The negotiation process of Letters of Credit of IFIC Bank Ltd.

Abstract

To survive competitively in the market any business whether it is production or service oriented should make their product and services more diversified. Responding to the market demand IFIC Bank Dhanmondi Branch opens a huge amount of Letters of Credit every year. L/C is a major income source of the bank which is a long process and need lot of documentation. That is why I have decided to prepare my internship report on the Negotiation Process of Letters of Credit. This report has been conducted to find out the overall procedure of L/C by considering two real companies. As IFIC Dhanmondi Branch is one of the big branches and located in a lucrative commercial position a big number of clients come here. So the number of transaction in each department is high. There are three department—General Banking (GB), Credit and Foreign Exchange (FOREX). In GB client oriented transaction number is more than other department where credit and FOREX do a lengthy task but the direct involvement of client is not that much as GB. The most full of activity department is the foreign exchange where a single task is required lengthy time to complete whereas other department can do the same task within one third time of the foreign exchange. Due to the critical nature of the process of Letters of credit, the whole process takes more than three months to complete a single L/C. So in compare to other department there is no specific day closing of foreign exchange but they do monthly closing and send that information to the head office of IFIC bank and Bangladesh Bank at the beginning of each month. During the negotiation process of L/C the modern technology which is worldwide recognized is used named SWIFT. By using SWIFT any countries authorized dealer or a.d. bank can do transaction with any other country of the world. SWIFT is the electrical medium to transfer the confidential information of importer and exporter. However paper documentation is needed for L/C which is sent to the desired party by courier. By the money transfer the L/C process summed up and IFIC bank can calculate the final income from a single L/C.