Executive SummaryUnited Commercial Bank Limited (UCBL) is one of the first generation private sector Banks in Bangladesh, commenced its commercial operations from mid 1983 and has since been able to establish one of the largest network of 84 branches in six different districts. United Commercial Bank Ltd. offers all kinds of Commercial Corporate and Personal Banking services covering all segments of society within the framework of Banking Company Act and rules and regulations laid down by our central bank. Diversification of products and services include Corporate Banking, Retail Banking, and Consumer Banking right from industry to agriculture, and real state to software.UCBL Rajshahi branch is one of the branches, which facilitate all kind of facilities that a Bank offers. It has General Banking, Credit Management, as well as Foreign Exchange Department.General Banking is the starting point of all the banking operating. It is the department, which provides day-to-day services to the customers. General Banking consists of the many sections in the branch. These are including customer service, account opening/closing, remittance, deposit department, accounts department.Credit management department provides many facilities like as loan and advance products to the client for financing different purpose that fulfill the requirements of the bank and have good return to the investment as well as satisfy the client. The loan and advance products are personal loan scheme, small & medium enterprise loan, working capital financing, import financing, export financing, syndicate loan, industrial financing etc.Foreign Exchange Department deals with import, export, and foreign remittance and post import financing. This department is playing an important role in enhancing export earnings, which aids economic growth and, in turn, will be helpful for economic development. United Commercial Bank Limited is the preferred choice in banking for friendly and personalized services, tailored solutions for business needs, global reach in trade and commerce and high yield on investments, assuring Excellence in Banking Services.

Introduction

INTRODUCTION BackgroundA commercial bank performs an imperative function in the economy. It helps to mobilize money by a continuous procedure of borrowing and lending money. It accumulates its capital through both own sourcing and out sourcing (depositors are the major part of out sourcing). This amount is then lent to the other party. Being a service industry provides various services to its customers. So, every commercial bank has to think about their customer first, because the customers are the sovereign. This report has been prepared as the partial fulfillment of BBA program in AUST. To complete the BBA program successfully each participants required to undergo internship program in an organization for three months to learn practical knowledge of business activities. To accomplish the aforesaid requirement, I am assigned as an internee in United Commercial Bank Ltd, Rajshahi Branch for 3 months starting from September, 11, 2011. ObjectivesThe objective of the report is to gather practical knowledge particularly regarding any business organization and its operations. Theoretical classes of Bachelor of Business Administration program provides us knowledge regarding theories and models whereas internship program gives us the chance to view those systems and their operations (based on theories and models) in practice. Apart from this broad objective, we can identify the objectives of this report as follows: Understanding the environment, functions and management of the organization for my case it is UCBL Bank. Narrating experience in working in UCBL To apply theoretical knowledge in the practical filed in order to formulate a problem to work on. Defining and analyzing the problem. To learn about banking more thoroughly. To relate the theoretical knowledge with the practical content. MethodologyI joined as an intern in UCBL Rajshahi Branch on September 11, 2011. I was assigned to work under all the 3 departments within 3 months. I was allocated for 1 month for each department. I worked under each officer and learn from him or her directly. I frequently ask questions and obey their instructions. ScopeAs my study title is The General Banking Activities, Credit Management & Foreign Exchange of UCBL, it is clear that the scope of this study has spread over whole customers of the organization both corporate and retail. The scope of the study has been divided in two parts. One is operational scope and another is time scope. These are described below -Operational Scope: The operational scope of this study has been confined working under all the departments for 3 months. -Time Scope: This report has accomplished with in the period of three months started from 30 December 2008. LimitationsWhile doing this paper, I have faced several obstacles. They were The website of UCBL does not contain updated information. UCBL does not possess any Annual Report or Brochure. I have to submit the report within short period.Overview of United Commercial Bank ltdUnited Commercial Bank Limited (UCBL) is a Bangladesh based financial institution that provides banking services. The services include personal and business banking, loans, credit cards, online banking and money transfer services. The bank primarily operates in Bangladesh, where it is headquartered in Dhaka.With its firm commitment to the economic development of the country, the Bank has already made a distinct mark in the realm of Private Sector Banking through personalized service, innovative practices, dynamic approach and efficient Management. The Bank, aiming to play a leading role in the economic activities of the country, is firmly engaged in the development of trade, commerce and industry thorough a creative credit policy. HistoryUnited Commercial Bank Limited incorporated on 26 June 1983 as a public company with limited liability under the Companies Act 1993. The bank obtained permission to commence business with effect from 26 June 1983 and started banking operations on 29 June 1983 with an authorized capital of Tk. 100 million divided into 1 million ordinary shares of Tk. 100 each. ManagementThe Bank has in its Management a combination of highly skilled and eminent bankers of the country of varied experience and expertise successfully led by Mr. M. Shahjahan Bhuiyan, a dynamic banker, as its Managing Director and well-educated young, energetic, and dedicated officers working with missionary zeal for the growth and progress of the institution. Corporate Information at a Glance?Registered NameUnited Commercial Bank Limited

Registered Head OfficeFederation Building, 60 Motijheel, Dhaka.

ChairmanMr. Md. Jahangir Alam Khan

Managing DirectorMr. M. Shahjahan Bhuiyan

Number of Branches84

Organogram of UCBL

Products and ServicesThe Bank provides a broad range of financial services to its customers and corporate clients. The Products and Services UCBL offers are:Products & Services

UCB Multi Millionaire Industrial Finance

UCB Money Maximizer Foreign Currency Deposit A/C

UCB Earning Plus NFCD ( Non Resident Foreign Currency Deposit Account )

UCB DPS Plus RFCD ( Resident Foreign Currency Deposit Account )

Western Union Money Transfer Consumer Credit Scheme

SMS Banking Service Locker Service

Online Service Industrial Finance

Credit Card, Debit Card Foreign Currency Deposit A/C

One Stop Service

NFCD ( Non Resident Foreign Currency Deposit Account )

Time Deposit Scheme Inward & Outward Remittances

Monthly Savings Scheme Travelers Cheques

Deposit Insurance Scheme Import Finance

Working Capital Finance Export Finance

Inward & Outward Remittances Trade Finance

Loan Syndication Underwriting and Bridge Financing

United Commercial Bank divided its branch into several departments. The main 3 departments are:

General Banking

GENERAL BANKING General Banking is the starting point of all the banking operating. General Banking department aids in taking deposits and simultaneously provides some ancillaries services. It provides those customers who come frequently and those customers who come one time in banking for enjoying ancillary services. It is the department, which provides day-to-day services to the customers. Every day it receives deposits from the customers and meets their demand for cash by honoring cheques. It opens new accounts, demit funds, issue bank drafts and pay orders etc. Cash Management DepartmentCash section demonstrates liquidity strength of a Bank. It is also sensitive as it deals with liquid money. It is the most important department that is contributing to the earning of the bank in terms of goodwill and customer satisfaction with their quality and prompt services. Cash department of UCB Rajshahi Branch is well equipped and decorated. There is also electronic counted machine and computers with online system in this department. Balance of account can be seen with few seconds. So cash payment can be made very promptly. Transaction involving cash is called cash transactions. The cheques/ instrument / vouchers which are paid in cash over the counter are cash transactions. It has two types of services: Cash Receipt Cash Payment Procedure of Cash ReceiptThe depositor will use the prescribed deposit slip supplied by the bank to deposit cash /cheques/ demand draft/ pay order etc. All cash receipt voucher shall be received by the teller. Cash receipt counter performs its job as follows: First checks if the deposit slip is properly filled up containing title of account, account number, date, amount in word and figures and depositors sign. Cash is received by the cash receiving officer, twice counted and matched with the deposit slip and also write down the denomination of notes behind the cheque. Cash receiving officer write down the amount in figure and in words on the front side of the cheque. Cash received stamp is affixed on the face of the deposit slip along with the signature of the cash receiving officer. Record it in the Record Book and put scroll no in the cheque Deposit slip is credited and posted in the concerned account in the system. Counter folio is given to the depositor as receipt. One consolidated cash debit voucher is posted in the system to balance the cash. Procedure of Cash PaymentAt this counter cash is paid to the customer on demand by placing a cheque over counter. Payment counter performs its job as follows: Check the cheque leaf whether it is worded properly. This cheque covers Branch seal, Date (Date must be current date or 180 days earlier), amount in figure and word, and finally signature of the Drawer. We also check here whether the word Bearer is crossed away or the cheque is in the name of any company or firm. Verify the signature with the specimen signature and give verification seal and signature of the verifier. Check proper endorsement is given behind the check leaf in case of Check Drawn on Payees in the name of any Firm. For cheques in the name of Firm Attestation is required along with Firms common seal to be paid over the cash counter. Account is debited and then the officer cancels cheque. It is posted in the system and posting stamp and transaction number is affixed on it. Cheque is handed over to the cash payment officer for payment. Take one more receiver signature on the back of the cheque is taken from the holder to match with the first one and then cash is paid to the payee. And also write down the denomination of notes behind the check. Cash paid stamp is affixed on the face of the cheque. Entry is passed in the cash payment register. Give posting in PcBANK2000 and debit Drawer account and note the transaction no. on the top of the cheque. Cash Book BalanceAt the end of the working day cashier is responsible to maintain the cash balance book. The cash book contain the date, opening balance, detail of cash payment and received in figures, closing balance, denomination of government notes (Currency). It s checked by manager. The consolidated figure of receipt and payment of cash is entered in the cash book and the closing balance of cash is drawn from that i.e.Opening Balance of Cash + Receipts - Payments = BalanceThe closing balance of today will be the opening balance of tomorrow. This department is one of the most important departments of the Bank. All the books maintained in this department are checked by officer. Cash Insurance Limit

Maintenance of Cash Remittance The In-charge of Cash Department maintains the cash remittance according to the rules of the Bank. If the cash manager thinks that the amount of money cross the limit, then he called the Principal Branch to takes the extra amount of money or vice versa. Inter Branch Credit Advice (IBCA) is used for such transaction. On-Line Banking OperationsThe UCBL has 84 branches and all transactions among the branches are done through Online. UCBL uses PcBank2000 customized software for its day to day transaction. The activities are: Deposit cash in any branch in any account Withdraw cash from any branch Transfer from any account to any branchThere are several charges for online transaction. Such as- Inter City Transaction charges:AmountCommission (TK)VAT (TK)

Tk. 1-50000NilNil

Tk.50001-100000508

Tk.100001-100000010015

Above 100000020030

Within City Transaction charges:AmountCommission (TK)VAT (TK)

Tk. 1-50000NilNil

Tk.50001-100000254

Tk.100001-1000000508

Above 100000010015

Account Opening DepartmentResponsibility of the customer service starts with opening of new account in the name of new customer. This is the starting point of the client bank relationship. By opening an account, the bank bridge its customer to avail the facilities provided by the bank. Types of AccountUCBL has several types of deposits for its customers. Like- Savings Bank (SB) AccountThis is an interest bearing account and only individuals can open this type of accounts. Current Deposit (CD) AccountIt is popular known as Current Account. Any individual, company, firm, may open this type of account in its own name. This is non-interest bearing account. Short Term Deposit (STD) AccountThis is opened and operated for short term and for specific purpose. It is also an interest bearing account and where rate of interest is generally below the savings rate. Fixed Deposit Receipt (FDR) AccountIndividuals, Firms, Companies, Associations may open this account. The deposit is taken for a specific fixed period of time, such as 3 months, 6months, 1-year etc.There are few schemes UCBL is offering its customers. Such as- Monthly Savings Schemes Deposit Pension Scheme Plus Money Multiplier Money Maximize Scheme Rates of Interest on DepositsTypes of DepositRate of Interest (% p.a)

Savings Deposit6.00

Short Term Deposit5.00

Fixed DepositFor 3 months 6 Months 12 Months12.0012.0012.00

Formalities for Open an AccountFor opening the account, the first hand requirements are- Application on the prescribed form Introduction of the applicant Specimen signature Two copies of passport size recent photograph with attested by the introducer.At first customer service desk want to know whether the customer has introducer to open the account or not? If yes then give him/her a printed Account opening Form along with Specimen Signature Card, Customer Transaction Profile Form and Information form on Money Laundering. After that, request customer to fill up the form duly and submit the form with required documents. Required Documents Personal Account Two Copies of Passport size photographs of the applicant attested by the Introducer and one copy passport size photograph of the Nominee attested by the applicant. Copy of passport/National Identity Card/ Voter ID Card/ Certification from Word Commissioner or Union Perished Certificate. Details of occupation/employment and sources of wealth or income. Current Proprietary Same as personal account plus Trade License. Partnership Account Same as personal account plus Trade License and Partnership deed Limited Company Certificate of Incorporation. Memorandum and Articles of Association. Resolution of the Board of directors. Maintenance of Specimen Signature CardSpecimen Signature should be retained in card cabinet arranged in account number order. The key of the cabinet should be held by an authorized officer who should ensure that cabinets are securely locked and placed inside the Strong Room overnight. Maintenance of Account Opening Form (AOF)Account Opening Form are kept in AOF cabinet according to the account type as well as account number. Signature should be retained in card cabinet arranged in account number order. The key of the cabinet should be held by an authorized officer who should ensure the security of these forms. Letter of ThanksAfter completing all the formalities of opening an account, a letter of thanks is send to the address of the customer. If letters addressed to customers, introducers or referees are returned undelivered or not satisfactorily responded, then no service should be provided to the customer unless specifically approved by the Branch Manager. Letter of WelcomeLetter of welcome send to the potential customer to let them know about the latest offer of UCBL. Closing an AccountWhen a customer wants to close his account in the bank he has to follow the following procedure The client writes a written application She/he surrenders the unused checkbook The bank takes charge TK. 200.00 for closing fee The rest amount gives to the customer Closed rubber stamp uses top of the respective account opening form and file. Issuance of Cheque BookA cheque book contains a number of cheques, which is given to a customer upon written request and after marking the payment for the cheque book. It enables a customer to make withdrawal from his account or make payment to various parties by issue of cheques.All the account opening formalities must be completed before, issuance of cheque book. Particulars of the cheque book requisition should be completed containing title of account, account number, number of leaves and signature of the customer. Signature of the customer is verified on the requisition. If customer is unable to collect his cheque book, then he can give authority to the third person to collect his cheque book on his behalf by signing on the back of the requisition.Cheque book is taken out from the locker. It is assured that series of the cheque book is in order. Particulars are entered in the cheque book issuance register. Account number is stamped on every leaf of the cheque book and those leaves are counted. Name of the account holder is written on the cover of the cheque book and requisition on the cheque book for further issuance is properly filled stamped and signed by officer of the bank.Cheque book is delivered to the customer and his signature is taken on the cheque book issuance register, cheque serial number is entered in the system (PcBANK2000). Stock of Cheque books are balanced at the end of each day and kept under safe custody.Cheque Book Issue Charge

Per leafTk. 1

Account Bills & Remittance DepartmentRemittance is one of the important items of bank business. Now a day business person cannot run his business without bank remittance facilities. Sending some money from one station to another through banking channel is called remittance. Remittance may be both local and foreign. The main instruments used for local remittance of fund are: Pay Order (PO) Demand Drafts (DD) Telegraphic Transfer (TT) Pay Order (PO)Payment order is meant for making payment of the bankers own of the customers dues locally and not for affecting any remittance to outstation. In a sense, the payment order is used for making a remittance the local creditors. Issuance of Pay Order The customer should fill up PO application form. Money should be received by cash or by debiting clients account. Give necessary entry in the Pay Order register where payees name, date, PO no, etc is mentioned. Printed payment order leaf should be filled and signed by two authorized officers. Entry should be given in computer under supervision of authorized officers. After scrutinizing and approval of the instrument by the authority, it is delivered to customer. Signature of customer is taken on the counterpart.PO issuance thereof

Upto Tk. 1000/-Tk. 25/-

Above Tk. 1000/- but not exceeding Tk. 1.00 lacTk. 50/-

Over Tk. 1.00 lac but not exceeding Tk. 5.00 lacTk. 75/-

Over Tk. 5.00 lacTk. 150/-

Cancellation Charges of POTk. 50/- per instance

Charges for issuance of Duplicate InstrumentTk. 100/- per instance

Demand Draft (DD)A bank draft is an order to pay money drawn by one office of the bank on other office up on other office of the same bank for a sum of money payable to order on demand. A bank draft is an order by one branch to another branch of the same bank outside the clearing zone. Issuance of Demand DraftIssuance procedure of Demand Draft is same as of Pay Order. Issuance of Duplicate PO/DDIf the customer wants to issue a duplicate DD, than customer is asked to do the following formalities: Making a general diary (GD) in the nearest Police Station. Furnishing an Indemnity Bond in Tk.50/= stamp.The banker immediately marks Stop Payment in the register after receiving the application from the customer and a duplicate PO/DD is issued. Encasement Procedure of DDAfter receipt of advice: On receipt of advice from drawing branches following entries are passed. The signatures of the issuing branch should be verified by the responding branchHead Office A/c- Branch concernedDebit

Bill Payable Account- DD Payable Credit

Particulars of the above are entered on DD Payable Register in which separate foils are allocated to every branch and an index is maintained. The particulars are checked and initialed by the in-charge.Payment in Cash The dates, amount in words and figures, branch drawn upon and signatures on the drafts are checked. Particulars of the draft are verified from the register. Payment date is noted on the register. Stamp is affixed on the face of the drafts. Draft together with the register is sent to the officer in-charge for cancellation and initials in the register. After cancellation the draft is sent to the cash department for payment. In case of any irregularity in the draft an advice letter is sent to obtain the confirmation of the drawee branch.Payment in clearing Collection Banks stamp, crossing and discharge are checked. Other procedure is similar to that explained in payment in cash. Telegraph Transfer (TT)Sometimes the remitter of the fund requires the money to be available to the payee immediately. In that case, the banker is requested by him to remit the funds telegraphically. Here fund is transferred through the aid of Test Key Materials and SWIFT. TT can be both foreign and local. On received of TT massage test number should be checked immediately. Then voucher to be passed through register duly authenticated by authorized officials.DD/TT issuance thereof

Commission@0.10%Minimum Tk. 50/-

Cancellation Charges of DD/TTTk. 50/- per instance

Charges for issuance of Duplicate InstrumentTk. 100/- per instance

15% VAT on commission earning

Encasement Procedure of TTReceipt of Telegram: Telegram is detected and test is verified by the in-charge and the manager. If the test does not agree or the telegram is received mutilated, a telegram is sent the branch concerned asking them to repeat the test of the message with correct test. If the test agrees, stamp is affixed on the telegram and signed by the officer. Following entries are passed:General A/C- Branch ConcernedDebit

TT payable A/C Credit

TT payable A/CDebit

Partys A/C Credit

Advice to Payee: When TT Advice is receipt by the paying branch from the issuing branch, the advice (IBCA) is posted in the TT register for respond only without preparing any voucher. If the amount is to be credited to be payees account. Date of payment is noted in the register and initialed. If the TT is to be issued, then the receipt number is noted on the register. The receipt along with the register is sent for checking and signature of the in charge and manager. After that, the receipt is sent to the payee. Test Key TablesSecure Code Tables or Test Key Tables (TTK) is one of the facilities used for authorization of client orders made by bank-online system or by fax or email. In order to preclude any possibility of misuse, your personal Secure Code Tables should be kept in a safe place where it is accessible only to authorized persons. The test key is a digital signature that will secure any message to and from the bank. It is calculated by adding the key number from each table together with the unique fixed number sent to each client. It has 3 parts:Part-1

Table -ABranch Code

Table- BAmount Code

Table- CDate Code

Part-2

Table-AAmount Code

Table-BDate Code

Table-C Currency Code

Table-DRequired for TT and DD

Part-3

Table-AVariable Sheet

Crossing of Cheques and Endorsement ChequeCheque is a negotiable instrument. Cheques can be of two types:- Open or Uncrossed Cheque. Crossed Cheque.Open Cheque: An open cheque is a cheque which is payable at the counter of the drawee Bank presentation of the cheque.Crossed Cheque: A crossed cheque is a cheque which is payable only through a collecting banker and not directly at the counter of the bank. There are two mode of crossing- General Crossing and Special Crossing. EndorsementEndorsement is an essential part of day to day work in Bank. A cheque requires varieties of endorsement like- Branch Name Account Number Signature Verification etc. ClearingThe function of clearing department can be divided into two parts: Outward Clearing Inward Clearing Outward Clearing Messengers of different branches bring instruments drawn on other Banks to the clearing section of Head Office. Bills section of UCBL Head Office also sends the instruments drawn on other Banks to the clearing section for collection. The clearing stamps are affixed on the instruments and endorsed The particulars of these instruments are entered in the main schedule of Banks through NHCASH22 software and inserted in floppy disc. The diskettes along with the instruments are carried to the Clearing House. After going there the concerned officials of UCBL gives the instruments to the representative of respective Banks. Claims of UCBL on other Banks are set off by Bangladesh Bank through debiting other Banks account and crediting UCBLs account. This function is done in the first house. Outward Clearing The instruments drawn on UCBL are received from other Banks in the Clearing House. The amount and numbers of instrument are entered in the house from main schedule of respective Banks. The instruments with schedule are arranged branch-wise. The instruments are sent to the branches concerned for clearance and IBCAs are collected from them for honored cheques. The dishonored instruments are sent back to respective Banks through the second house. Collection of Cheques and BillsOne behalf of counts banks play a vital role to collect cheques and bill a credit to the beneficiarys a/c through banking channel. To collection of cheques and bills the bank follows two systems: Outward Bills for Collection (OBC) Inward Bills for collection (IBC)Outward Bills for Collection (OBC): These bills are included within the clearing area. These bills can be from the same bank but different branches.Inward Bills for collection (IBC): These bills can occur outside Dhaka within one bank or other banks.CRADIT MANAGEMENT

CREDIT MANAGRMENTThe word credit derives from Latin word cruder means to trust. The fundamental nature of credit is that, an element of trust exists between buyer and seller whether of goods or of money. Credit may also be defined narrowly or broadly. Narrowly credit is simply the opposite of debt. Debt is the obligation to make future payments. Credit is the claim to receive these payments. Credit is finance made available by one party (lender, seller or shareholder/ owner) to another (borrower, buyer, corporate or non-corporate firm), i.e. from surplus unit to deficit unit. Credit is the outcome of financial intermediation the very major service offered by Bank financial institution.

The economic basis of financial intermediation lies in the economics of scale in portfolio management and in the low of large numbers.Lander have preference for financial intermediation because of: Low risk Greater liquidity Convenience and Other auxiliary services.Borrowers have preference for financial intermediation because of: Availability of big pool of funds that can satisfy big individual demands. Greater certainty of the availability of fund at all times. The rate of interest charged lower then charged by other lenders. Regulated finance institution do not fleece small borrowers in the manner moneylender do. Broadly, credit is finance made available by one party (lender, seller) to another party(borrower, buyer).Organizational Structure for Credit Operation:Head Office

Fig: Organizational Structure for Credit Operation.At the minimum, one officer shall be placed in the Credit Administration unit immediately at each branch who shall independently under administrative and working control of Credit Administration Deptt. Credit Administration Flowchart:

Loan & AdvancesLoan and advances have primarily been divided into three main heads as follows:

Fixed Term LoanThese are the non-revolving loans made by the Bank with fixed repayment schedules. This loan is given for a specific term and usually repaid in Equal Installment either of monthly or quarterly. The interest may be paid quarterly or along with the installment. Fixed term loans are categorized into three categories based upon its tenure which is defined as follows: Short-term loan: The tenor of this loan is less than one year. Mid Term loan: The tenor of this loan is between one to five years. This type of loan is most preferred by both bank and the borrower. This loan is comprises with consumer credit, Agro credit, Micro Credit etc. Long Term Loan: The tenor of this loan is more than five years. Here the fund is locked up for a long period and hence risk exposure is higher than other term loans. Continuous LoanThese are the revolving loans having no fixed repayment schedule, but have an expiry date at which it is renewable on satisfactory performance of the customer.Here the customer avail the loan facility continuously for a specific time period. And the customer can enjoy the facility at any time with in the period. And also noted here that within stipulated limit he can enjoys the facility as much as he desires. Thats why this loan arrangement is also termed as revolving loan. This is a very much popular form of loan facility in the business community. Two most popular continuous loans are as follows:

Over Draft (OD)This is a loan arrangement between bank and customers by which the customer can draw money from his account up to a certain limit as approved by the bank. This loan is usually for one year time and renewable upon maturity. Secured Overdraft (SOD): Overdraft which is normally granted against the security of tangible assets such as pledge/lien of FDR, bonds ICB unit certificate etc. are called SOD. Description of overdraft will depend upon the nature and types of security charged to the bank. Temporary Overdraft (TO): Customers who maintain satisfactory conducted account may be accommodated at their specific request to overdraw their balance in the current account to meet unexpected and urgent requirements for credit facilities. The amount up to which overdrawing is permitted is dependent on the need of the customer, the previous conduct of his account with the bank and the turnover in the account, average balance maintained etc. Cash Credit (CC)This is an arrangement for meeting the firms working capital needs. Usually this loan is provided to procure raw materials and to complete it in finished goods. Therefore, usually the security of this loan is the subject matter for which the loan is arranged for i.e. the finished goods stock. Some other collateral securities are also may be kept for this facility. Cash credit depending on its nature classified in the following types: CC Hypothecation: In this arrangement the possession of goods (subject matter of the loan) goes with the client or borrower but the ownership is in banks hand. And client repays loan from the sales proceeds by turn. Here primary security is the goods purchased by the sanctioned loan and secondary security may be cash equivalent instrument or any mortgage property. CC pledge: Here ownership and possession of the goods, subject matter of the loan, lies with the bank. And upon prior payment the client release goods from banks custody and sale accordingly. Demand LoanThese are the non-revolving loans which are neither continuous nor fixed but have to be repaid on demand. This loan is repayable by the borrower on demand. That means for this loan the borrower is bound to pay back on demand of Bank. Personal Loan ( Consumer Credit Scheme)The objectives of this loan are to provide essential household durable to the fixed income group (Service Holders) and other eligible borrowers. Car loan, loan for house renovation, vacation loan, marriage loan and loan for household equipment well as entertainment products are governed by personal loan program. The Total amount of loans along with the duration in which these loans taken, need to be repaid is given below:Type of ProductLoan Amount (Tk.) LacRate of InterestTenure

Home LoanUp to 7.515%10 to 20 years

Auto Loan2.0016%5 years

Doctors Loan5.0016%5 years

Advance Against Salary5.0017%4 years

Any Purpose Loan10.0017%4 years

Education Loan5.0017%4 years

Travel Loan2.0017%3 years

Marriage Loan3.0017%3 years

Hospitalization Loan5.0017%2 years

CNG Conversion Scheme1.0017%1.5 years

Types of Credit FacilitiesSerial No.Name of the FacilityDescriptionPurposeTenor(Max)

Funded

1.SOD(FO)Secured Overdraft100% cash coveredGeneral purpose12 months

2.TODTemporary overdraftGeneral PurposeForced Loan60 days

3.PAD(Sight)Payment against Document (Foreign-sight)Advance against Sight L/CForced Loan21 days

4.PAD(EDF)Payment against Document (EDF)Advance against EDF L/CForced Loan21 days

5.PAD (A/G/B)Payment against documents (A/G/B)Advance against LC (A/G/B)-Forced loan21 days

6.PAD (Local)Payment against document (Local- sight)Advance against Sight L/C (Local) Forced loan21 days

7.PC (RMG & other than RMG)Packing Credit against Export L/C & Export OrderTo finance against Export L/CTo finance against Export OrderPre-shipment Finance120 days

8. ECC(New)Export Cash CreditFinancial accommodation to a customer for export of goods under export LC and allowed a certain percentage of Export LCs/ContractLiquidated out of export proceeds LC validity/180 days

9.BFLBridge Financing LoanSupport Equity 12-36 months

Serial No.Name of the FacilityDescriptionPurposeTenor(Max)

Funded

10.TRLTransport LoanTo finance commercial Transport36-48 months

11.HBL(Com)House Building Loan - CommercialTo finance commercial house/ apartment36-96 months

12.HBL(Res)House Building Loan - ResidentialTo finance residential building / apartment60-120 months

13.LTRLoan against Trust ReceiptTo finance import L/C180 days

14.HBL(S)House Building Loan StaffTo finance personal house/apartment15 years

15.CC(Hypo)Cash Credit against hypothecation of Inventory and Book DebtsTo finance InventoryOther Business operationsGeneral purpose12 months

16.CC(Pledge)Cash Credit against Pledge of Inventory To finance pledged Inventory 12 months

17.Loan General(New)Loan General Short term, medium term loans allowed for specific purpose for definite period and repayable by installments. 12-36 months

18.FBPDForeign Bill Purchased & DiscountedTo purchase /discount/ negotiate export documents against Sight/Usance Export L/C As per LC Terms

19.LBPD

Local Bill Purchased & DiscountedTo purchase /discount against local usance L/CAs per LC Terms 180 days

20.LCPS(S)Loan under Personal Loan StaffTo finance personal consumable items36 months

Serial No.Name of the FacilityDescriptionPurposeTenor(Max)

Funded

21.CL(S)Car Loan StaffTo finance personal car 5 years

22.FL(S)Furniture Loan StaffTo finance personal furniture72 months

23.LIM (Rename)Import Loan against Imported Merchandise pledged To finance imported merchandise under pledge180 days

Serial No.Name of the FacilityDescriptionPurposeTenor

24.Term Loan

Term Loan against fixed assetsTo finance fixed assetOver 1year max 7 years

25.Time Loan

Time Loan against Other Security/Collateral/Support To finance business operations/work order/Industrial working capital To finance fixed assetTo finance duty/taxGeneral purpose12 months

26.OAPOwn Acceptance PurchaseAdvance allowed for purchasing foreign currency for payment against LCs (Back to Back) where the exports do not materialize before the date of import paymentForced Loan 90 days

27.OD(General)Overdraft against Other Security CollateralTo finance business operations/Industry operations Misc. purpose 12 months

28.CP(Local)Cheque Purchase (Local)To purchase/discount Cheque, Bank Draft, and Payment Order 30 days

Serial No.Name of the FacilityDescriptionPurposeTenor(Max)

Funded

29.CP (Foreign)Cheque Purchase (Foreign)To purchase/discount foreign currency Cheque, Bank Draft, and Payment Order45 days

30.Consumer Credit Scheme (CCS)(New)Consumer credit provided to middle class income groupTo finance purchase of consumer durable by the fixed income group to raise their standard of living. Over 12 monthsMax 60 months

31.Hire Purchase(New)Hire purchaseTo finance capital machinery, equipment and vehicleInstallment creditBorrower agrees to take the goods on hire at a stated rentalRepayment is inclusive of Principal as well as Interest for adjustment Over 12 monthsMax 60 months

32.Lease Financing(New)Lease financeTo finance capital machinery, equipment and vehicleExclusive right to use the asset by the leaseholder for an agreed period against payment of rent. Over 1 year max 5 years

33.OD (Work Order)(New)Overdraft against workorderAdvance against assignment of work order/ bill for execution of contractual worksNot a continuous credit rather time loan 06 months to 36 months

34. OD(EM)(New)Over Draft for Earnest MoneyTo pay earnest money90 days

Under non-funded credit, there are basically two major products namely Letter of Credit and Letter of Guarantee. Following are the non-funded products of UCBLSerial No.Name of the Facility

DescriptionPurposeTenor

Non Funded

1BFC (Local)Bills for Collection LocalCollection of local outstation cheques/ Drafts/DocumentsAs per rules/terms

2.BFC (Foreign)Bills for Collection ForeignCollection of foreign cheques/ Drafts/DocumentsAs per rules/terms

3.LG(Local)Letter of Guarantee - LocalFor contractual obligation (Bid-Bond, Payment Guarantee, Advance Payment Guarantee, Performance Guarantee, Customs Guarantee, Shipping Guarantee)Specific period

4.LG(Foreign)Letter of Guarantee ForeignFor contractual obligation and othersSpecific period

5.SLC(Local)Sight Letter of Credit LocalFor local procurementRecourse on title to local document As per LC Terms

6.SLC(Foreign)Sight Letter of Credit ForeignFor foreign procurement under sight L/CRecourse on title to import documentAs per LC Terms

7.SLC(EDF)Sight Letter of Credit EDF For importation under sight EDF L/CRecourse on title to import documentAs per LC Terms

8.SLC (A/G/B)Sight Letter of Credit (Aid/ Grant/ Barter)For Importation under (A/G/B)As per LC Terms

Process Work Flow Credit Approval ProcessCredit approval process starts with receiving prescribed completed credit application from the customer and ends with issuance of a written Sanction Advice by the Bank. Credit approval process in the bank shall be guided by some basic principles. These are as follows: Credit ProposalA Credit Proposal is prepared by the Relationship Management Team either at Branch or Corporate Division based at Head Office to present a concise and objective assessment of the risks associated with lending money to the prospective borrowers. Banks have to ensure before sanction/disbursement that their portfolio is of high quality, i.e., the risks associated with the portfolio are relatively low. A credit proposal may be defined as hereunder:1. Initial Credit Proposal Initiate credit facilities for any new relationship for the bank.2. Annual Credit Proposal Renew existing facilities extended to a borrower or amendments to existing facilities at the Annual Review Date.3. Interim Credit Proposal Propose amendments (for e.g., an increase in amount or tenor or pricing, or a change in security structure), and/or new facilities for an existing borrower at any time other that the Annual Review Date. Any credit proposal as mentioned above and/or Pre-sanction Inspection Report/Call Report/Visit Report must be originated by the Relationship Officer duly recommended by Relationship Manager of Branch or Relationship Officer of Corporate Division of Head Office duly recommended by Head of Corporate. If a proposal is originated by Head Office Corporate Division, the transaction would be suitably booked to a branch as proposed by the customer. Identification NumberEach borrower would have a unique Loan Identification Number. The Branch originating a Credit Proposal shall assign this number after getting written acceptance of the borrower in the Facility Offer Letter that forwarded to the borrower after receipt of the approval from the competent authority of the Bank. The identification number will consist of three parts: three digit Branch Code, four digit Unique Serial Number and four digit Year in which the customer begins credit relationship with our bank. In fine, the identification number format will be as follows: Branch Code-Unique Serial Number-Year. There would be two digit loan category number assigned by Head Office also. Time Frame for DecisionAny requirement for further information regarding a particular credit proposal shall have to be communicated in writing to the customer within 5(five) days from the date of submission of the credit application. And, any decision of declining a credit application other than retail credit shall have to be communicated to the customer by the Relationship Team within 15 (Fifteen) days from the date of receiving all information from the customer. On the other hand, Head Office Credit Risk Management Division will inform the primary status of the proposal after scrutiny of the proposal within 3(three) days from the date of submission of the scrutinized credit proposal by the Corporate Banking Division other than Industrial Credit. Reporting ApprovalsCredit Executives having credit approval authority at Branch level should report on monthly basis a summarized position of all credit facilities sanctioned by him/her during the month in the prescribed form. This is to be submitted to the Head of Credit and Head of Corporate within the first week of the following month. Review of ApprovalThe Head of Credit Risk Management Division will review at least 10% of total approval of an individual executive on monthly basis in respect of compliance with the Credit Risk Management Policy, internal circulars, prevailing regulations etc and report the findings to the Managing Director. Revision of Credit DecisionAny credit proposal declined by Credit Risk Management Division may be placed before next higher authority for reassessment/review if Corporate Banking Division feels that the exceptions are justifiable, or can be rectified over a reasonable period of time. But no appeal will go beyond the Managing Director. Compliance to RegulationAny credit approval/sanction shall be subject to the compliance of Banks Credit Policy as well as banking regulations in force or to be imposed by the regulatory body from time to time and to the changes in the Banks policy. This is to be specifically mentioned in the Sanction Advice issued to the customer. Credit CommitteeBank has a multi-tier Credit approving system to manage the credit risk efficiently. Credit proposals after preliminary evaluation and making necessary adjustment will be placed by Corporate Banking Division before the Credit Committee for preliminary appraisal since recommendation of the Credit Committee is pre-requisite before approving any loans by the appropriate approval authority. Credit Risk Review Department of CRMD will conduct their risk assessment on different aspects of the proposal and may place their observation in the Credit Committee meeting. Additional Managing Director/Deputy Managing Director will be the Chairman of the committee and the committee is to be constituted by the Managing Director. TOR of the Credit Committee will be framed time to time and to be approved by Managing Director. There will be Branch Credit Committee to review the Credit proposal which fall under the delegated power of Branch incumbent. No proposal will be approved unless it is screened and recommended by the Branch Credit Committee. The Branch Credit Committee will be constituted within the framework as advised by the Credit Risk Management Division duly approved by the Managing Director. Branch will inform Credit Risk Management Division about the formation of the committee and any changes due to transfer and others time to time. Steps in credit Approval ProcessStep-1: A potential borrower collects prescribed Credit Application Form from the Relationship Officer of Branch/Corporate Division, Head Office/Web address of the Bank. Later, he/she submits the filled in Credit Application Form along with required papers and documents. Step-2: The Relationship Officer scrutinizes the Credit Application Form and other documents submitted by the customer and make a preliminary assessment on creditworthiness of the potential borrower on the basis of the information provided by the borrower. Relationship Officer collects further information from the customer if it is felt necessary. And, if Relationship Officer finds the proposal not credit worthy, a refusal letter to the customer would be sent immediately. On the other hand, if Relationship Officer finds the proposal acceptable within the parameter as set by the Credit Policy and instructions issued time to time by Credit Department, Relationship Officer will forward the application with his comments to the concerned Relationship Manager.Step-3: The Relationship Manager, singly or jointly with Relationship Officer, visit the customers business premise and try to acquire proper understanding about the business position, business expertise and reputation of the borrower, purpose of credit, actual credit requirement, sources of repayment, etc. Besides, he/she negotiates with the customer about the structure of the proposed credit facility to control the risks. Apart from this, he/she assesses the value of the security to be offered and prepares Valuation Report. Finally, the Relationship Manager summarizes all these information in the Pre-sanction Inspection Report/Call Report/Visit Report in the Banks prescribed format in which he/she recommends for specific credit facility for the customer. At the same time, The Relationship Officer, who is the primary bank contact with the borrowers collects duly filled in CIB Inquiry Form from the customer and send the same to the Credit Administration Department of Head Office to collect latest CIB Report from Credit Information Bureau of Bangladesh Bank.Step-4: The Relationship Manager sends the Pre-sanction Inspection Report to the Corporate Division, Head Office. The Head of Corporate Division or assigned Executive assesses the credit proposal and may contact with the concerned Relationship Manager or directly to the customer for any query. Finally, Corporate Division of Head Office communicates their decision to the Relationship Manager. Step-5: Credit Administration Department on receipt of the request letter from the Branch will send the CIB Inquiry Form to Bangladesh Bank. Credit Administration Department will send the CIB report immediately by facsimile/e-mail/courier service to the concerned Relationship Officer on receipt of the report. Everything may be closed if adverse CIB report is received. In that case, letter of regrets would be issued to the customer informing the reason accordingly. Step-6: If, clean CIB Report is received, the Relationship Officer originates a formal Credit Proposal in prescribed format that should carry the recommendations of the Relationship Manager. After signing by him, it is to be sent to the Corporate Banking Division, Head Office and a copy to the Credit Risk Review Department of Credit Risk Management Division. It is to be mentioned here that for renewal proposal, a certification of Credit Administration officer is required stating the documentation status following existing sanction advice. Step-7: Corporate Banking Division, Head Office after modifying the proposal as required place the proposal along with Head of Corporate Banking Divisions recommendation before the Credit Committee. Head of Credit Risk Review Department of CRMD or his authorized representative may report his observation in writing/verbally before the Credit Committee. Corporate Banking Division should inform the list of proposals that are to be placed before the Credit Committee at least 15(fifteen) hours before to the Credit Risk Review Department of CRMD for smooth functioning of the committee except the exception cases. Step-8: Credit Committee will analyze the proposal and if found viable recommend for approval to the appropriate approval authority following discretionary power provided in delegation of credit approval authority with their observations. If the proposal is endorsed by the Credit Committee, Corporate Banking Division will prepare required Memo mitigating the weakness/risk factors and incorporating the suggestion/observation of the Credit Risk Review Department as well as Credit Committee for approval of the appropriate authority. The modified Memo should be routed through Credit Risk Management Division for further scrutiny. On receipt of the Memo, Head of Credit Risk Review Department will distribute to the respective Credit Officer to review, scrutinize and analyze in line with the business plan, risk acceptance criteria of the bank and general credit norms. Credit Officer after evaluating the credit information, facility structure and risk factors summarize his observations with reasons and forward for concurrence of Head of Credit. The Head of Credit may contact with the Head of Corporate Banking Division for clarification/rectification on any issues if required. Credit Risk Management Division may include covenants & conditions to control the acceptable risk and verify the status of the observations of Credit Committee as well as Credit Risk Management Division. If the final Memo is acceptable, risk is within tolerance level and facility structure commensurate with the total facility, it will be recommended by Credit Risk Management Division for approval. The appropriate approving authorities may approve the proposal if within their respective delegated approval authority or decline the proposal or may ask for further review. If the proposal exceeds Managing Directors delegated authority, he/she recommends it to the Executive Committee of the Board of Directors or to the full Board of Directors. Step-9: If the facility is approved by the appropriate approval authority, Corporate Banking Division will send the copy of approval Memo/Note sheet to Credit Risk Management Division. On receipt of approval, Credit Risk Review Department of CRM issues Sanction Advice to the originating Branch along with a Documentation Check List preferably on the same date which clearly spells out what is the documentation formalities required to be completed before disbursement. Copy of the Sanction Advice is to be sent to Corporate Banking Division and Credit Administration Department. Step-10: Sanction Letter to the customer following Credit Risk Review Department of CRM sanction advice to be issued under dual signatures from the originating Branch. Preferably, Relationship Manager and Credit Administration Officer of the Branch should sign on the Sanction Letter. Disbursement ProcessDisbursement of a loan sanctioned by the competent authority shall be made after receipt of written clearance obtained from Credit Administration Department of Head Office. The disbursement process will be guided by some basic principles. These are: Separation of AuthorityRelationship Department and Disbursement Authority shall be separate from each other to minimize the risk. Relationship Department will market the products along with preparation of credit proposal while Credit Administration Department will deal with disbursement of approved credit facilities after completing all formalities as mentioned in the Sanction Advice. Documentation Check ListWhile issuing Sanction Advice to the Corporate Division/Branch, the Credit Division will enclose therewith a Documentation Check List in which documentation formalities will be specified that to be completed by the Credit Administration Unit of the disbursing branch before any disbursement to secure the credit facility.Documentation is obtaining such agreement where all the terms and condition and securities are written and signed by the borrower. It specifies rights and liabilities of both the banker and the borrower. In documentation each type of advances requires a different set of documents. It also differs with the nature of securities. The documents should be stamped according to the stamp Act. There are no hard and fast rules of documentation and it varies from bank to bank. Generally, the documents are taken in the case of a secured advance by UCB: Demand promissory note: Here the borrower promises to pay the loan as and when demand by bank to repay the loan. Letter of arrangement. Letter of continuity. Letter of hypothecation of goods and capital machinery. Stock report: This report is used for OD and CC. In this report, information about the quality and quantity of goods hypothecated is furnished. Memorandum of deposit of title deed of property duly signed by the owners of the property with resolution of Board of Directors of the company owning the landed. Personal guarantee of the owners of the property. Guarantee of all the directors of the company. Resolution of the board of directors to borrow fund to execute documents and completes other formalities Form no. XVII/XIX for filling charges with the register of joint stock companies under relevant section. Letter of Revival Letter of lien for advance against FDR. Signing Documentation Check ListRelationship Officer is responsible for getting the document signed by the customer and completing other formalities as per checklist. After completion of documentation formalities as per checklist, the Branch will submit the same to the Credit Risk Administration Department, Head Office, duly signed by the Relationship Manager (Head of the Branch) and countersigned by the Credit Administration officer at the Branch seeking Disbursement Authority (In case of credit facilities approved by Branch incumbent within delegated approval authority from Managing Director, copy of signed Documentation Check List is to be sent to CAD, Head Office for information). It is the responsibility of the Credit Administration Officer to verify the proper execution of documents/security/collaterals before countersigning. However, both the signing officer will be equally accountable for any lapses in documentation. Deferral of DocumentationNo credit facility is to be released for utilization, if requisite documentation is not available or proper deferral approvals have not been obtained. If there is any inadequacy in documentation as per sanction advice, the Relationship Manager shall have to seek temporary deferral/waiver stating the reasons and specific time frame. Request of deferral will only be processed in cases of extreme need, i.e., all reasonable attempts have been made to complete the documentation prior to disbursements and have failed only because of unusual circumstances. Such temporary deferral/waiver shall be approved by the Head of Credit Risk Management Division/Additional Managing Director and/or the Managing Director depending on the issues. However whole responsibility for removal of the inadequacy within the stipulated time shall rest with concerned Relationship Officer/Manager and respective Credit Risk Administration Unit are responsible for monitoring deferrals. Disbursement AuthorityAll the approved credit facilities except the facilities approved under delegated authority of Branch incumbent shall be disbursed only after having written disbursement authority/clearance from the Credit Administration Department, Head Office. If there is any inadequacy in documentation, the CAD Officer at Branch level will specifically mention it in the Documentation Check List / Certificate of Documentation and concern Relationship Manager/ Branch Manager will mention reason behind the inadequacy and asked for temporary deferral with specific time frame along with reasons behind for deferral. If the request is approved by the authority as mentioned in the preceding paragraph, Credit Risk Administration Department will intimate the deferral of documentation for specific time as approved and will issue disbursement authority to the Relationship Manager/ Branch Manager. However, Branch will not disburse any facility without proper documentation and if necessary, should obtain deferral approval from CAD, Head Office. Facilities Approved by the Head of BranchLoan against financial obligation or others under the approval authority of Branch incumbent, if authorized by Managing Director, may be disbursed after completion of documentation formalities and signing of the Documentation Check List by the Head of the Branch and countersigning by the CAD Officer of the Branch. Limit will be input in the system by the CAD officer independently to control the accounts. ValuationValuation of assets charged to the Bank is a crucial function, as it has a direct bearing on the amount of loss that the Bank might have to suffer in the event that the Borrowers default. The method of valuation employed, has to be appropriate to the nature of the assets.All valuations must be supported with factual data, in order to qualify the collateral for credit value; valuators estimates without supporting documents are not acceptable. Valuation should be conducted by an enlisted Valuator of Banks choice. Where the exposure is not large, joint valuation by Relationship Manager and another officer of the bank may be accepted since it will not be cost effective. Apart from Valuators valuation independent valuation by Relationship Manager and another Officer should also be carried out. Legal VettingMortgage documents should be properly vetted by the Bank's Legal Counsel. He/she will also certify that proper documentation, borrower's legal standing and enforcement of securities are in place. Finally, Lawyer's Satisfaction Certificate shall have to be obtained regarding documentation where there are securities/collaterals other than Personal Guarantee and Financial Obligation. File MaintenanceMaintenance of credit files is an important part of the credit process and is required to determine whether or not credit extensions are based on adequate and complete information. Credit files contain records of analysis and business strategy information submitted to the Bank by the clients. Adequate system is required to be in place to restrict access to this confidential information to only those personnel who are authorized to use it and maintain it. Each borrowing client should have separate and independent file(s) and shall be maintained under the custody of the concerned Relationship Officer of Branch and Credit Officer of Credit Department, Corporate Banking Division and Recovery Unit (Where applicable) of Head Office. Credit Administration Department will also maintain independent files for each borrower where copy of Sanction Advice, acceptance of the borrower, signed Documentation Checklist, Disbursement Authorization Memo, Deferral letter and other papers related with CAD will be maintained. It is the responsibility of the concerned officer for proper filing of the papers to ensure that required information is easily locatable and maintained in good order. An officer who does not handle the file will have to take written permission from the higher authority to have access to it. Steps in Documentation ProcessStep-1: The Relationship Officer of Branch is responsible for getting the document signed by the customer and completes the formalities of mortgage with the help of banks legal counsel. The CAD Officer stationed in Branch will scrutinizes and reviews each document and mortgage papers independently as mentioned in the Sanction Advice. After completion of documentation formalities, the concerned Relationship Manager signs the duly filled in Documentation Check List/Certificate of Documentation sent by Credit Department of Head Office. CAD Officer countersigns the Documentation Check List/Certificate of Documentation if found in order and sends it to the Head of Credit Administration seeking disbursement authority and loading the facility in the system. Step-2: All legal and banking documentation will be kept with utmost security in fire proof safe (vault) separately from the credit file under dual custody. Documentation Check List should be maintained in Credit File as well as in the Jacket of documents. Dual custodian and their alternates are to be nominated by the Credit Administration Department. Safe in /Safe out register of documents is to be maintained by Relationship Manager. Step-3: If Credit Administration Department, Head Office found the Documentation Check List having no discrepancy, Disbursement authority will be given to the concerned Relationship Manager/ Branch Manager and CAD officer would load the limit in the system/database and limit is made available to the customer for drawing. Credit Monitoring ProcessCredit monitoring and review is very important, because it ensures proper utilities and repayment of Bank fund. Credit monitoring and review feature of UCBL is concerned was assessing the quality of different type of loan. In classifying the loan and advance there are four classes in the loan review practiced in United Commercial Bank Limited. They are as follows: UnclassifiedThe loan account is performing satisfactorily in the terms of its installments and no overdue is occurred. This type of loan and advances are fall into this class. SubstandardThis classification contains where irregularities have been occurred but such irregularities are temporarily in nature. To fall in this class the loan and advance has to fulfill the following factor.Category of CreditTime overdue (irregularities)Substandard

S-T Agri & Micro Credit3 months & above but less than 6 months.

Continuous loan

Demand LoanUn-recovered for 3 months & above but less than 6 months from the date of the loan is claimed.

Fixed Term loanRepayable within 5years: If the overdue installment equals or exceeds the amount repayable within 6 months.

Repayable more than 5years: If the overdue installment equals or exceeds the amount repayable within 12 months.

The main criterion for a substandard advance is that despite these technicalities or irregularities no loss is expected to be arise for the bank. These accounts will require close supervision by management to ensure that the situation does not deteriorate further. DoubtfulThis classification contains where doubt exists on the full recovery of the loan and advance along with a loss is anticipated but cannot be quantifiable at this stage. Moreover if the state of the loan accounts fall under the following criterion can be declared as doubtful loan and advance. Category of CreditTime overdue (irregularities)Doubtful

S-T Agri & Micro Credit6 months & above but less than 12 months.

Continuous loan

Demand LoanUn-recovered for 6 months & above but less than 12 months from the date of the loan is claimed.

Fixed Term loanRepayable within 5years: If the overdue installment equals or exceeds the amount repayable within 12 months.

Repayable more than 5years: If the overdue installment equals or exceeds the amount repayable within 18 months.

Bad and LossA particular loan and advance fall in this class when it seems that this loan and advance is not collectable or worthless even after all the security has been exhausted. In the following table the criteria to be fulfilled to fall in this category are summarized: Category of CreditTime overdue (irregularities)Bad and Loss

S-T Agri & Micro CreditNot recovered within more than 12 months.

Continuous loan

Demand LoanUn-recovered more than 12 months from the date of the loan is claimed.

Fixed Term loanRepayable within 5years: If the overdue installment equals or exceeds the amount repayable within 18 months.

Repayable more than 5years: If the overdue installment equals or exceeds the amount repayable within 24 months.

Foreign Exchange

Foreign exchange departmentForeign Exchange Department is an important one in UCBL Rajshahi Branch that deals with import, export, and foreign remittance and post import financing. Through this is an ancillary service provided by the Bank. The Bank is purchasing primary security by giving loan in form of loan against imported merchandise (LIM), and loan against trust receipt (LTR). Bank branch should be Authorized Dealer with the approval of Bangladesh Bank to run foreign exchange business. This department is playing an important role in enhancing export earnings, which aids economic growth and, in turn, will be helpful for economic development. On the other hand, it also helps to meet those goods and services, which are more demandable and not adequate in our country. Function of Foreign Exchange L/C opening & L/C amendment Sanctioning PAD, LIM, LTR, Packing credit Foreign Bill Purchase Local Bill Purchase Foreign Currency Account Maintaining Foreign Currency RemittedThe Foreign Exchange Department of UCBL is divided into three broad sections: Letter of CreditLetter of Credit is a payment guarantee to the seller by the buyers Bank. It is a Credit Contract whereby the buyers Bank on behalf of the buyer is committed to pay an agreed amount of money to the seller under some agreed conditions. Form of Letter of CreditA letter of credit (L/C) may be two forms. These as below: Revocable Letter of Credit. Irrevocable Letter of Credit.Revocable L/C: If any letter of credit can be amendment or change of any clause or canceled by consent of the exporter and importer is known as revocable letter of credit.Irrevocable L/C: If any letter of credit cannot be changed or amendment without the consent of the importer and exporter is known as irrevocable letter of credit. Contents of Letter of CreditBanks normally issued letter of credit (L/C) on forms which clearly indicate the Banks name and extent of the Banks obligation under the credit. The contents of the L/C of different Banks may be different .In general L/C contains the following information:- Name of the Buyer: who is also known as the accounted since it is for his account that the credit has been opened? Name of the Seller: Who is also known as the beneficiary of the credit? Moment of the Credit: When it should be the value of the merchandise plus any shipping charges intent to be paid under the credit. Trade Terms: Such as F.O.B/CIF. Tenor: Tenor of the Draft which is normally dependent upon the requirements of the buyer. Expiration Date: Which is specified the latest date documents may be presented. In this manner or by including additionally a latest shipping date, the buyer may exercise control over the time of shipment. Documents Required: Which will normally include commercial invoice consular or customers invoice, insurance policies as certificates, if the source is to be effected by the beneficiary and original bills of lading.foreign exchange importImport policy refers to government policies account for a particular fiscal period envisaging the allocation of fund available from various sources for import of certain quantity of certain goods. The main purpose of the policy is to conserve scare foreign exchange & to ensure its utilization for the import of goods and services which have national priority. The selected persons on institutions those who have got valid Import Registration Certificate (IRC) form the Chief Controller of Import and Export (CCI & E) can import and they are known as importers Flow Chart of Import Procedure

Open an L/C by the ImporterAn Importer is required to fulfill some conditions/criteria to be eligible as an importer as per provisions of import policy order and guide lines for Foreign Exchange Transaction. An importer is required to submit the following documents along with L/C applications to get a license to import goods through UCBL. A current account with UCBL, Mohakhali Branch. Import Registration Certificate (IRC) Pro-forma Invoice/Indent Tax Identification Number (TIN) Membership Certificate from recognized Chamber of Commerce and Industry. Letter of Credit Authorization (LCA) from duly attested. L/C application duly signed by the importer. One set of IMP form. Insurance Cover note with money receipt. Import Registration CertificateTo import a person should be competent to be an importer. According to Import and Export Control Act, 1950, the office of Chief Controller of Import and Export provides the registration (IRC) to the importer. After obtaining this, the person has to secure a Letter of Credit authorization (LCA) from Bangladesh Bank and then he becomes a qualified importer. He is the person who requests or instructs the Issuing Bank to open a Letter of Credit. He is also called applicant of the credit. Indent or Proforma InvoiceIndent or Performa invoice is the sale contract between seller and buyer in import-export business. There is slight difference between indent and Performa invoice. The sales contract, which is direct correspondence between importer and exporter, is called Performa invoice. There is no intermediary between them. On the other hand, there may be an agent of exporter in importers country. In this regard, if the sale contract is occurred between the agent of exporter and importer then it is called indent. Letter of Authorization Form (LCAF)The Letter Of Credit Authorization Form is the form prescribed for the authorization of opening letter of credit or payment against import and used in lieu of import license. The authorized dealers are empowered to issue LCA forms to the importers to allow import in Bangladesh. If foreign exchange, it is intended to be bought from Bangladesh Bank against a LCAF, it has to be registered with Bangladesh Banks Registration Unit located in the concerned area office of the CCI&E. the LCA forms available with the authorized dealers are issued in a set of five copies each. First copy is exchange control copy, which is used for opening of L/C and effecting remittance. Second copy is the custom purpose copy, which is used for clearance of imported goods from custom authority. Triplicate and Quadruplicate copy of LCAF are sent to concerned area of CCI&E office by authorized dealer/Registration Unit of Bangladesh Bank. Registration Unit keeps quintuplicate copy as office copy.When a client approaches for issuance of letter of credit, Import section of United Commercial Bank Ltd. Checks the following: Whether the item for import of which the documentary letter of credit need to be opened is permissible i.e. not include in the restrictive list as per Import policy Order in force. Whether there are any legal/technical defects/restrictions in opening the letter of credit under the various sources as intended by the customer. Whether the Bank is holding satisfactory credit report on the beneficiary to satisfy the guidelines for foreign exchange transactions. Importer Application for L/C LimitThe importer must have sufficient credit line for opening an L/C. In case the client does not have approved credit line for opening an L/C the Manager of the branch takes necessary arrangement to submit a proposal to the Credit Committee/Executive. Committee of the Board keeps pending of opening the L/C till its approval. On receipt of the approval the Manager issues a sanction letter to the client providing copies of the same to Credit Division. To have an import credit line, an importer submits an application to the Foreign Exchange Department of UCBL, Mohakhali Branch furnishing the following: Full particulars of Bank account. Nature of the business. Required amount of limit. Payment terms and conditions. Goods to be imported. Offered security. Repayment schedule.A credit officer scrutinizes this application and prepares the proposal accordingly and forwards it to the Head Office Credit Committee. The Committee, if satisfied sanctions the credit line and returns back to the branch. Thus the importer is entitled to the credit. L/C ApplicationL/C Application is a sort of arrangement between client and Bank. UCBL provides a printed form for opening a L/C to the importer. Usually the importer expresses his desire to open a L/C quoting the amount of margin in percentage. The importer gives the following details: Full name and address of the Applicant. Full name and address of the Beneficiary. Draft amount (both in figure and word). The form of credit whether Revocable or Irrevocable. Whether the credit is available by payment, acceptance or negotiation. On which party the draft are to be drawn and the tenure of such draft. A brief description of goods, including details of quantity and unit price. Whether the freight is to be prepaid or not. The country of origin. The port of shipment and destination. The last date of shipment. Partial shipment is allowed or not. The date and place of expiry of the credit. Negotiation period. Details of the documents required and mode of transmission of documents (swift/mail/telex). The time bar within which the documents should be presented. Whether the credit is to be transferable one or not. Sales terms (FOB/ C&F/ CIF). Shipping mark. IRC Number and LCA Number. Insurance cover note.Additional Instruments/Conditions: Shipment/Transshipment not effected by Iraq, Montenegro, Cuba, Libya, Serbian, Israel, flag vessels/carriers or any vessel/carrier calling at any port of Iraq, Israel, Serbia, Montenegro, Cuba, Libya is prohibited. Radiation certificate is required in case of food items. All charges outside Bangladesh are of account of importer or beneficiary.The above information is provided along with the following documents:1. Performa Invoice or Indent stating the description of the goods including quantity, unit price etc. 2. Insurance Cover Note with money receipt, name and address of issuing company and the policy number.3. Four set of IMP (Import) Form. Scrutiny of L/C ApplicationOn receipt of L/C application, the branch officials scrutinize the same very carefully giving emphasis to the following: The terms and conditions of the L/C must be complete with UCPDC 500 and Exchange Control & Import Trade Regulation. L/C application is stamped, as it is a guarantee of payment. All the information mentioned in different columns has been furnished. Eligibility of the goods to be imported.If L/C is opened against indent, Bangladesh Banks permission, valid registration, authority to issue indent by indenter are to be checked.1) The L/C must not be opened in favor of the importer or his agent.2) The importer agreeing all terms and conditions mentioned in the application must sign L/C.3) IMP form duly filled and signed.4) Validity of IRC.5) HS code of the goods.6) Insurance cover mode with date of shipment.7) Radioactivity report in case of old machinery.8) Certificate declaring that the item is in operation not more than 5 years in case of car. Account Procedure in Case of L/C OpeningWhen the application is found to be in order and the client has sufficient approved credit line for opening an L/C, vouchers are prepared to record the contingent Liability for the L/C opened and realized margin, commission, Telex charges, postage etc. as per Banks schedule of charges/sanction letter. Accounting treatment at the time of L/C opening is follows:For recording Contingent Liability:Customers LiabilityDebit

Bankers LiabilityCredit

For realization of margin, commission, telex and other charges:Customer A/CDebit

Margin on L/CCommission on L/C SWIFT/Postage ChargeMiscellaneous ChargeCreditCreditCreditCredit

After that, L/C number and above entries are given in the L/C opening register has following details: Date, L/C number, Name of the customer, Foreign currency amount, Exchange rate, Taka equivalent and source of import. Goods, country of origin, advising Bank, expiry date, margin. Charges: Commission, Postage, SWIFT. DistributionAfter giving the accounting entries the transmission of L/C is done. UCBL takes the following steps through SWIFT to advise the L/C to the beneficiary: Send the signed original L/C together with the copy to the dispatch section for mailing to the L/C advising Bank and L/C reimbursement Bank respectively by Courier/ Air mail. Send the approved text of L/C and reimbursement authorization to SWIFT service in-charge for their onward transmission to advising Bank and reimbursing Bank respectively. Deliver the customer copy of the L/C along with the Debit Advise to the customer over the counter or send the same to the dispatch section for onward delivery to the customer. Send the original accounting vouchers in batches to the accounts section for capture and updating of the data-base/records. Check the L/C file to ensure that all the related documents i.e. L/C application with supporting documents, approval, L/C copy, reimbursement instruction copy and copy of accounting vouchers are filled properly. Amendment of L/CParties involved in a letter of credit, particularly the seller and the buyer cannot always satisfy the terms and conditions in full as expected due to some genuine reasons. In such a situation, the letter of credit is amended. In Revocable letter of credit, it can be amended or cancelled by the issuing Bank at any amount and without prior notice to the beneficiary. But in case of irrevocable letter of credit, it can never be amended or cancelled without the agreement of the issuing Bank, the confirming Bank (if any) and the beneficiary. When the customer approaches for amending the terms and conditions of a L/C opened at his request, UCBL checks the following: The type of amendment the customer is asking for: Whether it is concerning an increase of decrease in the L/C amount. Whether it is concerning extension of shipment/expiry date of the L/C. Whether it is relation to change in the merchandise/mode or route of transportation. Depending on the type of amendments, Bank has to review the matter in the same way as applicable while opening a L/C in accordance with the provisions. ProcedureOn receipt of a request letter for amendment of L/C from the customer the Bank takes the following steps: Record the date and time of receipt of the application. Read the request letter for amendment briefly to ensure that concerned L/C number and the instructions mentioned are clear. If found in order check the request letter for amendment together with all supporting papers. In case the letter of amendment is completed or required papers neither are nor submitted, the customer should be contacted promptly for rectification of the defects. In case the customers do not have approved credit line for increasing/amending the L/C, the import section has to submit proposal to the Executive Committee of the Board and keep pending of amending the L/C till its approval. When the request letter for amendment with all papers found to be in order, record the particular of amendments with date in appropriate column against the relevant L/C in the L/C register. Prepare the letter of amendment either in mail, SWIFT telex format. Account EntriesAfter preparing the letter of amendment, the Bank prepares the vouchers to amend the amount of contingent liability for increase (in case of increase in L/C value) and commission & charges. In case of decrease in L/C value, refund the margin to the credit of customer account if the L/C was established under 100% margin, otherwise management consent is required. The accounting treatments are as follows: For amending contingent liability:Increase of L/C value Customer LiabilityDebit

Bankers Liability Credit

Decrease of L/C value Customer LiabilityDebit

Customers Liability Credit

For increase of L/C value,Customer A/CDebit

Margin on L/CCommission on L/C SWIFT/Postage ChargeMiscellaneous ChargeCreditCreditCreditCredit

Form refunding customers liability (after the amendment by the advising Bank)Margin A/CDebit

CD account of customer Credit

UCBL, Rajshahi Branch transmits the letter of amendment to the advising Bank and L/C Reimbursing Bank respectively by Courier/ Air Mail. A letter of amendment executed by the issuing Bank becomes enforceable only after agreement of the party in documentary credit operation. Lodgment of import DocumentsOn scrutiny, if it is found that the documents drawn in conformity with the terms of the credit, United commercial Bank Rajshahi Branch lodges the documents in Payment Against Documents (PAD) register/database giving a bill reference serially in numerical order.The Bank that opens the letter of credit is bound to honor its commitment to pay for import bills when these are presented for payment, if drawn strictly in terms of letter of credit. The opening Bank will lodge the shipping documents to their book and will respond to the debit advice originated by the foreign correspondent to the debit of Payment Against Documents A/C or Bills of Exchange A/C and present the bill to the importer for payment. The following steps are involved in lodgment: First all the particulars of the documents are entered in the PAD register and PAD No seal is given on all the copies of the received documents. Convert the foreign currency into Bangladeshi currency. Reverse the contingent liability and entry made in the liability register. Prepare lodgment voucher. Send IBCA to the Head Office. Make intimation to the importer. Retirement of DocumentsThe importer receives the intimation and gives necessary instruction to the Bank for retirement of the bills or for the disposal of the shipping documents to release the imported goods from the customs authority. The importer may instruct the Bank to retire the documents by debiting his account with the Bank. During delivery of the documents the following accounting entry is given:-Customer or LTR A/C (with PAD interest)Margin on L/C A/CDebitDebit

PAD A/CInterest/Commission Credit Credit

Post Import FinancingIf there is no available in cash in importers hand, he can request the Bank to grant loan against the documents for the purpose of post import finance. There are two following forms of post import finance available in UCBL Rajshahi Branch. LIM (Loan against imported merchandise). LTR (Loan against trust receipt).On the arrival of goods and lodgment of import documents, importer may request the Bank for clearance of goods from the port (custom) and keep the same to Bank Godown. Proper sanction from the authority is to be obtained before clearance of consignment. For giving these types of loan, officer makes loan proposal and sends it to H/O for approval. After getting approval from H/O, Bank grants loan in the form of either LTR or LIM. Account Entries LIM/LTR creation:LTR/LIM (Importer) A/CDebit

PAD A/C Credit

After payment of the loan or delivery of goods: Partys A/CDebit

LTR/LIM A/CInterest A/C Credit Credit

By and large, it is mentioned herewith that Bank only deals with the documents, not with goods & services in case of foreign exchange business.foreign exchange ExportAccording to Foreign Exchange Regulation Act, 1947, nobody can export by post and otherwise any goods either directly or indirectly to any place outside Bangladesh, unless a declaration is furnished by the exporter to the collector of customs or to such other person as the Bangladesh Bank may specify in this behalf that foreign exchange representing the full export value of the goods have been or will be disposed of in a manner and within a period specified by Bangladesh Bank. Payment for goods exported from Bangladesh should be received through an Authorized Dealer in freely convertible foreign currency or in Bangladeshi Taka from a Non-Resident Account.The Export section deals with two types of Letter of credit that are as follows: Back to Back Letter of CreditBack-to-Back L/C is a secondary L/C opened by the sellers Bank based on the original/master L/C to purchase the raw materials and accessories for manufacturing of the export products required by the seller. In our country, export oriented Garment Industry, operating under bonded warehouse system are availing Back-to-Back facilities. In UCBL, Rajshahi Branch most of the Backto-Back L/C opened on Garment Industry Account. Therefore the discussion is based on account of garment Industry in Bangladesh. Opening Back to Back L/CBesides normal formalities and requirements for L/C opening, the following points are considered. No Back-to-Back L/C on account of Garment industries should be opened without prior approval from Head Office. Branches are required to obtain prior approval from Head Office Division/Credit Committee for opening all Back-to-Back L/C. While opening of Back-to-Back L/C following instruction should be followed. At first, UCBL needs to check in the Performance Register whether the B/B L/C has the validity to open the L/C. The bank makes sure that the last date of shipment date in CF7 is 15 days earlier than that of performance register. After that, UCBL will check that the total amount of B/B L/C will not exceed the 75% of the Master L/C. If everything goes in order, the officer will give entry on the register of B/B L/C registers and put a number of the B/B L/C. Separate L/C number should be used for Back-to-Back L/C and are to be recorded in separate Register. Necessary information are written down in the performance register. Next, the dispatch employee will write down the confirmation letter which is send to the Bank of the importer. Account Entries Creation of Shipping Guarantee Liability:Customers liability for Back-to-back L/CDebit

Bankers liability for Back-to-Back L/C Credit

For realization of margin, commission, telex and other charges:Customer A/CDebit

Commission on L/C StampLCAF (If Foreign)IMP (If EPZ & Foreign)SWIFT/Postage ChargeMiscellaneous ChargeCreditCreditCreditCreditCreditCredit

Documents Required for Back to Back L/CIn United Commercial Bank Ltd. Rajshahi Branch, following papers/ documents are required for opening a Back-to-Back L/C. Master L/C Valid Import Registration Certificate (IRC) and Export Registration Certificate (ERC). L/C Application and LCAF duly filled and signed. Pro forma Invoice Indemnity or undertaking No objection from previous Bank (if any) Factory inspection certificate Insurance cover note with money receipt IMP form duly signed VAT Registration In addition to above documents, the following are also required to export oriented garments industries while requesting for opening a Back-to-Back L/C Textile Permission Valid bonded warehouse license Quota Allocation Letter issued by the Export Promotion Bureau (EPB) in favor of applicant for quota items. BGMEA Membership.In case the factory premises is a rented one, the Letter of Disclaimer duly executed by the owner of the house/premises to be submitted. A checklist to open a Back-to-Back L/C as follows: Applicant is registered with CCI&E and has bonded warehouse license. The master L/C has adequate Validity period and has no defective clause. L/C value shall not exceed the admissible percentage of net