CHAPTER I

INTRODUCTION
1.1 Background

An internship is a work-related learning experience for individuals who wish to develop hands-on
work experience in a certain occupational field. It involves working in your expected career field.
It gives the students a valuable experience and a chance to get exposed to the business
environment. Interns are usually college or university students, but they can also be high school
students or post graduate adults seeking skills for a new career. Student internships provide
opportunities for students to gain experience in their field, determine if they have an interest in a
career and create a network of contacts. Internships provide the employers with cheap or free labor
for low-level tasks and the prospect of interns returning to the company after completing their
education and requiring little or no training.

This internship program is designed by Pokhara University for the partial fulfillment of the degree
of Masters in Business Administration (MBA). Being the student of MBA and specializing in
Business and Finance the students are honored by the internship program under this curriculum. It
helps the students develop their inner ability or the confidence level and the level of understanding
to compete in this complex and sophisticated age. It also increases the ability of the students to
tackle the business problems, to grasp the opportunities and to face the threats. In its totality,
internship program teaches us the corporate culture, develops our public relationship skills, makes
us competent and provides us an excellent working experience.

The Letters of Credit give importers the most extensively used and conventional international trade
payment means and finance instrument. By making Letter of Credit terms to permit Deferred
Payment or Trade Acceptance, a Letter of Credit facilitates financing to the importer. It promises
payment, provided the seller complies with the terms and conditions of the Letter of Credit. The
Irrevocable letter of credit can't be canceled or varied without the approval of all parties.
1.2 Objectives
The general objectives of the report are as follows:
 To acquire knowledge of banking activities and environment.
 To understand the practical implications of academic knowledge.

The specific objectives of the report are as follows:

 To know the various procedures involved in Letter of Credit.
 To know the various parties involved in LC.
 To acquaintance with the overall organizational environment of Prime Commercial Bank
Limited.

1.3 Detail of Internship at Prime Commercial Bank

Address: Central Office, Kamalpokhari
Position: Senior Assistant
Department: Trade Finance Department
Working Duration: 8 Weeks
Work Hours: 9:30 A.M. to 5:30 P.M.
Name & Designation of Internship Supervisor at Prime Commercial Bank: Arpana Lacoul
Name & Designation of Internship Supervisor at AIM: Mr. Dhiroj Shrestha
1.4 Introduction to Prime Commercial Bank
The Prime Commercial Bank Limited, the 21st commercial bank registered in the Office of
Company Registrar Kathmandu under the Ministry of Industry, Commerce, and Supply, on
2064/04/01 B.S. in accordance with the Company Act 2063 of Nepal. The bank got its certificate
of commencement as a financial institution of Class “A” on 2064/05/30 B.S. under the Nepal
Rastra Bank Act 2058, Banking and Financial Institution Act 2063 and other applicable Acts of
the government of Nepal. The bank commenced its operations as a financial institution on
2064/06/07 B.S. corresponding English date September 24, 2007.

The Bank has been established by prominent business personnel and professionals from diversified
areas with a prime objective of providing 'Banking Services to Everyone' in the country where still
a large number of the population are deprived of Banking Services. The head office of the PCBL
is situated in New Road Kathmandu and has 4 branches in the valley including the head office and
three other branches outside the valley which makes a total of 7 branches at present, with new
upcoming branches throughout the country.
PCBL, started its banking service to the public, with two other banks, where PCBL has
successfully able to better position itself in the market, in compared to other banks, in short period
of time.
BANK VISIONS
To position itself as a leading and well- established banking institution in its kind and establish it
as 'Bank with Difference'.

MISSION
a. To make a qualitative lending in the Nepalese market to support all kinds of businesses
including personal needs of the Nepalese citizens.

b. To render quick and prompt banking services to the customers.

c. To involve in aggressive marketing and business promotions to promote the banking products
and awareness among the citizens where the country has large number of citizen who is still
deprived of the banking services

d. To introduce new banking services and products.

e. To run the institution with an efficient and professional management;

f. To develop a good corporate governance and ensure adherence to the Central Bank Directives
as well as prevailing rules and regulations;

g. To develop an effective internal control system, Management Information System (MIS) and
compliance.

OBJECTIVE OF THE BANK

The main objectives of the bank in accordance with the Nepal Rastra Bank Act 2058, Banking and
Financial Institution Act 2063 and Company Act 2063 of Nepal are as follows: -

a) To provide world class and reliable banking services provided safeguarding the interest of
the shareholder and the depositors are taken care off.
 b) To uplift the Nepalese Economy by investing in the agricultural, industrial, service, and
other commercial sectors and providing the required financial assistance both from the
internal and external sources.

c) Maximum utilization of available skills, labors, and capital by setting up commercial

activities both in rural and urban Nepal and assisting the government to manage these
industries for poverty alleviation.

d) Acting as a financial intermediary and collecting the scattered funds around the economy
and bring it into use for institutional investment purposes.

e) The bank will endeavor to establish itself as technology savvy, customer friendly and try
to maintain a good relationship with its customers.

VALUES
a. The bank focuses on customer service and extends personalized service to gain confidence
of the customers;

b. The professional management team of the bank upholds a strong belief on teamwork to
deliver extraordinary result to the organization;

BOARD OF DIRECTORS AND MANAGEMENT TEAM

The bank focuses more on leadership skills and working in teams capabilities in its management
team. These two factors are considered as key success factors for any organization. The rising
trend of globalization and recent management turnover in the leading bank of the world owing to
the recession has started demanding dedicated professionals and PCBL is no exception to it.

The management team should not only be able to compete domestically but also have an
international exposure as at present is the 21st-century world, with numerous opportunities to be
exploited, as well as sustain the great degree of rising competition in the sector. PCBL management
team comprises of experienced professionals with years of experiences in the different commercial
bank and another financial sector of Nepal.

The management team of the bank is committed towards the uplift men of the bank in the height
of success through customer satisfaction. The professionals comprising of present Boards of
Directors (BOD’s) and the management teams are as follows

Board of Directors
Table 4: Board of Director
NAME OF THE DESIGNATION EXPERIENCES
DIRECTOR
Mr. Narendra Chairman  Past President Hotel Association of Nepal.
Bajracharya
 Experience in the Banking sector for past 30
years.
Mr. Uttam Narayan Director  32 years of experience in Agricultural
Shrestha
Development Bank.
 General Manager in NIDC Capital Market for 2
years.
 General Manager Cottage and Handicraft
Industry for 1 Year.
Mr. Rajendra Das Director  30 years of experience in industry and trading
Shrestha
house.
Mr. Shyam Director  4 years of experience in insurance companies
Bahadur Shrestha
 20 years of experience in Pharmaceutical
Industry
Mr. Uday Mohan Director  2 years of experience in Banking Sector
Shrestha
 25 years of experience in Hotel Industry
Mr. Umesh Director  President for PABSON for 6 years
Shrestha
 30 years of experience in educational
institutions.
Above table 4 explains about the brief background about the Board of Directors of Prime
Commercial Bank Limited.

Structure of Board of Directors

Figure 2: Board of Directors

Narendra
Bajracharya
Chairman

Uttam Udhya Rajendra Shyam

Umesh
Narayan Mohan Das Bahadur
Shrestha
Shrestha Shrestha Shrestha Shrestha
(Director) (Director)
(Director) (Director) (Director)

Above figures show the hierarchy of Board of Directors of Prime Commercial Bank Limited.

Organizational Structure of Prime Commercial Bank Limited

Figure 3: Organization Structure of Prime Commercial Bank Ltd.

 Chief Executive
Officer

General
Manager

Deputy General Deputy general

Manager Manager
(Corporate) (Operational)

Credit Marketing HRM

Operation Department Trade Finance
Department Department Department

The above figure explains the organization structure of Prime Commercial Bank Limited.
Chapter Two: Assignment / Activities Undertaken
4.1 Overview of Letter of Credit
A standard, commercial letter of credit is a document issued mostly by a financial institution,
used primarily in trade finance, which usually provides an irrevocable payment undertaking.

The LC can also be the source of payment for a transaction, meaning that redeeming the letter of
credit will pay an exporter. Letters of credit are used primarily in international trade transactions
of significant value, for deals between a supplier in one country and a customer in another. They
are also used in the land development process to ensure that approved public facilities (streets,
sidewalks, etc.) will be built. The parties to a letter of credit are usually a beneficiary who is to
receive the money, the issuing bank of whom the applicant is a client, and the advising bank of
whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended
or canceled without the prior agreement of the beneficiary, the issuing bank, and the confirming
bank, if any. In executing a transaction, letters of credit incorporate functions common to Traveler's
cheques. Typically, the documents a beneficiary has to present in order to receive payment include
a commercial invoice, bill of lading, and documents proving the shipment were insured against
loss or damage in transit. However, the list and form of documents is open to imagination and
negotiation and might contain requirements to present documents issued by a neutral third party
evidencing the quality of the goods shipped, or their place of origin.

A commercial letter of credit is a contractual agreement between banks, known as the issuing bank,
on behalf of one of its customers, authorizing another bank, known as the advising or confirming
bank, to make payment to the beneficiary. The issuing bank, on the request of its customer, opens
the letter of credit. The issuing bank makes a commitment to honor drawings made under the
credit. The beneficiary is normally the provider of goods and/or services. Essentially, the issuing
bank replaces the bank's customer as the payee.

As per the definition of International Chamber of Commerce (ICC) "documentary credit is any
arrangement however named or described whereby a bank, (the issuing bank) acting at the request
and in accordance with the instructions of a customer (the applicant), is to make payment to or to
the order of a third party (the beneficiary) or is to pay, accept or negotiate bill of exchange (drafts)
drawn by the beneficiary, or authorize such payments to be made or such drafts to be paid, accepted
or negotiated by a other bank against stipulated documents in compliance with stipulated terms
and conditions."

4.2 Parties involved in LC transaction

a. The Applicant is the party that arranges for the letter of credit to be issued.
b. The Beneficiary is the party named in the letter of credit in whose favor the letter of credit is
issued.
c. The Issuing or Opening Bank is the applicant’s bank that issues or opens the letter of credit
in favor of the beneficiary and substitutes its creditworthiness for that of the applicant.
d. An Advising Bank may be named in the letter of credit to advise the beneficiary that the letter
of credit was issued. The role of the Advising Bank is limited to establish the apparent
authenticity of the credit, which it advises.
e. The Paying Bank is the bank nominated in the letter of credit that makes payment to the
beneficiary, after determining that documents confirm, and upon receipt of funds from the
issuing bank or another intermediary bank nominated by the issuing bank.
f. The Confirming Bank is the bank, which, under instruction from the issuing bank, substitutes
its creditworthiness for that of the issuing bank. It ultimately assumes the issuing bank’s
commitment to pay.
4.3 Types of Letters of Credit at PCBL

To suit the nature of requirement of the involved parties, documents letter of credit are classified
into various categories depending upon nature, feature and the function of the letter of credits. The
broad classification of a documentary letter of credit is as follows:

A. Security Wise
a. Revocable Letter of Credit
A Revocable Credit may be an amendment or canceled by the Issuing Bank at any time and
without prior notice the Beneficiary. As per the UCPDC 600, Letter of Credit means
irrevocable only. This type of credit is not favorable to exporters and is not in practice. Once
the documents have been presented and meet the terms and conditions in the LC, and the draft
is honored, the LC cannot be revoked. Sunrise Bank does not entertain any request for issuance
of a recoverable letter of credit.
b. Irrevocable Letter of Credit
This type of credit is the converse of revocable LC. It gives the beneficiary greater assurance
of payment; however, he remains dependent on an undertaking of a foreign issuing bank.
Irrevocable credit is a firm undertaking on the parts of the issuing bank and cannot be
amendment/ canceled without the prior consent of all the parties concerned thereto.
c. Confirmed Letter of Credit
As discussed above, issuing bank gives a firm undertaking under a credit (irrevocable). If the
issuing bank asks nominated bank to add confirmation to their credit and so is done by the
nominated bank it is deemed to be a confirmed credit. In other words, the nominated bank
provides an undertaking for payment in addition to that of the issuing bank. A confirmed LC
is preferred when the beneficiary is not able to ensure payment surety form the issuing bank
and/or have faith in it. It is costly since it includes the confirmation charge from the confirming
bank.
B. Payment Wise
a.Sight Letter of Credit
When LC term stipulates that “Credit is available by Sight”, this means that the payment of
the documents drawn under the LC will be paid immediately upon receipt of same, hence, is
called sight credit. The amount is payable as soon as the prescribed documents have been
presented and the bank has checked them. So the proceeds are normally at the immediate
disposal of the beneficiary.
b. Usance Letter of (Acceptance) Credit
When a credit calls for drawing of drafts at a stated date or after a stated period (usance period)
requiring acceptance and/or payment by drawee at the end of such usance period, it is known
a Usance Credit. This type of credit is also referred as “Term Credit”.
c. Red Clause LC
This particular type of LC allows for advance payment to the exporter. This type of LC has
been prohibited by Nepal Rastra Bank in case of import Letter of Credit. The release of the
advance payment is subject to fulfillment of certain prescribed conditions. In short, a red clause
LC allows the beneficiary to avail finances in advance to execute the required order in the LC.
d. Back-To-Back Credit
When a credit is opened against the security of another credit it is called a Back-To-Back credit.
It is also called as countervailing credit. These type of LC is quite popular in Nepalese garment
exporters who require importing fabrics from back to back import LC to execute their export
order of ready-made garments. In Nepal, the back to back Import LC can be opened only up to
50% of the Export LC.
e. Green Clause Letter of Credit
A credit providing facilities for warehousing and storing of goods at the port of shipment at
the cost of opener/opening bank till the goods covered under the credit is put “on board” the
carrying vessel is called Green Clause Letters of Credit. In such cases, warehouse warrants are
given as security.
f. Reimbursement Letter of Credit
Any standard LC having special payment conditions that the negotiating bank is authorized to
claim and get the payment against the LC directly from the opening bank’s nominated agency
bank after the presentation of credit confirmed documents is known as reimbursement LC. It
 ensures more security and faster payment for the exporter and it is always at the cost of the
importer as the risk and cost of the fund are higher.
g. Deferred Payment Credit
A Letter of Credit in which payment is made by the designated bank, on respective due dates,
determined in accordance with stipulations of the credit, without the drawing of drafts in
installment basis or in a lump-sum is known as deferred payment LC. It is an extended payment
credit, in which no draft will be called upon to be drawn, but it must specify the maturity at
which payment is to be made and how such maturity is to be determined.
h. Installment Letter of Credit
Installment LC calls for shipment of goods in specified quantity on stated dates or periods.
Since this credit is for shipment in specifically stated installments, it is called installment credit.
An installment LC is similar to any simple LC with partial shipment. However, an installment
LC specifies quantities and dates of such partial shipments.
i. Negotiation Letter of Credit
In a negotiation credit, the negotiation can be restricted to a specific bank or it may allow free
negotiation, which is called ‘freely negotiable credit’ wherein any bank willing to negotiate
can do so. If the bank nominated as negotiating bank and refuse to negotiate, then the
responsibility of issuing bank would be to pay as per terms of that credit.
C. Others
a. Transferable Letter of Credit
It is a credit which can be transferred by the original beneficiary in favor of a second
beneficiary or several beneficiaries. As per the article 48b UCPDC, credit can be transferred
only if it is expressly designated as ‘Transferable’ by the issuing bank. Further, such credit can
be transferred only once, i.e. from the first beneficiary to a second beneficiary and not
thereafter from the second beneficiary to a third beneficiary.
b. Standby Letter of Credit
A bank will issue a standby LC on behalf of a customer to provide assurances of his ability to
perform under the terms of a contract between the beneficiaries. It assures the beneficiary of
the performance of the customer’s obligation. As per ICC International Standby Practices
(ISP98), “Standby LCs are issued to support payments, when due or after default, of
obligations based on money loaned or advanced, or upon the occurrence of non-occurrence of
 another contingency.” These credits are used generally as substitutes for performance
guarantees or securing loans.
c. Revolving Letter of Credit
In this type of LC, the value of the credit is reinstated automatically to its original value after
each drawing. Importers who maintain an ongoing relationship with a supplier occasionally
open revolving letter of credit. The amounts under such type of LC are reinstated in terms of
value or time and payment is made accordingly.

4.4 Benefits of using Letter of Credit

a. The beneficiary is assured of payment as long as it complies with the terms and conditions of
the letter of credit. The letter of credit identifies which documents must be presented and the
data content of those documents. The credit risk is transferred from the applicant to the issuing
bank.

b. The beneficiary can enjoy the advantage of mitigating the issuing bank’s country risk by
requiring that a bank in its own country confirm the letter of credit. That bank then takes on
the country and commercial risk of the issuing bank and protects the beneficiary.

c. The beneficiary minimizes collection time as the letter of credit accelerates payment of the
receivables.

d. The beneficiary’s foreign exchange risk is eliminated with a letter of credit issued in the
currency of the beneficiary’s country.

4.5 Risks involved in Letter of Credit

 Since all the parties involved in Letter of Credit deal with the documents and not with the
goods, the risk of Beneficiary not shipping goods as mentioned in the LC is still persists.
 The Letter of Credit as a payment method is costlier than other methods of payment such
as Open Account or Collection
 The Beneficiary’s documents must comply with the terms and conditions of the Letter of
Credit for Issuing Bank to make the payment.
  The Beneficiary is exposed to the Commercial risk on Issuing Bank, Political risk on the
Issuing Bank’s country and Foreign Exchange Risk in case of Usance Letter of Credits.

4.6 Documents required in LC at PCBL

When making payment for product on behalf of its customer, the issuing bank must verify that all
documents and drafts conform precisely to the terms and conditions of the LC. Although the credit
can require an array of documents, the most common documents that must accompany the draft
include:

A. Financial document:

a. Bill of exchange: A bill of exchange is also referred to as “Draft” or “Hundi”. It is a

financial instrument in writing containing an unconditional order, signed by the maker,
directing a certain person to pay a certain sum of money only to, or to the order of, a certain
person, or to the bearer of the instrument. It is a means of collecting payment, demanding
payment, extending credit. It is a promise for payment after it is accepted by the drawee at
specified tenor. Morever, it acts as the receipt for payment when the payee endorses the
bill of exchange as ‘Received Payment’ and hands it over to the drawee after the amount
shown on the B/E is paid by the drawee.

B. Commercial Document:
a. Performa Invoice/Sales Contract: Basically it is form of quotation by the seller to a
potential buyer. Normally it shows the terms of trade and prices in addition to the
description of goods so that once the buyer has accepted the order, there is a firm contract
to be performed as per terms and conditions mentioned in it. It normally forms the basis
for all transactions.
b. Commercial Invoice: It is also called a “document of contents” because it generally
contains all the information required for the preparation of all other documents. It is the
accounting document for seller’s claim on the buyer of goods sold to the buyer. It includes
a description of merchandise, quantity of goods, terms of sale, port of shipment and port
of destination, value of goods, unit prices, shipping marks, date, name and address of buyer
 and seller etc. The buyer and seller information must correspond exactly to the description
in the LC. The main use of commercial invoice is to check whether the proper merchandise
is shipped at an agreed price.
c. Packing List: It is a document which shows the nature and number of goods put in each
packer/container etc., with distinctive numbers or marks. This is generally needed by the
importer when he is importing different types of sizes of merchandise so that he may
identify the nature of goods in each package or when an importer is importing goods for
ultimate direct distribution to various suppliers. It is also used by customs for checking the
goods on random basis or otherwise. Thus it mainly facilities easy identification of goods
in each package/container by the importer customs etc.
d. Certificate of Origin: It is a document which specifies the country of manufacture or
growth of goods or its origin. It is generally issued by the Chamber of Commerce. In some
countries, the customs law requires this certificate to be produced before clearance of goods
and assessment of duty.
e. Certificate of Analysis and Quality (Inspection Certificate): It is a certificate which
indicates the inner composition, quality, technical composition and intricate nature of the
goods broadly described in the invoice. This certificate may be given by the exporter
himself or an institution/organization which is competent or nominated to give such a
certificate. In certain types of goods like chemical, food articles, clothes etc., this certificate
is generally required called for so that goods exported conform to the desired
quality/standard analysis.

C. Transport Documents
a. Bill of Lading (B/L): Bill of Lading is a format receipt given by the ship owners or their
authorized agents stating that the goods mentioned therein (quantity, quality, and description)
are shipped to specified date and vessel and are deliverable to the person mentioned therein or
to his order after payment of all dues of shipping company. The main functions of B/L are- to
act as an evidence of contract of affreightment, a receipt for the merchandise shipped and a
document of title of goods. The documents evidence control of goods and also serve as
evidence of the carrier’s obligation to transport the goods to their proper destination. The
 different types of B/L are: clean B/L, on board B/L, charter party B/L, stale B/L, and house
B/L.
b. Air Way Bill: It is an acknowledgement issued by an airline company or their authorized
agents stating that they have received the goods detailed therein (number of packages, quantity
and nature of goods) for dispatch by air to named consignee at the address stated therein.
c. Truck/Rail Consignment Note: It is used when trade is between two neighboring countries
physically attached together or when one of the trading partners is a landlocked country like
Nepal. It is issued by trucking or rail Transport Company and goods are usually delivered
against surrender of consignee copy. It is usually issued in a non-negotiable form.

D. Risk Covering Documents:

a. Insurance Policy: It is a document detailing all the terms of a contract of insurance and risk
covered by the contract. Normally it is issued in negotiable form and rights under the contract
could be assigned by endorsement and delivery.

E. Discrepant Document

After receiving the documents, it needs to be thoroughly checked with terms and conditions of
L/C. If any document contains any discrepancies which are not accepted by the issuing bank, then
it immediately informs the settlement bank and the client within seven working days as per UCP
Act. If the issuing bank fails to inform the settlement bank then the bank is bound to remit the
payment even though the documents contain any discrepancies. If the client accepts the
discrepancies then s/he immediately has to submit an acceptance letter to the bank before retiring
the documents and remittance the payment.
4.7 Amendments in the Documentary Credit

Amendments may be necessary when the stipulation of the credit does not comply with the sales
contract, or when there is a need to modify the stipulations of the credit or the wording in the
credit.

The letter of credit (L/C) is often amended by means of a full text cable. The L/C amendment is
advised through the same advising bank that advised the credit. Nevertheless, the advising bank
that has confirmed the L/C may not add its confirmation to the amendment of the L/C.

The advising bank mails the amendment advice to the beneficiary. The beneficiary pays an
amendment fee to claim the L/C amendment from the advising bank.

In the event of an amendment, the beneficiary must give notification of acceptance or rejection of
the amendment to the advising bank. If the beneficiary fails to notify the advising bank, it is
deemed that the beneficiary has accepted the amendment.
4.8 Eligibility for opening Letter of Credit

A. To open Import L/C

a. L/C application form
b. Firm registration certificate
c. Renewed tax registration certificate
d. Proforma invoice
e. Bi.Bi.Ni. form no. 3
f. Declaration of import
C. At the time of L/C received
a. Packing list
b. Bill of lading
c. Insurance
d. Certificate of original
e. Commercial invoice
D. At the time sending Bi.Bi.No. form no. 4 to the concerned customs office also enclose the
following documents
a. Copy of L/C
b. Commercial invoice
c. Transport documents
d. Certificate of origin
e. Packing list
f. Bi.Bi.Ni. Form No. 3

D. Following particulars are required to be disclosed in the proforma invoice

a. Name, brand and model no., if any, of merchandise
b. Name of the manufacturing country
c. Harmonic code
d. Unit price
e. Quantity
f. Total amount
E. The cheques issued for custom purpose or to custom office, in the reverse side of such cheques,
the particular as to
a. The letter of credit number
b. The importer
c. The exporter
d. Invoice number
e. Amount in foreign exchange as per the invoice
f. Serial number of Bi.Bi.No. form no.4
F. To refund the security deposit
a. Original copy of Bi.Bi.No. form no.4 endorsed custom copy
b. Copy of declaration form ( pragyapan patra)
c. Customs duty payment receipt

4.10 Process of Opening L/C Account

Before opening a L/C Account, the applicant must have a current account with the bank. The
following are the systematic steps of opening a L/C account:

Procedure of opening LC
a. Apply for the application of L/C.
The applicant needs to fill in application of L/C, declarations of imports and Bi.Bi.Ni. Form no.3;
provided that the applicant brings along the Company registered form, tax form and proforma
invoice.
b. Documentation of the forms in a file and filling up the offering sheet. After getting the above
documents and forms, they need to be kept in a file. This ensures a systematic record keeping of
the applicant’s information. Based on the documents, the offering sheet is filled.
c. Filling of Bi.Bi.Ni. Form no.3. This form is important for the evidence that the applicant and its
goods transaction are legal and bear no fraud. It is necessary to fill Bi.Bi.Ni. Form no.3.
d. Double entry transaction and multiple entries in form and in computer.
e. Stacking of transaction and clearing it.
f. Insertion of applicant’s information in computer software and sending it.
g. Filling up the “Advice of Debit” card or take out the print of it and get checked by supervisor
and give one copy to customer.
h. Fill up the worksheet.
i. Check before filling the document so fill up the checking form.
j. Type the L/C in software and send it to Advising Bank.
k. If there is any amendment, then fill up the form and complete the procedure.

4.11 Process of Closing L/C Account

The following process states the process of closing L/C Account:

a. After receiving document, check it thoroughly according to L/C. See required documents are
full and well or not.
b. Fill up bills under Import Credit.
c. Fill offering sheet and take approval.
d. Double and multiple entry transaction and post it in computer and stack it and clear it.
e. Fill up the debit advice.
f. Fill up the worksheet.
g. Fill up IDT form for Remittance and Loan Department.
h. Fill up the Bi.Bi.Ni. Form no. 4 and issue cheques to custom office.
i. Submit those documents (required) to Applicant.
j. If the 10% margin is saved then credit applicant’s account and fill and give “advice of credit”
to applicant.

4.12 Problem Solved

There were some problems faced by the department. All the employees put their full effort to
manage the situation.
 Applicants would come to the department to ask whether the LC have been issued or not,
in such situation if the client is important, their work are completed first. This would give
the customer higher satisfaction. The bank would also try to convince other customers
that their LC would be issued the following day.
 Customers were always in a hurry to get the cheques to be paid, on such situation staff
with good customer handling skill dealt with them.
  Discrepancies in the documents (sent by the beneficiary) are identified and it is informed
to the customer. If it is accepted by the customer then there is no problem if they are not
accepted then another set or documents would be ordered.
 Documents which were to be sent to respective branches were sometimes misplaced in
such conditions all the documents of that particular day had to be rechecked.

4.13 Activities performed by internee

 Transport of the Customer Liability Report (CLR) to the corporate department and the bank
guarantee form to the RM for authorization for opening the Letter of Credit and Guarantee
were done by internee.
 The documents received from the advising bank in the respective registers such as Bills
Collection Inward, Post Financing Bills and Trust Receipt Loan depending upon the nature of
the documents and instructions were recorded by the internee
 The files of the applicant were extracted by whenever the documents were received.
 Entering the information about the SWIFT messages send to the beneficiary in the register and
filing the Xerox copy of the message in the brown file of the branch bank.
 Separation of the documents for head office and respective branch to be sent depending upon
the nature of the documents, to branches from where the L/C was opened with sufficient Xerox
was done by the internee.
 Necessary documents were faxed, as per the request or instruction, to the branch and the
concerned applicant, by the internee
 As the bank printed large number of debit advice at a time and as the customers were not
regular to collect the advice due to which misplacing was possible. So, proper arrangements of
all the advices were done by the internee.
4.14 SWOT Analysis

SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business. It involves specifying the
objective of the business venture or project and identifying the internal and external factors that
are favorable and unfavorable to achieving that objective

Every organization is influenced by both the internal as well as external forces. It acquires some
strength over its rivals and at same time it may possess some weaknesses internal to the
organization’s boundary. There are a lot of opportunities and threats in the external environment.
A SWOT analysis is done by the internee to evaluate the PCBL banks effectiveness in the Trade
and Finance Department. The strength, weakness, opportunities and threats of PCBL in Trade and
Finance Department are given below:

Strengths
 Large network within the nation and outside the country.
 Customized and reliable service.
 Advance banking software (Finacle) implemented.
 Goodwill (Awarded as Bank of the year – 2008 by the banker).
 Goal oriented, motivated and smart professional employees.
 Sound relationship with the correspondent bank and link ups in almost every part of the
world.
 Very good relationship with the credit administration department of the bank as well as the
governmental agencies concerned.
 Allocation of an entire flat for the department has made the department more spacious and
easy to access.
Weaknesses
 The record keeping facility if the department is very poor especially at the physical level.
 The fact that the credit administration and TFD lies in different buildings can sometimes
make the work tiresome and time consuming in urgent cases.
 Relatively high price compared to rival banks though quality of service is outstanding and
the negotiations can be made in case of large transactions.

Opportunities
 Prospects to enter into a new market.
 New rules and regulations by the government
 Increase in number of industries involved in trading of goods and services.
 Technological Advancement.

Threats
 High competition from other competitive banks
 Political instability within the country
 Change in rules and regulation by the government
 Establishment of new commercial banks and its operation in various parts of the country.
Chapter 3
Program workplace relationship
Learning is the endless process, in a person’s life all the time he should learn something. Learning
is the essential part in a person’s life. Knowledge is bigger than the ocean, when you have
knowledge with you, you will get all powers. When you are spending something to learn anything,
it will never waste. At the same time, Practical knowledge is very much important. We all know
famous quote “Practice makes man perfect”. Through theoretical knowledge you can get an idea
about the concept. But, practical knowledge will give in-depth understanding of the concept
through by doing, exercising and experiencing it. So, theoretical knowledge is not enough,
practical knowledge is essential, then only you can understand the complete concept.
Today’s world is very dynamic and competitive. A person cannot be competitive enough without
acquiring knowledge in both theoretical and practical aspects and getting exposure in the practical
field. The main objective of internship program is to provide us the platform and foundation for
starting our career in the field which we have done our specialization. Practical knowledge is more
important than the theoretical knowledge in a sense that once the people enter the real work setting,
diverse situation, novel problems, difficulties and challenges arises which makes the person more
dynamic and enthusiastic. Dealing with the complexities develops the interpersonal and
communication skills and further shapes our personality.
Some of the Courses that I could relate directly with and got to experience during my internship
program are :
Organisational Behavior

Madan lal Pradan sir, always taught us that The way your employees behave at work will differ from
their behavior as individuals in a social setting. A variety of factors influence organizational behavior,
including the company's structure, policies, and procedures, management effectiveness and interactions
between colleagues. All of these elements can inspire employees to work harder or contribute to
disengagement. By understanding how to get the best out of your employees, your company can become
more productive and competitive. Being there at PCBL during intern period all I learned about
Organisational Behavior was :
 Have a positive attitude about it. our personality is a big part of our
happiness. If we are always looking for the negative side of everything,
we will find it.
  Develop good relationships at work. Make friends. Try to get a
mentor. All I did over there was, approached a person I admired and
attempted to build a relationship with this person. She was an
experienced mentor because of which I got an opportunity to learn so
quickly that greatly helped me to make friends at the workplace.
Having good friends at workplace not only helped me to work for 8
hours but helped me greatly in enhancing my social network.
 Pay is important, but job characteristics matter more to job
satisfaction. Don’t sacrifice the job itself for a little bit more money.
When choosing a job, look at the level of challenge, and the potential
of the job to make you engaged.
 Be proactive in managing organizational life. If the job is stressful,
cope with it by effective time management and having a good social
network, as well as being proactive in getting to the source of stress. If
you don’t have enough direction, ask for it!
 Know when to leave. If the job makes you unhappy over an extended
period of time and there is little hope of solving the problems, it may
be time to look elsewhere.

Managmeent Information System

Management Information Systems (MIS) is the key factor to facilitate and
attain efficient decision making in an organization. Information is essential for
the endurance of a financial organization competitive market. The nature of
competitiveness in the market stress on the importance of developing an
organization capability through better enhancing MIS. Accordingly, the stored
information must then be recalled and distributed for the use of an
organization leadership and top management as well as mid-level managers
to take effective long term (strategic) and short term (Tactical) decision-
making. MIS is deemed to be a system which provides organizations top
management and, even lower level management, with appropriate
information based on data from both internal and external sources, to allow
them to make effective and timely decisions that best achieve their
organization goals and satisfy stakeholder requirements
 CHAPTER V

SUMMARY AND CONCLUSION

5.1 Summary

The Internship Program of MBA under the Pokhara University is to provide a blend of practical
knowledge to the theoretical knowledge we have gained till now. The knowledge that has been
acquired in the courses has proved to be very much relevant in the context of the job placement
made. It provided an opportunity to put the theoretical aspect of the studies to practical use.

The feeling of being responsible towards a work was very new and challenging though it was
performed to best efforts possible. Dealing with the customers and the responsibility of making
decisions under difficult situations has helped me a lot to have an insight of my future career. One
of the important experiences learned from the internship program is to know the various facets of
an organization and their functioning, and learning customers and the ability of the employee to
handle the various types of customers with varied needs, demands, and temperament.

The letter of credit primarily has been developed to provide the security to both the parties of
international trade where the conditions are uncertain or if there is no previous trading relationship.
Over the past decade, the use of the LC has grown significantly as it mitigates the risk and makes
the trade simple. LC is a simple concept but it has wide coverage and is very vast and sensitive by
nature; so, LC is to be handled by the person having complete knowledge and training.

In our country, the use of LC is increasing at a rapid pace. Every commercial bank in Nepal has
LC department and they all have to follow NRB directives for LC operation. The rapid increment
of international trade of Nepal has provided the various opportunities for every sector of the
economy including the commercial banks.
5.2 Conclusion

Trade and Finance department is very important for the bank as it generates a significant amount
of profit for the organization. Trade and Finance Department of PCBL deals with Letter of Credit
and Bank Guarantee. Letter of Credit facilitates customers to import as well as export the goods.
Letter of credit is an instrument issued by a bank at the request of its customer (applicant) whereby
it undertakes to pay value, provided all terms and conditions stipulated in LC have been complied
with. LC has been very important for the country like Nepal where there is a significant volume
of import than export. Bank Guarantee is a contract between the bank and beneficiary and the
beneficiary has a legal right to enforce such an agreement to pay a specified sum of money either
on simply written demand or a demand accomplished by stipulated documents in the event of
default by the principal.

5.3 Lessons Learnt

Today’s world is very dynamic and competitive. A person cannot be competitive enough without
acquiring knowledge in both theoretical and practical aspects and getting exposure in the practical
field. The main objective of the internship program is to provide us the platform and foundation
for starting our career in the field which we have done our specialization. Practical knowledge is
more important than the theoretical knowledge in a sense that once the people enter into the real
work setting, diverse situation, novel problems, difficulties, and challenges arises which makes the
person more dynamic and enthusiastic. Dealing with the complexities develops the interpersonal
and communication skills and further shapes our personality.

Working in the LC department has helped me in gaining a deep knowledge and understanding of
the basic concept, different aspects, procedures, problems, risk and challenges of LC operation as
a whole, internationally as well as in the context of our country. Since, LC involves the people of
different countries with differing laws, rules, regulations, culture, the noble problems, challenges,
and difficulties are its part and parcel. LC department of any bank is a very risky department since
any party involved in the particular LC transaction can be sued by another party in the international
court as LC is governed by international articles of UCPDC. I have learned different tactics and
techniques to resolve problems arising from LC.

The 8 weeks long internship at PCBL did not only gave me an opportunity to learn about the basic
activities of the various departments that I worked in but also helped me to shape my personality
and character to a greater extent. The valuable lessons that I learned apart from the basic activities
of the concerned department that I worked in are:

 Learned about the general banking practices and corporate culture.

 Learned to communicate and deal with the customers belonging to different classes.
 Learned to handle the grievances of the customers.
 Learned to be calm under the adverse conditions and tactfully handle the complex
situations.
 Learned about the importance of time and punctuality.
 Learned to socialize with the professionals.
 Learned the importance of displayed emotion in the workplace.
 Learned to use office equipment like fax, photocopy, cheque writer, printer etc.
 Learned to use different banking software like Finacle, Pumori Plus and MS office tools.
 APPENDICES

Purchase Order (1)

Sales Confirmation (2)
Goods/
Service s (6)
s (6) rvice
Buyer ods/Se Seller
Go

)
(7

or
Carrier

ts
DC Application (3)

Letter of Credit (5)

en

13 t (8
Documents (10)

um
Payment (9)

Pa

en
)
ym

c
Do
en

ym
Reimbursing
t(
)

Bank

Pa
(11

12
)
nt
me
Pay

s (8)
ment
Docu Negotiating Bank

Letter of Credit (4)

Buyer’s Bank
(Issuing Bank) Advising Bank

Figure 3: Process of Letter of Credit