CHAPTER -1

INTRODUCTION
1.1 Historical Background of the Study
This fieldwork helped me a lot to figure out the similarities and
differences between which we have learnt during our university course
and practical work in organization. The decisionmaking procedure, flow
of responsibility, accountability and authority are in the same way, which
we have taught in class. These basic things helped me to understand what
organization is, how it is functioning and how the organization decides.
This program is really fruitful to me in understanding the organization
during fieldwork period.
1.1.1 Historical background of Banking:
Banking in the form of today has came through various stages, some sort
of banking activities used to be carried out since the time, before history
could trace. But traditional form of banking could be traced during the
early civilization of Greece, Rome and Mesopotamia.
In the earlier times, the safe storage of valuables and money used to be
done in some safe places like temples. Slowly, these storage institutions
began to lend money to the people who needed them, this money used to
be returned with interest in stated time. This type of activities of deposit
and borrowing emerged and advanced stage by stage and finally took the
form of modern banking.
A bank of modern form was setup in 1157 AD in Venice for the first time
named, Bank of Venice. But, Bank of Amsterdam which was setup in
1609 AD became very popular.
1

The growth of bank accelerated throughout the globe after the

introduction of Banking Act-1883, in the United Kingdom as it allowed
opening joint-stock company banks.
1.1.2 Origin and Expansion of banking in Nepal:
The origins of banking in Nepal also were the ancient moneylenders and
merchants. The banking in Nepal crossed many stages since then to come
to the modern form. But, Rana Prime-Minister Ranoddeep Singh in 1933
B.S. started the banking activities in the modern concept by establishing
the Tejarath Adda. The establishment of Tejarath Adda was the first
step towards the institutional development of banking in Nepal. Tejarath
Adda did not collect deposits from public, but it only used to extend
loans to employees and public against the bullion.
But the commercial banking in Nepal in the true sense started with the
establishment of Nepal Bank Limited in 1937 AD, Nepal Rastra Bank
was established in 2013 B.S., which has been functioning as the
Governments Bank till today. Thereafter, the banking in Nepal expanded
slowly to reach the form of today. Till the date there are 16 commercial
banks in Nepal. The name and the year of establishment of the
commercial banks operating in Nepal are as following:
Name of the Bank

Year of Establishment (AD)

1.

Nepal Bank Ltd.

1937

2.

Rastriya Banijya Bank Ltd.

1965

3.

Nabil Bank Ltd.

1984

4.

Nepal Investment Bank Ltd.

1985

5.

Standard Chartered Bank Ltd.

1986

6.

Himalayan Bank Ltd.

1993
2

7.

Nepal SBI Bank Ltd.

1993

8.

Nepal Bangladesh Bank Ltd.

9.

Everest Bank Ltd.

1994

10.

Bank of Kathmandu Ltd.

1995

11.

Nepal Credit & Commerce Bank Limited

1996

12.

Nepal Industrial and Commercial Bank Ltd.

1998

13.

Lumbini Bank Ltd.

1998

14.

Machhapuchhre Bank Ltd.

1999

15.

Kumari Bank Ltd.

2001

16.

Laxmi Bank Ltd.

2002

17.

Siddhartha Bank Limited

2004

18.

Agricultural Development Bank

2006

19.

Global Bank Limited

2006

20.

Citizen Bank Limited

2006

1994

Besides these commercial banks there are five development banks

(among which Agricultural Development Bank is permitted to perform a
few functions of commercial banks) and five rural development banks
operating in the country.
1.1.3 Importance of the bank
A commercial bank renders very reliable services to the community by
increasing the productive capacity of the country. The commercial bank
can be listed as follows.
1. Legal entity and freedom from exploitation: - A bank is registered
under the different acts and thus it has a legal entity. It supports to the
public from being exploited through moneylender, merchant and
goldsmiths, who charge high interest rate on lending.

2. To develop industry and commerce: - A bank can provide lone for the
industry and commerce in need as it collects large scale of money on
deposit. The industry and commerce can be developed only from large
amount of capital. Apart from lending money a bank can provide
technological and administrative services. Developed industry means the
boosted trade and commerce.
3. Safety of valuable assets
4. Employment creation
5. Transfer of fund: - Physical transfer of cash involves many risks and
costs but transfer of fund from one place to another is the necessity of the
day is it for common people. So bank is a mean of transferring funds to
any corner of the world through their vast mechanism and network by
various expeditious modes.
6. Financial intermediate: - A bank acts as a financial intermediate by
mobilizing the saving of society as deposit and then providing money to
those who are in need of it by granting loan.
1.1.4 Types of Bank
There are different types of bank in modern economy. A single bank
cannot fulfill all the services demanded by the customers and cannot
cover all the sector of economy. So, different types of banks specializing
in different functional area are listed below.
1) Central bank
2) Commercial
3) Industrial Banks
4) Development banks
5) Exchange bank

In addition to these, there are other types of banks viz. student bank,
labor bank, saving bank, co-operative bank, merchant bank etc. are in
practice in the world.
1.2 Introduction to Nepal bank Limited.
Nepal Bank Ltd. Is an initiator Bank in Nepal. It is the first established
public institution and first modern bank. There wasn't any bank before its
establishment in the county. It was the first encouraged effort removing
program. It was established on 20th. Kartik 1994 B.S. Under the 'Nepal
Bank Act 1994'. Now it's operating under the 'Commercial Bank Act
2031. Its main objective was to give economic welfare and facility to the
people t give loan n commerce and industry and achieving the banking
services to the people. In 30th. Kartik 1994, His Majesty the late king
Tribhuwan Bir Bikram Shah Dev had inaugurates the bank
1.2.1 Capital Structure of NBL
(Provision for fin. Year 2062/2063
1. Authorized Capital

1,000,000,000

10, 00,000 Ordinary shares of Rs 100/- each.

2. Issued and Subscribed Capital
5, 00,000 Ordinary Shares of Rs 100/- each
500,000,000
3. Paid-up capital
Starting Paid Up Capital

842,000

14, 96,745 Ordinary Shares. (Bonus Shares 14, 21,745 included)

2,307,081 Right Shares issued
3,803,826 Ordinary Shares of Rs. 100/- each.
380,382,600

Share ownership charts

Owner

Ordinary

Bonus

Total shares

Percentage

Nepal

Shares
964,505

shares
586,937

1,551,442

40.49

117,198
1,300,378
2,382,081

834,808
1,421,745

1,17,198
2,135,186
3,830,826

4.92
54.59
100.00

Government
(Finance
Ministry
N C C Bank
General Public
Total Shares

There was Rs. One Crore authorized capital Twenty-five Lakhs issued
capital & eight Lakhs Forty two thousand paid up capital of the NBL in
the beginning days. Nepal Government has subscribed 40.69% of shares
and 54.59% of shares has been subscribed by the private sector & 4.92%
of shares has been subscribed by NCC Bank. During the time of Rana
reign (1994-2007), the speed of development of trade and industry was
too much slow and it couldn't help development due to lack of economic
feasibility. After 2007 B. S., it began to develop extremely. Now, the
authorized capital has been raised up to the Rupees 100 crores and paid
up capital is Rs 38.04crore. Some years before 51% of shares were hold
by government and rest by the share holder. But now, the government
sold it's 9.2% shared to the public now, so the participation of the private
sectors has increased in this bank, it has reserve of Rs. 50.16 crores.
Before the establishment of Nepal Rastra Bank, there were only 10
branches of NBL.
The bank has been taking the policy to reduce branch, which are going to
lose continuously. Until 2046, it has 234 branches and 8531 employees in

the bank, After the CBPASS report, it was suggested that the bank should
decrease the branches, which are in loss and should use the modern
technology on the activities of the bank. Therefore, the bank decreased its
branches to 215 on 30th Ashwin 2061. It also reduced its employees from
8531 on the last date of (2046) B.S. to 6590 on the 30 th Ashwin 2061 it
has 215 branches before 2062/03/01, now there are 106 branches, and
2985 employees in the bank, Out of 106 branches, only 44 branches are
computerize in this bank. This Bank Covers 67 District before but after
2062/03/01, it covers only 56 District.
2

Financial Condition of Bank.

Particular

2058

2059

2060

2061

Loan And

21,048,047.00

19,648,332.00

16,883,592.00

17,964,995.00

16,867,6

Advance
Investment

6,842,123.00

7,152,822.00

11,739,907.00

10,593,845.00

14,219,7

Deposits

35,528,515.00

34,060,124.00

34,737,407.00

36,519,784.00

35,934,1

Current
Saving
Fixed
Others

2062

5,000,747.00

4,311,672.00

4,689,494.00

6,300,063.00

5,840,

20,281,559.00

19,851,522.00

21,534,512.00

22,062,936.00

22,740,

9,921,714.00

9,731,774.00

8,396,883.00

7,480,976.00

7,216,

324,495.00

165,156.00

116,518.00

675,809.00

135,

2,341,017.00

2,049,004.00

1,377,635.00

3,579,370.00

903,4

576,319.00

779,961.00

467,838.00

278,912.00

119,

628,526.00

305,109.00

311,927.00

159,726.00

276,

534,632.00

322,480.00

281,857.00

34,719.00

93,

268,514.00

193,925.00

333,026.00

447,529.00

316,013.00

3,106,013.00

Priority
Sector loan
Agriculture
Cottage
Industry
Service
Hire Purchase
Deprived

Source: Nepal Bank Limited.

1.2.2 Introduction to Letter of credit
A letter of credit is written by one bank to another by requesting the latter
to pay any amount up to a certain limit to a person named in the L/C. A

316,

letter for credit is the most acceptable instrument for arranging payments
in international business transactions as it provides the greatest protection
to the concerned parties. So it used as a basis of settlement for payment is
widely accepted by both exporter and importer. I is guarantee to the
exporter that he well receive payment for the goods he is exporting that.
It is also convincing and comfortable instrument to the importer to import
goods from foreign country. The importer could also get it issued from
the bank with which he has a close relationship without having to commit
funds in advance.
In L/C. The period of validity must be mentioned up to, which only the
amount is to be paid by the addressee. The bank does both Letter of
credit negotiation and issuing.
Hence, what is required for such transactions is form of proceeding that
will protect the interest of the parties involved. The buyer will need to
know that he has paid for and is to get promptly right goods.
So A letter of credit is a conditional bank undertaking of payment. I is a
written undertaking y a bank given to the seller at the request and on the
instruction of the buyer. To pay at sight or at a determinable fact, not in
good.
According to Van Horne, "A letter of credit promise forms a third party
(Usually a bank) for payment in the event that certain conditions are met.
It is frequently used to guarantee payment of obligation. "
According to uniform customs and practice for documentary credit
(UCPDC), 1993 Revision a letter of credit means any arrangement,

however named or described whereby a bank (issuing bank )acting at the

request and on it's own behalf;
I) to make a payment to or to the order of a third party (The
beneficiary), or is to accept and pay bills of exchange
(Drafts), or drawn by the beneficiary, or
II) Authorize another bank to effect such payment, or to accept and
pay such bills of exchange (Drafts ) or,
III)

Authorize another bank to negotiate, against stipulated

documents), provided that the terms and conditions of the
credit are complied with.

Here, the branches of a bank in different countries are considered as

another bank.
UCPDC is first brought in operation and function international chamber
of commerce (ICC) In France in 1933 AD. According to UCPDEC, L/C
is distinct and separate transaction from the contract on which they are
base. And all partied concerned in credit operations deal with document
and not with goods, services and / or other performance to which the
documents may relate.
1.2.3 Parties involved in letter of credit
Main parties involved in letter of credit transaction are as follows:
1.

Applicant :

The applicant is the buyer/ importer of goods who asked his bank, the
issuing bank, to issue a L/C. The applicant is also called opener or the
creditor. In the most of all cases the applicant maintains an accent
relation with the issuing bank.
9

2.

Issuing Bank:

The applicant is the customer of the issuing bank, and it is the issuing
bank, which gives the written undertaking in the form of a letter of credit
in favor of the beneficiary.
3.

Advising Bank:

This is a bank usually domiciled in the beneficiary's country, which is

requested by the issuing bank to advise the beneficiary of the terms and
conditions of the credit. There is no liability in the part of advising bank
to honor the L/C. The main function of the advising bank is to L/C is
genuine, since the advising bank has to satisfy itself that the issuing bank
properly authenticates the L/C.
4.

Confirming Bank:

When a beneficiary cannot believe the issuing bank he requests the

advising bank or any other bank of his country for confirmation to the
L/C of his name. In his condition the advising bank or any other bank
who add confirmation to L/C is called confirming bank and the
confirming bank becomes liable in the same way as if it has issued the
credit.
5.

Negotiating bank:

The bank authorized to negotiate drawings under the credit and make
payment to the beneficiary is called the negotiation bank it may or may
not be the same as the advising bank.
6.

Reimbursing or paying bank:

10

The payment by the issuing bank to provide payment to the negotiating

bank for negotiation effected under L/C. It may be the issuing bank or
another.
1.2.4 Procedure to be followed in opening L/C
The parties involved in opening L/C must have followed the following
procedures.
1.

Both the buyer and seller must fully agree in their contract.
According to contract, the must fill an application form to
open L/C. The buyer must submit the application to the
issuing bank with the perform invoice which must clearly
state about description of goods, unit price, quantity, total
price, country of origin and harmonic code as well

as

supplier's address etc.

2.

The buyer or L/C opener must have current account with

the issuing with the issuing bank. In case of Nepal Bank, the
customer must have a current deposit with a balance of Rs.
2000 with the bank to open L/C.

3.

In the beginning, bank takes some margin from customer

had good reputation, relationship and familiar with the bank.
In case of Nepal Bank, it takes 10-12% margin at the time of
opening L/C. If the customer is new one, then bank can take
more than 100% margin.

4.

After taking margin, bank also charge commission from the

customers for opening L.C. The normal rate of commission
is depend upon the amount of L/C.

5.

The customer can open up to 20 times of authorized capital

of the concerned bank.

11

6.

The client must submit the renewed income tax clearance

certificate to the bank.

7.

If the client is the trading house, then it must submit the

income tax clearance certificate which also stat the objective
of the firm is either export or import.

8.

The part which one black listed can't open the L/C.

9.

The goods which are going to import, should not be

restricted by concerned country. So the customer and the
issuing bank must direction of the government and Nepal
Rastra Bank in case of Nepal Bank.

10.

Further procedures to be followed in opening L/C.

If the L/C is opened in foreign currency (other than Indian currency),

issuing bank fills the form informing NRB about the opening of L/C. The
main purpose of this form is to inform. NRB about the opening of L/C.
Two copies of this form have two parts, first part has to be filled by L/C
opener and second part has to be filled by concerned bank. In first part,
the name, address and income tax certificate number of L/C opener. The
name of exporter's country, custom duty point, name of goods, quantity,
and harmonic code number amount of L/C is mentioned. If any
amendment is made, this form can also be used to inform the Nepal
Rastra Bank.
In second part, issuing or concerned bank must o\mention about L/C
number, date of L/C in opening, expiry dates, total amount of L/C in
foreign currency, sources of payment, exchange rate, name of advising
bank, mode if credit description of amendment, amendment date,
guarantors name and address.

12

1.2.5 Types of credits and terms of L/C

Different types of credit available for opening L/C is export and import
business transaction are as follows:
1.

Revocable and Irrevocable credit

2.

Transferable credit

3.

Deferred payment credit

4.

Sight payment

5.

Usance credit

6.

Back to Back credit

7.

With recourse and without recourse credit

8.

Advised credit

9.

Confirmed credit

10.

Acceptance credit

11.

Negotiation credit

12.

Revolving credit

13.

Red clause credit

14.

Usance credit

15.

Back to Back credit

16.

With recourse and without recourse credit

17.

Advised credit

18.

Confirmed credit

19.

Acceptance credit

20.

Negotiation credit

21.

Revolving credit

22.

Red clause credit

In usual, the credit may be revocable or irrevocable and in later case, it

may be confirmed or unconfirmed the applicant must clearly mention the
type of credit in the application form and the certain terms and conditions
13

should be fulfilled in L/C procedures. The terms and conditions can be

explained using sample of irrevocable L/C form of Nepal Bank Ltd. In
the form the customer has to clearly mention the following term:
1.

Applicants name and address:

The applicant has to write his/her full name and permanent address in this
section Application means the party who opens the L/C and imports the
goods.
2.

Beneficiary's name and address:

In this section, applicant has to write the name and address of the
beneficiary party. Beneficiary means exporter or seller who is entitled to
receive payment under the credit presentation of specified documents.
For goods shipped. Some foreign companies are black listed and the
applicant can't open the L/C on the name of such Black listed parties.
Notes:
The name and address of the applicant beneficiary must match with their
name and address mentioned in the perform invoice.
3. Credit available by:
In this section, an applicant has to fill about when the payment will be
made generally; there are four types of payment systems.
I. Sight payment: If the credit provide for sight bank has to pay
when party presents the document.
II. Acceptance: If the credit provide for acceptance bank has to at
maturity of drafts drawn by the beneficiary. If the
beneficiary has drawn drafts before its maturity, the bank
has discounted certain amount from the drafts.
14

III.Defined payment: If the credit provides for deferred payment

to pay on maturity, the bank has discounted certain amount
form the drafts. Determinable in accordance with the
stipulation of the credit.
IV.Negotiation: If the credit provides for negotiation to pay
without recourse to drawers and /or bona fide holders. Drafts
drawn by beneficiary and/or documents presented under the
credit. A credit should not be issued available by drafts on
the applicant. If the credit nevertheless calls for drafts on the
applicant, bank will consider such drafts an additional
document.
4. Amount of L/C:
Total amount of L/C in foreign currency as well as in local currency is
given in this section. The amount mentioned here must be matched with
the value of perform invoice.
5. Part shipment:
The applicant has to define whether goods can be shipped in part or all
the goods have to be shipped at once in this section.
6. Transshipment:
The applicant has to mention whether the transshipment of the goods is
allowed or not. In this section, transshipment of goods means transferring
goods from one shop to another.
7. Shipment form:
In this section, the applicant has to define from where and to where goods
are shipped and delivered. He has also to define the means of
transportation and custom paint.
15

8. All charges outside Nepal For:

In this section, the applicant has to mention whether all charges which
occurs outside Nepal has to be born by the applicant himself or the
beneficiary
9. Shipment validity:
She, the applicant defines the period in which the goods should be
shipped if the beneficiary fails to ship the goods within this perfidy the
applicant has no legal obligation to pay.
10. Credit expiring:
Documents presentation for negotiation within a day from shipment date.
11.Mode of credit:
I

Free On Board (FOB):

Then an exporter delivers goods "FOB" , he pays all charges involved in

getting them actually on to the ship his responsibilities include putting
the goods in a condition for shipping taking them it the ship loading them
and providing a clean of board receipt. He also has to provide expert
license. Pay export taxes and loading costs if not included in the freight
charge his responsibilities and when the goods are on board. And the
buyer or exporters duties are seemed from the board site as he pays the
freight. Pay discharge costs and loading costs if included in he freight
charges, pay insurance Premium.
II.

Cast and freight (CFR):

If the mode of credit is CFR, and then the seller must contact for carriage,
pay freight to named destination, deliver goods on board and provide
buyer with an invoice and clean on board bill of lading. He also must
16

obtain expert license and pay expert taxes, loading cost and unloading
cost if the freight charges. In this case, the buyer must accept the delivery
of goods on shipment after documents are tendered to him; pay unloading
costs if not included in the freight charges and pay insurance Premium.
III.

Cost insurance freight (CIF):

It is same as in case of "cost of freight" mentioned above, here the seller

must also contract for the insurance of goods, pay the Premium and
provide the buyer with the policy or certificate. The seller must provide
the buyer with the documents necessary to take delivery of the goods an
arrival. These documents are normally a bill of landing, and insurance
policy and an invoice here the buyer must accept delivery of goods on
shipment after documents are tendered to him whether or not,
A.

The goods actually arrive.

B.

They have been lost in route.

C.

He has had any opportunities of examining hem. Here the

buyer also has to pay unloading costs if not included in the
freight charges.

IV.

Cost and Insurable (C&I):

If the mode of credit is for C&I, then the seller must contract for
carriage, pay freight to named destination, pay insurance Premium,
deliver goods on board, provide buyer with, invoice, and clean on board
bill of landing. Nepal Rastra Bank (NRB) has instructed all the
commercial Banks to open L/C. Based on the status of the client.
Commercial Banks fi9nd the term; status very vague. They say how to
find out one's status. They say if someone comes to pen L/C with import
license and income

17

V. Cast and freight (CFR):

If the mode of credit is CFR, and then the seller must contact for carriage,
pay freight to named destination, deliver goods on board, provide buyer
with an invoice, and clean on board bill of lading. He also must obtain
expert license and pay expert taxes, loading cost and unloading cost if the
freight charges. In this case, the buyer must accept the delivery of goods
on shipment after documents are tendered to him; pay unloading costs if
not included in the freight charges and pay insurance Premium.
V.

Cost insurance freight (CIF):

It is same as in case of "cost of freight" mentioned above, here the seller

must also contract for the insurance of goods, pay the Premium and
provide the buyer with the policy or certificate. The seller must provide
the buyer with the documents necessary to take delivery of the goods an
arrival. These documents are normally a bill of landing, and insurance
policy and an invoice here the buyer must accept delivery of goods on
shipment after documents are tendered to him whether or not,
D.

The goods actually arrive.

E.

They have been lost in route.

F.

He has had any opportunities of examining hem. Here the buyer

also has to pay unloading costs if not included in the freight charges.
VI.

Cost and Insurable (C&I):

If the mode of credit is for C&I, then the seller must contract for
carriage, pay freight to named destination, pay insurance Premium,
deliver goods on board, provide buyer with, invoice, and clean on board
bill of landing.

18

VII. Nepal Rastra Bank (NRB) has instructed all the commercial Banks
to open L/C. Based on the status of the client. Commercial Banks fi9nd
the term; status very vague. They say how to find out one's status. They
say if someone comes to pen L/C with import license and income
12.Country of origin:
In this section, the importer has to mention the name of he country form
where the goods are produced.
13.Description of merchandise:
In this section, the importer has to mention the kind of product to be
imported, its brand name and model number if necessary; it should be
matched with the program invoice.
14.Documents required for negotiation:
I.

Commercial invoice in copies showing exact quantity of

gods, shipped and country of origin quantity of goods
shipped and country of origin

II.

Full set if clean "On Board"

III.Bill of lading
IV.Airway bill
V. Thick receipt
VI.
VII.

Part parcel receipt

Certificate of origin of companies issued by chamber of
commerce/manufactures/similar

Institutions.

VIII. Packing list/Weight list/ Measurement list in copies.

Insurance policy or certificates in favor to Nepal Bank Ltd For 15% of
invoiced values covering institute cargo, air cargo, institute war, clause
19

cargo, air cargo, post parcel, including bond but final destination is
Kathmandu.
Other documents:
These are major terms, which is clearly fulfilled by and applicant when
opening L/C
15.Country of origin:
In this section, the importer has to mention the name of he country form
where the goods are produced.
16.Description of merchandise:
In this section, the importer has to mention the kind of product to be
imported, its brand name and model number if necessary; it should be
matched with the program invoice.
17.Documents required for negotiation:
I.

Commercial invoice in copies showing exact quantity of

gods, shipped and country of origin quantity of goods
shipped and country of origin

II.

Full set if clean "On Board" Insurance policy or certificates

in favor to Nepal Bank Ltd For 15% of invoiced values
covering institute cargo, air

cargo, institute war, clause

cargo, air cargo, post parcel, including bond but final

destination is Kathmandu.
Other documents:
These are major terms, which is clearly fulfilled by and applicant when
opening L/C.

20

1.2.6 Problems that has been faced in opening L/C

Opening procedure of L/C is long, legal and complicated process. So
parties involve in this process in face many problems. The main problem
faced by opening banks and customers may be as follows:
1. Nepal Rastra Bank (NRB) has instructed all the commercial
Banks to open L/C. On the basis of the status of the client.
Commercial Banks fi9nd the term; status very vague. They
say how to find out one's status. They say if someone comes
to pen L/C with import license and income tax clearance
certificate, then why should they sorry about status of the
person in their view it should be the authority that gives
import license to be responsible for giving license by
cooking tat the person's status and not them.
2. Commercial banks don't have authority to use ever their own
foreign currency as they with. Thy have to follow the limits
prescribed by NRB while opening L/C for any client.
3. NRB's some of the rules regulations do not match with that of
UNCPDC'S . NRB's ruled are strict. For example, UCPDC
allows opening L/C for early shipment but NRB'S rule does
not.
4. Employees of commercial banks involved in L/C transaction
have to responsible if anything gives wring in the
transaction. But employees of commerce department and
taxation department from where people import license and
income tax clearance certificate respectively to open L/C, do
not have to be responsible.
5. Government has done valuation for goods which one imported.
Most to them are under valued NRB gives foreign currency
21

according to their harmonic code, which is not sufficient to

pay the bill. Therefore, they one compelled to get foreign
currency form black-market.
6. Sometimes the client of the bank may turn out to be a fraud. In
such cases bank has to face lots of problems. If all the
documents arrive but the client do not come to take the
documents, in that case, the bank has to pay money to the
exporter although the goods will be under the bank control..
If the goods which it has by any means.
7. if the client of the bank is found to be missing foreign currency,
then the reputation of the bank will go down and it has to be
responsible for it.
8. He new customer has to pay more than 100% margin of total
amount of L/C. L/C process takes 5-30 days for settlement
and in this period, the customers whole amount will be
blacked and the can't mobilize the amount.
9. Bank does not believe in the credibility of new customers.
10.If the party is new, exporter does not believe on them. So they
ask for advance payment to deliver the goods. But, Nepal
Raster bank does not give permission for advance payment.
NRB has provision to give ht advanced payment only for
sample. For this purpose, they may have to use other reputed
importer's account and pay them commission.
11. If a firm's age does not exceed more than one year, they have
to pay tax in advance of L/C amount. Issuing Bank charge
10% tax of L/C amount and sends it to tax office early time
businessman do not have much idea about the profit margin
but have to pay the tax in advance. Furthermore within that

22

year on year, they have to a pay advance tax every time they
open L/C. This amount is also blocked for whole the year.
Thus, the customers and issuing bank faced many problems in opening
L/C.
1.2.7 ORGANIZATIONATIONAL CHART
ORGANIZATIONATIONAL CHART
A/c

Loan Adm. Personal

Priority Sector

Legal

Interception

Board of Director
General Manager
Deputy Manager
Departmental
Heads

Fund Mgmt Institution

&

GM

Admt.

Training
Loan Dept

Dept.

Dept.

Mgmt dept

Repay
Dept.
Dept.

&

&

Develop
Internal

Computerization

Dept.

There are nine members in the board of directors of which Government

nominates 4 directors and 4 directors are elected by shareholders in the
annual meeting and one director will be elected by NRB. Among these
nine members of the board of directors, one member is nominated as a
chairperson of the board of directors. The board controls and direct all the
activities of he bank. All the activities depend on the board except the
rules and regulations make by the NRB. So its board of directors governs
23

NBL.The general manager is a chief executive of the bank who will be

appointed by the board in the meeting. The function of the manager is to
look after the management and banking transaction of the bank. He
authorized to take decision without taking any consideration to the board.
But he is responsible to the board. There are other responsible executives
of the bank like deputy general manager and departmental heads. They
hold their own decision and can take decision without consulting to the
board and GM.
There are also general managers who area the real representatives of the
head office, authorized to perform certain specific function. They are
given more responsibilities and authorized by the head office. They
should work like true administrators of the decentralized unit of bank
management.
Therefore, the board has complete control over the banking activities and
it supervise the performance of the staffs and it fives instruction for
regulating the banking activities to run smoothly.
1.3

Statements of Problems

As we know that the main objective of any business organization e.g.

Bank, is profit maximization. Deposit mobilization. Deposit mobilization
is the key factor to attain this objection therefore if the Bank fails to
employ its funds suitably it is not possible to maximize profit. A Bank
has to make decisions within a framework of statutory requirements of
credit regulation by central Bank, as well as the national objectives that
are determined in the matter of the provision of credit from time to time.
The commercial Bank should maintain adequate credit deposit ratio but
sometimes Bank credit may expand out of proportion to the requirement.
24

In this situation Bank has to collect sufficient fund from deposits and
must make some permanent changes in its banking policies, otherwise
there will be a question in the survival of that particular Bank in this
highly competitive commercial sector.
In order to attract sufficient number of deposit i.e. from the viewpoint of
quantity and quality, the Bank should analyses their position in collection
cash and trend of deposit in term of small cash balance is not the
representation of Bank policy for cash collection.
1.4 Objectives of Study
1.

To gain practical knowledge about the L/C department of

NBL.

2.

To identify the trend.

3.

To gain work experience of the field visit.

4.

To access the Contribution, Source and Tackles.

5.

To gain ability to analyze the present and future market

environment and to develop new service strategies for the
company to improve profitability.

6.

To make effective suggestions and recommendation like

strength

and

weakness

to

NBL for

it's

continues

improvement so that it could be the leading commercial

bank of Nepal.
7.

To identify and study the problems of fieldwork assignment

using the conceptual knowledge acquired in class room.

8.

To find out the process and problems of L/C opening.

9.

To develop practical knowledge and skill in Report Writing.

10.

In practical fulfillment of Bachelor of Business Studies

(BBS)
25

11.

To keep eagle eye-view on related chapter and pick up some

certain statically tools like tabulation, bar-diagram etc.

1.5 Significance of the Study

For the practical fulfillment of the course on the Bachelor on Business
Studies, provided by Faculty of management, Tribhuwan University, this
field report was prepared on field writing in Nepal Bank Ltd. New Road,
Banking Office, Kathmandu. As my sector selection area is banking and
Insurance, Letter of Credit transaction is taking as study subject in the
Nepal Bank, Banking Office, and Kathmandu. As I met to manager,
staffs, assistants and other concerned individuals of the Nepal Bank Ltd,
Banking office Kathmandu. I asked necessary questions and documents
which are helpful and useful to carry out my fieldwork report writing.
In my fieldwork assignment, firstly, I tried to know the structure of the
Organization, Objectives, Functions, and policies of the bank as well as
the Rules Regulations, Services and Customers. Secondly I studied the
concerned parties of L/C, types and terms of L/C, procedure and problem
of L/C etc in my topic of issues. I collected relevant data's of the study
unit through observation, questioning with concerned individuals of the
bank and some data are collected from organizational forms, charts
reports and records of the bank. I studied many books of banking system
and consulted with concerned persons for gaining the conceptual
knowledge in the subject and report writing. At last, I organized and
arranged all data's and materials in the way that I have planned for
presentation and analysis in order to develop effective resulted report.
1.6 Limitation of the Study

26

I wish to remind the reader of the following constraints I had to face

during the research project;
I this fieldwork is limited into Nepal Bank Limited, Banking office, new
Road, Kathmandu. I prefer on L/C transaction of NBL; date of Baisakh
2061 to Chaitra 2061 is taken for this study. It doesn't compare with
financial position and lending with the other commercial banks.
1)

Though most of the personnel from the banks were very cooperative in providing the necessary facts and data, at many
times they were quite reluctant to provide certain data,
which they considered, was company's secrecy.

2)

The statistical data available on the service was limited

because there are lacks of computers. Because of relevant
data, the problem is to be solved can't be expressed in
desired form.

3)

The total time was found to be quite limited for the

comprehensive research.

I hope that keeping in mind these constraints the reader will find this
report informative and useful.
1.7 Research Methodology
1.7.1 Research Design:
Research design helps to collect right quantum of accurate data
economically but there is various type of research design. Here I have
applied descriptive and analytical research design as it deal with the
descriptive of the situation and interpretation of data.

1.7.2 Source of Data:

27

There are two methods of collecting the source of data:

Primary Data &

Secondary Data

Fortunately, I applied both methods in this study.

Primary Data:

Those types of data, which is collected by own intellectual power,

sense and field observation, interviews, questioning etc. attach interview

& questioning section in this report as primary data.
Secondary Data:

That data which is collected by the help of other people, professors,

students, library, books, dissertation, thesis, articles, report, journal etc.

that types of data is colleted from the staff of NBL. Nepal Bank Patrika,
Annual Report of NBL studying a lot of dissertation, thesis, journals,
books from T.U. library etc.
1.7.3. Use of tools:
Select tabulation, graph diagram and chart etc. stoical device according to
the matching chapter or subject.
Interview Section
This chap is necessary because their experience, feeling, struggle, up and
down during their service period as very important right now. As well,
customer's feelings feed back, opinion towards bank and management is
very important which is also included in questioning section.
In this chap, I present interview of NBL'S X-chairman i.e. Mr. Raj
Bhandari, Joshi and Pradhan.

28

Navin:

Have you get any desire, which was not fulfilled during

your time?
Mr. Pandey: I used to eager to apply computerized system nationalize
but it could not do it properly at that situation. I realized privatization is
necessary at that time which was gradually used on these days. At that
movement, staff strikes breakout time to time due to political changes. In
short, we should develop NBL as joint venture banks.
Navin: At last, would you like to give any solid suggestion to make
bank more efficiency and progressive?
Mr. Pradhan: I see following steps will make bank more efficiency and
effectively;

Door to door service to branch banking should be service

plus profit oriented.

Placement of efficient and skilled manpower instead of point

of no return off

Supervision and control on banking activities.

Motivate to staff leading them as teamwork.

To standardize NBL; market professional development is

necessary. If it is urgent invite expert or specialist from
foreign countries.

Navin: Did you find any different on banking activities in your time
than this time?

29

Mr. Raj Bhandari: At that time, there were not so competitions. Nepal
commercial Bank could not stand properly as perfect competitor. Nepal
Central Bank also gave general advice, observation and control but nowa-days NBL has a lot of competitors specially joint venture banks such as
Nepal Himalayan Bank etc
Questioning Sections
Navin:

Why you prefer to open L/C in NBL instead of other

commercial banks?
Customer:

Oh, you know; it is the oldest bank of Nepal with

Government Involvement. Besides, now a day there is many financial

Co. Banks, which expense huge amount in Adv. And had believed to
customers giving more facilities and when the customers open L/C in
large amount. Proprietor goes under ground. These types of disaster
happened in India and some parts of Nepal too.
Navin:

Do you have any complain about NBL?

Customer: It is O.K. however, if they should do this service (about\C)

as fast as other C/B like, Himalayan and Grinlays etc. Some staff behaves
very roughly like we are robbers. Isn't it? Management should put right
man in the right place. Instead of those men who have only qualification
but did not have any disciplines & good behave towards customers &
responsibilities about bank

30

CHAPTER 2
DATA PRESENTATION AND ANALYSIS
2.1 Data Presentation & Analysis
Table No-1
Exporting Amount of L/C
Year
2057/2058
2058/2059
2059/2060
2060/2061
2061/2062
Source: Nepal Bank Limited

No.
39
29
32
44
35

Amount (NC)
1,46,21,462
1,08,16,083
1,20,17,870
2,68,85,198
1,30,70,600

From the above table, it is clear that in the year 2060/2061, the maximum
Exporting amount took place.
Table No-2
Importing amount of L/C
Year
No.
2057/2058
8
2058/2059
11
2059/2060
13
2060/2061
10
2061/2062
30
Source: Nepal Bank Limited

Amount (NC)
54,20,951
60,51,057
66,67,841
60,51,200
88,90,455

From the above the table, it is clear that in the year 2061/062, the
maximum importing amount took place.
From the above table the export and import of L/C. The total L/C
(Export) has been classified as 1.46 cores in 2057/058 and 1.30 cores in

31

058/059, 1.20 cores in 059/060, and 4.68 cores in 060/061, 1.30 cores in
061/062.and1.60crores in 062/063.
And the total L/C. (Import) has been classified as 54.20 lakhs in
2057/058, 60.51 lakhs in 058/059, 66.67 lakhs in 060/061, 6051 lakhs
importing and of L/C in NBL in year 2057 to 2060 is in increasing trend
but in year 2061 this trend is decreased. As like in exporting of L/C in
2058 it is in increasing trend but in 2059 it is decreased in the year 2060
it is slightly increased but also in 2061 it is decreased. Its position is in up
and down trend. So, it is clear that NBL should have to develop his job.
Table No. 3
Exporting Amount of L/C
Year

IC.

FC

2057/2058

39,23,047

6,621,852

2058/2059

34,87,153

8,828,068

2059/2060

36,70,688

7,356,724

2060/2061

40,78,543

7,743,920

2061/2062

50,57,580

4,440,453

Source: Nepal Bank Limited

From the above table, it is clear that in the year 2058/2059, the maximum
Exporting amount took place.

Table No.4
Importing amount of L/C
32

Year

IC.

FC

2057/2058

23,80,628

9,149,225

2058/2059

19,83,857

9,511,865

2059/2060

20,88,271

10,568,739

2060/2061

34,80,451

1,2108,045

2061/2062

13,20,404

7,045,826

Source: Nepal Bank Limited

From the above table, it is clear that in the year 2060/2061, the maximum
Exporting amount took place.
Chart -1
Import and Export of L/C in NBL

Source: Nepal Bank Limited Annual Report

From the above chart importing and of L/C in NBL in year 2057 to 2060
is in increasing trend but in year 2061 this trend is decreased. As like in
exporting of L/C in 2058 it is in increasing trend but in 2059 it is

33

decreased in the year 2060 it is slightly increase but also in 2061 it is

decreased.
From the above table the export and import of L/C. The total L/C
(Export) has been classified as 1.46 cores in 2057/058 and 1.30 cores in
058/059, 1.20 cores in 059/060, and 4.68 cores in 060/061 and 1.30 cores
in 061/062.
And the total L/C. (Import) has been classified as 54.20 lakhs in
2057/058, 60.51 lakhs in 058/059, 66.67 lakhs in 060/061, 6051 lakhs
importing and of L/C in NBL in year 2057 to 2060 is in increasing trend
but in year 2061 this trend is decreased. As like in exporting of L/C in
2058 it is in increasing trend but in 2059 it is decreased In the year 2060
it is slightly increased but also in 2061 it is decreased. Its position is in up
and down trend. So, it is clear that NBL should have to develop his
performance.

34

CHAPTER -3
SUMMARY, CONCLUSION & RECOMMENDATION
3.1 Summary
In the beginning. NBL has as authorized capital of Rs. One core and
divided to 1, 00,000 sharing of Rs. 100 each of which 25,000 shares were
allowed to be issued. Now it has reached up to 100 core authorized
capital and paid up capital has been raised up to Rs 38.038 corer from 8
lakhs 42 thousand.
This study limited only the L/C's transaction of NBL, banking office,
new road of later one year. It doesn't deal with the financial position and
lending by other bank. It is designed to show the L/C position of NBL
and relation between import and export activities. This study is
concerned to the year form 2057 to 2061. The data are collected from
NBL and other sources.
3.2 Conclusion:
This study deals with the cases and effort of decrease or increase in the
total L/C (Export) has been classified as 1.46 cores in 2057/058 and 1.30
cores in 058/059, 1.20 cores in 059/060, and 4.68 cores in 060/061 and
1.30 cores in 061/062.
And the total L/C.(Import) has been classified as 54.20 lakhs in
2057/058, 60.51 lakhs in 058/059, 66.67 lakhs in 060/061, 6051 lakhs in
061/062.
Its position is in up and down trend. So, it is clear that NBL should have
to develop his job.
35

Number of negotiation contributed for this growing number of

Negotiation of the bank. One of the important factors that lead to grow
the negotiation number of bank is the lack of investment policy, second
important factor is political instability and important factor is different
problems to be faced in opening L/C. As the person of Nepal is lack of
entrepreneurship, they hesitate to open L/C and don't know properly how
to invest and open the L/C.
In conclusion, above mentions are some of the terms and procedures
commonly used in international trade? However, practice in various
countries and at advised that bank in Nepal should follow NRB's
regulations as well as ICC guidelines before inter into international trade.
The opinion of NBL most of the customers wasn't to open L/C with
security, quick service easily transfer their products and TC loan from
one country to another country in a very short period. So NBL should
have to fulfill customer's desire.
3.3 Recommendation
1.

Some of the staffs are untrained. They do not have good

attitude towards the customers. They neglect the proverb, as
the customer is the king. Training must be provided to them
while selecting the candidate, chances should be given to all
the staff instead of selecting much time at the same person.
Training and Promotion should be provided in right time to
right person. Right man should be keep in the right place
according to their capacity and willingness to work, there is
need of defining their job, their authority, and their
responsibility so that they provide quicker service to the

36

customer and able to convince the people that bank is for

their benefit rather than the profit.
2.

There should be sound co-ordination between NRB, NBL

and other commercial banks. So as to deliver credit and
other supporting services smoothly. So hat joint effort can be
carried out in making any decision like change in the interest
rate, lending policy etc.

3.

Bank should give view on mobilizing deposits..

4.

It should focus on development of modern technology and

scientifically try to solve the problems and obstacles of
customers; it should care to solve the problems by the
management and personals.

5.

It is more necessary to supervise and control the banking

transaction.

6.

It may provide better banking services than the other

commercial bank to their customers.

7.

I suggest giving preference on loan repayment instead of

pressure loan for hat purpose it manage effectively and
skilled management.

8.

I suggest making effective repayment f loan program by

giving discounts and door-to-door facilities.

9.

In over all, it can be said that the bank needs, so many

improvements by its own part but also the help of
government is most essential.

10.

I suggest making effective repayment f loan program by

giving discounts and door-to-door facilities.

37