The following article was printed in DCInsight Volume 9 number 3 - July - September 2003.

Source: DCInsight Published monthly by ICCBOOKS.COM

DCInsight is the voice of the International Chamber of Commerce on letters of credit. The ICC, which over 70 years ago created the UCP - its universally used rules on letters of credit, has in DCInsight, a quarterly magazine which brings the views of its L/C experts to readers in more than 100 countries. With a new UCP revision now on the way, practitioners need DCInsight to get ready for the new rules.

An indictment of India's L/C training

DCInsight: Volume 9  No 3 July - September 2003

India's foreign trade could be more successful if its documentary credit bankers were adequately trained, were allowed to conduct documentary credit practice properly, and if its export/import managers were also trained in UCP. Too often this is not the case. This is evident from the reactions in the West where one often hears: "India's export documentation and import L/Cs are erratic."

Importers

With importers, the main problems one finds are defective or restrictive stipulations in L/C applications and the importers' tendency to interfere in the banker's document examination practice. With exporters, one often finds discrepant documentation and lack of compliance planning. These deficiencies are often caused by inadequate UCP knowledge.

With regard to both import or export practice, there is a need to train traders in UCP in order to improve their L/C management skills as a part of improving their trade business management skills. The importer needs to learn to make L/C applications clear, correct, specific and relevant. He has to understand that the UCP does not allow non-documentary conditions and insists that instructions should not be confusing and misleading.

On instructions/stipulations, UCP Article 5 is as relevant to the importer as it is to the banker. The importer has to learn UCP Articles 3 and 4 in order to understand the essentials of L/C-based trade. And he needs to understand that it is the banker's duty to examine documents and take decisions and that the importer has no right to interfere in the banker's examination process.

In short, the importer must learn three tips, which can be summed up in the acronym UCP: U: UCP knowledge management; C: credit application management; and P: payment management.

Exporters

The Indian exporter should learn that the UCP expects documents to be in compliance with the L/C and consistent with one another. In this connection, the key is Article 13. This Article, though meant for bankers, is also important for exporters because they have to follow its requirements and to present their documents accordingly. Other UCP articles that can be helpful to the exporter: with regard to understanding documentation (Articles 20 and 21) and to safeguard his interests in the event of document rejection (Articles 14 and 39). Again, the acronym UCP applies: U:UCP knowledge management; C: compliance management; P: payment dispute management.

Clearly, India's international traders need UCP knowledge management skills to make their international trading skills more effective. The UCP is relevant, not only to bankers, but to traders as well. As such, UCP knowledge will be helpful in managing disputes and controversies between banker and trader, between the trader (applicant) and the trader (beneficiary). To achieve these purposes, remedial training in UCP is a must.

Trader and banker training

Practising bankers with training skills, correct and up-to-date UCP knowledge, and experience in handling L/Cs and the application of UCP are the logical persons to train the traders.

India's banking officers and clerks, unlike traders, are trained from time to time to conduct documentary credit operations. However, the question is: are they well trained? I suggest that in general they are not, that much banker training in India is defective.

Despite the fact that there are regular attempts to train bankers in the UCP, documentary credit operations in India's banking system are not consistent with international standard banking practice as codified in the UCP. The West says that Indian bankers are inept in issuing L/Cs but artful in concocting discrepancies.

This, I suggest, is because India's banking training is not well-planned, well-focused, well-presented, and wellevaluated. Consider some examples.

Frequently, an Indian banker working in a nondocumentary credit department or in a non-international banking branch is nominated to follow training in documentary credit banking. But after the training he is often not assigned to documentary credit jobs. Some banking clerks/junior management officers, for example, are trained in L/Cs but afterwards may be placed in charge of handling cheques. In other words, training is not appropriate, i.e., not consistent with the job/corporate requirements.

In India, there is little in the way of a systematic approach to training. That's why it is said that training time is a paid holiday. Those who have documentary credit jobs may not be nominated for training for updating their UCP knowledge management skills, since their bosses consider them to be indispensable in documentary credit operations and believe that off-the-job training disrupts banking operations. They often nominate those for training those whom they find to be inconvenient (the Indian banking system is highly unionized), or incompetent and redundant (public-sector banks are overstaffed).

In the training itself, topics are frequently not well planned, with some teaching inputs being irrelevant or outdated. UCP information is rarely supplemented with ICC clarifications in the form of Banking Commission Opinions or policy documents, and therefore does not serve to correct wrong notions that bankers may have about the UCP.

Because there is often too much theory, too much lecturing, and not enough discussion or use of focused exercises/case studies, training presentation becomes one-way communication without the Q & A approach necessary to enliven the discussion and to correct misinterpretations and misunderstandings. Another acronym applies here: UCP - unskilled course presentation.

Required changes

The essence of the art of course planning is giving the right information at the right time to the right people at the right place (whether off- or on-the-job) by the right trainers using the right teaching methods and aids. It involves generating interest for learning. Indian trainers would do well to read Roy Becker's "Banker's Insights on International Trade" (available from ICC) to learn how to illustrate UCP-related information to make UCP presentation more interesting. Erratic or uninteresting UCP presentation by the Indian trainer is as problematic as erratic documentation presentation by the exporter and controversial document examination by the banker.

Training evaluation

Also, training needs to be evaluated. But in India there is little post-training evaluation of the impact of training on job performance. The training evaluation at corporate level is focused on how many have been trained or how many courses were presented, and not on how well the candidates have been trained or how well have they performed.

Training in the Indian banking system is defective because it is considered to be just a formality, to meet the external training guidelines and regulations of India's central bank, Reserve Bank of India (RBI), and not an internal necessity/ requirement. Moreover, formal classroom or off-the-job training is considered to be an expenditure that eats up profit and not an investment.

Conclusion

I suggest that the Indian banking system should have three training objectives, which can be summed up once again in the acronym: UCP: U: UCP knowledge management skills development; C: credit (L/C) management skills development; and P: payment dispute management skills development.

Bankers should be able to develop/ improve these skills during training, because bad training leads to bad practice. India's premier banking training institute, the National Institute of Bank Management (NIBM), needs to conduct UCP courses for banks' internal trainers in order to develop trainers with necessary skills in UCP course planning and presentation. ICC's online training course DC-PRO could be helpful here.

India - and its trading partners - deserve no less.


Ravi Mehta (Ph.D.) is Associate Trade Finance Editor, The Exporter, New York.