bank. An advising bank and negotiating bank can be same or different.

e. Advising Bank

An advising bank, usually a foreign correspondent bank of the issuing bank, will advise the beneficiary. Generally, the beneficiary would want to use a local bank to insure that the letter of credit is valid. There is no liability on the part of the advising bank to honor the credit in any way. But the advising bank would be responsible for sending the documents to the issuing bank.

f. Conforming Bank

The conforming bank is the bank which, at the request of, or with the permission of the issuing bank, adds its own undertaking to honor the documentary credit. A conforming bank undertakes the risk of the issuing bank for the payment to beneficiary.

g. Reimbursing Bank

The bank, which effects the payment under the credit as per the instruction and authorization of the issuing bank, is called reimbursing bank.

4.1.4 Terms and Conditions in LC

· Banks deal in documents, not with the goods.

· Regulatory conditions to be ensured.

· Conditions put in the LC should be practically feasible.

· Terms and conditions requiring documentary evidence should clearly mention the issuer of such documents.

· Non-documentary conditions should thus be avoided.

· Terms and conditions mentioned in the LC should be precise.

· Unusual terms and conditions should be avoided.

4.1.5 Types of LC

Documentary letter of credits are classified into various categories depending upon nature, features and the function of the letter of credits.

1) Security Wise

There are three types of LCs under this category:

· Revocable LC

· Irrevocable LC

· Confirmed/Unconfirmed LC

a. Revocable LC:

A revocable Letter of Credit is the one which can be amended or cancelled without the beneficiary’s consent and even without prior notice to the beneficiary. A revocable LC gives maximum flexibility to the buyer and exposes the seller to a certain degree of risk. Revocable LC is very rarely used. A revocable LC must indicate so in the Letter of Credit itself, in the absence of which LC will be irrevocable as per UCPDC 500.

b. Irrevocable LC:

An Irrevocable LC is converse of Revocable LC that cannot be amended or cancelled without the express consent of all the parties, concerned particularly of beneficiary.

c. Confirmed/Unconfirmed LC:

A letter of Credit, issued by a foreign bank, which has been verified and guaranteed by a domestic bank in the event of default by the foreign bank or buyer, is known as confirmed LC. This type of LCs will be sought when a domestic exporter seeks assurance of payment from a foreign importer.

A letter of Credit, which bears the obligation of only the issuing bank, is known as unconfirmed LC.

2 ) Payment Wise

There are four types of LCs under this category:

· Sight LC

· Usance /Time LC

· Deferred Payment LC

· Installment LC

a) Sight LC:

A letter of Credit under which payment of the draft or document drawn under the LC is made immediately upon receipt of such drafts of documents is called sight letter of credit.

b) Usance / Time LC:

When a credit calls for drawing of drafts at a stated Usance (tenor) period requiring acceptance or payment by the drawee at the end of such tenor of Usance period, it’s known as Usance or Time LC.

c) Deferred Payment LC:

Letter of Credit, which calls for payment at a future, determinable date after presentation of specified shipping documents, is deferred payment LC. The time payment is more than a year in this type of LC.

d) Installment LC:

If partial shipment is allowed in a credit, then it is known as installment letter of credit.

2. Others

Those LCs which does not belong to above two categories of LCs fall under this category:

· Revolving LC

· Transferrable LC

· Stand by LC

a) Revolving LC:

The LC which allows importing goods a number of times without any amendment is revolving LC. When the requirement of goods is in regular basis then such type of LC is opened. This type of LC safeguards buyer from price hike.

b) Transferable LC:

A transferable LC is the one that can be transferred partially of fully by the original beneficiary (known as first beneficiary) to one or multiple other parties (known as second beneficiary). It is normally used when the first beneficiary does not supply the merchandise himself, but is a middleman and thus wish transfer part or all of his right and obligation to the actual supplier as second beneficiary.

c) Stand by LC:

In the event that the bank’s customer defaults on a payment to the beneficiary, and the beneficiary documents proof of its loss consistent with any terms set forth in the letter, a standby LC may be used by the beneficiary to secure payment from the issuing bank.

4.1.6 Inco Terms used in LC

Inco terms define the mode and medium of payment on the transactions. These terms must be mentioned in the document. The following inco terms used in LC are derived from UCP 500:

1. EXW- Ex work

2. CIF - Cost Insurance and Freight

3. FAS - Free Alongside Ship

4. CFR - Cost and Freight

5. FCA - Free Carrier

6. FOB - Free on Board

7. DES - Delivered Ex Ship

8. DEQ - Delivered Ex Quay

9. DDU - Delivered Duty Unpaid

10. DDP - Delivered Duty Paid

11. DAF - Delivered at Frontier

12. CPT - Carriage Paid to

13. CIP - Carriage and Insurance Paid to

4.1.7 Parties Eligible to Open LC:

1. Should be a registered firm / company, renewed up to date.

2. In case of individual, permission from NRB is required.

3. Should be a current account holder.

4. Party must not be blacklisted or defaulter.

5. Most important of all is that the party must have creditworthiness.

4.1.8 Documents /forms required

Party whose is interested to open the LC should accompany the following forms or documents:

1. Application to open irrevocable letter of credit.

2. Valid Proforma Invoice or Indent or Contract Paper.

3. Valid Registration Certificate of the firm /company (PAN no).

4. Income Tax Certificate of the firm.

5. Insurance Policy.

6. NRB permission letter.

7. Approval/ recommendation letter from the concerned authority for import of specific items.

4.1.9 Issuing of LC

Whenever a party comes to open LC, first they are provided with LC application form and Bi.Bi.Ni.3 form by the staff and give some guidance to fill that form.

LC application consists of:

· Date of issuance, date and place of expiry of LC

· Applicant’s name and address, beneficiary name and address

· Amount, tolerance level

· LC type, drawer, mode of payment

· Partial shipment, Transshipment

· Place of taking in charge, place of final destination, latest date of shipment

· Description of goods and services

· Document required

· Charges period for presentation

· Confirmation instruction

Along with these above details, application should explicitly mention harmonic code, incoterm and country of origin of goods. If application consists of all these detail then LC application is stamped and signed by authorized signatory along with Bi.Bi.Ni.3 is send to NRB record. The applicant is then charged commission, telecommunication charges and margin as per the bank policy.

After this, checklist is prepared by the staffs to ensure all documents have been submitted in bank. The required documents and points to be considered while opening LC are:

· LC application stamped and signed by the authorized signatory.

· Renewed company registration certificate.

· Renewed income tax certificate.

· Bi.Bi.NI.3 stamped and signed by authorized signatory.

· Proforma invoice or sales contract enclosed with harmonic code, incoterm, country of origin, which to issue, detail of goods.

Fig 4.1: Issuance of a Letter of Credit

4.1.10 Payment under Letter of Credit

A key principle underlying LC is that bank deals only in documents and not in goods. The decision to pay under a LC is entirely on whether the documents presented to the bank appear on their face to be in accordance with the terms and conditions of the LC. It would be prohibitive for the banks to physically check all merchandise shipped under LC to ensure merchandise has been shipped exactly as per each LC. The appropriate due diligence should be exercised by both parties.

Fig 4.2: Payment under L/C

Where,

(1) Shipment of goods

(2) Documents

(3) Payment

4.1.11 Document Checking

After LC documents is sent to advising bank, advising bank advice beneficiary about LC then beneficiary collect the required document as mentioned in LC and those documents are send by advising bank to issuing bank.

4.1.12 Amendment of LC

At the request of the applicant the issuing bank change the terms of the credit as per amendment of LC. The applicant’s request for amendment of LC should consider following points.

a. LC number and date for which amendment is required should be correctly mentioned.

b. Subject of amendment should be clear, complete and precise.

c. Duly authenticated by the applicant.

d. Revised Performa invoice is required if the amendment is related to description of merchandise, LC value, name/address of beneficiary or term of delivery.

e. Insurance policy/certificate is required if term of delivery is to be amended from CIF/CA to FOB/CFR.

The applicant’s request for amendment should include the following forms and documents according to their amendment criteria.

i. Request for amendment

ii. NRB Bi.Bi.NI. form No.3

iii. Proforma Invoice

iv. Insurance Policy/ certificate

v. Permission from NRB or agency wherever applicable

4.1.13 Discrepancies in LC transaction

Discrepancies means divergence from the terms and conditions of the LC in the documents presented. There can be many types of discrepancies such as:

· LC already expired

· Shipment made before LC or after the last shipment date

· All the documents called in the LC are not presented

· If the description of goods ,value and unit price differ in the invoice

· If signature is missing in the documents

· If insurance documents are not as per LC terms or does not provide adequate coverage

· If the credit amount exceeds the LC amount

· If partial or transshipment is done when it is prohibited etc

Any discrepancies found while checking document, EBL charges certain fee according to the terms mentioned at the time of LC opening. Each set of documents presented with discrepancy will attract a deduction of certain amount on balance (including both discrepancy fee and commission charge).

4.1.14 Settlement

After the issuing bank receives all the necessary documents from advising bank, the issuing bank must determine that these documents are strictly in conformity with the terms and conditions in the LC and documents are meeting the basic objective of the LC established. If no discrepancies found in documented, the documents are released to the importer and settled the LC. These documents are to be presented to the custom office for the release of the goods from custom point. Bank also issues another documents for release of goods through authorized custom point. The bank is responsible to make payment or advise the due date payment to the documents presenting bank after the documents are released to the importer. The process of making payment is known as reimbursement. A reimbursement is made through the reimbursing bank.

4.2 Introduction of Bank Guarantee

A guarantee from a lending institution ensuring that the liabilities of a debtor will be met is called bank Guarantee. In other words, if the debtor fails to settle a debt, the bank will cover it. A bank guarantee, like a line of credit, guarantees a sum of money to a beneficiary. Unlike a line of credit, the sum is only paid if the opposing party does not fulfill the stipulated obligations under the contract. This can be used to essentially insure a buyer or seller from loss or damage due to non-performance by the other party in a contract. A bank guarantee might be used when a buyer obtains goods from a seller then runs into cash flow difficulties and can't pay the seller. The bank guarantee would pay an agreed-upon sum to the seller. Similarly, if the supplier was unable to provide the goods, the bank would then pay the purchaser the agreed-upon sum. The bank guarantee acts as a safety measure for the opposing party in the transaction.

MBNL issue every type of guarantees as per the requirement of customer. The most commonly used guarantees are as under:

1. Bid Bond (Tender bond)

Its purpose is to secure any claims by the party inviting the tender on the tenderer in the event of withdrawal of the bid before its expiry date or if the bid is modified unilaterally. It is also used if the tenderer, upon being awarded the contract, refuses to sign the contract or provide further guarantees on request.

For issuance of bid bonds, customers need credit line from the bank.

2. Performance Bond Guarantee

As the name implies, performance bonds are a means of guaranteeing the performance of a company to live up to what it is promising to do. This also applies to any subcontractors or material suppliers that company may employ. All parties must adhere to certain cost, time, and quality criteria based on what they've been contracted to produce.

This guarantee is asked for by the beneficiary once it has elected a party to perform a certain task. In case the terms and conditions are violated by the customer, the beneficiary will invoke the guarantee and will obtain compensation for his loss.

3. Advance Payment Guarantees

Some contracts require that some percentage of Advance payment be made against the contract awarded. In such cases, the Buyer or the employer may seek an advance payment guarantee from the bank with an undertaking to pay the guaranteed sum to the buyer if the contractor has failed to comply with the terms and conditions of the contract.

4. Counter Guarantee

For foreign bidders, who intend to participate in tenders or intend to enter into a contract in a project of Nepal must submit a guarantee acceptable to the beneficiary. In that case, the foreign party obtains a guarantee from the bank (acceptable to MBNL) in favor of MBNL, which in turn will issue a guarantee on behalf of the foreign party.

5. Deferred Payment /Supplier Credit Guarantee

Generally this type of guarantee is used in import of merchandise or purchases on credit. By issuing the guarantee, MBNL agrees to pay the beneficiary up to the amount of the guarantee, in full or installment due, which otherwise was not paid by the buyer under the purchase agreement guaranteed by the bank.

6. Shipping Indemnity

Sometimes under an import LC, if the transport document (bills of lading) and other related documents do not arrive on the due time at the issuing bank's counter even after the goods have reached to the destined entry point, this type of guarantee is issued in favor of the shipping company/port authority to release the imported goods.

Once the original documents arrive at the LC issuing bank and are submitted to the shipping company, guarantee will be released.

4.2.1 Documents Required

The list below is a very comprehensive list of paper; however some of the documents listed below may not be relevant in some cases.

Basic Information Sheet to be filled up and submitted by the customer.
Citizenship and/or valid permanent ID of the borrower/authorized persons and guarantors.
Company Registration Certificate
Copy of PAN/VAT registration with tax payment receipt.
Copy of partnership deed in case of partnership firm.
Copies of Articles and Memorandum of Association and certificates of incorporation of companies.
Board minute in case of private limited company.
Audited, Management prepared or provisional financial statements of last 2 years for the running company and projected financial statement for the new company for the next 5 years.
Authenticated copy documents relating to security offered/ applies to valuation report:

Title Deed (Lalpurja)
Blue print of cadastral map (Napi Naksa) certified by Napi Office
Recent land tax payment receipt from malpot office (Tiro tireko rashid)
Wealth tax payment receipt of the borrower
Copy of property transfer deed Certificate from municipality stating the name of land owners of four corners along with kitta no. (Char-Killa Pramanit Gareko)
Citizenship certificate of landlord
approved/Certified building drawing along with the approval (Naksha & Pass Certificate)
NOC from legal hires of owner of the company/Institution mortgage of the property
Relation certificate issued by local authority

Resume of the major promoters with highlighting of his technical qualification business experience and expertise.
Business plan/proposal report
Stock report, receivables report, payables report and bank outstanding report in case of existing firm.

4.3 Introduction of Telex Transfer (TT):-

Telegraphic Transfer, Telex Transfer or Wire transfer, often abbreviated to TT, is an electronic means of transferring funds overseas. Originally, telegraphic transfers made use of the telegraph as a means of transferring money between a point of origin and a point of termination. Today, the process of transferring money between two parties no longer involves the telegraph, but the use of the term remains common in several countries. A transfer charge is collected while sending money. It is a banking term commonly called "T/T," meaning a cable message from one bank to another in order to affect the transfer of money. This is an electronic payment from one bank to another. This is the most secure form of payment as the “funds are guaranteed to be paid before the goods are shipped.” This type of payment is normally required when a customer places a large order or asks for an order to be shipped to a deferent country or person.

Comparing to the above two, TT is the easier method of transferring funds overseas. The bank bears no risk as it has no obligation towards either party. This is the method of “advance payment” so importer is only in risk.

4.3.1 Documents required

· PAN certificate

· Company Registration certificate

· Articles of Association of the company

· Memorandum of Association of the company

· Performa Invoice indicating date, PI number, Exporter’s name.

4.4 Activities Performed

The activities done and problem solved during internship period in LC department are briefly explained below:-

i. Providing Forms of Letter of Credit: The internee was assigned to provide forms of letter of credit to customers and inform them about the documents required while opening L/C.

ii. Preparing Bi.Bi.Ni. and other Forms: The internee was asked to fill the Bi.Bi.Ni. Forms which are given to the customer for the purpose of submission to the Custom Office while releasing the L/C goods. The internee was also asked to fill other important forms like Work Sheet, L/C Application Checklist, Letter of Indemnity, Arrival Advice, etc.

iii. Checking Discrepancies in the documents: Checking the received documents from the party who has submitted the documents for opening the L/C was the main task of the internee. Documents were checked with the help of checklist provided to internee. If any discrepancies were found internee are asked to mention it at the back of the checklist. The checked documents are re-checked by the LC supervisor.

iv. Keeping Records: Record keeping is essential part of any job. Internee was assigned to record the documents in the concerned register as soon as the documents were received. Documents received from beneficiary’s bank with airway bill and other details were registered in the register manually.

v. Chronological Filing of the documents: The internee’s job was also to file the documents such as Porforma Invoice (PI), copy of LC opened, copy of documents received from beneficiary bank, copy of Bi.Bi.Ni.Fa.No.4, etc. in the respective customer file chronologically. Filing is done according to the LC no. and the branch code in the Trade Finance department of MBNL.

vi. Updating files: The internee also updated files as soon as new transaction was made and new documents or any important forms were received. It required interaction with CAD and other staffs of the department. While updating the files. It should be checked whether all the important documents and forms are present along with required authorities’ verified signature and stamps.

vii. Preparing NRB cheque: The Internee also used to prepare NRB cheques of LC and TT on behalf of the customer, which has to be sent to the custom office for releasing the LC goods. After writing the amount and the custom point in the front side of the check; and, LC no, Invoice no. and date, beneficiary’s name and Bi.Bi.Ni no. at the back side of the check, it was taken by the internee to get signed by the authorized persons.

viii. Recording of the copy returned: Recording of the copy returned from Custom Office (which is the evidence for releasing goods to the customers) is done in the register manually and then filing was done to the respective files after verifying the signatures.

ix. Forwarding approval sheet to the Customer Administration Department: CAD is not only involved in the documentation part, but also checking and approving the Approval Sheets of LC, TT and Guarantee. So, the internee had to forward the approval sheets to the CAD frequently.

x. Sending letters to other organization: The internee was assigned to send letters to the customs, NRB and other advising banks. For this, the internee had to maintain record of outgoing correspondences, and keep O/C copy for reference purpose.

xi. Photocopying and scanning of documents: Photocopying and scanning of documents such as Commercial Invoice, Packing List, Certificate of Origin, Bill of Lading, Insurance, SWIFT message, Performa Invoice, NRB cheques was also another job of the internee.

xii. Sending fax: Sending fax to different applicants as well as branches was also the important task that the internee used to perform at MBNL. But, this was not so frequent.

4.5 Problem Solved

Trade Finance is a complex and one of the vital departments in the banking institutions which require deliberation and appropriateness as it is concerned with the international trade. Problems are non-detachable terms in Trade Finance where different complexities arise. During the internship period, the following problems were solved:-

· Helped to solve the queries of customer.

· Helped the customers to fill the forms.

· Helped the supervisor in find the files in the department as well as file the documents according to the reference no.

· Helped in finding the discrepancies and informing it to the supervisor.

· Helped to find out the missing documents and non-verified signatures.

CHAPTER FIVE

CONCLUSION AND LESSON LEARNT

5.1 Conclusion

Letter of credit, along with the Bank Guarantee and Telex Transfer are the most important services provided by the banks in order to fulfill the trade finance need of buyer and seller for export and import. LC secures settlement between buyer and seller as it is a guarantee that the seller will be provided with the fund and buyer will be provided with the merchandise upon the effective execution of the terms and conditions mentioned in the LC. TT facilitates advance payments. Bank guarantee ensures a guarantee from a lending institution that the liabilities of a debtor will be met.

Among these three, Letter of Credit is the most issued product by the bank. It is the major and attractive sources of profit for banks involved in providing Trade Finance service to the customer as it earns interest income, commission and fee-based income and earnings from foreign exchange. The banks involved in LC must perform under the national and international regulatory framework. The banks must follow the directives provided by the central bank and also the international standard concerning LC.

The LC service is managed by highly experienced and professional staffs of MBNL under Trade Finance Department at the Head Office, Kantipath. Due to the strategic location of the bank and good relationship with corporate clients, MBNL has gained a competitive edge in the LC service segment. Due to the profitable nature of the LC service, the competition is rising among the banks. In order to survive in this competitive environment, MBNL must focus on relationship with corporate customers, competitive pricing of the LC service by lowering the interest and fee involved in LC and tactical partnership with other international banks.

5.2 Lesson Learnt

The internship period really proved to be a great and knowledgeable experience getting acquainted with the real life scenario of the working environment. The internee is able to learn various new knowledge as well as the practical implications of various theoretical knowledge after the two month internship exposure. All the lessons learnt can’t be express in the language form because much knowledge is related to the realization rather than the new knowledge. Anyways, the important lessons that the internee is pleased to express in the word form are bulleted in the points below:-

The lesson that internee has learnt during internship period are:

· Basic activities and functions of the Trade Finance.

· Overall process and steps performed while opening LC, Bank Guarantee and TT.

· Conversion of theoretical knowledge acquired in the course of study into real life working practice

· Development of the managerial and communication skills to tackle the real life situations.

· Exposure to the practical working environment and got acquainted with the institutional cultures, behavioral issues and value system of the corporate world.

· The general banking practices.

· Knowing how the records are maintained and recording procedures.

· Using different office equipment like fax, photocopy machine, cheque writer, printer, etc.

· Communicating effectively with the people and improving interpersonal skills.

· Importance of motivation and satisfaction could be directly related to the work and performances.

· “Customers are always the King”, so they are to be treated properly and their problems should be cared with due attention.

· Real-life Working is a very pressurized task and hence cool and calm mind is essential for success.

· Speaking, functioning and working in a corporate way.

· No practical theory can be developed regarding how to deal with customer because customers are different in their perception and attitudes.

In conclusion, this internship has been very productive and fruitful because it has helped the internee to see the same things from the two opposite directions (from the customer’s point of view as well as the bank’s point of view) and find the differences in the perception of these two completely opposite sides as a “neutral observer.” It has also helped the internee to actually “feel the gap” between the theoretical knowledge learnt in the course of study and the practical practices in the real working environment. It was the perfect place to practice the theory based knowledge like Financial Management, Organizational Relations, Critical Thinking and many more in the actual working setting.

BIBLIOGRAPHY

Kolb, Robert W. an Rodriguez, Richardo J. (1996). Financial Market & Institutions (FMI). USA: Blackwell Publishers, Inc.

Manandhar, K.D. and Pokhrel, S.B. (2012). Marketing Financial Services. Kathmandu: Buddha Publication.

Shrestha, M.K. and Bhandari, D.B.(2008). Financial Markets & Institutions. Kathmandu: Asmita Publication.

Sharma, Anjali (2011). Kathmandu: A report submitted to FoM, TU

Websites

www.google.com dated 02.09.2012

www.megabanknepal.com dated 02.09.2012

www.nrb.org.np dated 02.09.2012

Others

Mega Bank Nepal Limited, Letter of Credit Manual, Kathmandu

ANNEXES

Interest Rates

Branches of Mega Bank

S. No.	Branch	Location
1.	Arghakhanchi	Sandhikhrka, Arghankhanchi
2.	Jawalakhel	Jawalakhel, Lalitpur
3.	Pokhara	Newroad, Pokhara
4.	Biratnagar	Jaljal Road, Biratnagar
5.	Butwal	Ram Mandir, Butwal 6
6.	Hariwan	Hariwan 9, Sarlahi
7.	New Baneshowr	New Baneshowr, Kathmandu
8.	New Road	New Road, Kathmandu
9.	Chautara	Chautara, Sindhupalchok
10.	Main Branch	Mega Mahal. Kantipath, Kathmandu
11.	Birgunj	Birgunj, Parsa
12.	Kapan	Saraswoti Nagar, Kapan
13.	Syafru Besi	Syafru 9, Rasuwa
14.	Corporate Office	Mega Mahal, Kantipath, Kathmandu
15.	Teku	Teku, Kathmandu
16.	Maharajgunj	Maharajgunj, Kathmandu
17.	Maitidevi	Maitidevi, Kathmandu
18.	Bouddha	Bouddha, Kathmandu
19.	Thimi	Thimi, Bhaktapur
20.	Dailekh	Dailekh
21.	Dhangadi	Dhangadi, Kailali
22.	Birtamod	Birtamod, Jhapa
23.	Dhading	Dhading Besi, Dhading
24.	Ghorahi	Dang, Ghorahi
25.	Dharan	Dharan, Sunsari
26.	Narayangarh	Narayangarh, Chitwan
27.	Janakpur	Janakpur, Dhanusa
28.	Nepalgunj	Nepalgunj, Banke
29.	Bhairawa	Bhairawa, Rupandehi

Source: www.megabanknepal.com

S.N	Name	Position
1	Anil Keshary Shah	Chief Executive Officer
2	Anupama Khunjeli	Chief Operating Officer
3	Govinda Gurung	Chief Corporate Banking
4	Raveena Desraj Shrestha	Chief Consumer Banking & Corporate Affairs
5	Tulsi Ram Pokharel	Company Secretary
6	Pradyuman Pokharel	Head, Deposit, Remittance and Card
7	Sachin Jung Rayamajhi	Head , Risk, Compliance & Support
8	Amit Shrestha	Head Mega SME Banking
9	Pragya Pandey	Head, Mega Corporate Credit
10	Bidya Kanta Adhikari	Head Legal & Share Operations
11	Shambhu B. Thapa	Branch Manager Main Branch & Head ATM
12	Deny Shrestha	Head Global Markets & Trade Finance
13	Raju Krishna Shrestha	Head Administration and Network Expansion
14	Jenu Thapa	Head Human Resources
15	Bipul Rayamajhi	Head Operations & Shared Distribution
16	Rajesh Sharma	Head Credit Administration
17	Ritesh Lamichhane	Head Mega Deposit Centre
18	Sujeet Dhakal	Head Consumer Lending
19	Ramesh Khadka	Head Finance & Planning
20	Shyam Chand	Head IT & SWIFT
21	Yubraj Guragain	Head Mega Micro Banking
22	Shilu Aryal	Senior Relationship Manager Mega Deposit Centre