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A Research Report On Foreign Exchange Operations of Jamuna Bank

JAMUNA BANK LIMITED


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JAGANNATH UNIVERSITY, DHAKA

Report
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On

Prepared To:
A. K. M. Moniruzzaman Ph. D Professor Department of Management Studies
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JAGANNATH UNIVERSITY, DHAKA.

Prepared By:
Name ID Sec Session : Md. Zakir Hossain : 05122353 :A : 2005-2006 Department of Management Studies JAGANNATH UNIVERSITY, DHAKA.
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Date of Submission: 20th November, 2011

Letter of Transmittal
To

A. K. M. Moniruzzaman Ph. D
Professor Department of Management studies
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Jagannath University Dhaka. Subject: Submission of Internship Report. Dear Sir, It is my privilege to let you know that as partial fulfillment of the requirements for the degree of Bachelor of Business Administration (BBA), I have completed my term paper report in the Jamuna Bank Limited. I have to furnish a report based on my practical experience. The report focuses mainly on the foreign exchange operations of Jamuna Bank Limited.

It was stimulating opportunity and a valuable experience for me to the real business world. I am grateful for providing me such an opportunity to gather practical experience of working in a private commercial bank, like Jamuna Bank Limited. Hope that you would be very pleased to accept my report and oblige me. Sincerely Yours Md. Zakir Hossain ID 05122353 Department of Management Studies
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Jagannath University Dhaka.

ACKNOWLEDGEMENT

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At first I want to express my gratitude to almighty Allah for giving me the strength, ability and opportunity to complete the report within the schedule time successfully. My sincere gratitude goes to my respected internship supervisor, Professor A. K. M. Moniruzzaman Ph. D, report would not have been possible and such endeavor really deserves compliment. Thanks to him for giving me the opportunity to prepare this report which I think will enhance my skill and help the practical application of my knowledge in future. I received cordial cooperation from the officers and members of staffs of jamuna Bank Ltd, Dilkusha / Principal branch, Dhaka and the teachers and staff of Jagannath University of Dhaka. I want to express my cordial gratitude to them for their cooperation without which it would not have been possible to complete the report.

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I am reallythankful to Mr. Kamal Uddin, SAVP and operation in charge, Jamuna Bank Dilkusha Branch for giving me the excellent opportunity to do my practical coordination in this branch. I would also like to thank to Mr. Shahed Morshed Chowdhury, JAVP, Mr. A S.M Masouk, SEO, Mr. ABM Mazharul Hoque Sikder, EO of Import Division, and Ms. Sapna Habib Srabanti, Officer, Customer Care for giving me the excellent direction with their proper compassionate with me.

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Executive Summary
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A few years back also, banks are nothing but a medium whose only task is to collect money from people who have excess of it and give it to those people who need it.But very recently banks have diversified their operations into various sectors. Even, they have notification able contribution in maintaining the global relation among various countries of the world. The JBL is one of the newest banks of Bangladesh; in fact, it has been doing business just over 10 years in the country. However, in this short period of time, it has already made a significant impact on the economic, financial, and social system of Bangladesh. Jamuna Bank Ltd has a long and relishing heritage. Jamuna Bank Limited (JBL) started its journey in the financial sector of the country as an investment company back in May 20, 1999. The company operated up to 1999 with 9 branches and thereafter with the permission of the Central Bank converted in a full-fledged 14

schedule private commercial bank in June 2, 1993 with paid up capital of Tk. 39.00 crore to serve the nation from a broader platform. The Bank and its first Branch at the busiest commercial hub of the country at 61, Dilkusha commercial Area, Dhaka was opened. My Report titled Foreign Exchange Practices in Private Banks: A Case Study of Jamuna Bank Ltd. is conducted to describe the section as well as the organization where I was placed as an Intern. The first chapter gives a broad over view about the origin of the report, objective of the report, methodology of preparing the report, data collection procedure and its source, scope and limitations faced while preparing the report. After the first part it has been focused in the second part of the report. The overview consists of the definition and objective of the bank, historical background of the banking institutions and banking operations in Bangladesh. 15

The report part started from the third chapter. In that chapter, describe the theoretical framework of foreign exchange and other foreign exchange activities.The fourth chapter is highlighted of Jamuna bank with SWOT analysis.The fifth chapter consists General foreign exchange policy of the bank.The sixth chapter consists of performance evaluation of the bank in 2009.The seventh & last chapter highlighted with recommendations, problems and Conclusion.

Table of Contents
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Chapter-1 Introduction
1.1 1.2 1.3 1.4 1.5 Statement of the research problem Objectives of the Study Methodology of the Study Definition of terms used in the study Limitation of the study

10 10 11 12-13 13

Chapter-2 Scenario of Foreign Exchange Operations in Bangladesh.


2.1

Illustrated the international trade in Bangladesh with the help

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2.2

of a diagram Scenario of Foreign Exchange Operations in Bangladesh. Chapter-3 An Overview of Jamuna Bank LTD.

16-17

3.1
3.2 3.3 3.4 3.5 3.6 3.7

Background Corporate Information Organization Structure Branches information Number of employees Vision statement of the Bank Mission statement of the Bank

19 19-20 21 22 23 23 23 18

3.8 3.9 3.10 3.10.1 3.10.2 3.10.3

Product scheme Principal Activities SWOT analysis of JBL

Identification of Strengths, Weaknesses, Opportunities and Threats of the JBL Draw conclusion Prepare action plan

24 24 25 26-27 27 27

Chapter-4 Foreign Exchange: Theoretical Background & Practical Experiences 19

4.1 4.2 4.3 4.4 4.5 4.6

Objectives of Jamuna Bank Strategies of JBL


Foreign exchange: its meaning and definition Types of foreign exchange Tools for foreign exchange

General Foreign exchange policy of JBL

29 29 30 30-31 31-32 33-35

Chapter-5 Data Analysis & Findings


5.1

Findings

37 20

5.2 5.3 5.4

Performance of the Bank Key Financial Indicators Identified problems for the JBL

38-40 41-46 47

Chapter-6 Conclusions and Recommendations


6.1 6.2 Recommendation for the JBL Conclusion Bibliography Acronyms 49 50 51 52

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List of Tables and Figures

SL 01 02 03 04 05 06 07 08

List of Figure Framework of the overall structure of the total work Organization Structure of JBL Branch Network SWOT Analysis The international trade can be illustrated by the following diagram Types of Foreign Exchange Profit scenario of JBL Capital Tire-I

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29 30 44 49 50 71 23

09 10 11 12 13

Capital Tire-II Capital Tire-I & II Deposit & Deposit Mix Import Trade Export Trade

88 97 98 98 98

SL

List of Tables

01 02 03 04 05

Ways of classifying products and services

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Import procedure Flow Chart Export procedure Flow Chart Highlights of Jamuna Bank Capital adequacy ratio

34 43 67 68 24

06 07 08 09 10

Deposit & Deposit Mix Import Position Export Position Foreign Remittance position Acronyms

73 96 100 101 101

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Chapter One

Introduction
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1.1 Statement of the research problem


To write a report it is necessary to select a topic. A well-defined topic reflects what is going on to be discussed throughout the report. The topic that has been assigned by organization supervisor is The foreign exchange operations the ultimate way to success. The report has discussed how the bank can improve the foreign exchange operations.

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1.2 Objectives of the study


Primary objective:
The primary objective of this report is to familiar with the working environment of present institutions. And also fulfill the requirement of BBA theoretical knowledge gained from the coursework of the BBA program in a specific field.

Secondary Objective:
To have exposure to the credit operation and other function of Jamuna Bank Limited. 28

To have a clear understanding of the business operation of Jamuna Bank Limited. To discuss the services offered by Jamuna Bank Limitcd. To assess and evaluate the growth trends of Jamuna Bank Limited. To evaluate the profitability of Jamuna Bank Limited. To identify the major strength and weakness of Jamuna Bank Limited in respect to other banks.

To recommend ways and means to solve problems regarding banking of Jamuna Bank Limited. 29

To get acquainted with the loan structure, size, profile of sector wise outstanding position of loans and system of loan classification of Jamuna Bank Limited.

1.3 Methodology of the Study


To make the Report more meaningful and presentable, two sources of data and informations have been used widely. The Primary Sources are as follows: Face-to-face conversation with the respective officers and staffs of the Branch Informal conversation with the clients 30

Practical work exposures from the different desks of the four departments of the Branch covered

Relevant file study as provided by the officers concerned

The Secondary Sources are as follows: Annual Report (2009) of Jamuna Bank Ltd. Periodicals published by Bangladesh Bank. Various books, articles, complications etc. regarding general banking function, foreign exchange operation and credit policies. 31

FRAMEWORK OF THE OVERALL STRUCTURE OF THE TOTAL WORK

Appointing as an intern Dividing the study work

Doing work in different department of ABBL Collecting informatio n from ABBL Preparation of the Final Report

Selecting the topic of the study Analysis of collected data ninformati

Preparing outline

Collecting secondary informatio 32

1.4 Terms used in Foreign Exchange Operations

Foreign Exchange:
Foreign exchange refers to the process or mechanism by which the currency of one country is converted into the currency of another country. According to Foreign Exchange Regulation Act (FERA) 1947, "Anything that conveys the right to wealth in another country is foreign exchange. 33

Foreign exchange means and includes all deposits, credits and balances payable in foreign currency as well as foreign currency instruments such as drafts, TCs. Bill of Exchange, promissory Notes and Letters of Credit payable in any foreign currency. ". Liquidity: In terms of international trade, liquidity is the ease in which foreign currency is converted into domestic currency. FX markets, such as the New York Jamuna Exchange, match buyers and sellers to bring about speedy, orderly transactions. International Trade: 34

Businesses rely on FX markets to buy currency that is spent to obtain overseas goods. Corporations will also look to FX markets to convert international earnings back into the domestic currency. Imports and Exports: Businesses all around the world are increasingly depending on buying and selling from other countries. Although the international trade environment has changed substantially over the last 100 years, the risks have essentially remained the same. Jamuna Bank is ready to assist you with your trade documentation and adherence to exchange control regulations. 35

SWIFT:Electronic payments are the most commonly used method of transferring any currency. These payments are most commonly used for imports and exports, but holidaymakers may also use them. They are done using SWIFT, a worldwide electronic payment and receipts network. Traveller's Cheques: If you are travelling out of the country either for business or holiday, you can buy Traveller's Cheques directly from us.

Letter of credit (L/C):


Letter of credit means any arrangement whereby a Bank (the issuing Bank) is committed (on behalf of the buyer/applicant) to pay certain amount at the sellers disposal under some agreed conditions. 36

Foreign remittance:
Foreign remittance means remittance of foreign currencies from one place/person to another place/person. In broad sense, foreign remittance includes all sale and purchase of foreign currencies on account of Import Export, Travel and other purposes. However, especially foreign remittance means sale & purpose of foreign currencies for the purposes other than export and import. SOUTHEAST Bank Limited performs the remittance function with different countries. It maintains the foreign remittance in the following form: Foreign Demand Draft Inward Remittance Outward Remittance 37

1.5 Limitation of the study


All the time of preparing my report I tried to gather every details of process but the major limitation is lack of adequate information, Lack of opportunity to visit more than one branch Sufficient records, publications were not available as per my requirement. Time constraint. Non-cooperative behavior of some officials of the bank. It is my first work, and inexperience was a problem. 38

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Scenario of Foreign Exchange Operations in Bangladesh.


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Chapter Two

2.1 The international trade can be illustrated in Bangladesh by the following diagram
Contract

of sale (1)

Contract of sale (1) Exporter


(Beneficiary) Ships Goods to

(5)

Importer (Applicant)

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Forwards L/C to

(4)

Presents documents and obtains payment from (6)

Recovers Amount from

Applies for opening of L/C (2)

(8)

Advising/ negotiating

Bank

Obtains reimbursement from (7)

Issuing Bank

Opens L/C and send it to (3)

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2.2 Scenario of Foreign exchange operations in Bangladesh

1. Foreign Exchange Regulation (FER) Act, 1947 (Act No. VII of 1947) enacted on 11th March, 1947 in the then British India provides the legal basis for regulating certain payments, dealings in foreign exchange and securities and the import and export of currency and bullion. This Act was first adapted in Pakistan and then, in Bangladesh. The Act is reproduced at Appendix-1. 44

Bangladesh Bank is responsible for administration of regulations under the Act. Appendix 4 provides a list of Bangladesh Bank's offices and their jurisdictions. 2. Basic regulations under the FER Act are issued by the Government as well as by the Bangladesh Bank in the form of Notifications which are published in the Bangladesh Gazette. Notifications issued by the Bangladesh Government and the erstwhile Government of Pakistan and the Bangladesh Bank and the erstwhile State Bank of Pakistan are reproduced at Appendices 2 and 3. Directions having general application are issued by the Bangladesh Bank in the form of notifications, foreign exchange circulars and circular letters. 45

3. Authorized Dealers (ADs) in foreign exchange are required to bring the foreign exchange regulations to the notice of their customers in their day-to-day dealings and to ensure compliance with the regulations by such customers. The ADs should report to the Bangladesh Bank any attempt, direct or indirect, of evasion of the provisions of the Act, or any rules, orders or directions issued there under. 4. Bangladesh Bank issues licenses normally to scheduled banks to deal in foreign exchange if it is satisfied that the bank applying for this license has adequate manpower trained in foreign exchange. 46

5. Licenses with limited scope are also issued to persons or firms to exchange foreign currency notes, coins and travellers' cheques in places where money changing facilities are required. 6. ADs, on their own, are free to buy and sell foreign currencies forward in accordance with tile internationally established practices however, in all cases the ADs must ensure that the cover is intended to neutralize the risks arising from definite and genuine transactions. 7. All remittances from Bangladesh to a foreign country or local currency credited to on resident Taka accounts of foreign banks or convertible Taka account constitute outward remittances of foreign exchange 47

8. Lacking of experience related to foreign cxchange policy. 9. Lacking of skill manpower. 10. Lacking of proper knowledge about foreign exchange policy and related items.

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Chapter Three

An Overview of Jamuna Bank

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3.1 Background Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act, 1994 with its head office at Printers Building (2 nd floor and 8th floor), 5, Rajuk Avenue, Dhaka-1000. The Bank started its operation from 3rd June 2001.
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Jamuna Bank Limited is a highly capitalized new generation Bank started its operation with an authorized capital of Tk.1600.00 million and paid up capital of Tk.390.00 million, as of December 2006 Paid up capital of the Bank raised to Tk.1072.5 million and number of branches raised to 29 (Twenty nine). JBL undertakes all type of banking transactions to support the development of trade and commerce in the country. JBLs services are also available for the entrepreneurs to set up new ventures and BMRE for industrial units. The Bank gives special emphasis on Export, Import, Trade Finance, SME Finance, Retail Credit and Finance to Women Entrepreneurs.

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To provide clientele services in respect of International Trade it has established wide correspondent banking relationship with local and foreign banks covering major trade and financial centres at home and abroad.

3.2 Corporate Information of Jamuna Bank Registered Office:


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Chini Shilpa Bhaban 3, Dilkusha C/A, Dhaka-1000.

Company Registration Number: C-42780 (2139)/2001 External Audior(s) Howladar Yunus & Co
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Chartered Accountants 67, Dilkusha C/A (2nd Floor), Dhaka-1000 Legal Advisor Mr. Habibul Islam Bhuiyan Senior Advocate Bhuiyan Islam & Zaidi Advocates and Barristers H# 29, Rd# 9/A, Dhanmondi R/A, Dhaka Number of Branches & SME/ Agri Branches / Centers
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Total Branches: 52 SME/ Agri Branches: 3 SME/ Agri Centers: 1 Allied Concern Jamuna Bank Foundation Hadi Mansion (4th Floor), 2, Dilkusha C/A, Dhaka Subsidiary Company Jamuna Bank Capital Management Ltd (Proposed)
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Chini shilpa Bhaban 3, Dilkusha C/A, Dhaka-1000

3.3Organization Structure of JBL:


Board of Directors Organization Chart of Jamuna Bank Limited Managing Director - HRD Deputy Managing Director GSD, CAD, A&I, GB, D&M Executive Vice President/ Company Secretary Deputy Managing Director ID, IT, CREDIT, R&P Board of Directors Chief Adviser

Chairman

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Senior Vice President

Senior Vice President Vice President Senior Asst. Vice President


Asst. Vice President

Senior Vice President

Senior Principle Officer


Principle Officer Senior Officer Officer Junior Officer
Asst. Asst. Officer Officer

Abbreviations: GSD General Service Division CAD Central Account Division ASI Audit and Inspect CB Central Bank D&M Developing and Marketing ID International Division R&P Research & Planning

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Figure: 3.3 Organization chart of JBL

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3.4 Branch Information


Branch: 52 & SME / Agri Branch : 4

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3.5 Number of employees Number of employees in the main branch of Jamuna bank is 65

3.6 Vision statement of the bank


To become a leading banking institution and to play a pivotal role in the development of the country.

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3.7.Mision statement of the bank


The Bank is committed to satisfying diverse needs of its customers through an array of products at a competitive price by using appropriate technology and providing timely service so that a sustainable growth, reasonable return and contribution to the development of the country can be ensured with a motivated and professional work-force. The bank has some mission to achieve the organizational goals. Some of them are as follows as: Jamuna Bank Limited provide high quality financial services to strengthen the well being and success of individual, industries and business communities. Its aim to ensure their competitive advantages by upgrading banking technology and information system. 65

JBL intends to play more important role in economic development of Bangladesh and its financial relations with the rest of the world by interlining both modernistic and international operations. JBL encourages investors to boost up share market. The bank creates wealth for the shareholders. The bank believes in strong capitalization. It maintains high standard of corporate and business ethics. Jamuna Bank Limited extend highest quality of services, which attracts the customers to choose them first. 66

The bank creates wealth for the shareholders. The bank maintains congenial atmosphere for which people are proud and eager to word with Jamuna Bank Limited.

3.8 Product Scheme


The products and services can be classifying in two ways & those arc.

The deposit products & services The lending products & services

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Deposits products & services Corporate Banking Personal Banking Online Banking Monthly Savings Scheme
i Monthly Benefit Scheme

Lending/Investment products & services Hi-her Purchase Lease Finance Personal loan for woman Project Finance
i Loan Syndication

Double/Triple Benefit Scheme Marriage Scheme Education Scheme

Consumer Credit Import and Export. Handling Financing

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Lakhpati Deposit Scheme Q-Cash ATM

3.9 Principal activities of Jamuna bank Ltd.


The principal activities of the bank are to provide all kind of commercial bank activities encompass a wide range of services including excepting deposits, making loans, discounting bills, conducting money transfer and foreign exchange transactions and performing other related 69

services such as safe keeping, collections, issuing guarantees, acceptances and letters of credit to its customers through its branches in Bangladesh.

3.10 SWOT ANALYSIS OF JBL

In the competitive area of marketing are SWOT analysis is based on product, price, place and promotion of a financial institution like private Bank. By doing the SWOT analysis it is possible 70

to find out the strengths, Weaknesses, opportunities, and threats of the JBL. From the SWOT analysis we can figure out on going scenario of the Bank.

SWOT Analysis

SWOT analysis two factors act as prime movers

Internal Factors
Weakness.

External Factors

Internal factors which are prevailing inside the concern which include Strength and

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Strength

Weakness

Opportunity

Threats

On the other hand another factor is external factors which act as opportunity and threat.

3.10.1 Identification of Strengths, Weaknesses, Opportunities and Threats of the JBL


Strength: 1. The bank provides quality service to the clients compared to it other contemporary competitors. 72

2. Experienced bankers and corporate personnel have formed the management. 3. The bank recently introduce on line banking which enable it to automate all of its operations. At present, several banking functions are performed by computers. The bank is also a member of SWIFT (Society for Worldwide Inter bank Financial Telecommunication) alliance Access which enables the bank to exchange critical financial messages swiftly and cost effective. Weaknesses: 1. Delegation of authority is centralized which makes the employee to realize less responsibility. Thus, the employee morale is deteriorated. 73

2. The credit proposal evaluation process is lengthy. Therefore, sometimes valuable clients are lost and the bank becomes unable to meet targets. 3. No substantive use of Annual Confidential Report (performance evaluation form of the employee) to reward or to punish the employee. Hence the employee becomes ineffective. 4. The bank lacks aggressive advertising and promotional activities to get a broad geographical coverage. 5. Computer facility for all the officers is not available. Moreover, all the officers have no computer knowledge. 6. The bank has no any research and development division. 74

Opportunities: 1. The bank can introduce more innovative and modern products and services for then customers. 2. It can diversity its portfolio by taking new sector. 3. Many branches can be opened to reach the banks services to the remote areas. 4. It can recruit more efficient and experienced persons to give fast and efficient service to the customers Threats: 1. The common attitude of Bangladeshi clients is default. 75

2. Multinational as well as the fast growing local banks with modern products and services are capturing huge market within short period a resulting to switch over the existing customers of the bank. 3. Bangladesh Bank Sometimes requires Private Commercial Banks to be abides by such rules and regulations which are not suitable for every commercial Bank

3.10.2 Draw conclusion


The bank provides quality service to the clients compared to its other contemporary competitors. The bank can introduce more innovative and modern products and services for then customers. 76

The common attitude of Bangladeshi clients is default. Delegation of authority is centralized and the bank has no any research and development division. Conclusions concerning the companys overall business situation: Where on the scale from alarmingly week to exceptionally strong does the attractiveness of the companys situation rank? What are the attractive or unattractive aspects of the companys situation?

3.10.3 Prepare action plan


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Use company strengths and capabilities as cornerstones for strategy. Pursue those market opportunities best suited to company strengths and opportunities. Correct weaknesses and deficiencies that impair pursuit of important market opportunities or heighten vulnerability to external threats. Use company strengths to lessen the impact of important external threats.

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Chapter Four

Foreign Exchange: Theoretical


Background & Practical Experiences

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4.1 Objective of Jamuna Bank


To earn and maintain CAMEL Rating 'Strong' To establish relationship banking and improve service quality through development of Strategic Marketing Plans. To remain one of the best banks in Bangladesh in terms of profitability and assets quality. To introduce fully automated systems through integration of information technology. To ensure an adequate rate of return on investment. To keep risk position at an acceptable range (including any off balance sheet risk). To maintain adequate liquidity to meet maturing obligations and commitments. 80

To maintain a healthy growth of business with desired image. To maintain adequate control systems and transparency in procedures. To develop and retain a quality work-force through an effective human Resources Management System. To ensure optimum utilization of all available resources. To pursue an effective system of management by ensuring compliance to ethical norms, transparency and accountability at all levels.

4.2 Strategies of JBL

To manage and operate the Bank in the most efficient manner to enhance financial 81

performance and to control cost of fund To strive for customer satisfaction through quality control and delivery of timely services To identify customers' credit and other banking needs and monitor their perception towards our performance in meeting those requirements. To review and update policies, procedures and practices to enhance the ability to extend better service to customers. To train and develop all employees and provide them adequate resources so that customers' needs can be reasonably addressed. To promote organizational effectiveness by openly communicating company plans, policies, practices and procedures to employees in a timely fashion To cultivate a working environment that fosters positive motivation for improved performance To diversify portfolio both in the retail and wholesale market 82

To increase direct contact with customers in order to cultivate a closer relationship between the bank and its customers.

4.3 Foreign Exchange- its meaning and definition:


Foreign exchange refers to the process or mechanism by which the currency of one country is converted into the currency of another country. Foreign exchange is the means and methods by which rights to wealth in a country's currency are converted into rights to wealth in another country's currency. In banks when we talk of foreign exchange, we refer to the general mechanism by which a bank converts currency of one country into that of another. Foreign Trade gives rise to foreign exchange. 83

According to Foreign Exchange Regulation Act (FERA) 1947, "Any thing that conveys the right to wealth in another country is foreign exchange. Foreign exchange means and includes all deposits, credits and balances payable in foreign currency as well as foreign currency instruments such as drafts, TCs. Bill of Exchange, promissory Notes and Letters of Credit payable in any foreign currency. ". This definition implies that all business activities relating to Import, Export, Outward & Inward Remittances, buying & selling of foreign commissions, etc. come under the purview of foreign exchange business. Foreign exchange department of banks plays significant roles through providing different services for the customers. 84

4.4 Types of Foreign Exchange:


There are mainly three types of transactions which lead to foreign exchange. These are: a) Import b) Export c) Foreign Remittance

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Foreign Exchange Department

L/C

Foreign Remittance

Import

Export

Foreign Currency A/C

Inward Remittance

Outward Remittance

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4.5 Tools for foreign exchange


Importer (Buyer)/Applicant The Issuing Bank (Opening Bank) The Advising Bank/Notifying Bank 87

Exporter/Seller (Beneficiary) Confirming Bank Negotiating Bank The Paying/Reimbursing/Accepting/Remitting Bank.

a) Applicant The person/body (customer of the bank) who requests the bank (opening bank) to issue letter of credit. As per instruction and on behalf of the applicant, bank open L/C in line with the terms and conditions of the sales contract between the buyer and seller. 88

b) Opening bank/Issuing Bank The bank which open/issue L/C on behalf of the applicant/importer. Issuing banks obligation is to make payment against presentation of documents drawn strictly as per terms of the L/C. c) Advising/Notifying Bank The bank through which the L/C is advised/forwarded to the beneficiary (exporter). The responsibility of advising bank is to communicate the L/C to the beneficiary after checking the authenticity of the credit. The advising bank acts only as agent of the issuing bank without having any engagement on their part. 89

d) Beneficiary Beneficiary of the L/C is the party in whose favor the letter of credit is issued. Usually they are the seller or exporter. e) Confirming Bank The Bank, which under instruction in the letter of credit, adds confirmation of making payment in addition to the issuing bank. It is done at the request of the issuing bank having arrangement with them. This confirmation constitutes a definite undertaking on the part of confirming bank in addition to that of issuing bank. 90

f) Negotiating Bank The Bank, which negotiate documents and pays the amount to the beneficiary when presented complying credit terms. If the negotiation of documents is not restricted to a particular bank in the L/C, normally negotiating bank is the banker of the beneficiary. g) Reimbursing/Paying Bank The Bank nominated in the credit by the issuing bank to make payment stipulated in the document, complying with the reimbursing bank.

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4.6 General foreign exchange policy of the Jamuna Bank LTD. Import procedure in Flow Chart:
Registration with CCI&E, Import Registration Certificate

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Purchase contract with foreign supplier directly or through agent Registration of Letter of Credit Authorization Form(LCAF) Opening/Issuance of L/C by the Importers Bank Dispatch/Transmit the L/C to the beneficiary through issuing Banks correspondent in the beneficiarys country

Receipt of import Documents from Negotiating/collecting bank Scrutiny if import Document

Yes

Inform Negotiating Bank about Discrepancies

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Inform Opener about Discrepancies Are the documents

discrepant?

Yes
Do they agree to accept document despite

Lodgment of import Bill Dr. PAD (Payment against Document) Cr. H.O A/C Foreign Bank (Negotiating Bank)

discrepancies?
Ask Negotiating Bank for disposal Instruction

No

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Ask the opener to take delivery of Import documents for release of

Do they accept documents on collection basis?

Yes

Deliver the documents to the Importer for release of goods

No

Export

Send back documents Dr. S.D A/C Margin on L/C processCr. inImporters Flow Chart A/C

Collect Proceeds from Importer Dr. S.D A/C Margin on L/C Dr. Importers A/C Cr. H.O Foreign Bank (Collecting Bank)

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Securing Export Order from Foreign Buyer directly or through agent Receiving L/C from buyers bank through an advising bank in Banglades h Certification of EXP from by Authorized Dealer(Bank)
Will the Exporter be allowed any preshipment Credit Facility? If

Yes
Mark Banks Lien on the page of the original L/C

If No
Shipment of goods by Exporter

Obtain necessary securities

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Arrange shipment of goods through Banks approved C&F agent and instruct them to send the original Bill of Lading etc. to the Bank Directly Preparation of Export Documents for submission to Negotiating Bank Scrutinizing Export documents by Negotiating Bank Are the document in order?

No

Ask the exporter to remove discrepancies Inform opening Bank about discrepancies

Yes

Are the discrepancies removed?

No

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Negotiate documents

Yes

Do they allow negotiation?

Despatch documents with reimbursement instruction Check whether youre A/C with foreign bank has been credited

No
Send the documents for collection with reimbursement instruction

Has it been credited?

No

Send reminder to paying bank

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/Retire FDBP ImportLodgment trade in Bangladesh is controlled under the Import and Export control Act 1950.

Authorized Dealer Banks will import the goods into Bangladesh following the import policy, public notice, F.E. circular and other instructions from competent authorities from time to time. The import functions of the branch as far I have understood are discussed bellow:

Documentary Requirements for Opening L/C


Importer shall submit following documents for opening L/C: 99

(a) Valid Import Registration Certificate (IRC) (commercial/industrial) (b) Tax Identification Number Certificate (c) VAT Registration Certificate (d) Membership Certificate of a recognized Trade Association as per IPO (e) A declaration, in triplicate, that the importer has paid income-tax or submitted income lax return for the preceding year (f) Pro forma Invoice or Indent duly accepted by the importer

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(g) Insurance Cover Note with Money Paid Receipt covering value of goods to be imported plus 10 (Ten) percent above h) L/C application Form (MF-fx l3) duly signed by the importer i) Letter of Credit Authorization Form (LCAF), commercial or industrial as the case may be, duly signed 'by the importer and incorporating New ITC number of at least 6(six) digits under the Harmonized System as given in the Import Trade Control Schedule 1988. j) IMP Form duly signed by the importer Time Limit for Opening of L/C: L/Cs shall be opened within 150 days from the date of issuance of LCAF. 101

Data Analysis & Findings

Chapter- 5

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5.1 Findings
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While working at Jamuna Bank, I have attained to the newer kind of experience. After the collecting and analyzing of data I have got some findings. These findings are completely from my personal point of view. Those are given below. Based on my experience, I can be said that Jamuna Bank should reconsider its services that better satisfy customer needs and requirements Bank should be more tactful in dealing with the customers and launch new products that fully meet customer expectations. Jamuna Bank Limited has already established a favorable reputation in the banking industry of the country. It is one of the leading private sector commercial banks in Bangladesh. The bank has already shown a tremendous growth the profits and deposits 105

sectors. The bank follow the online banking system to provide the customer better services; but all the branches of Jamuna bank are not follow the online banking system During the last 6 years (2004-2010) the average growth of deposits and advance were 33% and 37% respectively, which was 20% in the case of import business. 72% in export business and 36% in guarantee business during the period, shareholders equity grew at the rate of 40%. The bank always fulfills Die provisioning requirements as set by Bangladesh Bank reflecting sound financial health and discipline The consistent and increasing growth trend of the above mentioned performance indicators has increased depositors' confidence as well as good will/reputation of the bank to a great extent and these have contributed to increase the shareholders value. 106

The Banks Human resources Development strategy is to build up quality manpower with conceptual/managerial Knowledge, skills through designing/arranging of continuous inhouse and outside training programs The bank focuses on customer-friendly marketing approaches by offering various efficient delivery of personalized banking services at the clients door steps and caters to the ever-growing financing needs of clientele at a competitive price The company philosophy to workout best solutions for customers and clients as a business and customer friendly Bank Jamuna bank has an interactive corporate culture & friendly working environment. 107

108

5.2 Performance of the bank:


The incessant fall-out of international credit market due to world economic meltdown resulting sluggish growth has put significant pressure on financial performance of banks and financial institutions worldwide. Jamuna Bank Ltd has achieved continuous growth in almost all arenas of its business arenas 109

despite this economic crisis, facing intensified competition of the industry. The bank remained in financial strong position with its continued focus on the vision of becoming countrys finest corporate citizen , providing excellent and need-based customer service. The bank mobilized deposits of BDT 42356 million as at December 31, 2010 compared to BDT 27307million, till 2009. Total loans and advances stood at BDT 32287million at the end of 2010 that was BDT 21036million at the end of 2009. Import business stood at BDT 46685 million in 2010 compared to BDT 30312 million in 2009. Export business stood at BDT 21407 million in 2010 as against BDT 18617 million in 2009. The bank collected foreign remittance of BDT 5.06 billion in 2010 compared to BDT 4.72 billion in 2009. 110

In 2010, the bank was able to make profit before tax BDT 1.66 billion as compared to 1.28 billion indicating 29.73% growth. Net profit attributable to shareholders stood at BDT 807.52 million. The return on equity remained 18.80% during 2010 and earnings per share (EPS) stood at BDT at 56.92. Non performing loan (NPL) ratio reduced to 2.54% in 2009 as compared to 2.86% in 2008. JBL made adequate provision against classified loans which is significantly higher than last year. Adequate provision made the bank stronger than before. Tier-1 capital stood at BDT 3054.14 million at the end of 2010 compared to that of BDT 2131.02 at the end of 2009. Tier-2 capital reached to BDT 943.52 million at the end of December 2010 as compared to that of BDT 313.32million at the end of 2009. Return of assets (ROA) increased to 1.89% in 2009 from 111

1.51% in 2009 and return on equity (ROE) also increased significantly to 18.80% from 17.75% in 2009. The capital adequacy ratio (CAR) increased to 10.48% in 2009 as against that of 10.17% in 2009. Net interest margin (NIM) stood at 3.58% at the end of 2010, suggesting a healthy growth in net interest income.

112

HIGHLIGHTS OF JAMUNA BANK LIMITED


Amount in Taka ( Except Ratio) Sl.No. P a 2010 2009

113

1 2 3 4 5 6 7 8 9 10 11 12 13

Paid up Capital Total Capital Capital surplus/(deficit) Total Assets ( excluding off balance sheet items) Total Deposits Total Loans & Advances Total Contingent Liabilities & Commitments Advance Deposit Ratio % of classified loans against Total Loans Profit after taxation & provisions Amount of classified loans Provision kept against Classified loan Provision surplus / deficit

1,621,882,500 3,997,664,705 880,659,405 48,730,951,557 42,356,203,563 32,287,661,155 14,718,947,868 76.23% 2.20% 923,123,207 710,858,000 465,638,000 -

1,313,265,200 2,444,338,501 392,695,301 31,646,629,499 27,307,936,141 21,036,861,012 9,169,471,638 77.04% 2.84% 479,437,923 598,309,000 296,285,000 -

114

5.3 Key Financial Indicator:

115

Profit scenario of Jamuna Bank:


In 2009Jamuna Bank Limited posted an operating profit of Tk.1914.25 million as against Tk.1040.20 million in 2008 with a spectacular growth of 84.03 percent over the preceding year. After having made necessary provisions for loans and advances of Tk.351.05 million in accordance with the instruction of Bangladesh Bank Net Income Before Tax (NIBT) stood at Tk.1536.20 million in the year under review against Tk.865.82 million in the preceding year. An amount of Tk.632.26 million has been kept as provision for payment of Tax. Thus Net Income after Tax and provision stood at Tk.923.12 million in 2009 which was Tk.479.44 million in 2008.

116

117

Operating Profit Year 2005 2006 2007 2008 2009 Tk.(Million) 419.94 701.32 824.20 1040.20 1914.25 118

2000 1800 1600 1400 1200 1000 800 600 400 200 0

2005

2006

2007

2008

2009

119

Capital Structure:
Jamuna Bank Limited has a conviction of maintaining a strong capital base in carrying on opereat operation on June 03, 2001 with a paid-up capital of Tk.390.00 million divided into 3.90 million 120

ordinary shares of Tk.100 each. The authorized capital of the Bank is Tk.1600 million divided into 16.00 million of Tk.100 each. The Bank's paid-up capital as at 31st December 2009 stood at Tk.1621.88 million. Tk429.00 million was raised through initial public issue of 4.29 million ordinary shares of TkA 00 each with a premiu- each while Tk.214.50 million was raised by issue of Bonus Shares in the ratio of 1:4, i.e. one bonus _s-holding of 8.58 million ordinary shares as on 31.12.2005, for every 4 shares out of profits upto the Thus, as on 31st December 2009, the total shareholder's equity and reserve stood at Tk.3997.66 million!" Capital Tire-I Capital Tire-II

121

3500 3000 2500 2000 1500 1000 500 0 2005 2006 2007 2008 2009

2010 2009 2008 2007 2006 2005 2004 2003 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

Total capital Tire-I & II

122

4000 3500 3000 2500 2000 1500 1000 500 0 2005 2006 2007 2008 2009

CAPITAL ADEQUACY RATIO


123

The Bank adopted BIS risk adjusted capital standards to measure the capital adequacy in line with set by Bangladesh Bank. According to the instructions contained in Bangladesh Bank's BRPD Circ dated May 14, 2007 relating to Capital Adequacy every commercial bank operating in the required to maintain at minimum 9 percent of its risk-weighted assets as capital. Jamuna Bank Li-maintain Capital Adequacy ratio of 12.83 percent as at 31.12.2009 which was higher than the require Adequacy Ratio. The amount of capital with break-up is given below:

Particulars

"Fig in BDT Million" 2008 2009 124

Tier I Capital Paid up Capital Non-repayable Share Premium Account Statutory Reserve Retained Earnings Proposed Bonus Share Tier II capital 1 % Provision against Unclassified Loans Exchange Equalization Fund Total Capital (Tier I +Tier 11)

3054.14 1621.88 816.48 615.78 943.52 332.64 0.33 3997.66

2131.02 1313.27 503.84 313.91 313.32 213.80 0.33 2444.34

125

126

DEPOSITS AND DEPOSIT MIX

In commercial banks operation starts with mobilization of resources i.e. tapping of deposits and then the said resources are deployed as loans, advances and investments for the purpose of maximizing wealth which -sans deposits have dominance in commercial bank's operations. That is why; there is a common saying that deposit is the lifeblood of a bank. The comparative position of deposit mix of the Bank as on 31.12.2009 and 31.12.2008 is depicted below: Type of Deposit As on 31.12.2009 As on 31.12.2008 Changes (+)/(-) Changes in % over the 127

Current A/C & other Bills Payable Savings Deposit Short term Deposit Fixed Deposit Scheme Deposits Foreign Currency Deposit Total Deposits

4715.31 516.31 2891.25 25201.52 2762.49 6118.32 151.00 151.00

3283.21 412.03 1679.40 16360.18 1335.16 4131.80 106.16 27307.94

+1432.10 +57.59 +1211.85 +8841.34 +1427.33 +1986.52 +44.84 +15048.26

year 43.62 25.30 72.15 54.04 93.54 48.07 42.24 55.10

128

45000 40000 35000 30000 25000 20000 15000 10000 5000 0 2005 2006 2007 2008 2009

129

Import, Export & Remittance Position Import Trade


The total import business handled by the bank in 2009 was Tk.46684.73 million compared to Tk.30311.71 million in the preceding year registering a growth of Tk.16373.02 million being 54.02 percent. A sizable L/Cs were also opened by the bank in the year under review. The import items included industrial raw materials, machinery, consumer goods, fabrics, accessories, food item etc.

130

50000

Year 2005 2006 2007 2008 2009

Import Tk. (Million) 12152 15458 22192 30312 46685

40000 30000 20000 10000 0 2005 2006 2007 2008 2009

Export Trade
131

The Bank handled export business worth Tk.21406.94 million in the year under report. In 2008 export business handled by the Bank was Tk.1861.43 million. Thus there was an increases of Tk.2789.51 million in export business handled by the Bank, being 14.98 percent over the preceding year. The major export item was Readymade Garments.

132

Export Year 2005 2006 2007 2008 2009

25000

Tk. (Million) 6522 11584 13990 18617 21407

20000 15000 10000 5000 0 2005 2006 2007 2008 2009

133

Foreign Remittance
Total foreign remittance in a single year,i.e. in 2009 made a record high to the tune of BDT 5061.30 million compared to that of BDT 4722.90 million in 2008. The Bank has deepened its step on the foreign soils further by establishing more and more remittance arrangements with overseas exchange companies where Bangladeshi expatriates are working. These Include U.K, U.A.E, Kuwait, Baharain, Canada, Italy, France etc. Moreover, for prompt and safe distribution of this hard earned money to their near and dear ones in every corner of the country, the Bank has made an arrangement with Bangladesh Post Office, Western Union and some other agencies.
Particulars Upto Last Date on 23/06/2010 No Amount 741 447.35 2389 397.23 As on 23/06/2010 No. 15 17 Amount 5.29 2.82 Total Amount is Crore Tk. No. Amount 756 452.64 2406 400.05

a. b.

L/C (Cash) L/C (BTB Local)

Impo

134

r t

c.

L/C (BTB Foeign) Sub Total BTB L/C Total a)Export Bill (Gen) b) Export Bill (RMGF c) Export Bill (RMGL) Total Inward Outward Total

890 3279 3992 374 2350 1626 4350 0 0

290.80 688.03 1135.38 107.16 711.01 229.87 1048.03 51.57 5.30 56.87

3 20 35 1 19 12 32 0.00 0.00 -

4.15 6.97 12.26 0.67 5.33 1.88 7.88

893 3299 4027 375 2369 1638 4382 0 0

294.95 695.00 1147.64 107.83 716.33 231.75 1055.91 51.57 5.30 56.87

Export Remi ttanc

135

Banking industry has entered into the new Risk Based Capital Adequacy Framework (Basel II ) arena from 2010. JBL has already taken necessary steps to comply with this accord properly. The bank will also continue strengthen its position by expanding the core business activities.

136

5.4 Identified Problems for the Jamuna Bank


The main constraint of the study was insufficiency of information that was highly required for the study. Since the bank officials are very busy with their activities, as a result it was though to have proper knowledge as was required for the study. The duration was not enough to cover all aspects of banking. Lack of depth knowledge and analytical ability for writing import. The data and information related with the topic was not easily available because of confidentiality of the concern. 137

Foreign Exchange dealing is a technical job and has a great prospect in our country. Floating Exchange Rate has been introduced and it has put the banking sector into a new era. Bangladesh Banks total control is not there but there is some risk factor involved in it. Jamuna Bank Ltd wanted to find whether the process of their foreign exchange operation is good enough to avoid any unwanted risk and the prospect in foreign exchange dealing in their present standing, The office of JBL, Malibagh Branch, and Dhaka is not sufficient enough. In JBL, Malibagh Branch, Dhaka maximum officers are working in a specific desk for a long time and for this reason they may feel monotony and certainly they are not be able to know the overall banking activities through they have enough eagerness to know. 138

Foreign Exchange Section is one of the busiest sections in Bank. Sometimes it is found that all works are not performed efficiently due to insufficiency to Officer/Staffs. Training facility isnt sufficient especially for the lower level officers. Still now, like most of the branches of JBL, Malibagh Branch, Dhaka, follows the traditional banking system. JBL, Malibagh Branch, Dhaka, has no reception section and has no receptionist that may receive phone calls and complains from customer and supply the enough information. In this branch there is lack of modern equipments.

139

140

141

Conclusion and Recommendations

Chapter- Six

6.1 Recommendations

In view of the facts, the following recommendations are made to the respective concerned for the consideration and implementation. The bank should have standardized system of measuring customer satisfaction. Need for integrity of the officials within reasonable limits. 142

The officials should have a through knowledge of the product. The officials should be trained up for their efficiency. Reasonable interest rate for all kinds of loan. Increasing number of staffs and cash terminals. Officials should be more cooperative with the clients. Officials should be trained up for self-management. Customized new financial product development. Officials should be faster during transaction. Bank can accept new ideas from the customers for regarding improvement the quality of their service. 143

They need to maintain an upgraded guideline for the employees to avoid any kind of confusion. They should enhance their savings facilities by introducing many other saving schemes, because customers really look for various savings programs. Special increment should be given to middle and junior level managers and executives also to increase their motivation level.

144

6.2 Conclusion
From the beginning of greater change in the world economic structure, banking activities has becoming an important thing. Now a day the idea of banking is also developed and a huge number of private commercial banks are just on waiting for business. So it is a matter of think that how to establish an idea with different techniques, In Bangladesh, Commercial banks are playing vital role in the development of our economy and financial system. Standard Charted 145

Bank Limited has a strong position in the todays competitive market. The JBL, Malibagh Branch, Dhaka also contributing a better proportion of profit in JBLs total earning. Total analysis of the bank has the greater opportunity to do better in the future. Day by day JBLs area of service is increased all over the country through setting up new branches at new places. The reliability of the customer on JBLs increasing day by day for its better services. But they may introduce online and ATM services comparing with other commercial bank to improve their services and to make efficient and easy customer services. They also may follow the given recommendations in order to improve day by day. Jamuna Bank Limited may contribute a vital role in the socio-economic prospective and in the development of our economy. 146

The JBL has been trying to operate its business successfully in Bangladesh since 1999. JBL has already developed an image of goodwill among its clientele by offering its excellent services. This success has resulted from dedication, commitment and dynamic Leadership of its management over the periods. During the short span of time of its operation, the bank bas successfully grabbed a position as a progressive and dynamic financial institution in the country. If the bank goes this way. It is expected that in the near future JBL may become one of the top performers in the banking sector. Here I observed its deposit figure is strong. The bank should take necessary action for maintaining .JBL has been able to maintain its recovery position in sector wise credit financing is 147

up to the satisfactory level. At last it should give more emphasis in this sector to acquire more profit.

References

1.Annual Report of Jamuna Bank Limited, 2005, 2006,2007

148

2. Chowdhury, L.R; A Textbook on Foreign Exchange, Fair Corporation,139, Azimpur, Dhaka, 1205 3. Foreign Exchange Manual, Jamuna Bank Limited., 1st November,2009 4. Collyer Gary, ICC Uniform Customs And Practice For Documentary Credits ,3rdEdition, International Chamber Of Commerce, ICC Publication No.600 5. Bangladesh Bank Foreign Exchange Guidelines, Volume-1 6. www.jamunabankbd.com

149

150

Acronyms
A/C AD B/L BB BOE C&F C&F CC CCI & E CIB CIF CRF DD DP Note EPB ERC EXP FC FDD FDR HS Code IBC IBCA IBCT IBDA IMP IRC L/C LCAF LIM LTR OBC PAD PO PSI STD SWIFT TC TIN TT Account Authorized Dealer Bill of Lading Bangladesh Bank Bill of exchange Clearing & Forwarding Cost & Freight Cash Credit Chief Controller of Import & Export Credit Information Bureau Cost Insurance & Freight Clean Report Findings Demand Draft Demand Promissory Note Export Promotion Bureau Export Registration Certificate Export Form Foreign Currency Foreign Demand Draft Fixed deposit receipt Harmonized system of coding Inward Bills for Collection Inter Branch Credit Advice Inter branch Credit Transaction Inter Branch Debit Advice Import Form Import Registration Certificate Letter of Credit Letter of Credit Authorization Form Loan against Imported Merchandise Loan against Trust Receipt Outward Bills for Collection Payment against Document Payment Order Pre Shipment Inspection Short Term Deposit Society for Worldwide Inter bank Financial Travelers Cheque Tax Identification Number Telegraphic Transfer

151

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153

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