Internship Report on Civil Bank Limited (CBL) - Nepal
CHAPTER
I
INTRODUCTION
1.1 Background
As per the curriculum of Bachelor in Business
Administration (BBA), it is the great opportunity for a student is the part of
the internship program, which has helped in acquiring the practical knowledge
of general banking transactions. This has helped intern to know about the
banking industry that has worked as a building block for career development in
this financial service sector.
The general purpose of
the internship program is to fulfill the requirement of the BBA program
designed by the Tribhuvan University. This internship supposed to undertake for
eight weeks targets to train and prepare students for managerial functions,
develop student’s interpersonal and communication skills by encouraging
interacting with the people in organizations. It also provides the platform to
apply the theoretical knowledge that was learnt in the last four years by
exposing own self in real working environments.
1.2
Objective of the Study
The internship program is
undertaken for the partial fulfillment of the requirements for the degree of
Bachelors in Business Administration. The general objective of this program is
to make students familiar with the working environment and gain the practical
experience in the related field. This further helps the students to expose themselves
to the real world of the external environment about different aspects of
management where they can apply their theoretical knowledge. The main task of
the internship program is to make a study on the banking operations process,
understand the services provided to its customers, and have complete knowledge
and functioning of the related departments.
However the specific
objectives of the study were:
• To understand how theoretical concepts are
implemented practically in the working procedures of financial institutions
• To understand the banking organization, its
structure, culture, norms, working procedures and risk associated with it.
• To understand how the Letter of Credit (LC)
activities is carried out in the bank.
1.3
Methodology
1.3.1
Selection of the organization:
Selection of a good
organization is a very crucial and an important step in the internship program.
It is a very important to know the details about the bank, its popularity and
position in the market. After knowing the detail about the bank, interne has
selected Civil Bank Limited for internship among different banks as it has the
best offerings to the fresher.
Firstly, Interne dropped
the college recommendation letter with resume in Civil Bank Ltd since it is the
newly established bank and has got high prospects for fresher. Further, the
regular follow–up was done with the human resource department of CBL.
Finally, interne got a
call from HR Department after a week and was placed at New Road Branch for my
internship.
1.3.2
Placement and Duration:
Throughout the internship
period, the interne was placed at New Road Branch for 8 weeks. The time period
of the internship was from 4th June 2012 to 30th July 2012. During this period,
the interne got an opportunity to work at various departments like customer
service department, remittance & clearing department, Trade Finance
department and credit department. The task was assigned as per the requirement
of the different department under the supervision of respective department
head.
Table:
1.1 Work plan chart with time schedule
 Working
weeks |
1
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2
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3
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4
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5
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6
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7
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8
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 Departments |
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Customer
Service
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Remittance
and Clearing
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Credit
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Marketing
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Trade
Finance Department
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1.3.3
Activities Performed in the Organization
As the branch where
interne was placed was small, the interne was placed in various departments and
performed various activities related with each department. The activities that
were performed during internship period on the basis of the departments are as
follows:
1. Business Desk
The major work in this
department includes responding the inquiries or the complaints directly from
the customers. The major activities performed in this department are as
follows:
• To respond to the customer queries.
• To providing forms and assist in filling
them:
Account Opening form (Individual Accounts,
Saving Accounts, Fixed Deposits Accounts)
Account Closing forms
• Debit card distribution after proper
verification of customers.
• To accept requisition of cheque books.
• Printing, Binding, Recording, Sorting and
Distribution of cheque books.
• To distribute the debit cards after their
verification to the customers.
• Filing the document after completion of
account opening procedures.
2. Remittance and Clearing Department
The remittance department
is concerned with the transfer of funds. The clearing department deals with the
processing of checks so that the funds are deducted from the payer’s account
and put into the payee’s account. Followings are the major functions that were
performed in this department:
• To provide the related forms to customers
for remittance purpose. For the e.g. form of the net fox, bijulee remit,
reliance remit, western union etc.
• To assist in record keeping and filing
documents related to remittance.
• Use the cheque writer for quoting the
amount.
• Endorsing the cheque.
• Keeping the record of clearing cheques as
well as returned cheques.
• Forward inter-bank cheques to center
collection bank i.e. Main branch, kamaladi.
3. Trade
Finance Department
This department looks
after Letter of Credit (Import and Export), Telex Transfer (T.T) and Bank
Guarantee. Followings are the major functions that were performed in this
department:
• To receive the application related to LC and
authenticate the same.
• Assign LC reference number in LC register.
• To prepare SWIFT message related to
International banking and forward them to the SWIFT department.
• To receive the SWIFT messages and generate
the necessary copies for filing purpose.
• To receive import documents and check
whether they are as per the LC terms of not.
• To check for the discrepancy in the
documents presented for the negotiation.
• To receive the application for Bank
Guarantee and authenticate them.
• To prepare Guarantee instrument.
• To ensure the proper filing of each and
every document.
• To assist in maintaining each and every
file at their proper location.
4. Credit Department
This department provides
different types of credit facilities as per the requirement of customers.
Management of credit is also the main responsibility under this department.
This department also holds the responsibility of finding ways to improve its
product and services related to credit in order to attract new customers as
well as retain the existing customers. The major works performed in this
department were as follows:
• Conducted stock visit at different places
with the respected department head.
• Performed various activities like lodging
of the missing documents in the system, checking the property details (plot no,
the area of land, property owner, kitta no.) etc.
• Helped in proper documentation and filing
of all related documents.
In addition to above
related activities, interns at this branch were also engaged in marketing
activities related to bank products, services, and features. Similarly, our
main focus was on making aware the people about the Small and medium enterprise
loan (SME), which is the currently proposed product of the bank.
1.4
Limitations of the study
The main limitations of
the study are:
• Two months’ time period is too short to
learn about an overall work procedure.
• This report cannot be generalized to the
entire banking industry.
• Interns are not allowed to use the system.
So it’s difficult to learn everything just by seeing.
• Most of the information is collected
through personal experience and observation; the overall information may not be
presented.
• The bank’s staffs were highly occupied by
their work so they had very little time for the interns.
• The source of data collection is
restrictive so every data has not been collected.
CHAPTER
II
INTRODUCTION
TO BANKING INDUSTRY
2.1
Meaning of Bank
Bank can be defined as a
financial institution which provides financial services that may be in the form
of accepting deposits, accepting the loan, providing technical advice, dealing
over foreign currencies, remitting funds, etc. It collects deposits from the
general public, corporate bodies and private organizations by providing them a
certain percent of interest, mobilizes the fund to productive sectors and
distributes the accumulated fund to others, who are in need of money by
charging a certain percent of interest. Bank is, therefore; known as a dealer
of money that bridges the gap between the savers of fund and users of the fund.
Some definitions of banks
are:
“Bank is a financial
institution, which provides financial services that may be in the form of
accepting deposits, advancing loans, providing necessary technical advice,
dealing over foreign currencies, remitting funds, etc.”
- (Nepal Rastra Bank Act
2002)
Banks are financial
institutions that fund in the form of deposits, repayable on demand or in short
notice.
-World Bank
From the above
definitions, it is clear that a bank is a financial institution, which accepts
deposits from the public in different accounts and grant loans to individuals
and corporations against their certain securities. In these days, it performs a
wide variety of functions. It does lot more than deposit and credit such as
remitting money, letter of credit, guarantee, etc, for the service and benefits
of individuals, corporations and general public .i.e. it is an agent of its
clients, which remits money, provides services like LC, guarantee etc. and
collects incomes, commissions and pays expenses on behalf of them.
2.2
History and Origin of Bank
The banking concept is as
old as authentic history. The word ‘bank’ is derived from the Latin word
‘bancus’ which means bench. In the ancient time, the Italian goldsmith used to
sit on the benches when they were in work of exchanging of money, and trading
of gold and silver. The word bench means ‘Banck’ in German, ‘Benca’ in Italian
and ‘Banquee’ in French, from which it is used as ‘BANK’ in The English
Language.
The history of modern
banks starts from the establishment of the bank of Venice, established in
Venice, Italy in 1157 AD. Subsequently, Bank of Barcelona (1401) and Bank of
Geneva (1407), Bank of Amsterdam (1607) and the bank of Hamburg (1619) were
established. The ‘Bank of England’, first English bank, was established in 1964
A.D. The bank of Hindustan established
in 1770 A.D. is regarded as the first bank in India. But these banks were not
established according to the law. In 1833 A.D., Banking Act-1833 was introduced
in the United Kingdom which allowed opening Joint stock company banks. With the
expansion of the commercial activities in the northern Europe, there sprang a
number of private banking houses in Europe and slowly spread throughout the
world.
In 1838 A.D., New York
adopted the Free banking Act, which allowed anyone to engage in banking
business as long as they met certain legal specifications. As free banking
quickly spread to other states, the problem associated with the system soon
became apparent. The bank incorporated under these laws had the right to issue
their own bank notes. This led multiplicity of notes many of which proved to be
worthless in the event of bank failure. Then the Federally Chartered system of
banks came in legislation which allowed national banks to issue notes and
placed a tax on state issued notes. The national bank came into Federal
guarantee, which protected the note holder if the bank failed. The new
legislation also brought all the banks under federal supervision. In essence,
it laid the foundation of present day system. By this time, all the countries
have their own banks and the system of operating them.
2.3 Development of
banking system in Nepal
Through the study of the historical evidence,
it is found that the existence of banking practices started in the eight
century. The banking history in Nepal is relatively new even though the numbers
of banks can be found operating in Nepal. In the Nepalese context, it is very
difficult to trace the correct chronological history of the traditional banking
system due to lack of historical records of banking. In respect of formulation
of the financial institution in Nepal,
simple lending and borrowing functions existed during “The Lichhabi Period”
King Gunakamdav in 780 B.S. during the tenure of Rana Prime Minister Randeep
Singh was the first step towards institutional development banking of Nepal.
But their functions were limited only to granting the loan. “Sainik Dravya
Kash” was established in 1993 B.S. specially established for the future welfare
government staffs and Sainik only once since 2019 B.S. Karmachari Shanchaya
Kosh has been performing more functions than Sainik Dravya Kosh to give
facilities not only to the staff of the government but also to the staff
corporations.
In Nepal, Banking in the
true sense of term started with the inception of Nepal Bank Limited. His
Majesty king Tribhuvan inaugurated Nepal Bank Limited on Kartik 30, 1994 B.S.
This marked the beginning of an era of formal banking in Nepal. Until then all
monetary transactions were carried out by private dealers, private
moneylenders, and trading center. It function was to meet the need for the
development of banking sector and also to formulate monetary policies. Nepal
Rastra Bank (NRB) was established on 14th Baisakh 2031 B.S. under NRB act 2012
since then it has been functioning as Government’s bank. The government
established Rastra Banijya Bank (RBB) in 2022 B.S. as fully government owned
commercial bank. As the name suggests commercial banks had to carry out
commercial transactions. But commercial banks had to carry out the functions of
all types of financial institutions. Here industrial development corporation
(IDC) was set up in 2013 BS. The agriculture development bank (ADB) was
established to provide finance for agricultural producers so that introducing
modern agricultural productivity. Then there were the introduction of joint
venture bank in Nepal in 2014 BS with the established on Nepal Arab Bank
Limited. It has provided a milestone in the history of banking in Nepal.
2.4 Concept of Commercial Bank
A commercial bank is
regarded as the eldest financial institution in the history of baking.
Commercial banking is also known as business banking. The major objective of
the commercial bank is to earn the profit. The term commercial bank refers to
those who pull together the saving of the community and arrange their
productive use and supply the financial needs of modern business by various
means. It is a bank that provides checking accounts, savings accounts, and
money market accounts and that accepts time deposits. A commercial bank is a
financial intermediary which collects credit from lenders in the form of
deposits and lends in the form of loans.
According to Commercial
Bank Act 2031 B.S.: “ A commercial bank refers to such type of bank which
operates currency exchange transaction, accepts deposits, advances loans,
performs dealing relating to commerce except the banks which been specified for
the cooperative, agriculture, industry of the similar other specific
objectives.”
A commercial bank holds
deposits for individuals and businesses in the form of checking and savings
accounts and certificates of deposit of varying maturities while a commercial
bank issues loans in the form of personal and business loans as well as
mortgages. The term commercial bank came about as a way to distinguish it from
an “investment bank”. The primary difference between a commercial bank and its
counterpart is that a commercial bank earns revenue by issuing primary loans
from its pool of deposits while an investment bank brings debt and equity
offerings to market for a fee. Among its assets, including loans, a commercial
bank holds a portfolio of other securities to generate proprietary income.
Till today, there are
many commercial banks as well as development banks that have been in operation
in Nepal. The licensed commercial banks according to the central bank of Nepal
i.e. NRB are 32 and they are listed in annex 1.
CHAPTER
III
INTRODUCTION
OF CIVIL BANK L.T.D
3.1
Background
Civil Bank Limited (CBL)
has established itself as the 30th commercial bank of Nepal. It is founded by
promoters with the strong background in real estate, financial institutions,
business, trade, and industry. The Bank envisions in becoming a dominant player
in the Nepalese banking industry.
The Bank firmly believes
in contributing to the nation's economic growth by rendering services and
empowerment to all classes and sectors of the society. Recently this bank has
been running with its 13 branches located at different parts of Nepal and has
targeted to reach 20 with the end of this fiscal year.
The Bank has been using
T24 software to provide fast and efficient services to its customers.
Similarly, the bank is providing its debit card facilities through Smart Choice
Technology (SCT)/ National Payment Network (NPN) and is planning to introduce
VISA card in the bank. The customers are provided the debit card free with zero
charges. Recently, the bank has introduced internet banking to make its
services more easy and convenient.
3.1.1
Vision of CBL
To become the most
trusted bank by providing dedicated service and support to customers through
thick or thin.
3.1.2
Mission of CBL
To become every Nepali's
banking partner by extending all types of banking services.
3.1.3
Goal of CBL
To contribute
directly/indirectly in the economic growth of the country by being a prominent
player associated with all classes and sectors of society.
3.1.4
Objectives of CBL
• Prudent expansion
• Innovation
• Dedicated customer service
• Competitive human resource
• Vigilance
With the two major
slogans, one bank 20 million aspirations and thinking forward moving forward, CBL
has been moving forward to make its own different and renowned status in the
banking industry. Similarly, the bank bases itself on a set of superior values
and moral principles. It aims to succeed and reach higher grounds by
maintaining and adhering to its corporate values as below:
• Maintain the highest standards in all
relationships with customers, suppliers, environment, and community.
• Foster a climate which encourages
innovation and diligence amongst staff and reward accordingly.
• Function with the principle of
"Thinking Forward Moving Forward".
3.2
Equity Structure of CBL
The capital structure of CBL is presented in
the table below:
Table
3.1: Capital structure of CBL
|
Capital
|
Amount (in Rs.)
|
|
Authorized Capital
|
4,00,00,00,000
|
|
Issued Capital
|
2,00,00,00,000
|
|
Paid up Capital
|
1,20,00,00,000
|
Source: CBL Annual Report 2067/68
The above equity
structure of CBL is presented in the following diagram:
Fig
3.1: Bar diagram showing equity structure of CBL (Rs. In billion)
CBL being a newly established bank in Nepalese
banking industry has been able to earn some profit through its business
operations. The banking activities of CBL in its first fiscal year are shown in
the table below:
Table:
3.2 Position of banking activities in 1st fiscal year
|
S.N
|
Particulars
|
Amount
(Rs in 1000)
|
|
1.
|
Deposits
|
4,23,75,25
|
|
2.
|
Loans
|
4,08,22,07
|
|
3.
|
Investments
|
30,09,59
|
|
4.
|
Operational
Profit
|
98,97
|
Source: CBL Annual Report
2067/68
CBL has not yet issued
its share to the general public. The shares are held by the local promoters. CBL
is planning to issue public shares of Rs 80 crores in coming Mangsir 2069.
See annex 2 for the
balance sheet of CBL as on the end of fiscal year 2067/68.
3.3
Commercial and Business Relations of CBL
CBL, within the short
period of business operation, has been able to establish business relation with
various national as well as international banks and financial institutions. The
major international banks having business relation with CBL is listed below:
3.4
Board of Directors
The Board of directors of
CBL consists of five members who have been elected for the proper execution of
banking activities and services. The name and designation of B.O.D are
presented in annex 3.
3.5
Management Committee
The management committee
of CBL consists of highly professional and dedicated members for the success of
the overall organization. The committee consists of 20 members which are listed
with their designation in annex 4.
3.6 Branch network
Civil Bank Ltd is trying
to reach maximum numbers customer by establishing new well-equipped branches in
different areas of Nepal. The Head Office of CBL is located at Kamaladi,
Classic Complex, and Kathmandu.
It has 13 branches all
over the country, 4 branches inside valley and 9 branches outside the valley.
The details about the branches are listed in annex 5.
3.7
Product and services
Civil Bank delivers
various products and services through its ABBS services. The major of them are
as follows:
3.7.1
Deposits
The major deposit schemes
offered by CBL are listed below:
• Saving accounts
1. Mero Bachat Khata
Civil Bank Mero Bachat
Khata is an interest bearing normal savings account. This account intends to
develop a saving habit for the future in order to facilitate the accumulation
of funds over a period of time.
Criteria:
Minimum Balance: (No
minimum balance required)
Rate of Interest: 6.50%
per annum (On Daily Balance)
Withdrawals and Deposits:
Unrestricted
2. Aama Buwa Bachat Khata
Civil Bank Ama Buwa
Bachat Khata is a special savings product designed for senior citizens. This
product not just yields high returns on the hard-earned income but also
provides them with convenience and easy accessibility to their savings account.
Criteria:
Minimum Balance: NPR
10,000
Rate of Interest: 7.75%
per annum (On Daily Balance)
Withdrawals and Deposits:
Unrestricted
Interest Posting: Monthly
Qualifying Age: 58 and
above
3. Kishore Bachat Khata
Civil Bank Kishor Bachat
Khata is designed to instill a savings habit amongst parents so that can save
and amass the significant amount of funds to build a secure future for their
children.
Criteria:
Minimum Balance: NPR
1,000
Rate of Interest: 7% per
annum (On Daily Balance)
Withdrawals and Deposits:
Unrestricted
Qualifying Age: 16 and
below
4. Nari Bachat Khata
Civil Bank Nari Bachat
Khata is a product especially for the ladies (housewives, professionals, and
others). This product is tailor-made to suit the requirements of its target
audience. This savings account offers exclusive value-added services.
Criteria:
Minimum Balance: NPR
1,000
Rate of Interest: 7% per
annum (On Daily Balance)
Withdrawals and Deposits:
Unrestricted
Qualifying Gender:
Females
5. Gold Savings Account
Civil Bank Gold Savings
Account is savings scheme which offers an attractive rate of interest and is
for those individuals who are self-employed or professionals working in various
organizations. This scheme also gives the account holder the added flexibility
of unrestricted withdrawal.
Criteria:
Minimum Balance: NPR
50,000
Rate of Interest: 8.50%
per annum (On Daily Balance)
Withdrawals and Deposits:
Unrestricted
6. Silver Savings Account
Civil Bank Silver Savings
Account is savings scheme which offers a competitive rate of interest to the
account holder and is for those individuals who are self-employed or
professionals working in various organizations. Besides offering an attractive
interest rate, the product is also flexible in that the customer can withdraw
and deposit funds as per their convenience while retaining the required minimum
balance in the account.
Criteria:
Minimum Balance: NPR
10,000
Rate of Interest: 7.50%
per annum (On Daily Balance)
Withdrawals and Deposits:
Unrestricted
• Civil Bank Loyalty Call Account
Civil Bank Loyalty Call
Account is meant for individuals and corporate houses who seek to earn interest
on their deposits on a daily balance as well as experience the flexibility
which the market today demands. Account holders are paid interest on the daily
balance in their call account.
Criteria:
Minimum Balance: NPR
1,000,000
Withdrawals and Deposits:
Unrestricted
Account Type: - Loyalty
Current Account
Loyalty Call
Account
Interest Rate
Calculation: Daily Basis
3.7.2
Loans
The different loan
schemes offered by CBL are listed below:
1.
Personal Mortgage Loan
Civil Bank Personal
Mortgage Loan is one such product to cater to the various financing requirement
of individuals. The minimum limit of CiPML is NPR. 100,000 and the maximum
limit of CiPML are NPR. 50,000,000.The applicant for the loan must provide
unencumbered fixed assets collateral (land and building) fully covering the
requested loan exposure.
2.
Home Loan
Civil Bank Home Loan is
established as a retail lending product to cater to the prevailing market
demands. CBL 'Home Loan' limit shall be fixed for minimum and maximum range of
NPR 100,000 and NPR 50,000,000 respectively for all types of schemes. Any
Nepalese individual of at least 18 years of age is eligible for Home Loan
facility subject to stable, reliable source of income. Furthermore, the
disposable income should be sufficient to serve the loan installment and due
interest. Civil Bank 'Home Loan' limit shall be fixed for minimum and maximum
range of NPR 100,000 and NPR 50,000,000 respectively for all types of schemes.
3.
Hire Purchase Loan
Civil Bank Hire Purchase
Loan (CiHPL) as a retail lending product to cater to the prevailing market
demands. Hire Purchase Loan will be applicable to private automobiles (cars,
jeeps), commercial vehicles (trucks, buses), heavy equipment (excavators,
cranes, dozers) and other equipment (hospital equipment, heavy kitchen types of
equipment). CBL ‘Hire Purchase Loan' limit will be fixed for a minimum and
maximum range of NPR 500,000 and 50,000,000 respectively for all types of
schemes.
4.
Loan against Fixed Deposit Receipt
The Loan against Fixed
Deposit is an added feature in the Fixed Deposit product and enables the
depositor/account holder to withdraw a certain percentage of the deposit amount
as a loan to cater to his/her various immediate needs.
Normally, the Bank will
finance up to 90% of the value of the FD, if the same is issued by itself. In
the case of loan against FDR issued by other Banks/financial institutions, the
Bank may not finance more than 80% of the face value.
5.
Loan against Government Bond/ Securities
Loan against Government
Bond/Securities enables an individual or firm to avail a loan against the value
of the securities and bonds in their possession.
Generally, Credit against
Govt. / NRB Instrument will be extended up to 90% of the value of the
instrument. However, in exceptional cases, the credit may be extended up to the
face value of the instrument upon approval from a competent authority.
3.7.3
Remittance
Remittance means sending
income in terms of money or goods in a home by the migrants or workers who have
their earnings outside their home country.
Civil Bank Ltd is
providing the remittance services through the Western Union, International
Money Express (IME), Money gram, reliable remit, NET fox and Prabhu Money
Transfer.
3.7.4
Letter of Credit (LC)
Letter of credit is an
undertaking issued by a bank in favor of a beneficiary by which the bank substitutes
its own creditworthiness for that of the applicant by promising to honor (pay)
if the documents specified in the letter of credit are timely presented.
CBL is delivering this
service to its customers through Trade Finance Department.
3.7.5
Others
The other services
provided by CBL include the “Bank Assurance” which is the recent product of the
bank. The bank is providing insurance facilities to its customers through the
collaboration of Prime Life Insurance Company.
3.8 SWOT Analysis of CBL
The strengths, weaknesses, opportunities’ and threats of CBL is shown in the
figure below:
SWOT
Analysis
Figure
3.2: SWOT Analysis of CBL
CHAPTER
IV
ANALYSIS
OF ACTIVITIES DONE AND PROBLEM SOLVED
4.1
Introduction to letter of credit (L.C)
Letter of credit is used
primarily in international trade for large transactions between the supplier in
one country and customer in another. Letter of credit is an undertaking by a bank, (Issuing Bank) to the seller of
goods (the beneficiary) in accordance with the instruction of the buyer (Applicant) to effect payment up to
a prescribed amount at sight or at any future determinable time(Tenure)
provided the beneficiary presents stipulated documents within stipulated
time frame.
A letter of credit is
basically a document issued by a bank guaranteeing a client's ability to pay
for goods or services. A bank or finance company issues a letter of credit on
behalf of a buyer, authorizing the seller to obtain payment within a specified
time frame once the terms and conditions outlined in the letter of credit are
met. The letter of credit acts like an insurance contract for both the buyer
and seller and practically eliminates the credit risk for both parties while at
the same time reducing payment delays. A letter of credit provides the seller
with the greatest degree of safety when extending credit. It is useful when the
buyer is not well known and when exchange restrictions exist or are possible.
4.1.1
Benefits of Opening LC
1. Benefits To Buyer
• Buyer is assured that the Bank will make
payment if stipulated documents will
be received
• If the seller agrees to extend loans, LC can be opened.
• Terms and conditions can be accommodated to
ensure accurate shipment.
• There is the benefit of finance under trust
receipt loan arrangement.
2. Benefits to Seller
• The seller can rely on the credit
worthiness of banks rather than of customer.
• Non-payment or late payment can be avoided.
• Can take financing, can negotiate
4.1.2 Risk Involved In Letter Of Credit
1. Risks to the Applicant
• Non-delivery of Goods
• Short Shipment
• Inferior Quality
• Early /Late Shipment
• Damaged in transit
• Foreign exchange
• Failure of Bank viz issuing bank /
Collecting Bank
2. Risks to the Beneficiary
• Failure to Comply with Credit Conditions
• Failure of, or Delays in Payment from, the
Issuing Bank
4.2 Customary Practices for Letter Of Credit
1. The Uniform Customs and Practice for
Documentary Credits (UCPDC)
The UCPDC is concerned
with documentary credits, commonly referred to as “letters of credit.” The UCP
is focused on “commercial” letters of credit, the traditional letters of credit
that are used as a vehicle for payment in international trade, but the UCP is
also used in the realm of standby letters of credit and bank guarantees. In
short, we can know about UCPDC in following points:
• Issued by the International Chamber of
Commerce in Paris.
• UCP are a set of internationally accepted
rules and definitions which cover the liabilities and duties of all parties to
documentary credits.
• Periodically revised
• In effect since 1933
• The edition “UCPDC 600” came out in 2007 and
was effective from July 01, 2007.
2. International Commercial Terms (INCOTERMS)
INCOTERMS is a set of uniform rules for the
interpretation of international commercial terms defining the costs, risks and
obligations of buyers and sellers in international transactions. Some of the
examples are:
EXW= Ex Work
FOB= Free On Board
CFR= Cost and Freight
FCA= Free Carrier
4.3
Parties to LC
1. Applicant (Buyer/Opener)
The applicant is the
buyer / importer of the goods who asks his bank, the Issuing Bank, to issue an
LC. In almost all cases, the applicant maintains an account relationship with
the issuing bank.
2. Beneficiary (Seller)
The beneficiary is the
seller/exporter in whose favor the documentary credit will be opened / issued.
3. Issuing Bank
The applicant is the
customer of the issuing bank, and it is the issuing bank which gives the
written undertaking in the form of a documentary credit in favor of the
exporter.
4. Advising Bank
This is the bank, usually
domiciled in the beneficiary’s country, which is requested by the issuing bank
to advise the beneficiary of the terms and conditions of the credit.
There is no liability on
the part of the advising bank to honor the credit in any way. The main function
of the advising bank is to prove to the beneficiary that the credit is genuine
since the advising bank has to satisfy itself that the credit is properly
authenticated by the issuing bank.
5. Confirming Bank
The confirming 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.
6. Nominated Bank (Presenting bank)
A bank named in or
otherwise permitted by the terms and conditions of the LC to receive a
presentation of documents. The nominated bank can either send the documents
received from the beneficiary to the issuing bank without giving value to the
draft or if it wishes can give value to the drafts.
7. 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.
As negotiated documents
can ultimately be refused by the applicant if they are not exactly as per the
terms of the credit, the Negotiating bank should take extreme care while
examining the documents.
4.3 Types of Letter of credit
1. Revocable LC
In this type of credit
buyer and the bank which has established the LC, are able to manipulate the
letter of credits or make any kinds of corrections without informing the seller
and getting permissions from him. This type of LC is not a commonly used
instrument.
2. Irrevocable LC
In this type of LC, any
kinds of change and manipulations from the buyer part and the established bank
require the permission and satisfaction of seller part. According to the last
rules of the international business room, return ability or none return
ability; the credit will be none returnable.
3. Confirmed LC
They are the guarantees
that buyer will be given so that, the buyer will give the guarantee from his
own bank to any other valid bank that the seller will desire it.
4. Unconfirmed LC
This type of letter of
credit does not acquire the other bank's confirmation.
5. Transferable LC
It is a type of credit
that the seller can give a part or parts of credit (Completely) to the person
or persons he decides. This type of credit is a benefit for the seller.
6. Nontransferable LC
It is said to the credit
that seller cannot give a part or completely right of assigned credit to
somebody or to the persons he wants. In international commerce, it is required
that the credit will be nontransferable.
7. Usance LC
It is kind of credit that
won't be paid and assigned immediately after checking the valid documents but
paying and assigning it requires an indicated duration which is accepted by
both of the buyer and sellers. In reality, the buyer will give an opportunity
to the seller to pay the required money after taking the related goods and
selling them.
8. Sight LC
It is a kind of credit
that the announcer bank after observing the carriage documents from the seller
and checking all the documents immediately pays the required money.
9. Red Clause LC
In this kind of credit
assignment seller before sending the products can take the pre-paid and parts
of the money from the bank. The first part of the credit is to attract the
attention acceptor bank. It allows the beneficiary of a documentary credit to
receive funds for the purchase of goods described in the credit. These letters
are commonly used by beneficiaries who act as purchasing agents for buyers in
another country. It carries a provision that is written or typed in red ink
which allows a seller to draw up to a fixed sum from the advising or paying-bank, in advance of the shipment or
before presenting the prescribed documents.
10. Back to Back LC
This type of LC consists
of two separated and different types of LC. First one is established in the
benefit of the seller that is not able to provide the corresponding goods for
any reasons. Because of that reason according to the credit which is opened for
him, neither credit will be opened for another seller to provide the desired goods
and sends it.
4.5
Important terms used in LC
1. Pro-forma Invoice (P.I)
An invoice is a
commercial document issued by a seller to the buyer, indicating the products,
quantities, and agreed prices for products or services the seller has provided
the buyer. An invoice indicates the sale transaction only. Payment terms are
independent of the invoice and are negotiated by the buyer and the seller.
As, per NRB, Performa Invoice should
mention:
• Name of item
• Model / Brand
• Quantity, Purchase Price Unit, Total Price
• 8 digit harmonic code
• Should not contain clauses like “All discrepancies
acceptable)
• Country of Origin
2. Bill Of Lading (B/L)
A bill of lading is a
type of document that is used to acknowledge the receipt of a shipment of
goods. A transportation company or carrier issues this document to a shipper.
In addition to acknowledging the receipt of goods, a bill of lading indicates
the particular vessel on which the goods have been placed, their intended
destination, and the terms for transporting the shipment to its final
destination.
3. Bills Of Exchange
Bills of exchange is an
unconditional order in writing, addressed by the drawer to the drawee,
requiring the drawee to pay a sum of money on demand or at a specified future
time to the payee (who might be the drawer or another party) or to the bearer.
Bill of exchange under an LC is issued as per the terms of the LC.
4. Airway Bill
Airway bill is issued by
the transporting airlines as a receipt of the merchandise for delivery up to
the specified point. The airline industry has adopted a standard format for air
waybill which is used throughout the world for both domestic and international
traffic. Unlike a bill of lading, air waybill is a non-negotiable instrument,
does not specify on which flight the shipment will be sent, or when it will
reach its destination.
5. Insurance Policy
Insurance Certificate
states that a specified party will be reimbursed an amount in the event
merchandise is damaged or destroyed. An Insurance Policy generally covers
accidental losses and covers voluntary losses when a cargo must be sacrificed
to save a ship. The exporter should be able to produce Insurance Policy
document in case the goods are shipped under CIF and C&I arrangement.
4.6 LC Opening, Amendment and Cancellation
Procedures in CBL
4.6.1 Opening Procedures of LC in CBL
The LC opening procedures
of every commercial bank is as per the NRB directives. However the common LC
opening procedures is explained in brief in the points given below:
1. There is a negotiation between buyer and
seller and thus finalization of deal & buyer approach its bank to open
import LC.
2. Issuing bank issues the LC through its
advising bank & advising bank informs and advises the LC to the exporter.
3. Exporter prepares the goods and makes the
shipment through the carrier
4. Exporter prepares the documents demanded in
the credit and furnishes to its negotiating bank.
5. Negotiating bank forwards the documents to
issuing bank for payment.
6. The issuing bank obtains payment from the
importer and provides the documents.
7. Importer obtains the goods shipped by
exporter through the carrier (or its agent).
8. Issuing bank releases the payment to
negotiating bank through the reimbursing bank.
9. Exporter receives payment through
negotiating bank.
The above-explained
process of opening LC can be generalized in the following figure which makes
clearer in understanding the procedure.
Fig:
4.1: Procedures of LC
4.6.2
Charges for LC in CBL
The charges for
establishing LC with Civil Bank Ltd has been categorized into prime customers
and other customers. Prime customers are those who are a regular customer of
the bank and are loyal towards the bank. Other customers are generally one-time
customer of the bank.
The charges are shown in
the table below:
Table:
4.1 Charges for LC
|
S.N
|
PARTICULARS
|
PRIME CUSTOMERS
|
OTHER CUSTOMERS
|
|
1.
|
LC establishment in convertible
foreign currency
|
·
Min:1000 NPR OR
·
0.125% of LC (Industry)
·
0.25% of LC (Trading)
·
025% of LC (Case to Case).
|
·
Min:1500 NPR OR 0.25%of LC(Industry)
·
Min:1500 NPR OR 0.375%of LC(Trading)
·
Min:2000 NPR OR 0.375% of LC(Case to
Case)
|
|
2.
|
LC establishment in
INR and local currency
|
·
MIN:1000 NPR OR
·
0.25% of LC(Industry)
·
0.375% of LC(Trading)
|
·
Min:1500 NPR OR 0.375% of LC(Industry)
·
Min:1500 NPR OR 0.50% of LC(Trading)
·
Min:2000 NPR OR 0.50% of LC(Case to
Case)
|
LC
establishment in convertible foreign
currency
•
Min: 1000 NPR OR
• 0.125% of LC (Industry)
• 0.25% of LC (Trading)
• 025% of LC (Case to Case).
•
Min: 1500 NPR OR 0.25%of LC (Industry)
• Min: 1500 NPR OR 0.375%of LC (Trading)
• Min: 2000 NPR OR 0.375% of LC (Case to
Case)
2. LC establishment in INR and local
currency
•
MIN:1000 NPR OR
• 0.25% of LC(Industry)
• 0.375% of LC(Trading
• Min:1500 NPR OR 0.375% of LC(Industry)
• Min:1500 NPR OR 0.50% of LC(Trading)
• Min:2000 NPR OR 0.50% of LC(Case to Case)
Other
additional charges:
• Document charge: NPR 500
• BCI: NPR 500(Only for sight LC)
• Swift Charges: For foreign currency(NPR
2000)
For Indian currency (NPR 1200)
For Nepalese currency (NPR 500)
4.6.3
Amendment procedures of LC in CBL
The amendment is required
if the client finds a need of change in the LC. For this, the client has to
request for amendment and the letter should be signed by the authorized person.
The issuing bank is approached by the Applicant for the amendment along with
the LC amendment form and Bi. Bi. Ni. 3. Mechanism to be followed is almost similar
to opening a new LC.
Issuing Bank, Advising /
Confirming Bank or Beneficiary have the right to refuse any amendment if they
feel it can create additional involvement, unwanted liability.
Normally, amendments are
not refused if they are essential such as the extension of the validity and /
or latest shipment date or adding essentials such as a document or instruction
or conditions mentioned in the contract of sale but omitted in the original
credit.
Partial acceptance of
amendments contained in one and the same advice is not allowed without the
agreement of all the named parties.
The amendment charges in CBL
are shown in the table below:
Table:
4.2 Amendment Charges
|
S.N
|
For value and
validity
|
Other than
value and validity
|
|
1.
|
·
As
per the issuance commision
|
·
500
NPR
(Prime customers)
·
1000
NPR(Other customers)
|
4.6.4
Cancellation of LC in CBL
Since the LC opened in CBL
basically are Irrevocable in nature the LC cannot be canceled through just one
party, for the cancellation of LC the consent of both parties is required. The
buyer can cancel the LC before the goods have been shipped by the seller, but
if the seller has shipped the goods then he would not agree to cancel the LC.
There can be various personal as well as the business problem which lead him to
cancel and LC.
The cancellation charges
in CBL are as follows:
Cancellation charges NPR
500 plus SWIFT charge NPR 500
4.7
Problem Solved
• Provided general information to the
customers who visited LC department regarding their queries on LC procedures.
• Assisted the customers in filling up the LC
form if they were in confusion.
• Helped the respected department head by
proper filing and documentation of each and every file.
• Helped in preparing SWIFT copy whenever
required to assist the department head.
• Checked all the missing documents in the
file and informed the respective person.
CHAPTER
V:
CONCLUSION
AND LESSON LEARNT
5.1 Conclusion
The banking industry has
become highly competitive and it’s essential to establish good corporate
governance policies with systematic transaction and operation and operational
procedure.
Civil Bank Ltd is one of
the pioneering commercial banks in Nepal established with the motto of
fulfilling all the customers’ aspirations through its advanced banking
facilities. Due to globalization and rapid development of international trade,
the customer’s attraction towards LC is growing day by day and this facility is
provided through Trade Finance Center (TFC) department in CBL.
This report is prepared
on the basis of internship done in the New Road Branch of CBL, for two months.
It is, therefore, focused on the activities learned in Letter of Credit
department among the different departments of CBL. The internship done at CBL
was a great experience to learn various aspects of banking and finance.
However, my focal point of the study was the Letter of the Credit department.
TFC department in CBL deals with issuance of
Letter Of Credit (LC), Telex Transfer (T.T) and Bank Guarantee. However, the
main concern of this report is on LC as the interne was more concentrated in
LC.
During my stay in the
letter of credit department of CBL, I found that trade finance center renders
proper services to the customers along with generating suitable proceeds for
the bank. But, I found the problem of delay in services as the trade operation
of CBL were centralized and also found the problem of lack of space. Overall I
had a great experience while doing the internship in CBL with cooperative
staffs and other intern friends.
5.2
Lesson Learnt
The main focus of
preparing this report is management oriented in order to know the internal system
of the banking industry and grasp the opportunities and face challenges in the
competitive banking environment in Nepal. So its main objective is to explore
the managerial skills and gain experience from the internship that are helpful
to analyze the overall activities of each department to tackle real life
situation arising in the organization.
The interne conducted an internship in
Civil Bank Limited, New Road for a period of eight weeks. The interne was able
to gain knowledge about the work environment and also learnt a lot about
responsibility, work pressure and the importance of time management.
The interne was placed in
various departments so that the interne can get insight knowledge in overall
procedures and system. However, the most of the time was spent on Trade Finance
Department along with Customer Service Department, Remittance and Clearing
Department, and Credit Department. Similarly, interne work day to day
activities as per instruction and supervision and learnt operational procedure.
However the major lesson learnt from the 8 weeks internship program can be
summarized in the following points:
• Learned about the banking norms, rules and
regulations by working under the strict discipline of the bank.
• Learned briefly about all banking
departments, their working procedures, documentation, and practices.
• Learned how to deal with customers, solving
their queries and solving their problems in need.
• More precisely learned about the LC
procedures and documentation as it was the subject of keen interest for the
interne.
• Learned to prepare B.B.Ni forms and LC
messages which are the most requirements in Trade Finance Department.
• The things learnt theoretically were found
different from the banking procedure and working system.
Finally concluding the report, working as an
intern in CBL was of the great experience of practical banking scenario.
Interne felt that the charm of banking industry outside the work field is very
high, but it is as difficult to work inside with strong discipline and
dedication.
CHAPTER
I
INTRODUCTION
1.1 Background
As per the curriculum of Bachelor in Business
Administration (BBA), it is the great opportunity for a student is the part of
the internship program, which has helped in acquiring the practical knowledge
of general banking transactions. This has helped intern to know about the
banking industry that has worked as a building block for career development in
this financial service sector.
The general purpose of
the internship program is to fulfill the requirement of the BBA program
designed by the Tribhuvan University. This internship supposed to undertake for
eight weeks targets to train and prepare students for managerial functions,
develop student’s interpersonal and communication skills by encouraging
interacting with the people in organizations. It also provides the platform to
apply the theoretical knowledge that was learnt in the last four years by
exposing own self in real working environments.
1.2
Objective of the Study
The internship program is
undertaken for the partial fulfillment of the requirements for the degree of
Bachelors in Business Administration. The general objective of this program is
to make students familiar with the working environment and gain the practical
experience in the related field. This further helps the students to expose themselves
to the real world of the external environment about different aspects of
management where they can apply their theoretical knowledge. The main task of
the internship program is to make a study on the banking operations process,
understand the services provided to its customers, and have complete knowledge
and functioning of the related departments.
However the specific
objectives of the study were:
• To understand how theoretical concepts are
implemented practically in the working procedures of financial institutions
• To understand the banking organization, its
structure, culture, norms, working procedures and risk associated with it.
• To understand how the Letter of Credit (LC)
activities is carried out in the bank.
1.3
Methodology
1.3.1
Selection of the organization:
Selection of a good
organization is a very crucial and an important step in the internship program.
It is a very important to know the details about the bank, its popularity and
position in the market. After knowing the detail about the bank, interne has
selected Civil Bank Limited for internship among different banks as it has the
best offerings to the fresher.
Firstly, Interne dropped
the college recommendation letter with resume in Civil Bank Ltd since it is the
newly established bank and has got high prospects for fresher. Further, the
regular follow–up was done with the human resource department of CBL.
Finally, interne got a
call from HR Department after a week and was placed at New Road Branch for my
internship.
1.3.2
Placement and Duration:
Throughout the internship
period, the interne was placed at New Road Branch for 8 weeks. The time period
of the internship was from 4th June 2012 to 30th July 2012. During this period,
the interne got an opportunity to work at various departments like customer
service department, remittance & clearing department, Trade Finance
department and credit department. The task was assigned as per the requirement
of the different department under the supervision of respective department
head.
Table:
1.1 Work plan chart with time schedule
1.3.3
Activities Performed in the Organization
As the branch where
interne was placed was small, the interne was placed in various departments and
performed various activities related with each department. The activities that
were performed during internship period on the basis of the departments are as
follows:
1. Business Desk
The major work in this
department includes responding the inquiries or the complaints directly from
the customers. The major activities performed in this department are as
follows:
• To respond to the customer queries.
• To providing forms and assist in filling
them:
Account Opening form (Individual Accounts,
Saving Accounts, Fixed Deposits Accounts)
Account Closing forms
• Debit card distribution after proper
verification of customers.
• To accept requisition of cheque books.
• Printing, Binding, Recording, Sorting and
Distribution of cheque books.
• To distribute the debit cards after their
verification to the customers.
• Filing the document after completion of
account opening procedures.
2. Remittance and Clearing Department
The remittance department
is concerned with the transfer of funds. The clearing department deals with the
processing of checks so that the funds are deducted from the payer’s account
and put into the payee’s account. Followings are the major functions that were
performed in this department:
• To provide the related forms to customers
for remittance purpose. For the e.g. form of the net fox, bijulee remit,
reliance remit, western union etc.
• To assist in record keeping and filing
documents related to remittance.
• Use the cheque writer for quoting the
amount.
• Endorsing the cheque.
• Keeping the record of clearing cheques as
well as returned cheques.
• Forward inter-bank cheques to center
collection bank i.e. Main branch, kamaladi.
3. Trade
Finance Department
This department looks
after Letter of Credit (Import and Export), Telex Transfer (T.T) and Bank
Guarantee. Followings are the major functions that were performed in this
department:
• To receive the application related to LC and
authenticate the same.
• Assign LC reference number in LC register.
• To prepare SWIFT message related to
International banking and forward them to the SWIFT department.
• To receive the SWIFT messages and generate
the necessary copies for filing purpose.
• To receive import documents and check
whether they are as per the LC terms of not.
• To check for the discrepancy in the
documents presented for the negotiation.
• To receive the application for Bank
Guarantee and authenticate them.
• To prepare Guarantee instrument.
• To ensure the proper filing of each and
every document.
• To assist in maintaining each and every
file at their proper location.
4. Credit Department
This department provides
different types of credit facilities as per the requirement of customers.
Management of credit is also the main responsibility under this department.
This department also holds the responsibility of finding ways to improve its
product and services related to credit in order to attract new customers as
well as retain the existing customers. The major works performed in this
department were as follows:
• Conducted stock visit at different places
with the respected department head.
• Performed various activities like lodging
of the missing documents in the system, checking the property details (plot no,
the area of land, property owner, kitta no.) etc.
• Helped in proper documentation and filing
of all related documents.
In addition to above
related activities, interns at this branch were also engaged in marketing
activities related to bank products, services, and features. Similarly, our
main focus was on making aware the people about the Small and medium enterprise
loan (SME), which is the currently proposed product of the bank.
1.4
Limitations of the study
The main limitations of
the study are:
• Two months’ time period is too short to
learn about an overall work procedure.
• This report cannot be generalized to the
entire banking industry.
• Interns are not allowed to use the system.
So it’s difficult to learn everything just by seeing.
• Most of the information is collected
through personal experience and observation; the overall information may not be
presented.
• The bank’s staffs were highly occupied by
their work so they had very little time for the interns.
• The source of data collection is
restrictive so every data has not been collected.
CHAPTER
II
INTRODUCTION
TO BANKING INDUSTRY
2.1
Meaning of Bank
Bank can be defined as a
financial institution which provides financial services that may be in the form
of accepting deposits, accepting the loan, providing technical advice, dealing
over foreign currencies, remitting funds, etc. It collects deposits from the
general public, corporate bodies and private organizations by providing them a
certain percent of interest, mobilizes the fund to productive sectors and
distributes the accumulated fund to others, who are in need of money by
charging a certain percent of interest. Bank is, therefore; known as a dealer
of money that bridges the gap between the savers of fund and users of the fund.
Some definitions of banks
are:
“Bank is a financial
institution, which provides financial services that may be in the form of
accepting deposits, advancing loans, providing necessary technical advice,
dealing over foreign currencies, remitting funds, etc.”
- (Nepal Rastra Bank Act
2002)
Banks are financial
institutions that fund in the form of deposits, repayable on demand or in short
notice.
-World Bank
From the above
definitions, it is clear that a bank is a financial institution, which accepts
deposits from the public in different accounts and grant loans to individuals
and corporations against their certain securities. In these days, it performs a
wide variety of functions. It does lot more than deposit and credit such as
remitting money, letter of credit, guarantee, etc, for the service and benefits
of individuals, corporations and general public .i.e. it is an agent of its
clients, which remits money, provides services like LC, guarantee etc. and
collects incomes, commissions and pays expenses on behalf of them.
2.2
History and Origin of Bank
The banking concept is as
old as authentic history. The word ‘bank’ is derived from the Latin word
‘bancus’ which means bench. In the ancient time, the Italian goldsmith used to
sit on the benches when they were in work of exchanging of money, and trading
of gold and silver. The word bench means ‘Banck’ in German, ‘Benca’ in Italian
and ‘Banquee’ in French, from which it is used as ‘BANK’ in The English
Language.
The history of modern
banks starts from the establishment of the bank of Venice, established in
Venice, Italy in 1157 AD. Subsequently, Bank of Barcelona (1401) and Bank of
Geneva (1407), Bank of Amsterdam (1607) and the bank of Hamburg (1619) were
established. The ‘Bank of England’, first English bank, was established in 1964
A.D. The bank of Hindustan established
in 1770 A.D. is regarded as the first bank in India. But these banks were not
established according to the law. In 1833 A.D., Banking Act-1833 was introduced
in the United Kingdom which allowed opening Joint stock company banks. With the
expansion of the commercial activities in the northern Europe, there sprang a
number of private banking houses in Europe and slowly spread throughout the
world.
In 1838 A.D., New York
adopted the Free banking Act, which allowed anyone to engage in banking
business as long as they met certain legal specifications. As free banking
quickly spread to other states, the problem associated with the system soon
became apparent. The bank incorporated under these laws had the right to issue
their own bank notes. This led multiplicity of notes many of which proved to be
worthless in the event of bank failure. Then the Federally Chartered system of
banks came in legislation which allowed national banks to issue notes and
placed a tax on state issued notes. The national bank came into Federal
guarantee, which protected the note holder if the bank failed. The new
legislation also brought all the banks under federal supervision. In essence,
it laid the foundation of present day system. By this time, all the countries
have their own banks and the system of operating them.
2.3 Development of
banking system in Nepal
Through the study of the historical evidence,
it is found that the existence of banking practices started in the eight
century. The banking history in Nepal is relatively new even though the numbers
of banks can be found operating in Nepal. In the Nepalese context, it is very
difficult to trace the correct chronological history of the traditional banking
system due to lack of historical records of banking. In respect of formulation
of the financial institution in Nepal,
simple lending and borrowing functions existed during “The Lichhabi Period”
King Gunakamdav in 780 B.S. during the tenure of Rana Prime Minister Randeep
Singh was the first step towards institutional development banking of Nepal.
But their functions were limited only to granting the loan. “Sainik Dravya
Kash” was established in 1993 B.S. specially established for the future welfare
government staffs and Sainik only once since 2019 B.S. Karmachari Shanchaya
Kosh has been performing more functions than Sainik Dravya Kosh to give
facilities not only to the staff of the government but also to the staff
corporations.
In Nepal, Banking in the
true sense of term started with the inception of Nepal Bank Limited. His
Majesty king Tribhuvan inaugurated Nepal Bank Limited on Kartik 30, 1994 B.S.
This marked the beginning of an era of formal banking in Nepal. Until then all
monetary transactions were carried out by private dealers, private
moneylenders, and trading center. It function was to meet the need for the
development of banking sector and also to formulate monetary policies. Nepal
Rastra Bank (NRB) was established on 14th Baisakh 2031 B.S. under NRB act 2012
since then it has been functioning as Government’s bank. The government
established Rastra Banijya Bank (RBB) in 2022 B.S. as fully government owned
commercial bank. As the name suggests commercial banks had to carry out
commercial transactions. But commercial banks had to carry out the functions of
all types of financial institutions. Here industrial development corporation
(IDC) was set up in 2013 BS. The agriculture development bank (ADB) was
established to provide finance for agricultural producers so that introducing
modern agricultural productivity. Then there were the introduction of joint
venture bank in Nepal in 2014 BS with the established on Nepal Arab Bank
Limited. It has provided a milestone in the history of banking in Nepal.
2.4 Concept of Commercial Bank
A commercial bank is
regarded as the eldest financial institution in the history of baking.
Commercial banking is also known as business banking. The major objective of
the commercial bank is to earn the profit. The term commercial bank refers to
those who pull together the saving of the community and arrange their
productive use and supply the financial needs of modern business by various
means. It is a bank that provides checking accounts, savings accounts, and
money market accounts and that accepts time deposits. A commercial bank is a
financial intermediary which collects credit from lenders in the form of
deposits and lends in the form of loans.
According to Commercial
Bank Act 2031 B.S.: “ A commercial bank refers to such type of bank which
operates currency exchange transaction, accepts deposits, advances loans,
performs dealing relating to commerce except the banks which been specified for
the cooperative, agriculture, industry of the similar other specific
objectives.”
A commercial bank holds
deposits for individuals and businesses in the form of checking and savings
accounts and certificates of deposit of varying maturities while a commercial
bank issues loans in the form of personal and business loans as well as
mortgages. The term commercial bank came about as a way to distinguish it from
an “investment bank”. The primary difference between a commercial bank and its
counterpart is that a commercial bank earns revenue by issuing primary loans
from its pool of deposits while an investment bank brings debt and equity
offerings to market for a fee. Among its assets, including loans, a commercial
bank holds a portfolio of other securities to generate proprietary income.
Till today, there are
many commercial banks as well as development banks that have been in operation
in Nepal. The licensed commercial banks according to the central bank of Nepal
i.e. NRB are 32 and they are listed in annex 1.
CHAPTER
III
INTRODUCTION
OF CIVIL BANK L.T.D
3.1
Background
Civil Bank Limited (CBL)
has established itself as the 30th commercial bank of Nepal. It is founded by
promoters with the strong background in real estate, financial institutions,
business, trade, and industry. The Bank envisions in becoming a dominant player
in the Nepalese banking industry.
The Bank firmly believes
in contributing to the nation's economic growth by rendering services and
empowerment to all classes and sectors of the society. Recently this bank has
been running with its 13 branches located at different parts of Nepal and has
targeted to reach 20 with the end of this fiscal year.
The Bank has been using
T24 software to provide fast and efficient services to its customers.
Similarly, the bank is providing its debit card facilities through Smart Choice
Technology (SCT)/ National Payment Network (NPN) and is planning to introduce
VISA card in the bank. The customers are provided the debit card free with zero
charges. Recently, the bank has introduced internet banking to make its
services more easy and convenient.
3.1.1
Vision of CBL
To become the most
trusted bank by providing dedicated service and support to customers through
thick or thin.
3.1.2
Mission of CBL
To become every Nepali's
banking partner by extending all types of banking services.
3.1.3
Goal of CBL
To contribute
directly/indirectly in the economic growth of the country by being a prominent
player associated with all classes and sectors of society.
3.1.4
Objectives of CBL
• Prudent expansion
• Innovation
• Dedicated customer service
• Competitive human resource
• Vigilance
With the two major
slogans, one bank 20 million aspirations and thinking forward moving forward, CBL
has been moving forward to make its own different and renowned status in the
banking industry. Similarly, the bank bases itself on a set of superior values
and moral principles. It aims to succeed and reach higher grounds by
maintaining and adhering to its corporate values as below:
• Maintain the highest standards in all
relationships with customers, suppliers, environment, and community.
• Foster a climate which encourages
innovation and diligence amongst staff and reward accordingly.
• Function with the principle of
"Thinking Forward Moving Forward".
3.2
Equity Structure of CBL
The capital structure of CBL is presented in
the table below:
Table
3.1: Capital structure of CBL
Source: CBL Annual Report 2067/68
The above equity
structure of CBL is presented in the following diagram:
Fig
3.1: Bar diagram showing equity structure of CBL (Rs. In billion)
CBL being a newly established bank in Nepalese
banking industry has been able to earn some profit through its business
operations. The banking activities of CBL in its first fiscal year are shown in
the table below:
Table:
3.2 Position of banking activities in 1st fiscal year
Source: CBL Annual Report
2067/68
CBL has not yet issued
its share to the general public. The shares are held by the local promoters. CBL
is planning to issue public shares of Rs 80 crores in coming Mangsir 2069.
See annex 2 for the
balance sheet of CBL as on the end of fiscal year 2067/68.
3.3
Commercial and Business Relations of CBL
CBL, within the short
period of business operation, has been able to establish business relation with
various national as well as international banks and financial institutions. The
major international banks having business relation with CBL is listed below:
3.4
Board of Directors
The Board of directors of
CBL consists of five members who have been elected for the proper execution of
banking activities and services. The name and designation of B.O.D are
presented in annex 3.
3.5
Management Committee
The management committee
of CBL consists of highly professional and dedicated members for the success of
the overall organization. The committee consists of 20 members which are listed
with their designation in annex 4.
3.6 Branch network
Civil Bank Ltd is trying
to reach maximum numbers customer by establishing new well-equipped branches in
different areas of Nepal. The Head Office of CBL is located at Kamaladi,
Classic Complex, and Kathmandu.
It has 13 branches all
over the country, 4 branches inside valley and 9 branches outside the valley.
The details about the branches are listed in annex 5.
3.7
Product and services
Civil Bank delivers
various products and services through its ABBS services. The major of them are
as follows:
3.7.1
Deposits
The major deposit schemes
offered by CBL are listed below:
• Saving accounts
1. Mero Bachat Khata
Civil Bank Mero Bachat
Khata is an interest bearing normal savings account. This account intends to
develop a saving habit for the future in order to facilitate the accumulation
of funds over a period of time.
Criteria:
Minimum Balance: (No
minimum balance required)
Rate of Interest: 6.50%
per annum (On Daily Balance)
Withdrawals and Deposits:
Unrestricted
2. Aama Buwa Bachat Khata
Civil Bank Ama Buwa
Bachat Khata is a special savings product designed for senior citizens. This
product not just yields high returns on the hard-earned income but also
provides them with convenience and easy accessibility to their savings account.
Criteria:
Minimum Balance: NPR
10,000
Rate of Interest: 7.75%
per annum (On Daily Balance)
Withdrawals and Deposits:
Unrestricted
Interest Posting: Monthly
Qualifying Age: 58 and
above
3. Kishore Bachat Khata
Civil Bank Kishor Bachat
Khata is designed to instill a savings habit amongst parents so that can save
and amass the significant amount of funds to build a secure future for their
children.
Criteria:
Minimum Balance: NPR
1,000
Rate of Interest: 7% per
annum (On Daily Balance)
Withdrawals and Deposits:
Unrestricted
Qualifying Age: 16 and
below
4. Nari Bachat Khata
Civil Bank Nari Bachat
Khata is a product especially for the ladies (housewives, professionals, and
others). This product is tailor-made to suit the requirements of its target
audience. This savings account offers exclusive value-added services.
Criteria:
Minimum Balance: NPR
1,000
Rate of Interest: 7% per
annum (On Daily Balance)
Withdrawals and Deposits:
Unrestricted
Qualifying Gender:
Females
5. Gold Savings Account
Civil Bank Gold Savings
Account is savings scheme which offers an attractive rate of interest and is
for those individuals who are self-employed or professionals working in various
organizations. This scheme also gives the account holder the added flexibility
of unrestricted withdrawal.
Criteria:
Minimum Balance: NPR
50,000
Rate of Interest: 8.50%
per annum (On Daily Balance)
Withdrawals and Deposits:
Unrestricted
6. Silver Savings Account
Civil Bank Silver Savings
Account is savings scheme which offers a competitive rate of interest to the
account holder and is for those individuals who are self-employed or
professionals working in various organizations. Besides offering an attractive
interest rate, the product is also flexible in that the customer can withdraw
and deposit funds as per their convenience while retaining the required minimum
balance in the account.
Criteria:
Minimum Balance: NPR
10,000
Rate of Interest: 7.50%
per annum (On Daily Balance)
Withdrawals and Deposits:
Unrestricted
• Civil Bank Loyalty Call Account
Civil Bank Loyalty Call
Account is meant for individuals and corporate houses who seek to earn interest
on their deposits on a daily balance as well as experience the flexibility
which the market today demands. Account holders are paid interest on the daily
balance in their call account.
Criteria:
Minimum Balance: NPR
1,000,000
Withdrawals and Deposits:
Unrestricted
Account Type: - Loyalty
Current Account
Loyalty Call
Account
Interest Rate
Calculation: Daily Basis
3.7.2
Loans
The different loan
schemes offered by CBL are listed below:
1.
Personal Mortgage Loan
Civil Bank Personal
Mortgage Loan is one such product to cater to the various financing requirement
of individuals. The minimum limit of CiPML is NPR. 100,000 and the maximum
limit of CiPML are NPR. 50,000,000.The applicant for the loan must provide
unencumbered fixed assets collateral (land and building) fully covering the
requested loan exposure.
2.
Home Loan
Civil Bank Home Loan is
established as a retail lending product to cater to the prevailing market
demands. CBL 'Home Loan' limit shall be fixed for minimum and maximum range of
NPR 100,000 and NPR 50,000,000 respectively for all types of schemes. Any
Nepalese individual of at least 18 years of age is eligible for Home Loan
facility subject to stable, reliable source of income. Furthermore, the
disposable income should be sufficient to serve the loan installment and due
interest. Civil Bank 'Home Loan' limit shall be fixed for minimum and maximum
range of NPR 100,000 and NPR 50,000,000 respectively for all types of schemes.
3.
Hire Purchase Loan
Civil Bank Hire Purchase
Loan (CiHPL) as a retail lending product to cater to the prevailing market
demands. Hire Purchase Loan will be applicable to private automobiles (cars,
jeeps), commercial vehicles (trucks, buses), heavy equipment (excavators,
cranes, dozers) and other equipment (hospital equipment, heavy kitchen types of
equipment). CBL ‘Hire Purchase Loan' limit will be fixed for a minimum and
maximum range of NPR 500,000 and 50,000,000 respectively for all types of
schemes.
4.
Loan against Fixed Deposit Receipt
The Loan against Fixed
Deposit is an added feature in the Fixed Deposit product and enables the
depositor/account holder to withdraw a certain percentage of the deposit amount
as a loan to cater to his/her various immediate needs.
Normally, the Bank will
finance up to 90% of the value of the FD, if the same is issued by itself. In
the case of loan against FDR issued by other Banks/financial institutions, the
Bank may not finance more than 80% of the face value.
5.
Loan against Government Bond/ Securities
Loan against Government
Bond/Securities enables an individual or firm to avail a loan against the value
of the securities and bonds in their possession.
Generally, Credit against
Govt. / NRB Instrument will be extended up to 90% of the value of the
instrument. However, in exceptional cases, the credit may be extended up to the
face value of the instrument upon approval from a competent authority.
3.7.3
Remittance
Remittance means sending
income in terms of money or goods in a home by the migrants or workers who have
their earnings outside their home country.
Civil Bank Ltd is
providing the remittance services through the Western Union, International
Money Express (IME), Money gram, reliable remit, NET fox and Prabhu Money
Transfer.
3.7.4
Letter of Credit (LC)
Letter of credit is an
undertaking issued by a bank in favor of a beneficiary by which the bank substitutes
its own creditworthiness for that of the applicant by promising to honor (pay)
if the documents specified in the letter of credit are timely presented.
CBL is delivering this
service to its customers through Trade Finance Department.
3.7.5
Others
The other services
provided by CBL include the “Bank Assurance” which is the recent product of the
bank. The bank is providing insurance facilities to its customers through the
collaboration of Prime Life Insurance Company.
3.8 SWOT Analysis of CBL
The strengths, weaknesses, opportunities’ and threats of CBL is shown in the
figure below:
SWOT
Analysis
Figure
3.2: SWOT Analysis of CBL
CHAPTER
IV:
ANALYSIS
OF ACTIVITIES DONE AND PROBLEM SOLVED
4.1
Introduction to letter of credit (L.C)
Letter of credit is used
primarily in international trade for large transactions between the supplier in
one country and customer in another. Letter of credit is an undertaking by a bank, (Issuing Bank) to the seller of
goods (the beneficiary) in accordance with the instruction of the buyer (Applicant) to effect payment up to
a prescribed amount at sight or at any future determinable time(Tenure)
provided the beneficiary presents stipulated documents within stipulated
timeframe.
A letter of credit is
basically a document issued by a bank guaranteeing a client's ability to pay
for goods or services. A bank or finance company issues a letter of credit on
behalf of a buyer, authorizing the seller to obtain payment within a specified
timeframe once the terms and conditions outlined in the letter of credit are
met. The letter of credit acts like an insurance contract for both the buyer
and seller and practically eliminates the credit risk for both parties while at
the same time reducing payment delays. A letter of credit provides the seller
with the greatest degree of safety when extending credit. It is useful when the
buyer is not well known and when exchange restrictions exist or are possible.
4.1.1
Benefits of Opening LC
1. Benefits To Buyer
• Buyer is assured that the Bank will make
payment if stipulated documents will
be received
• If the seller agrees to extend loans,
usance LC can be opened.
• Terms and conditions can be accommodated to
ensure accurate shipment.
• There is the benefit of finance under trust
receipt loan arrangement.
2. Benefits to Seller
• The seller can rely on the credit
worthiness of banks rather than of customer.
• Non-payment or late payment can be avoided.
• Can take financing, can negotiate
4.1.2 Risk Involved In Letter Of Credit
1. Risks to the Applicant
• Non-delivery of Goods
• Short Shipment
• Inferior Quality
• Early /Late Shipment
• Damaged in transit
• Foreign exchange
• Failure of Bank viz issuing bank /
Collecting Bank
2. Risks to the Beneficiary
• Failure to Comply with Credit Conditions
• Failure of, or Delays in Payment from, the
Issuing Bank
4.2 Customary Practices for Letter Of Credit
1. The Uniform Customs and Practice for
Documentary Credits (UCPDC)
The UCPDC is concerned
with documentary credits, commonly referred to as “letters of credit.” The UCP
is focused on “commercial” letters of credit, the traditional letters of credit
that are used as a vehicle for payment in international trade, but the UCP is
also used in the realm of standby letters of credit and bank guarantees. In
short, we can know about UCPDC in following points:
• Issued by the International Chamber of
Commerce in Paris.
• UCP are a set of internationally accepted
rules and definitions which cover the liabilities and duties of all parties to
documentary credits.
• Periodically revised
• In effect since 1933
• The edition “UCPDC 600” came out in 2007 and
was effective from July 01, 2007.
2. International Commercial Terms (INCOTERMS)
INCOTERMS is a set of uniform rules for the
interpretation of international commercial terms defining the costs, risks and
obligations of buyers and sellers in international transactions. Some of the
examples are:
EXW= Ex Work
FOB= Free On Board
CFR= Cost and Freight
FCA= Free Carrier
4.3
Parties to LC
1. Applicant (Buyer/Opener)
The applicant is the
buyer / importer of the goods who asks his bank, the Issuing Bank, to issue an
LC. In almost all cases, the applicant maintains an account relationship with
the issuing bank.
2. Beneficiary (Seller)
The beneficiary is the
seller/exporter in whose favor the documentary credit will be opened / issued.
3. Issuing Bank
The applicant is the
customer of the issuing bank, and it is the issuing bank which gives the
written undertaking in the form of a documentary credit in favor of the
exporter.
4. Advising Bank
This is the bank, usually
domiciled in the beneficiary’s country, which is requested by the issuing bank
to advise the beneficiary of the terms and conditions of the credit.
There is no liability on
the part of the advising bank to honor the credit in any way. The main function
of the advising bank is to prove to the beneficiary that the credit is genuine
since the advising bank has to satisfy itself that the credit is properly
authenticated by the issuing bank.
5. Confirming Bank
The confirming 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.
6. Nominated Bank (Presenting bank)
A bank named in or
otherwise permitted by the terms and conditions of the LC to receive a
presentation of documents. The nominated bank can either send the documents
received from the beneficiary to the issuing bank without giving value to the
draft or if it wishes can give value to the drafts.
7. 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.
As negotiated documents
can ultimately be refused by the applicant if they are not exactly as per the
terms of the credit, the Negotiating bank should take extreme care while
examining the documents.
4.3 Types of Letter of credit
1. Revocable LC
In this type of credit
buyer and the bank which has established the LC, are able to manipulate the
letter of credits or make any kinds of corrections without informing the seller
and getting permissions from him. This type of LC is not a commonly used
instrument.
2. Irrevocable LC
In this type of LC, any
kinds of change and manipulations from the buyer part and the established bank
require the permission and satisfaction of seller part. According to the last
rules of the international business room, return ability or none return
ability; the credit will be none returnable.
3. Confirmed LC
They are the guarantees
that buyer will be given so that, the buyer will give the guarantee from his
own bank to any other valid bank that the seller will desire it.
4. Unconfirmed LC
This type of letter of
credit does not acquire the other bank's confirmation.
5. Transferable LC
It is a type of credit
that the seller can give a part or parts of credit (Completely) to the person
or persons he decides. This type of credit is a benefit for the seller.
6. Untransferable LC
It is said to the credit
that seller cannot give a part or completely right of assigned credit to
somebody or to the persons he wants. In international commerce, it is required
that the credit will be untransferable.
7. Usance LC
It is kind of credit that
won't be paid and assigned immediately after checking the valid documents but
paying and assigning it requires an indicated duration which is accepted by
both of the buyer and sellers. In reality, the buyer will give an opportunity
to the seller to pay the required money after taking the related goods and
selling them.
8. Sight LC
It is a kind of credit
that the announcer bank after observing the carriage documents from the seller
and checking all the documents immediately pays the required money.
9. Red Clause LC
In this kind of credit
assignment seller before sending the products can take the pre-paid and parts
of the money from the bank. The first part of the credit is to attract the
attention acceptor bank. It allows the beneficiary of a documentary credit to
receive funds for the purchase of goods described in the credit. These letters
are commonly used by beneficiaries who act as purchasing agents for buyers in
another country. It carries a provision that is written or typed in red ink
which allows a seller to draw up to a fixed sum from the advising or paying-bank, in advance of the shipment or
before presenting the prescribed documents.
10. Back to Back LC
This type of LC consists
of two separated and different types of LC. First one is established in the
benefit of the seller that is not able to provide the corresponding goods for
any reasons. Because of that reason according to the credit which is opened for
him, neither credit will be opened for another seller to provide the desired goods
and sends it.
4.5
Important terms used in LC
1. Pro-forma Invoice (P.I)
An invoice is a
commercial document issued by a seller to the buyer, indicating the products,
quantities, and agreed prices for products or services the seller has provided
the buyer. An invoice indicates the sale transaction only. Payment terms are
independent of the invoice and are negotiated by the buyer and the seller.
As, per NRB, Performa Invoice should
mention:
• Name of item
• Model / Brand
• Quantity, Purchase Price Unit, Total Price
• 8 digit harmonic code
• Should not contain clauses like “All discrepancies
acceptable)
• Country of Origin
2. Bill Of Lading (B/L)
A bill of lading is a
type of document that is used to acknowledge the receipt of a shipment of
goods. A transportation company or carrier issues this document to a shipper.
In addition to acknowledging the receipt of goods, a bill of lading indicates
the particular vessel on which the goods have been placed, their intended
destination, and the terms for transporting the shipment to its final
destination.
3. Bills Of Exchange
Bills of exchange is an
unconditional order in writing, addressed by the drawer to the drawee,
requiring the drawee to pay a sum of money on demand or at a specified future
time to the payee (who might be the drawer or another party) or to the bearer.
Bill of exchange under an LC is issued as per the terms of the LC.
4. Airway Bill
Airway bill is issued by
the transporting airlines as a receipt of the merchandise for delivery up to
the specified point. The airline industry has adopted a standard format for air
waybill which is used throughout the world for both domestic and international
traffic. Unlike a bill of lading, air waybill is a non-negotiable instrument,
does not specify on which flight the shipment will be sent, or when it will
reach its destination.
5. Insurance Policy
Insurance Certificate
states that a specified party will be reimbursed an amount in the event
merchandise is damaged or destroyed. An Insurance Policy generally covers
accidental losses and covers voluntary losses when a cargo must be sacrificed
to save a ship. The exporter should be able to produce Insurance Policy
document in case the goods are shipped under CIF and C&I arrangement.
4.6 LC Opening, Amendment and Cancellation
Procedures in CBL
4.6.1 Opening Procedures of LC in CBL
The LC opening procedures
of every commercial bank is as per the NRB directives. However the common LC
opening procedures is explained in brief in the points given below:
1. There is a negotiation between buyer and
seller and thus finalization of deal & buyer approach its bank to open
import LC.
2. Issuing bank issues the LC through its
advising bank & advising bank informs and advises the LC to the exporter.
3. Exporter prepares the goods and makes the
shipment through the carrier
4. Exporter prepares the documents demanded in
the credit and furnishes to its negotiating bank.
5. Negotiating bank forwards the documents to
issuing bank for payment.
6. The issuing bank obtains payment from the
importer and provides the documents.
7. Importer obtains the goods shipped by
exporter through the carrier (or its agent).
8. Issuing bank releases the payment to
negotiating bank through the reimbursing bank.
9. Exporter receives payment through
negotiating bank.
The above-explained
process of opening LC can be generalized in the following figure which makes
clearer in understanding the procedure.
Fig:
4.1: Procedures of LC
4.6.2
Charges for LC in CBL
The charges for
establishing LC with Civil Bank Ltd has been categorized into prime customers
and other customers. Prime customers are those who are a regular customer of
the bank and are loyal towards the bank. Other customers are generally one-time
customer of the bank.
The charges are shown in
the table below:
Table:
4.1 Charges for LC
LC establishment in convertible foreign
currency
•
Min: 1000 NPR OR
• 0.125% of LC (Industry)
• 0.25% of LC (Trading)
• 025% of LC (Case to Case).
•
Min: 1500 NPR OR 0.25%of LC (Industry)
• Min: 1500 NPR OR 0.375%of LC (Trading)
• Min: 2000 NPR OR 0.375% of LC (Case to
Case)
2. LC establishment in INR and local
currency
•
MIN:1000 NPR OR
• 0.25% of LC(Industry)
• 0.375% of LC(Trading
• Min:1500 NPR OR 0.375% of LC(Industry)
• Min:1500 NPR OR 0.50% of LC(Trading)
• Min:2000 NPR OR 0.50% of LC(Case to Case)
Other
additional charges:
• Document charge: NPR 500
• BCI: NPR 500(Only for sight LC)
• Swift Charges: For foreign currency(NPR
2000)
For Indian currency (NPR 1200)
For Nepalese currency (NPR 500)
4.6.3
Amendment procedures of LC in CBL
The amendment is required
if the client finds a need of change in the LC. For this, the client has to
request for amendment and the letter should be signed by the authorized person.
The issuing bank is approached by the Applicant for the amendment along with
the LC amendment form and Bi. Bi. Ni. 3. Mechanism to be followed is almost similar
to opening a new LC.
Issuing Bank, Advising /
Confirming Bank or Beneficiary have the right to refuse any amendment if they
feel it can create additional involvement, unwanted liability.
Normally, amendments are
not refused if they are essential such as the extension of the validity and /
or latest shipment date or adding essentials such as a document or instruction
or conditions mentioned in the contract of sale but omitted in the original
credit.
Partial acceptance of
amendments contained in one and the same advice is not allowed without the
agreement of all the named parties.
The amendment charges in CBL
are shown in the table below:
Table:
4.2 Amendment Charges
4.6.4
Cancellation of LC in CBL
Since the LCs opened in CBL
basically are Irrevocable in nature the LC cannot be canceled through just one
party, for the cancelation of LC the consent of both parties is required. The
buyer can cancel the LC before the goods have been shipped by the seller, but
if the seller has shipped the goods then he would not agree to cancel the LC.
There can be various personal as well as the business problem which lead him to
cancel and LC.
The cancelation charges
in CBL are as follows:
Cancelation charges NPR
500 plus SWIFT charge NPR 500
4.7
Problem Solved
• Provided general information to the
customers who visited LC department regarding their queries on LC procedures.
• Assisted the customers in filling up the LC
form if they were in confusion.
• Helped the respected department head by
proper filing and documentation of each and every file.
• Helped in preparing SWIFT copy whenever
required to assist the department head.
• Checked all the missing documents in the
file and informed the respective person.
CHAPTER
V:
CONCLUSION
AND LESSON LEARNT
5.1 Conclusion
The banking industry has
become highly competitive and it’s essential to establish good corporate
governance policies with systematic transaction and operation and operational
procedure.
Civil Bank Ltd is one of
the pioneering commercial banks in Nepal established with the motto of
fulfilling all the customers’ aspirations through its advanced banking
facilities. Due to globalization and rapid development of international trade,
the customer’s attraction towards LC is growing day by day and this facility is
provided through Trade Finance Center (TFC) department in CBL.
This report is prepared
on the basis of internship done in the New Road Branch of CBL, for two months.
It is, therefore, focused on the activities learned in Letter of Credit
department among the different departments of CBL. The internship done at CBL
was a great experience to learn various aspects of banking and finance.
However, my focal point of the study was the Letter of the Credit department.
TFC department in CBL deals with issuance of
Letter Of Credit (LC), Telex Transfer (T.T) and Bank Guarantee. However, the
main concern of this report is on LC as the interne was more concentrated in
LC.
During my stay in the
letter of credit department of CBL, I found that trade finance center renders
proper services to the customers along with generating suitable proceeds for
the bank. But, I found the problem of delay in services as the trade operation
of CBL were centralized and also found the problem of lack of space. Overall I
had a great experience while doing the internship in CBL with cooperative
staffs and other intern friends.
5.2
Lesson Learnt
The main focus of
preparing this report is management oriented in order to know the internal system
of the banking industry and grasp the opportunities and face challenges in the
competitive banking environment in Nepal. So its main objective is to explore
the managerial skills and gain experience from the internship that are helpful
to analyze the overall activities of each department to tackle real life
situation arising in the organization.
The interne conducted an internship in
Civil Bank Limited, New Road for a period of eight weeks. The interne was able
to gain knowledge about the work environment and also learnt a lot about
responsibility, work pressure and the importance of time management.
The interne was placed in
various departments so that the interne can get insight knowledge in overall
procedures and system. However, the most of the time was spent on Trade Finance
Department along with Customer Service Department, Remittance and Clearing
Department, and Credit Department. Similarly, interne work day to day
activities as per instruction and supervision and learnt operational procedure.
However the major lesson learnt from the 8 weeks internship program can be
summarized in the following points:
• Learned about the banking norms, rules and
regulations by working under the strict discipline of the bank.
• Learned briefly about all banking
departments, their working procedures, documentation, and practices.
• Learned how to deal with customers, solving
their queries and solving their problems in need.
• More precisely learned about the LC
procedures and documentation as it was the subject of keen interest for the
interne.
• Learned to prepare B.B.Ni forms and LC
messages which are the most requirements in Trade Finance Department.
• The things learnt theoretically were found
different from the banking procedure and working system.
Finally concluding the report, working as an
intern in CBL was of the great experience of practical banking scenario.
Interne felt that the charm of banking industry outside the work field is very
high, but it is as difficult to work inside with strong discipline and
dedication.
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