Foreign Exchange Operations of Exim Bank Limited (Panthapath Branch)

Daffodil International University Institutional Repository Business Administration Project Report of BBA 2017-08-05 Foreign Exchange Operations of Exim Bank Limited (Panthapath Branch) Kundu, Ranjit Chandra Daffodil International University http://hdl.handle.net/20.500.11948/1671 Downloaded from http://dspace.library.daffodilvarsity.edu.bd, Copyright Daffodil International University Library

Internship Report On Foreign Exchange Operations of Exim Bank Limited (Panthapath Branch)

Internship Report On Foreign Exchange Operation (Exim Bank Limited)Panthapath Branch Submitted To Sayed Farrukh Ahmed Assistant Professor Faculty of Business & Economics Department of Business Administration Daffodil International University Submitted By Ranjit Chandra Kundu ID: 103-11-1695 Batch: 27 th Department of Business Administration Daffodil International University Date of Submission: 09 July, 2015

Letter of Transmittal Date: 09-07-2015 To Sayed Farrukh Ahmed Assistant Professor Department of Business Administration Faculty of Business and Economics Daffodil International University Subject: Submission of Internship report on Foreign Exchange Operations of EXIM Bank Limited, Panthapath Branch. Dear Sir, This a great pleasure to submit my internship report on Foreign Exchange Operation of EXIM Bank Ltd at Panthapath Branch. It was a golden opportunity for me to gain knowledge and practical experiences regarding the procedures and functions while working at the Panthapath Branch of EXIM Bank Ltd. So, I firmly believe that, these knowledge and experiences will help me in my professional life. I have tried hard to fulfill your expectations by sharing details of each and every topic and avoiding unnecessary amplification of the topics. Therefore, I will be very much glad to hear from you for further clarification. Sincerely yours, Ranjit Chandra Kundu ID: 103-11-1695 Batch: 27 th Department of Business Administration Daffodil International University Daffodil International University Page i

Acknowledgement My acknowledgement begins with thanking my academic supervisor Sayed Farrukh Ahmed who has provided me suggestions for making this Final Internship Report. I like to thank sir for his generous cooperation and supervision that made me really confident about the desired outcome of my internship project. I would like to show my warm hearted gratitude to the whole EXIM Bank Limited. Which has provided me with great deal of information s, adequate data and finally cooperated me for the accomplishment of the report successfully. I would like to thank each staffs of the different Department. I am especially grateful to Md. Zoshim Uddin Bhuiyan, (EVP & Relationship Manager) for invaluable support and direction that lead me to the successful completion of my internship report. I have done my whole internship period under him and really grateful to him for a big time for helping me in my each and every step of work at office. I am also grateful to Mohammad Arman Hossain, Sr. Assistant vice President & Operation Manager, Nasreen Akhtar, First Assistant Vice President, Md.Ariful Islam, Senior Officer, Mrs. Sharmin Sultana, Junior officer, Foreign Exchange Department, Mr.Sumon Kumer Mazumdar, Junior Officer General Banking Department for his valuable suggestions that make me confident to walk my desire way to construct my report. I am very much thankful to EXIM Bank Limited and its management specially the employees of the entire Department for their cordial support to prepare this difficult study with important information and data. Without them it would not possible for me to complete this difficult task. I got all necessary guidelines, cooperation and advice from them to complete this complicated task. Daffodil International University Page ii

Declaration I, Ranjit Chandra Kundu, hereby declare that the report of internship titled Foreign Exchange Operations of EXIM Bank Limited is prepared by me after completion of Three months work in EXIM Bank Limited. I also would like to confirm that, the report is prepared exclusively for academic purpose not for any other purposes. Ranjit Chandra Kundu ID: 103-11-1695 Major in Accounting Department of Business Administration Faculty of Business and Economics Daffodil International University Daffodil International University Page iii

Preface Being the student of Business Administration, It is my pleasure to have successfully completed my internship report on Foreign Exchange Operations of EXIM Bank Limited, Panthapath Branch. In my report, I have covered topics Foreign Exchange Operation. Within this short duration, I have tried my level best to gather information as much as I could regard the banking practices of EXIM Bank Limited. However, it is needless to say that, there may be some lacking and mistakes in my report preparation. So, I acquit for my inaccuracy. I worked as an internee in EXIM Bank Limited at Panthapath Branch. The purpose of my internship program was to know about the banking practices and have access to the professionals and expertise from whom I could learn about how by the help of team work the activities are performed in a financial institution. In this report, I would like to express the appreciation to my honorable supervisor Assistant Professor Sayed Farrukh Ahmed, Department of Business Administration, Faculty of Business and Economics, Daffodil International University. Sir Has enabled me to complete my internship report successfully. Therefore, I totally comply with the instructions of supervisor for preparing my report. Moreover, my practical knowledge of working as an internee in EXIM Bank, Panthapath Branch has enhanced me to develop my knowledge and skills. Daffodil International University Page iv

Letter of Acceptance I am pleased to certify that the internship report on Foreign Excnange Operatons of EXIM Bank Limited conducted by Ranjit Chandra Kundu bearing ID: 103-11-1695 of the Department of Business Administration has been approved for the presentation and defense/ under my direct supervision. Ranjit Chandra Kundu worked with EXIM Bank Limited as an intern. The data and the findings presented in the report are genuine work of Ranjit Chandra Kundu. I recommend the report prepared by Ranjit Chandra Kundu for further academic commendations. He bears a good moral character and pleasing personality. I wish him all the success in life. Supervisor,. Sayed Farrukh Ahmed Assistant Professor Department of Business Administration Faculty of Business and Economics Daffodil International University Daffodil International University Page v

Executive Summary The internship is designed to bridge the gap between the theoretical Knowledge and real life experience. It is designed to have a practical experience while passing through the theoretical understanding. The report is combination of Three months of internship program with EXIM Bank Ltd, Panthapath Branch. This report has been segmented into five different chapters. The first chapter contains Introduction, An Overview of the Banking sector, Origin, Objective, Methodology, Scope, limitations of the Report. The second chapter contains overview of EXIM Bank as a whole mentioning its historical background, Objective, Hierarchy, Special Products and Services, Swift Service of EXIM Bank. The third chapter contains about the Foreign Exchange Operation of EXIM Bank, Introduction, Import section, Import Registration Certificate (IRC), Function of Import section, Export Section, Export Registration Certificate (ERC), Function of Export Section, Remittance, Import Performance, Export Performance, Foreign Remittance, Within these chapters details about the functioning and practices of EXIM Bank has been described. In chapter four SWOT Analysis, I have discussed the Internal part Strength and Weakness External part Opportunities and Threats of the EXIM Bank in the better ways. Chapter five is the, I have discussed the findings which I found in three months of period in EXIM Bank and recommendations that can help EXIM Bank in better ways. Daffodil International University Page vi

Table of Content Topics Letter of Transmittal Acknowledgement. Page Number I Ii Declaration. Preface. Letter of Acceptance. Executive Summary.. Chapter 01 :Background of the Study 1.1 Introduction 1.2 An Overview of the Banking Sector.. 1.3 Origin of the Report 1.4Objective of the Report.. 1.5 Methodology of the Report. 1.6 Scope of the Report.. 1.7Limitations of the Report. Chapter 02:Overview of the EXIM Bank 2.1 Overview of the EXIM Bank... 2.2 Historical Background of the EXIM Bank.. 2.3 Objective of the EXIM Bank 2.4 Hierarchy of the EXIM Bank 2.5 Special Products and Services of EXIM Bank 2.5.1SWIFT Service:... Daffodil International University III Iv V vi 1-5 1 2 2 3 3-4 4-5 5 6-11 6 6-7 7 8 9-11 11-12 Page vii

Chapter 03:Foreign Exchange Operation of EXIM Bank 3.1 Introduction.. 3.2 Import section. 3.2.1 Import Registration Certificate (IRC).. 3.2.2 Function of Import section : 3.3 Import Performance 3.4Export Section. 3.4.1 Export Registration Certificate (ERC) 3.4.2 Function of Export Section... 3.5 Import Performance:... 3.6 Remittance:.. 3.7 Foreign Remittance... 13-26 13 14 15-21 22 22 22 23-26 27 27-28 28 Chapter 04:SWOT Analysis 4.1 SWOT Analysis:.. 29-31 29-31 Chapter 05: Findings and Recommendations Finding.. Recommendations. Conclusion References... 32-35 32 33 34 35 Daffodil International University Page viii

Chapter 1: Background of the Study 1.1 Introduction Bank is very old institution that is contributing toward the Development of any economy and is treated as an important service industry in the modern world. Economic history shows that development has started everywhere with the banking system and its contribution towards financial development of a country is the highest in the initial stage. Modern banks play an important part in promoting economic development of a country. Bank provides necessary funds for executing various programs in the process of economic development. They collect savings from large masses of people scattered throughout the country, which in the absence of banks would have remained ideal and unproductive. These scattered amounts are collected, pooled together and made available to commerce and industry for meeting the financial requirements. Economy of Bangladesh is in the group of world s most underdeveloped economies. One of the reasons behind this may be its underdeveloped banking system. Government as well as different international organizations have also identified that underdeveloped banking system causes some obstacles to the process of economic development. So they have highly recommended for reforming financial sector. Since 1990, Bangladesh Government has taken a lot of reform activities to ensure high economic growth. In 1996, World Bank published Bangladesh: Agenda for Action in which it has suggested lots of recommendations for economic development of our country. These recommendations include special presentation for reforming banking sector. Bank plays a vital role in the economy by providing means of payment and in mobilizing resources. Bank is the most important financial institution in the economy. The economic development of a country depends on the development of banking sector. Today s modern banks are not only providing traditional banking but also expanding the many financial services. In today s world the life of the people directly or indirectly are within the arena of banking whether conventional or Islamic banking. Although Islamic banking is not a newer concept in Bangladesh as it has started its operation since 1983, very few people are aware about its operation. But things are changing. Islamic Banking is also getting popularity in the country. Internship program is essential for every student, especially for the students of Business Administration, which helps them to know the real life situation. For this reason a student takes the internship program at the last stage of the bachelor s degree, to launch a career with some practical experience. Against this backdrop, I have completed my three months internship in the EXIM Bank Ltd., Panthapath Branch,Dhaka which has helped me a lot to understand the real life situation of banking business. 1 P a g e

1.2 An Overview of the Banking Sector After Independence of Bangladesh the Banking sector was restructured as a fall out of war of liberation. Banking grew primarily in the public sector with main emphasis development needs of the war-torn economy with gradual liberalization in subsequent years. It was increasingly felt that Banks should be allowed in the private sector. In the 80 s for the first time a number of Banks in the private sector was allowed. Subsequently in the mid 90 s some more Banks in private sector commenced operations. Finally 1999 3rd Generation of private sector Bank was given permission to operate. As a result while up to 80 s public sector Banks dominated financial sector, Banks in the private sector were given increased responsibility with the passage of time. The share of deposits of Nationalized Commercial Banks (NCBs) in total deposits, which stood at 89% in 1980 gradually, declined over the years to reach the level of 55% in 2000. Simultaneously, Private Commercial Banks (PCBs), which were responsible for only 18% of deposits in 1985, this share increased gradually over the years to constitute about one third of the total deposits of the country by the end of the millennium. But market share of deposits of Foreign Commercial Banks (FCBs) did not change much during the last twenty years. In the early 80 s, the share was 6% and it stood at 7% by the end of the century with a relatively small branch network in the country. Likewise share of NCBs in total advances of the country declined gradually from 80% in 1980 to reach the level of 47% by the end of year 2000. At the same time, share in advances of the PCBs increased from 14% to 31% over the same period. A break-up of deposits and advances indicates that share of rural branches contribute higher share in advances. Rural deposits constitute slightly more than one-fifth of the total deposits of the Banks. On the other hand, rural advances constitute around 17% of the total advances of the Banking sector. 1.3 Origin of the Report As a prerequisite for the Bachelor of Business Administration Degree of Daffodil International University (DIU), I was required to complete an internship in a suitable business organization and submit a report on my findings. I had been selected to work as an Internee in Export Import Bank of Bangladesh Limited, Panthapath Branch for a period of 3 months from Jan01, 2015 to April 01, 2015. Md. Mosharraf Hossain Mazumder, Executive Vice President, HR division, Export Import Bank of Bangladesh Limited appointed me as an Internee. After discussion and getting consent, I started to work on the project titled Foreign Exchange Operation of EXIM Bank. Without practical exposure, theory can never be fruitful. For this reason, B.B.A program has been designed in such a way that a student can get practical knowledge. A student needs to go for practical orientation in some organization where his/her duty is to bear all the some things from operations and activities of that branch. This internship report is generated under the 2 P a g e

supervision of Assistant Professor Sayed Farrukh Ahmed, School of Business, Daffodil International University (DIU), 1.4Objective of the Report The main objective of the report will be to provide an overview of the foreign exchange operations of EXIM Bank Limited at Pathapath Branch with fulfilling the requirement of BBA program. However, the objective behind this study is something broader. Objectives of the report are summarized in the following manner- 1. To provide an overview of EXIM Bank Limited. 2. To analyze Export- Import procedures of EXIM Bank Limited. 3. To identify the back to back letter of credit of EXIM Bank Limited. 4. To analyze the annual performances of export and import business of EXIM Bank Limited. 5. To evaluate the foreign inward and outward remittance of EXIM Bank Limited. 1.5 Methodology of the Report From my educational background I have learned different methodology in research process. So in this study I had the opportunity to implicate my educational knowledge in practical field. I have collected data from many sources: Sources of Data Primary Sources Secondary Sources 3 P a g e

Primary Sources : 1. Personal interview- face to face conversation and in depth interview with the respective officers of the branch. 2. Personal observation- observing the procedures of banking activities followed by each department. 3. Practical work exposure on different areas of the branch. 4. Informal conversation with the client or customers. Secondary sources: Although there were so many limitations, it was tried to use secondary sources of collecting information to make the report presentable with as less abstraction as possible. Secondary data Data that were published before for some other reasons had been collected using internal and external sources. Internal Secondary data To furnish the report properly some papers have been collected from the officials of EXIM Bank Limited. Information from annual reports, journals, newspapers and other published documents have been used. External Secondary Data For better interpretation some data had been collected through Internet Browsing. 1.6 Scope of the Report As I was sent to EXIM Bank Limited, Panthapath Branch, the scope of the study is only limited to this branch. The report covers details about EXIM Bank Limited (especially foreign exchange operation). 4 P a g e

1.7 Limitations of the Report The time frame, 3 months, is insufficient to know all activities of the branch and prepare the report. It was very difficult to collect the information from various personnel for their job constraint. As some of the fields of banking are still not covered by our courses, there was difficulty in understanding some activities. Another limitation of this report is Bank s policy of not disclosing some data and information for confidential reason, which could be very much useful. Because of the limitation of information, some assumptions were made. So there may be some personal mistake in the report. Omissions and error may be there due to lack of my prior experience in preparing a professional report like this one; nevertheless, I have tried utmost to avoid mistakes. 5 P a g e

Chapter02 Overview of the EXIM Bank 2.1 Overview of the EXIM Bank EX1M Bank Ltd is the name implies a newly formed commercial Bank but is the 1st of its kind in Bangladesh. It has been incorporated in Dhaka, EX1M Bank as a public limited company and its Head Office of the Bank is located at Symphony, Plot # SE (F) 9,Road #142, Gulshan Avenue, Dhaka-1212, Bangladesh. In the world of consumerism the business organization of the world strive for the consumers satisfaction as a number one business strategy whatever may be the product of the organization, either service or non service. Service is the product of Bank. There is a saying that customer service starts rights right from the stairs of the Bank building. The guard at the door is first person represents of the Bank, receives a customer with wishes in smiling face. 2.2 Historical Background of the EXIM Bank EXIM Bank Ltd. was incorporated under the Companies Act 1994, on the 2nd June 1999. EXIM Bank Ltd. believes in togetherness with its customers, in its march on the road to growth and progress with service. As a commercial Bank we will do all traditional Banking, business including introduction of a wide range of savings and credit products, retail Banking and ancillary services with the support of modem technology and professional skills. The Export Import Bank of Bangladesh Ltd. commenced formal commercial Banking operatic from 3rd August 1999 with the permission of Bangladesh Bank. The sponsors of the Bank are leading business personalities and reputed industrialists. The Bank has a sound capital base; its Authorized Capital is Tk. 1000.00 Million while its Initial Paid up Capital is Tk. 225.00 Million subscribed by the sponsors. To solidify its capital by further the paid up capital will rise to Tk. 450.00 Million within a reasonable period by pub offering of shares of the Company. The Bank will be immensely benefited further more from the able leadership of the Chairman and the valuable advice and guidance the advisor. Originally the name of the Bank was BEXIM Bank of Bangladesh Ltd. Later the management BEXIM Bank of Bangladesh Ltd. changes the name of the Bank to EXIM Bank Ltd. because the case lodged by BEXIMCO Group of Industries. The Board of Directors wants to carry out in the management all of this service industry s administration and credit portfolio independent without any undue influence from outside. The board will formulate policy and give policy directives to the Management 6 P a g e

Transparency and accountability will be strictly ensured at all levels of the Bank. The Bank will operate with integrity, competence and farsightedness abiding by all principles and provisions laid down the Bank Company Act, 1991, the guidelines of Bangladesh bank. Considering the inherent desire of the religious Muslims of Bangladesh, EXIM Bank Ltd. has been decided to convert the entire conventional system of the Bank into Islamic Banking with effect from 1st July, 2004. 2.3 Objective of the EXIM Bank Bangladesh is now an integral part of global market. As such there is an urgent requirement for Bangladesh to place the traditional Banking practices in harness with the global trades of a free market economy by following international Banking customs, practices and standards. Today clients of a Bank in Bangladesh are exposed as well as international markets. They have to stay update with their practice and standards to meet the demands of achieving harmony in the high standards of a free economy. Hence, by getting into both corporate and retail Banking and rapid innovation and networking the Bank believes that it can accomplish its goals. The core objectives are:- To carry on, Transact, undertake and conduct the business of Banking in all its branches and to transact and do all matters and things incidental there to in Bangladesh and abroad. To receive, borrow or raise money on deposits, loan or otherwise, upon such terms as the Company may approve and to hive guarantees and indemnities in respect of all debts and contracts. To establish welfare oriented Banking systems. To play a vital role in human development and employment generation. To invest money in such manner as may from time to time be thought proper. To carry on the business of buying and selling bullion, gold and other valuable assets. 7 P a g e

2.4 Hierarchy of the EXIM Bank Figure 2: Hierarchy of the EXIM Bank SOURCE: Author s Own Construction 8 P a g e

2.5 Special Products and Services of EXIM Bank Export Import Bank of Bangladesh Limited launched several financial products and services since its inception. A them are Money Grower Monthly Saving Scheme, Steady Money Scheme, Super Savings Scheme, Multiplus Savings Scheme. All of these have received wide acceptance among the people. Mudaraba Money Grower Monthly Savings Scheme The prime objective of this Scheme is to encourage people to build up a habit of saving. In this Scheme one can save a fixed amount of money every month and receive substantial lump sum of money after five, eight, ten or twelve years. Monthly installment rate is Tk. 500/-, 1,000/-, 2,000/- or 5,000/- Mudaraba Steady Money Scheme Monthly Income Scheme: Under this Scheme, customer has to deposit a fixed amount of money for five years and in return he will receive benefits on monthly basis. Benefits start right from the first month of opening an account under the Scheme and will continue up to five years when the depositor will get refund of his deposit. This scheme is an investment for a steady return. Mudaraba Super Savings Scheme Super Saving Scheme offers a small depositor to invest his fund (minimum 10.000/-) and fund will be double in 6 (six) years period. This scheme will secure the future of the investment with ease. MudarabaMultiplus Savings Scheme Savings helps to build up capital and capital is the prime source of business investment in a country. Investment takes the country towards industrialization, which eventually creates wealth. That is why savings is treated as the very foundation of development. To create more awareness and motivate people to save, EXIM Bank offers Multiplus Savings Scheme. Any individual, company, educational institution, government organization, NGO, trust, society etc may invest their savings under this scheme. The deposit can be made in multiples. 9 P a g e

Guidelines for premature encashment & Loan Advantage Mudaraba Money Grower Monthly Savings Scheme (MSS): Premature Encashment In case of premature encashment before 1 year no profit shall be paid. In case of premature encashment after 1 year but before maturity profit shall be paid at savings rate. Loan Advantage After three years of savings in this scheme the depositor (if an adult) is eligible for a loan up to 80% of his deposited amount. In that case, interest rates on the loan will be applicable as per prevailing rate at that time. Mudaraba Steady Money Scheme (MIS): Premature Encashment In case of premature encashment before 1 year no profit shall be paid. In case of premature encashment after 1 year but before maturity profit shall be paid at savings rate. Loan Advantage A depositor can avail loan up to 80% of the deposit amount under this scheme. In this case, interest will be charged against the loan as per Bank s prevailing rate. During the tenure of the loan, the Monthly Income will be credited to the loan account until liquidation of the loan amount inclusive of interest. Mudaraba Super Savings Scheme (MSSS): Premature Encashment In case of premature encashment before 1 year no profit shall be paid. In case of premature encashment after 1 year but before 3 years profit shall be paid at Savings Rate plus 1%. In case of premature encashment after 3 years but before maturity profit shall be paid at Savings Rate plus 1.5%. 10 P a g e

Loan Advantage A depositor can avail loan up to 80% of the deposit amount under this scheme. In this case, interest will be charged against the loan as per Bank s prevailing rate. MudarabaMultiplus Savings Scheme (MPS): Premature Encashment In case of premature encashment before 1 year no profit shall be paid. In case of premature encashment after 1 year but before 3 years profit shall be paid at Savings Rate plus 1%. In case of premature encashment after 3 years but before 5 years profit shall be paid at Savings Rate plus 1.5%. In case of premature encashment after 5 years but before 8 years profit shall be paid at Savings Rate plus 2%. In case of premature encashment after 8 years but before maturity profit shall be paid at Savings Rate plus 2.5%. Loan Advantage A depositor can avail loan up to 80% of the deposit amount under this scheme. In this case, interest will be charged against the loan as per Bank s prevailing rate. 2.5.1SWIFT Service: The SWIFT Service helped in sending and receiving the messages and instructions related to NOSTRO Account operations and L/C related matters. The banks have brought 11 of branches under SWIFT network. Other branches will come under the network hopefully by the 2005. SWIFT aims to provide a prompt and efficient service to help you gain the most from our products. As a part of this service a documentation set is supplied with each product. This Guide is a part of that documentation set and contains as comprehensive and as up-todate a description of the product as possible. 11 P a g e

SWIFT Network SWIFT or the Society for Worldwide Inter bank Financial Telecommunication is a cooperative institution established in 1973 by a group of banks to manage their international telecommunications activities. Now over 2900 member banks, and regularly processes in excess of three million banking messages per day between banks in over 150 countries around the world own SWIFT. SWIFT is the logical choice for most international financial transactions: With over 5900 connections among the world s major banks, the chance is high that for any given transaction the bank you are dealing with is a SWIFT user. The SWIFT network provides facilities for ensuring that messages are transmitted in standard, internationally accepted formats, simplifying processing and permitting end to end automation of many banking transactions. SWIFT is highly secure, with elaborate mechanisms to ensure that information remains confidential, authentic and intact. With an extremely low unit transaction cost, SWIFT is nearly always the most costeffective means of transmitting an international message. SWIFT Messages In addition to its role as network provider, SWIFT is responsible for defining and maintaining standards for international banking telecommunications. Standards are necessary to ensure that banks understand the messages that they send to each other, and to allow them to process messages automatically. SWIFT message also comprises Header containing the addresses of sending and receiving banks, the Message Type, Message priority, Delivery Monitoring Field, Obsolescence Period, Banking Priority. The usage and contents of SWIFT Message Headers and Trailers are more fully treated in the SWIFT. The advantages of SWIFT Message Types are: Predictability: Depending on the type of message, the format of the message can be predicted exactly, simplifying automation. Diversity: A specific Message Type exists for most banking activities. In order to use SWIFT Message Types and the SWIFT network, however, banks have to employ strict controls on the ways that messages are prepared to ensure that standards are respected and that the control Header and Trailer are complete and accurate. For this reason, most banks employ specialized computer software, such as PC Connect, to perform message preparation and processing. 12 P a g e

Chapter: 03 Foreign Exchange Operation of EXIM Bank 3.1 Introduction: Foreign trade can be easily defined as a business activity, which transcends national boundaries. These may be between parties or government ones. Trades among nationals are a common occurrence and normally benefit both the exporter and importer. In many countries, international trade accounts for more than 20% of their national incomes. In every international trade transactions, there must be: An agreed products or services A sales contract Delivery details Shipping and delivery details Terms of payment Required documentation Insurance cover Foreign trade can usually be justified on the principle of comparative advantage. According to this economic principle, it is economic profitable for a country to specialized in the production of that commodity in which the producers has the greater comparative advantage and to allow the other country to produce that commodity in which it has the lesser comparative advantage. It includes the spectrum of goods, services, investment, technology transfer etc. This trade among various countries causes for close linkage between the parties dealing in trade. The bank which provides such transactions is referred to as rendering international banking operations. International trade demands a flow of goods from seller to buyer and of payment from to seller and this flow of goods and payment are done through letter of credit (L/C). 13 P a g e

Foreign Exchange Export Import Remittance 3.2 Import section Import and Export (control) Act 1950 regulate the Import and Export trade of the country. There are a number of formalities, which on Importer has to fulfill before import goods. These formalities are explained bellow 3.2.1 Import Registration Certificate (IRC) The first thing one need to carry on a business of import is called Import Registration Certificate. But registration is not required for import goods, which do not involved remittance of foreign exchange like medicine; reading materials etc. can be imported without registration by the users within monetary limit. Documents to be required for Import Registration Certificate are as follows Income Registration Certificate Nationality Certificate Certificate from Chambers of Commerce and Industry Registered Trade Association Bank Solvency Certificate Copy of Trade License Requisite fees On receiving application, the respective CCI&E officer will scrutinize the documents and conduct physical verification and issue demand note to the prospective importers to furnish the following papers through their nominated Bank Original copy of treasury deposited as IRC fees Assets Certificate Affidavit from 1st class Magistrate Rent receipt Two passport size photograph 14 P a g e

Partnership deed in case of partnership firms Certificate of Registration, Memorandum and Articles of Association in case of Limited Company. After scrutinizing and verifying, the nominated Bank will forward the same to the respective CCI&E office with forwarding schedule in duplicate through Banks representative. CCI&E then issue Import Registration Certificate to the Applicant. 3.2.2 Function of Import section: Imp-Form: The form IMP contains the followings Name and address of the Authorized dealers. Amount of remittance to be permitted (i.e. L/C amount) LCA form no. Date and value in Taka. Description of goods. Invoice value in foreign currency, (i.e. L/C amount) Country of origin. Port of shipment. Name of steamer / Airline (i.e. By road/ship/air) Port of importation. Indenter s name and address. Indenter s registration number with CCI & E and Bangladesh Bank. Full name and address of the applicant. Registration number of the applicant with CCI & E. Type of LCAF. Import Procedures: The procedures, which follows at the time of Import are as, follow The buyer and the seller conclude a sale contract provided for payment by documentary credit. The buyer instructs his Bank (the issuing Bank) to issue a credit in favor of the seller / Exporter / Beneficiary. The Issuing Bank then send messages to another Bank (Advising Bank /Confirming Bank), usually situated in the country of seller, advice or confirms the Credit Issue. 15 P a g e

The Advising / confirming Bank then informs the seller through his Bank that the Credit has been issued. As soon as the seller receives the credit, if the credit satisfy him the he can reply that, he can meet its terms and conditions, he is in position to load the goods and dispatch them. The seller then sends the documents evidencing the shipment to the Bank where the Credit is available (nominated Bank). This can be the issuing Bank or Confirming Bank; Bank named in the Credit as the paying, accepting and Negotiating Bank. The Bank then checks the documents against the credit. If the documents meet the requirements of the credit, the Bank then pay, accept or negotiate according to the terms of credit. In the case of credit available by negotiation, Issuing Bank will negotiate with recourse. The Bank, if other then the issuing bank, sends the documents to the issuing Bank. The issuing Bank checks the document and if they found that the document has meet the credit requirements, they realize to the buyer upon payment of the amount due or other terms agreed between him and the issuing Bank. The buyer sends transport documents to the carrier who will then proceed to deliver the goods. An importer is required to have the followings to import through the bank A bank account in the bank. Import Registration certificate. Tax Paying identification number. Performa invoice indent Membership certificate LCA (Letter of credit application) form duly attested. One set of IMP form. Insurance cover note with money receipts. Others. 16 P a g e

Import Mechanisms: To import, a person should be competent to be an importer. According to import and export control act, 1950, the officer of the chief controller of import and export provides the registration (IRC) to the importer. After obtaining this, this person has to secure a letter of credit authorization (LCA) from Bangladesh Bank and then a person becomes a qualified importer. He is the person who requests or instructs the opening bank to open an L/C. he is also called opener or applicant of the credit. Proposal for opening of L/C: In case of an L/C of a small amount only the prescribed application form i.e. the LCA (Letter of credit application) form is enough to open an L/C. but when the L/C amount is reasonably high, then the importer is asked to submit a proposal to the bank authority to have a limit of L/C amount. This proposal should be approved in the meeting of the executive committee of the bank. The sufficient features of a proposal are Full particulars of bank account. Nature of business. Required amount of limit. Payment terms and conditions. Goods to be imported. Offered security. Repayment schedule. A credit officer scrutinizes this application and accordingly prepares a proposal (CLP) and forwards it to the Head office Credit Committee (HOCC). The committee, if satisfied, sanctions the limits and returns back to the branch. Thus the importer is entitled for the limit. L/C Application: BDI provides a printed form for opening of L/C to the importer. This form known as credit application form. A special adhesive stamp is affixed on the form. While opening, the stamp is cancelled. Usually the importer expresses his desire to open the L/C quoting the amount of margin percentage. The importer gives the following information 17 P a g e

Full name and address of the importer Full name and address of the beneficiary Availability of the credit by sight payment acceptance/ negotiation/ differed Payment Time bar within which the document should be presented Sales type (Cff/FOB/C&F) Brief specification of commodities, price, and quantity, indent no, etc. Country of origin Bangladesh Bank registration No Import license/ LCAF No. IRC No. Account No. Documents required Insurance cover note/policy No., date, amount. Name and address of the insurance co. Weather the partial shipment is allowed or not. Weather the Trans shipment is allowed or not. Last date of shipment. Last date of negotiation Other terms and condition if any. Letter of Credit Authorization (LCA) Form: The LCA form contains the followings Name and the address of the importer. IRC No. And year of renewal. Amount of L/C applied for. Description of items/to is imported. ITC number (s)/hs code. Stamp and signature of the importer with seal. Miniaturization of L/C Application: The bank officials scrutinizes the application in the following manners- The terms and condition of the L/C must be complied with UCPDC 500 and Exchange control & import trade regulation. Eligibility of goods to be imported. The L/C must not be opened in favour of the importer. Radioactivity report in case of food item. Survey reports or certificate in case of machinery. Carrying vessel is not of Israel or Serbia- Montenegro. Certificate declaring that the item is in operation not more than 5 years in case of car. 18 P a g e

On scrutiny, if the application is found fit then the L/C is opened and particulars of the same are recorded in the L/C register. Then the transmission of L/C is done through tested Telex or Fax to advise the L/C to beneficiary. If the amount exceeds US$ 10,000 the bank takes the credit report of the beneficiary (CIB report) to ensure the worthiness of the supplying goods Amendment of L/C: Parties involved in L/C, particularly the seller and the buyer cannot always satisfy the terms and conditions in full as expected due to some obvious and genuine reasons. In such a situation, the Credit should be amended. The bank transmits the amendment by tested telex to the advising bank. In case of revocable credit, it can be amended or cancelled by the issuing bank at any moment and without prior notice to the beneficiary. But in case of irrevocable letter of credit, it neither be amended nor cancelled without the agreement of issuing bank, the confirming bank (if any) and the beneficiary. If the L/C is amended, service charge and telex charge are debited from the party account accordingly. Adding confirmation: Add the confirming bank gives confirmation. An add confirmation letter contains the followings L/C no. L/C amount Items to be imported Name and address of the applicant Name and address of the beneficiary Tenor Date of shipment Date of apiary Port of loading Port of discharge Charges on which party Name of the advising bank Name of the reimbursing bank Name of the confirming bank 19 P a g e

Presentation of the Documents: The seller being satisfied with the terms and conditions of the credit proceeds to dispatch the required goods to the buyer and after that has to present the documents evidencing dispatching of goods to the negotiating bank on or before stipulated expiry date of the credit. After receiving all documents, the negotiating bank, then checks the documents against the credit. If the documents are found in order, the bank will pay, accept or negotiate to EXIM bank limited checks the documents. The usual documents are Invoice Bill of lading Certificate of origin Packing list Shipping advice Non negotiable copy of bill of lading Bill of exchange Pre-shipment inspection report. Shipment certificate. Examination Documents: EXIM Bank officials check weather these documents has any discrepancy or not. Here discrepancy means the dissimilarity of any documents with the terms and conditions of L/C. Retirement of Shipping Documents: On security if it is found that, the documents drawn are in order EXIM, lodges the documents in PAD and few vouchers are passed. Retirement of Import Bills: Importer will deposit the claim amount Banker will prepare and pass Retirement Vouchers Certifying Invoices Passing of Vouchers Entry in the Register Endorsement in the B/E and transport document i.e. B/L AWB, TR etc. At the end of the total procedure, taking the retirement of Import Bills/Clearing Certificate from the Bank, the Importer will clear the goods from the port through the Clearing Agent and Forwarding Agent. 20 P a g e

On the other hand, completing the above all steps in the issuing Bank will prepare Foreign Exchange Transaction Schedule and send one copy to international division of Head Office and another one copy to recommendation. Payment Procedure of Import Documents: This is the most sensitive task of the import department. The officials have to be very much careful while making payment. The task constitute the followings- Date of payment- Usually payment is made within seven days after the documents have been received. If the payment is become differed, the negotiating bank may claim interest for making delay. Preparing sale memo- a sale memo is made at B.C rate to the customer. As the TT & O.D rate is paid to the ID, the difference between these two rates is exchange trading. Finally an inter branch exchange trading credit advice is sent to ID. Requisition for foreign currency- for arranging necessary fund for payment a requisition is sent to the ID. Transmission of telex- a telex is transmitted to the correspondent bank ensuring the payment is being made. 21 P a g e

Value 150 145 140 135 130 125 120 115 Import Performance 143.31 146.8 135.41 129.57 128.45 2010 2011 2012 2013 2014 Year 3.3 Import Performance: In the year 2014, EXIM Bank conducted import business for BDT 146.80 billion (equivalent USD 1.88 billion) by handling 37,818 number import letter of credits. Import business increased by 8.41% in 2014 compare to 2013. 3.4 Export Section Literally, the term Export, we mean that carrying of anything from one country to another. On the other hand Banker s define Export as sending of visible things outside the country for dale. Export Trade plays a vital role in the development process of an Economy. With the Export earning, we meet our Import Bills. 3.4.1 Export Registration Certificate (ERC) Like any other business it needs Registration. The chief Controller of Import and Export (CCI&E) makes export registration. For Registration, prospective Exporters required to apply through Q.E.X.P from the CCI&E along with the following documents Trade License 50 Income Tax Clearance Nationality Certificate Bank s Solvency Certificate Asset certificate Registered Partnership Deed 22 P a g e

3.4.2 Function of Export Section: Export Form: All Export of which the requirements of declaration vide para-1 of chapter XXI of Exchange Control Manual of Bangladesh Bank applies must be declared on the EXP forms by the customer, now issued by the Authorized Dealers. Disposal of Exp. Form: Original: From Custom Authority to Bangladesh Bank after shipment goods. Duplicate: From Negotiating Bank to Bangladesh Bank after Negotiation. Triplicate: From Negotiating Bank to Bangladesh Bank after realization of the proceeds of the Export Bill. Quadruplicate: Retained by the Negotiating Bank as Office Copy. Export procedure: A person desirous to export should make application to obtain ERC from CCLNE. Then the person should take step for export purpose into the bank for obtaining EXP form. He must submit following documents: Trade license ERC Certificate from concerned Government Organization After satisfaction on the documents the banker will issue EXP form to the exporter. Now exporter will be getting shipping and other documents from the shipment procedure. Exporter should submit all these documents along with letter of indemnity to his bank for negotiation. 23 P a g e

Back to Back L/C (BTB L/C): Back to Back L/C Open: It is a secondary letter of credit opened by the advising bank in favour of a domestic/foreign supplier on behalf of the beneficiary original foreign L/C. As the original letter of credit of bank by import letter, it is called Back-to-Back L/C. The second L/C is opened on the strength of the original L/C for a smaller amount. Back to Back L/C (Foreign): When the B-To-B L/C is opened in a foreign country supplier it is called B-To-B L/C (Foreign). It is generally payable within 120 days at site. Back to Back L/C Export Development Fund (EDF): EDF provided by the ADB to Bangladesh Bank for export promotion of Third-World-Country like Bangladesh. When the bank is not in a position to support the amount of BtoB L/C then they apply for loans to the Bangladesh Bank for B-To-B (EDF). Back to Back L/C (Local): When the Back-to-Back L/C is opened for local purchase of materials, it is called Back-to-Back L/C (Local). It is generally payable within 90 days at site. Procedures for Back to Back L/C: Exporter should make application for Back to Back LAC Export L/C or Master L/C under is lien Opening of Back to Back L/C Terms and conditions for Back to Back L/C That the customer has credit line facility That L/C is issued as per UCPDC 500 That on the Export L/C a negotiating clause is present That there is no provision for blank endorsement of B/L That payment clause is there on the L/C issuing bank ensuring payment 24 P a g e

Consideration for Back to Back L/C: Whether client can manufacture within time period The un it price of the finished proforma invoice should be considering while allowing margin Consider the expiry date and shipment date On side inspection whether manufacturing is carried out Payment under Back to Back L/C: Deferred payment is made in case of BTB L/C as 60, 90,120, 180 date of maturity period. Payments will be given after realizing export proceeds from the L/C issuing bank from the abroad. Reporting of Bangladesh Bank: At the end of the every month reporting of Bangladesh Bank is mandatory regarding the whole month export operation, the procedures in this respect is as follows To fill-up the E-2/P-2 schedule of S-l category. The whole month import amount, quantity, goods category, country, currency, etc. all are mentioned. Respective IMP forms are attached with the schedule to fill E-3/P-3 for all invisible payment. Original IMP is forwarded to Bangladesh Bank with mentioning invoice value Duplicate IMP is skipped with the bank along with the bill of entry. Documentation for Export Purpose: Following major documents are required for export purpose Commercial invoice Bill of lading EXP. Form Bill of Exchange L/C copy Packing List Certificate of Origin Quality Control Certificate Weight List Inspection Certificate Other (if required) 25 P a g e

Procedure for Collection of Export Bill: There are two types of procedures regarding collection of Export Bill Foreign Documentary Bill for Collection (FDBC) Foreign Documentary Bill for Purchase (FDBP) Foreign Documentary Bill For Collection (FDBC): Exporter can collect the bill through negotiating bank on the basis of collection. Exporter in this case, will submit alt the documents to the negotiating bank for collection of bill from importer. The exporter will get money only when the issuing bank gives payment. In this connection bank will scrutinize all the documents as per terms and conditions mentioned in L/C. Foreign Documentary Bill For Purchase (FDBP): When exporter sale all the export documents to the negotiating bank is known as FDBP. In this case, the exporter will submit all the documents to the bank. The bank gives 60-80% amount to the exporter against total L/C value. Local documentary Bill for Purchase (LDBP): Incoming of L/C customer come with the L/C to negotiate. Documents given with L/C Scrutinizing documents as per L/C terms and conditions Forward the documents to L/C opening bank L/C issuing bank give acceptance and forward acceptance letter Payment given to the party by collection basis or by purchasing documents Secured Overdraft (SOD) Export: Secured Overdraft is one kind of credit facility enjoying by the exporter from the export section. It is generally given to meet the back-to-back L/C claim. Sometimes it is given to the exporter by force for meet the back-to-back L/C claim due to delay of Master L/C payment. 26 P a g e