Foreign Exchange

Introduction:
Commercial bank collects the ideal saving from the people and supplies them into productive channels. The success of a commercial bank depends on how successfully it can be mobilizing saving and advance short and long term credit to business community. In addition to deposit mobilization and credit management, commercial bank as well as Southeast Bank of Bangladesh imited deal in foreign e!change, which includes remittance of currency and financing, e!ports and imports. "oreign e!change dealing is one of the main functions of the bank and it generates a significant portions a bank#s income. "oreign Trade is one of the most important segments of Bank Business. $ith the changes of time international trade is diversifying gradually. %odern banks &like '()(T( B()*+ are playing significant role in foreign trade. "oreign trade Comprises of Import , -!port business. ( lot of work relating to e!port and import are done by banks. $hile performing those tasks bank should be very much cautious as lot of comple!ities are there. "oreign trading is strictly controlled by the Bangladesh Bank. Therefore an deviation or mistake will cost bank a more. .ealing in foreign trading needs a lot of concentration, accuracy and technical know how as any mistake or malpractice may lead to disaster for a Bank#s Business. /ersonnel should posses the above 0ualities to work in this arena.

Summery of Foreign Exchange Procedure:

The buyer and the seller conclude a sales contract providing for payment by documentary credit. The buyer instructs his bank1the issuing bank to issue a credit in favor of the seller &beneficiary+. The issuing bank asks another bank, usually in the country of the seller, to advise or confirm the credit. The advising or confirming bank informs the seller that the credit has been issued. (s soon as the seller receives the credit and is satisfied that he can meet its terms and conditions, he is in a 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 &the nominated bank+. This may be the issuing bank, or the confirming bank or a bank named in the credit as the paying, accepting or the negotiating bank. If the credit allows for negotiation by any bank there will not be negotiates bank and documents be sent to any bank willing to negotiate. The bank checks the documents against the credit. If the documents meet the re0uirements of the credit, the bank will pay, accept or negotiate according to the terms of the credit. In the case of a credit available by negotiation, the issuing bank or the confirming bank will negotiate without recourse. (ny other bank including the advising bank if it has not confirmed the credit, which negotiates, will do so with recourse. The bank, if other than the issuing bank, sends the documents to the issuing bank. The issuing banks checks the documents and if they meet the credit re0uirements, either -ffects payment in accordance with the terms of the credit, either to the seller if he sends the documents directly to the issuing bank or to the bank that has made funds available to him in anticipation, or 2eimburses in the pre1agreed manner the confirming bank or any bank that has paid accepted or negotiated under the credit. $hen the documents have been checked by the issuing bank and found to meet the credit re0uirements, they are released to the buyer upon payment of the amount due or upon other terms agreed between him and the issuing bank. The buyer sends the transport document to the carrier who will then proceed to deliver the good

Foreign Exchange Mechanism

B78-29 I%/32T-2 S- -29 -:/32T-29 B-)-"ICI(28 (dvises or confirms 9C

I).-)T32 Sales9 purchase Contract

(pplication for opening 9C

/(8I); 9 2-I%B72SI); B()*

Sources4 International Trade "inance 1 'ournal, &/age 1 56+ Bangladesh Institute of Bank %anage %anagement

/ay or 2eimburses

%akes /ayment against documents

/resent documents

Submits documents

Issuing 9C

ISS7I); B()* 9C 3/-))I); B()*

"orwards .ocuments %akes payment 3 2

(.<ISI); B()* C3)"I2%I); B()* )-;3TI(TI); B()*

%akes /ayment

Instructs to pay or 2eimburse

Types of Foreign Exchange Limit Sanctioned by Commercial an!s

"oreign -!change imits can be broadly into these categories4

etter of ;uarantee.

-!port Business. Import Business. "oreign -!change 2emittance.

I shall discuss the above mentioned in detail ne!t.

Introduction:

"uarantee

guarantee is an irrevocable undertaking to pay in case of a certain eventuality. ;uarantee serves as a protection against losses, which may occur if anyone of the party fails to fulfill his9her contractual obligations. Coverage is also re0uired if one partner make advance performance of some kind i.e.= a down payment before he9she has obtained the relevant counter performance form his9her partner. (ccording to contract act1>?@A under section >AB guarantees can be defined as a contract to perform the promise or discharge the liability of third person in case of his default. The promise to pay is usually unconditional and must be honored by the guarantees on first demand. ( guarantee is usually for a specified time period.

Letter of "uarantee4 Inland and "oreign

-!port /erformance bonds Backed by Counter ;uarantee of party Backed by -C;S cover "ully secured &backed by >66C cash margin+ "ully secured by approved securities. /artly secured &with minimum cash margin of say ADC+ 7nsecured guarantees &with a margin less than ADC+ .eferred /ayment ;uarantees &./;+ &"ully secures by collateral+

Tender guarantee$bid bond$Tender bond

The tender guarantee assures the tender that tenders shall uphold the conditions of his
tender during the period of the offer as binding and that he9she will also sign the contract in the event of the order being granted. ( demand can be made under a tender guarantee if the beneficiary provides a written statement that the tendered failed to comply with one of the above conditions.

The bank1issuing guarantee has to pay the amount guaranteed when first claimed by the beneficiary. The tendered should try to make the implementation of the guarantee conditional on a statement by the beneficiary to the effect that the tender is in breach of the tendering conditions. The amount of guarantee depends on the value of the contract for the respective proEect, varying from >C to DC of the contract value.

Performance "uarantee:

# performance guarantee e!pires on completion of the delivery or performance.

Beneficiaries find that as a guarantee, the contract will be fulfilled in every respect and can retain the guarantee as per provision for long time. Including a clause stating that the supplier can claim under the guarantee, by presenting an acceptance certificate signed by the buyer can counteract this. The seller normally make the delivery or perform the service when he has some security that payment will also be made e.g. in the form of a documentary credit opened in his favor. In such a case, one is recommended to add a clause to the performance guarantee stating that no claims can be made under the guarantee until the documentary credit has been issued or accepted by the seller as being in compliance with the contract.

%ther sort of guarantees:

&o'n payment guarantee:

&own payment guarantee assures to the importer that his down payment or advance
payment will be refunded if the e!porter fails to comply in full or in part with his contractual obligations.

(arranty guarantee:

In most cases, it is not possible for the importer to check immediately the 0uality of the
goods he has ordered and received. ( warranty guarantee provides a security that within the specified period he will receive a certain amount if the goods are not the agreed 0uality specifications and the e!porter does not honor his obligations to remove discrepancies, defects or repair damage.

Payment guarantee:

Through

the payment guarantee, the buyer#s bank undertakes to pay the seller if the buyer defaults, the seller ensures compliance with the terms of payment and thus the purchase price will be paid.

Bank guarantee is a contractual relationship between the account party &client+ and the beneficiary. The account party re0uest to the bank to issue the guarantee with the terms and conditions specified by him. The bank#s resource is the counter guarantee. The terms and conditions of the guarantee should be covered by the terms and conditions of counter guarantee. )ormally banks prepare the format of the counter ;uarantee by the banks approved lawyer. (t the re0uest of the account party the bank issues the guarantee in favor of the beneficiary. In foreign trade, guarantee is demanded by the buyer to ensure secured performance to the seller#s ability. $hen the e!porter#s bank assumes a direct obligation vis1F1vis beneficiary then it is a direct guarantee. If a bank in the importer#s country gives the relevant undertaking to the beneficiary at the re0uest of the e!porter#s bank, whereby the latter bank bears full liability is an indirect guarantee. In the Bank guarantee following particulars are normally mentioned. G Beneficiary &)ame and (ddress+ G (mount G -!piry &with claim period+ G .elivery obEect G Information relating to a guarantee issued under a documentary credit &In case of foreign guarantee+ G Special conditions G Handing over to principal9beneficiary9representative9third party. Bank guarantee is normally issued on non1Eudicial stamp while in the format of counter guarantee adhesive stamp is affi!ed.

Precaution for issuing an! guarantee

"or issuing bank guarantee following measures should be carefully observed4 (uthenticity of the client who approaches to issue Bank ;uarantee. (s such credit worthiness of the client should be Eudged. Clauses in the bank guarantee should not hamper the banking business. It should be precise and clear. Claim amount should be restricted within the amount stipulated in the guarantee. (s such if possible higher cash margin should be taken. ;uarantee should be issued with the approval form the competent authority. ;uarantee should specify e!piry period along with claim period. /roper entry of Bank ;uarantee should be given in the register and voucher should be passed. /articulars of guarantee should not be changed. In case of foreign guarantee authentication of message, counter guarantee, terms , conditions of the foreign correspondences should be carefully e!amined.

an!)s liability:

$ithin the stipulated time period, if beneficiary claimed the amount after fulfillment of
the terms and conditions payment can be made. (fter the e!piry date &claim period+ no claim should be honored. $hen the time period of the guarantee is over, the signed guarantee should be called back duly after cancellation from the beneficiary

Export Business (Financing) and Procedures

Introduction:

E!port brings the foreign currency in the economy. Higher the e!port higher the reserve
of foreign currency. The e!port section of '()(T( B()* is engaged with various e!port1related activities for the encouraging the e!porter. The maEor function of this section is comprises with purchase, collection and negotiate the e!port bill, provide the e!porter in e!port financing and helps the e!porter in different issues. ( person desired to e!port should make application to obtain -2C &-!port 2egistration Certificate+ from CCI,-. Then the person should step in to a bank along with -2C to obtain -:/ from the bank. He must submit4 Trade license. -2C. %embership Certificate from chamber of commerce.

Pre * Shipment Finance

(dvance against duty drawbacks &..s+ (dvance against cash incentives. (dvance against 2ecluses. Shipping oan &with -C;S cover+ Shipping Credits +'ith EC"S co,er-

Post * Shipment Finance

"oreign bills purchased &"3B/ sight bills ./ under Cs of /rime bank+ "3B/ &sight9 ./ bill without C+ "37B/ &usance+ without C but with -C;S cover (dvance against ..S (dvance against cash incentives (dvance under I/2S &International /rice 2eimbursement Scheme+

-!pansion of the country#s supply base is important to any e!port strategy. 2emoval of constraints to supplies and improvement in the incentive structure will enhance the e!port performance of the country. (t the same time e!pansion of production across the industries along with adaptation and development of products to complete in the overseas

market constitutes a medium to long1term priority. The strategy thus intends to turn the drive for e!port1led growth into an economic development

In the line with the above obEectives and strategies of an incentive package has been worked out in "ifth "ive1year plan. %ain incentives in this package may be summarized as follows4 a+ "iscal incentives b+ "inancial incentives

"iscal incentives4
.uty on import of capital machinery for cent percent e!port1oriented industries outside -!port /rocessing Iones &-/Is+ has been withdrawn= /rovision for bonded warehouse to facilitate duty1free import of raw materials for e!port production= /rovision for duty drawback, if the bonded warehouse facilities is not availed of4 /rovision for sale of A6C of the products by the cent percent e!port oriented industries in the local market on payment of duties and ta!es= -!emption to the e!tent of D6C of income arising out of e!port business from income ta!= /rovision for ta! holidays= and /rovision for duty1free import of samples.

"inancial incentives4
/rovision for local currency e!port credit at a concession rate of interest within a band /rovision for foreign currency e!port credit under -!port .evelopment "und &-."+ at a concession rate of interest &rate of interest applicable is IB32 J>C+= /rovision for back1to1back letter of credit for import of raw materials for e!port production on deferred payments basis= 2etention of e!port earnings by the e!porters in their own foreign currency accounts.

Financing at Pre*shipment stage:

Pre1shipment credit covers credit facilities e!tended to the e!porters by the commercial
banks at the pre1shipment stage i.e. prior to the actual shipment of goods for e!port. Credit can be allowed for the following purposes4 1 Cash for local procurements and meeting related e!penses /rocuring and processing raw materials /acking and transporting of goods for e!port /ayment of Insurance premium Inspection fees "reight charges etc. /re1shipment credit facilities are essentially a short1term credit, which is to be li0uidated by negotiation9purchase of e!port bills covering the particular shipment. /re1shipment credit facilities can be allowed against irrecoverable letter of credit of a good foreign Bank considering the credit worthiness of the e!porters. /re1shipment credit is allowed in the following forms4 1 >. A. 5. K. D. -!port Cash Credit &Hypothecation+ -!port Cash Credit &/ledge+ -!port credit against trust receipt /acking credit Back to Back letter of Credit Back to Back letter of Credit &Inland+ Back to Back letter of Credit &Import+

./ Export Cash Credit +0ypothecation-: Such credit facility is allowed to the credit worthy e!porters for procuring and
processing of goods or raw materials into finished goods for e!port against hypothecation of stock of raw materials into finished goods for e!port against hypothecation of stock of raw materials9goods1in1process9finished goods meant for e!port. )ormally collateral securities are obtained in case of such facilit

1/ Export Cash Credit +Pledge-: Such a credit facility is allowed against pledge of e!portable goods or raw
materials. Sometimes collateral securities may be obtained which may depend on the 0uality of goods pledged generally.

2/ Export Credit against Trust receipts:

Such a credit is allowed to a credit worthy e!porters against e!portable goods

where retaining the goods under bank#s pledge. The e!porter by signing the stamped trust receipt holds the goods in trust on behalf of the bank. Collateral security is generally obtained.

3/ Pac!ing Credit:
Such advance is provided to the e!porter against: ien on the -!port 9C Copy of Invoice The security of 2ailway 2eceipt9Steamer 2eceipt9Barge 2eceipt9Truck 2eceipt evidencing transportation of the goods to the port. 7ndertaking of the C," agent entrusted with the task of arranging shipment to the effect that they shall hold the goods under the lien of the Bank. Insurance Coverage.

4/ ac! to bac! letter of Credit:

%peration of BB C4
Before opening B.B. .C credit report on the applicant, the supplier 9 beneficiary and on the buyer of 2.%.;. to be prepared &Credit report on the beneficiary of the B.B. .C. is not a must if the 9C limit does not e!ceed T*. D ac+. 2eport from CIB of BB is to be obtained and 2( is to be prepared. If necessary B.B. .C may be opened up to the e!tent of @DC of ".3.B value of e!port 9C in case of both woven and knit garments. $here "3B value e!ceeds 7SL B69 dozen and cutting and making Charges not less than 7SL >A per dozen, back to back 9C may be opened up to ?6C and ?D C of "3B value of e!port 9C for 0uota and non 0uota category &of woven ready made garments respectively+. B.B. .C up to ?6D of ".3.B value for all children items may be opened. B.B. .C may be opened on usance basis covering usance period of not more than >A6 days and interest for usance period shall not e!ceed .I.B.3.2. The production capacity of the factory and the time gap available between the shipment date &of e!port 9C+ and e!pected arrival date of raw materials must be e!amined carefully to ascertain whether the garment products can be e!ported within the shipment validity to avoid stock lot. Branch will obtain pre and post shipment -!port credit guarantee from Shadharan Bima Corporation to safe guards the bank#s interest.

(de0uate insurance policy covering the risk of fire, 2.S... &2iot, Strike and .amage+, flood, cyclone and burglary should be obtained from the bonded warehouse and the factory. 3n receipt of import bills drawn under B.B. .C, the branch will e!amine the documents very carefully and must inform the negotiating bank over tele! about the discrepancy if found within @ banking days following the day of receipt of the documents. The importer must also be notified as to discrepancies if the documents comply all the terms and conditions of B.B. .C. acceptance is communicated to negotiating bank fi!ing up the maturity date for payment of import bills without delay. Branch will arrange clearance of imported consignment by deputing suitable bank#s representative to escort the consignment from the port up to the factory premises. ;oods to be cleared through a C," agent nominated by the garments industry and approved by the bank. .uring the course of production, the branch will e!ercise close supervision and control over manufacturing process. If the goods become stock lot the matter should be advised to )ational Board of 2evenue &).B.2+ and Bangladesh Bank immediately.

Paper $ &ocuments 5e6uired For %pening

LC

%aster 9C <alid Import 2egistration Certificate &I2C+ and -!port 2egistration Certificate &-2C+ issued by C.C.I , -. 9C application form and .C.(. form duly filled in and signed. /erforma Invoice and Indent. Insurance cover note with money receipt. .uly signed I%/ form

ac!*to* ac! Letter of Credit +Inland-:

Such facility is allowed to the e!porter who received e!port letter of credit from
overseas buyer but is not the actual producer9manufacturer of the goods for e!port. In such a case, the bank at the re0uest of the e!porter opens Inland letter of credit in favor of the actual producer within the country. The inland letter of credit on the strength of e!port letter of credit must confirm to the terms and conditions of the e!port letter of credit with the following e!ceptions4 1 )ame of the beneficiary will be actual supplier. 9C value will be less than that of the e!port letter of credit i.e. less margin of profit of the e!porter.

ac!*to* ac! Letter of Credit +Import-:

/eriod of validity will be earlier than the e!piry of the e!port

(here permitted by CCI , - and Bangladesh Bank, Back1to1Back

9C can be opened in favor of foreign supplier for import of raw materials for manufacture of e!portable items.

&ocumentation for pre*shipment Credit:

ien on confirmed irrevocable and unrestricted etter of Credit from a good foreign bank &ascertain about world ranking and country ranking from the Banker#s (lamance, /olack .irectory etc.+ etter of Hypothecation duty stamped &in case of facility allowed under hypothecation+ etter of /ledge duly stamped &in case of facility allowed under pledge+ .etailed stock statement duly verified by Bank officials. Insurance Coverage under Bank mortgage clause. etter of disclaimer to be signed by the owner of the go down in case of rented go down. .ocuments of title to goods. Trust receipt -!port credit ;uarantee Scheme Insurance where applicable -!port form duly signed by the e!porter. Charge, and other documents, if any.

Financing at Post Shipment Stage:

anks in this country generally e!tend post1shipment credit to the e!porters through4 )egotiation of documents under letter of credit /urchase of ./ and .( bills (dvances against -!port bills surrendered for collection. >. )egotiation of .ocument under letter of Credit4

7nder

this arrangement, after the goods are shipped, the e!porter submits the concerned documents to the negotiating bank for negotiation. The documents should be negotiated strictly in accordance with the terms and conditions and within the period mentioned in the letter of credit.

1/ Purchase of &P and &# ills

In such a case, the banks purchase9discount the ./ &.ocuments against payment+

and .( &.ocuments against acceptance+ bills at a rate published by the International .ivision of the Bank. $hile doing so, the banks should scrutinize all the e!port documents carefully and clear instructions have to be obtained from the drawer of the bill in regard to all1important issues related to the negotiation of the bills. In case of purchase of e!port bills, the bank re0uires to obtain clear instructions from the drawers of the bills regarding the course of action to be taken in respect of the following issues relating to the collection of the proceeds of the documents4 /rotest clause )otice of dishonor Collection charges and interest /rotection clause /resentation clause

2/ #d,ances against ills for collection:

If an e!porter fails to get the documents negotiated by the bank, he has to take
resort to alternative course of obtaining advance from the banks against the security of e!port bills surrendered for collection. In such a case, banks may give advance to the e!tent of certain percentage of the value of goods depending upon the standing of the e!porter and importer, nature of the good etc.

Some &efecti,e Point $ Clause #ppeared In the Export L$C:

Issuing bank is not reputed. Credit advised by the advising bank without authentication. /ort of destination absent. )omination of specific shipping 9 air line. )o specific reimbursement clause. 7C/ clause not mentioned.

Shipment or presentation period is not sufficient. 3riginal documents to be sent to buyer or nominated agents. /art shipment is restricted. )egotiation is restricted. Shipper#s load and count is not acceptable.

Import Business (Financing) and Types and Procedures

Introduction:
angladesh is one of the poorest countries of the world. Import of goods into Bangladesh is regulated by the %inistry of commerce in terms of the Import and -!port &Control+ act, >MD6, various import policy orders and also public notices issued from time to time by the office of the CCI , -. In Bangladesh now emphasis is giving on e!port led growth strategy. "urther for liberalizing the trade sector following measures have been taken4 Import lubrication through removal of significant reduction of tariff , non1 tariff barriers. 2ationalization of tariff structure. To promote e!port through simplification of the procedure The import section comprising with the function of opening C, pre1import and post1 import financing and other function of doing the import business. Import can be two types4 Cash Import +usually-: In this case margin should deposit in issuing bank for import.

ac! to bac! Import:

In this case import can be done on the basis of %aster C

Sources of Financing Imports

The sources of financing imports available to us are as under4 1

Types of Importer)s:

Cash "oreign -!change 2esources of the country. -!ternal -conomic (id &Commodity (id, oan or Credit , ;rant+ Commodity -!change4 Barter Special Trading (rrangement &ST(+ (ctual users Commercial Importers Industrial Consumers Import by %inisters, ;ovt. .epartments , other /ublic Sector (gencies. ease "inancing Importers

Financing of importers by commercial ban!s:

Commercial

Banks play an important role in financing imports of the country. ( substantial portion of the total bank credit is deployed for financing import trade. %aEor import items receiving bank finance are iron, steel, engineering , other Te!tiles, fuel , lubricants, "ood grains, oil seeds, consumer goods and miscellaneous important merchandise. Imports into our country are allowed only against opening of Irrevocable etter of Credit e!cept a few e!ceptional cases. The financing of imports are made by the bankers at various stages starting from the opening of letter of credit to the arrival and storied of the imported merchandise. "inancing of imports by the banks may broadly be classified as under4 1 /re1Import finance /ost1Import finance

Pre*import business +finance-:

The

finance, which is e!tended poorer to the arrival of the imported merchandise, is termed as N/re1Imp##

Letter of Credit:
Letter of credit &
9C+ can be defined as O Credit Contract# whereby the buyer#s bank is committed &on behalf of the buyer+ to place an agreed amount of money at the seller#s disposal under some agreed conditions. Since the agreed conditions include, amongst other things, the presentation of some specified documents, the letter of credit is called .ocumentary etter of Credit. The 7niform Customs , practices for .ocumentary Credit &7C/.C+ published by International Chamber of Commerce &>MM5+ 2evision= /ublication )o. D66 defines .ocumentary credit.

(ny arrangement, however named or described, whereby a bank &the Nissuing bankP+, acting at the re0uest and on the instructions of a customer &the N(pplicantP+ or on its own behalf, Is to make a payment to or to the order of a third party &the beneficiary+, or is to accept and pay bills of e!change &.rafts+ drawn by the Beneficiary, or (uthorizes another bank to effect such payment, or to accept and pay such bills of e!change &.rafts+ (uthorizes another bank to negotiate, against stipulated document&s+, provided that the terms and conditions are compiled with. Banks open letter of credits only on behalf of their own customers who maintain accounts with them and are known to be participating in the trade. By opening letter of credit on behalf of the importer, the bank undertakes liability to pay the 9C amount to the foreign seller subEect to submission of documents drawn in strict compliance with the credit terms. $ith the negotiation of import documents N)3ST23 (9CP of the 9C opening bank is debited.

Types:
&ocumentary Credits may be either4 2evocable Irrevocable

5e,ocable credit:

5evocable credit is a credit, which can be amended or canceled by the issuing bank at any time without prior notice to the seller.
Irre,ocable Credit:

#n irrevocable credit constitutes a definite undertaking of the issuing bank &since it can
not be amended or canceled without the agreement of all parties thereto+, provided that the Stipulated documents are presented and the terms and conditions are satisfied by the seller. (n irrevocable credit can be either confirmed depending on the desire of the seller. This sort of credit is always preferred to revocable letter or credit.

Special &ocumentary Credit:

+.- 5e,ol,ing Credit:

The revolving credit is one which provides for restoring the to the original amount after it has been utilized. How may times it will be taking place must be specifically mentioned in the credit. The involving credit may be either cumulative or non1cumulative.
+1- Transferable Credit:

# transferable credit is one that can be transferred by the original beneficiary in full or in
part to one or more subse0uent beneficiaries. Such credit can be transferred separately, provided partial shipments are not prohibited.

+2- ac! to ac! Credit:

The back to back credit is a new credit opened on the basis of an original credit in favor
or another beneficiary. 7nder the back to back concept, the seller as the beneficiary of the first credit offers it as Osecurity# to the advising bank for the issuance of the second credit. The beneficiary of the back to back credit may be located inside or outside the original beneficiary#s country.

+3- #nticipatory Credits:

The anticipatory credits make provision for pre1shipment payment, to the beneficiary in
anticipation of his effecting the shipment as per 9 C conditions.

5ed Clause:
(hen the clause of the credit authorizing the negotiating bank to provide pre1shipment
advance to the beneficiary is printed 9 typed in red, the credit is called O2ed Clause etter of Credit#. 7nder the above mentioned clauses, the opening bank is liable for the pre1 shipment advances made by the negotiated bank, in case the beneficiary fails to repay or deliver the documents for negotiation.

Parties to a Letter of Credit:

There
are a number of parties involved in a 9C and the rights , obligations of the different involve parties also differ from each other. The involved parties can be named below4 Importer 9 Buyer 3pening 9 Issuing Bank -!porter 9 Seller 9 Beneficiary (dvising 9 )otifying Bank Confirming Bank

 )egotiating Bank /aying 9 2eimbursing Bank. Importer 9 Buyer is the person who re0uests9 instructs the opening bank to open a 9 C. He is also called 3pener or (pplicant of the credit. 3pening 9 Issuing Bank is the bank which opens 9 issues an 9C on behalf of the importer. It is also called the importer#s 9 buyer#s bank.

-!porter 9 Seller 9 Beneficiary is the party in whose favour the 9 C is advised to the
e!porter. It is bank situated in the e!porting country and it may be branch of the opening bank or a correspondent bank. It may also assume the role of confirming and 9 or negotiating bank depending upon the conditions of the credit.

Confirming Bank is a bank, which adds its confirmation to the credit, and it is done at
the re0uest of the issuing bank. The confirming bank may or may not be the advising bank.

)egotiating Bank is the bank, which negotiates the bill and pays the amount to the
beneficiary. It has to carefully scrutinize the documentary credit before negotiation in order to see whether the documents apparently are in order or not. The advising bank and the negotiating bank may not or may not be one and the same. Sometimes it can also be the confirming bank.

/aying 9 2eimbursing Bank is the bank or whom the bill will be drawn & as per
conditions of the credit +. It is nominated in the credit to make payments against stipulated documents complying with the terms of the credit. It may or may not be the issuing bank. .etails regarding the rights and obligations of the different parties involved in the documentary credit operations may be had from 7C/.C.

%perations of &ocumentary Letters of Credit:

The following five maEor steps are involved in the operation of a documentary
letter of credit4 Issuing (dvising (mendment &if necessary+ /resentation Settlement

Issuing a Letter of Credit:

efore issuing an 9 C, the buyer and seller located in different countries, concludes a sales contract providing for payment by documentary credit. (s per re0uirement of the seller, the buyer then instructs the bank 1 the issuing bank 1 to issue a credit in favor of the seller &beneficiary+. Instruction 9 (pplication for issuing a credit should be made by the buyer &importer+ in the issuing bank#s standard form. The credit application which contains the full details or the proposed credit (lso serves as an agreement between the bank and the buyer. (fter being convinced about the necessary conditions contained in the application form and Osufficient conditions# to be fulfilled by the buyer for opening a credit, the opening bank then proceeds for opening the credit to be addressed to the beneficiary.

#d,ising a Letter of Credit:

#dvising through a bank is a proof of apparent authenticity of the credit to the

seller. The process of advising a credit consists of forwarding the original credit to the beneficiary to whom it is addressed. Before forwarding, the advising bank has to verify the signature &s+ of the officer &s+ of the opening bank and ensure that the terms and conditions of the credit are not in violation of the e!isting e!change control regulations and other regulations relating to e!port. In such act of advising, the advising, the advising bank does not undertake any liability.

#mendment of Credit:

Parties involved in a

9 C, particularly the seller and the buyer, can not always satisfy the terms and conditions in full as e!pected due to some obvious and genuine reasons. In such a situation, the credit should be amended. In case of revocable credit, it can be amended or canceled by the issuing bank at any moment and without prior notice to the beneficiary. But in case of irrevocable credit, it can neither be amended nor canceled without the agreement of the issuing bank, the confirming bank &if any+ and the beneficiary.

#mendment of Credit:

Parties involved in a

9 C, particularly the seller and the buyer, can not always satisfy the terms and conditions in full as e!pected due to some obvious and genuine reasons. In such a situation, the credit should be amended. In case of revocable credit, it can be amended or canceled by the issuing bank at any moment and without prior notice to the beneficiary. But in case of irrevocable credit, it can neither be amended nor canceled without the agreement of the issuing bank, the confirming bank &if any+ and the beneficiary. -ffects payment, or 2eimburses in the pre1agreed manner.

Settlement:
Settlement
means fulfilling the commitment of issuing bank in regard to effecting payment subEect to satisfying the credit terms fully. This settlement may be done under three separate arrangements as stipulated in the credit. These are

a- Settlement by Payment: b-

Here the seller presents the documents to the paying and the bank then scrutinizes the
documents. If satisfied, the paying bank makes payment to the beneficiary and in case this bank is other then the issuing bank is satisfied with the re0uirements, is obtained by the paying bank from the issuing bank.

c- Settlement by #cceptance: d- Settlement by 8egotiation:

7nder this arrangement, the seller submits the documents evidencing the shipment to the accepting bank accompanied by a draft drawn on the bank &where credit is available+ at the specified tenor. (fter being satisfied with the documents, the bank accepts the documents and the draft and if it is a bank other than the issuing bank, then sends the documents to the issuing bank stating that it has accepted the draft and at maturity the reimbursement will be obtained in the pre1agreed manners Post*Import Finance: The
finance e!tended after arrival of the goods is termed as N/ost1ImportP finance, which may be in the form of oan against Imported %erchandise & I%+ Cash Credit &CC+ , oan against Trust 2eceipt & T2+.

Loan #gainst Imported Merchandise +LIMLIM is created under two circumstances. "irstly, if there is an arrangement with the
importer the commercial bank will provide finance against imported merchandise with usual margin, Secondly, when the importer fails to retire the documents the bank is compelled to create I% to avoid demurrage9pilferage9damage etc. also to safeguard the interest of the bank, which is called N"orced I%P. The sets of documents usually obtained are4 1 ./ )ote etter of (rrangement etter of disbursement

etter of pledge Insurance policy covers.

Cash Credit +CC- #ccount

In some cases of Industrial importers with prior arrangement with the import
documents are retired through financing from cash credit account of the party. The following charge documents are to be obtained4 1 ../. )otes etter of (rrangement etter of Continuity etter from the borrower handling over physical possession of the goods. etter of /ledge etter of .isclaimer from the landlord in case of rented godown. etter of owner of rented godown acknowledging banks prior lien on the goods stored. etter of authority from the borrower to debit godown staff salary, inspection , other incidental charges. If cash credit is allowed against hypothecation of goods, letter of hypothecation is to be obtained instead of etter of /ledge. 3ther documents as above are to be taken as usual.

Loan #gainst Trust 5eceipt +LT5-

The bank handover the shipping documents

to the importer for taking delivery of the goods from the port without receiving payment there1against by taking a trust receipt from him. In the trust receipt the importer specifies the goods and agrees that he is holding the goods not as their owner but as an agent for the bank. Thus, the bank continues to have the rights of the pledge. However, in practices, trust receipt does not secure the position of the bank to a significant e!tent. (s such, the loan is usually allowed only to corporate bodies and first class parties. It is allowed for a period of 56 days to M6 days. In addition to the Trust 2eceipt the following documents are also to be obtained4 1 ./ )ote etter of (rrangement etter of .isbursement Import letter of Credit & 9C+ limit 1 on ./9.( basis. Inland 9C limits 1 on ./9.( basis oan against merchandises &/ledge+. Trust 2eceipt facility.

2evolving inland 9C including back1to1back 9Cs 9 Transferable 9Cs.

Comparative /osition on overall Import /erformance for the last 5 8ears &H-(. 3""IC-+
Item >. Import a+ Cash b+ BTB &"+ c+ BTB & + d+ -." T3T( 4 A66@ (mount )o. A66B (mount )o. C of ;rowth (mount )o. A66@ (mount )o. &(mount in %illion+ A66B C of ;rowth (mount )o. (mount )o.

Comparative /osition on overall Import /erformance for the last 5 8ears &39: Moti;heel ranch&(mount in %illion+
Item A66D (mou ) nt o. >. Import a+ Cash b+ BTB &"+ c+ BTB & + d+ -." T3T( 4 A66B (mou ) nt o. C of ;rowth (mou ) nt o. A66B (mou ) nt o. A66@ (mou ) nt o. C of ;rowth (mou ) nt o.

5emittance
Introduction:

Foreign

remittance refers to the transfer of fund from one country to another either through the office channel i.e. banking channel, /ost office or the informal channel. In Bangladesh still informal market is playing a significant role. However, we shall limit our discussion within the official channel. B(SIC places an important role to transfer money from other countries to Bangladesh and Bangladesh to other countries. Inward and outward T.T, %.T and draft are the main components of foreign e!change remittance. "oreign e!change earnings are very low as e!port earnings are very limited while import spending are huge which makes the balance of trade position in a chronic deficit situation. "oreign remittance is very important for the country as valuable foreign e!change is involved in the transfer mechanism. "rom the year >MM6, financial liberalization has been started which is still going on. .ue to liberalization, restrictions on foreign remittance become ease. Bangladeshi Taka. is convertible for current account transactions on %arch AK, >MMK with the view to achieve better e!change rate management system. (nd from (pril >MMK Bangladesh ;overnment has accepted the status of (rticle <III of international monetary fund. "oreign remittance has two wings i.e. inward and outward remittance. This can be shown below4
"oreign 2emittance

"oreign Inward 2emittance

"oreign 3utward 2emittance

Before discussing foreign inward remittance , outward remittance, I may discuss following relevant topics in brief4

#& ranch:

#uthorized

dealer branches of the bank are those who are permitted by the Bangladesh Bank to deal in foreign e!change business subEect to the fulfillment of foreign e!change rules , regulations of the country.

#gency #rrangement:

To

facilitate foreign e!change business throughout the world, agency arrangement may be made between local bank and foreign bank. However, in case of agency arrangement accounting relationship may or may not be made.

&ra'ing #rrangement:

&rawing

arrangement is made to facilitate remittances through concluding accounting relationship between a bank , corresponding bank or e!change house.

8%ST5% #ccount:

(hen a local bank maintains account in another bank in abroad.

<%ST5% #ccount:

(hen a foreign bank maintains account in local bank.

L%5% #ccount:

(hen the third party maintains account is known as

Foreign in'ard remittance

323 account.

Foreign inward remittance refers to the currency remitted from abroad to

our country. )ow I shall describe inward remittance The remittance in foreign currency that receives from outside the country to our country is known as foreign inward remittance. In case of inward remittance, TT9%T9.rafts etc. are drawn in local bank by the foreign banks of e!change houses. $hen a local bank purchases foreign bills, TCs , cash foreign currency is also known as inward remittance. ( local bank also receives indenting commission of local firm, trademarks, patent fee etc. Inward remittance can be classified into two groups4 <isible inward remittance such as e!port proceeds, Invisible inward remittance such as family maintenance, constancy fee etc.

In the following manner inward remittance can be sent:

TT:

Telegraphic

Transfer refers to the payment instruction by tested tele!9cable or authentically fa!es in foreign bank on local bank. )ormally foreign banks with whom drawing arrangement or correspondent banking relationship prevail send Telegraphic Transfer.

MT:

Mail transfer refers to payment in cash to the third party or for a credit to be used
to the account of the payee in the books of the agent.

F&&:

Foreign .emand drafts normally issued by the foreign bank9e!change company

in local bank.

Foreign Currency 8otes4 TC:

#uthorized dealers are permitted to purchase foreign currency, not

Issued Travelers che0ues may be purchased by local bank.

Co,er of Export:
banks receive e!port cover from foreign banks after negotiation of bill or in advance.

Local

Problem faces in in'ard remittance:

2e0uired particulars of the beneficiary such as name of the beneficiary (9C )o. 3r correct branch name may not be given in the TT. "urther geniuses or signature of drafts may be forged. In case of payment, sometimes branches of the bank may create certain problem4 1 .elay in making payment against remittance against remittance to the beneficiary. $ithout ascertaining genuinely, drafts may be paid. ack of timely response9communication against the 0ueries of remitter9beneficiary. Credit T2<#s may not be timely sent to head office. %oreover particulars may not be given in the T2<#s Inward remittance may be cancelled if beneficiary is not available. If an inward remittance already reported to B.B is cancelled either in full or in part become of non1 availability of beneficiary, the (. must report the cancellation of the remittance as an outward remittance on T% form.

Foreign %ut'ard 5emittance

Foreign outward remittance refers to the remittances in foreign currency made from this
country to abroad. "oreign outward remittance includes issuance of TT, %T, ".. issued by local banks on foreign banks. "urther it includes rate of foreign currency, notes, TC#S, reimbursement against import, bills retired etc. "orward outward remittance can be divided into two groups4

<isible outward remittance such as payment against import. Invisible outward remittance such as membership fee, subscription fee etc. 3utward remittance can be made for traveling purpose, educational purpose, attending seminar , workshop, medical treatment, business travel 0uota, evaluation fee, membership fee, visa fee, pre1shipment fee, advertising of Bangladesh commodities etc. In case of purchase of foreign currency, an applicant must be made to an (. and if necessary re0uires to Bangladesh Bank. "or payment against imports the prescribed application form is I%/ form , for other types of remittance T% form.

In the follo'ing manner out'ard remittance is made:

TT4 ocal banks can draw telegraphic transfer to those banks with which they
have accounting relationship , message should contain test , brief description of the beneficiary.

F&&: (ny authorized dealer branches can issue foreign drafts draw on the bank
with which they have an accounting relationship.

Foreign Currency: 8otes: (uthorized dealer branches are permitted to safe

foreign currency notes as per ceiling fi!ed by Bangladesh Bank.

TC: (. branches can sale Travelers che0ues as per the ceiling fi!ed by
Bangladesh Bank.

5eimbursement against Import4 ocal banks can reimburse funds against

import through their account. In following outward remittance, authorized dealer branches do not re0uire prior permission of Bangladesh Bank4 /rofits4 "oreign organization can freely remit their past ta! profit to their head office.

 .ividend9Capital gain4 .ividend income to non residents dividend declared out of previous years accumulated reserve , dividend , sales proceeds including capital gain can be remitted. Salaries , Savings by e!patriates4 (pproved e!patriates working in Bangladesh can remit D6C of salary , >66C of their salary. Technical9royalty fee4 In the total fees , other e!penses connected with technology should not e!ceed, I+ BC of the previous years sales of the enterprises as declared in their ta! returns or II+ BC of cost of import machinery in case of new proEects subEect to the B3I registration or approval. Training , Consultancy4 "or the purpose of training , consultancy services, industrial enterprises may remit >C of their sales as declared in their previous year#s ta! return. Shipping lines, airlines, courier services4 They can remit their funds locally collected towards freight , postage after the adEustment of local costs , ta!es. $hen 0uota is e!hausted, special permission is re0uired from Bangladesh Bank. 3n the basis of sanction, (. branches will send outward remittance subEect to the within valid time period. $hen the authorization is signed by an official of Bangladesh Bank whose specimen signature may not be available then such authorization should be presented to the nearest office of the "oreign -!change /olicy .ept. of B.B the (ds should carry out the transactions on behalf of the original applicant for whom the forms were approved.

Cancellation of MT$&&:

Foreign remittance can be cancelled such as unutilized foreign currency against passport
endorsement or cancellation of locally issued foreign demand drafts etc. %T9.. may be cancelled and payment against therein may be e!ecuted to the applicant only after observing all the e!isting formalities. In this case Bangladesh Bank must be reported and the cancellation of outward remittance will be considered as inward remittance. 3utward remittance can be reported in the following form4 Invisible payment schedule should be reported in schedule -159/15 or schedule -1K9/1K depending on Code )o, from 666> to DMMM , B666 to MMMM respectively along with T% form.

$hen bank sales foreign currency to other banks then report should be done in schedule N;P. In case of foreign currency sale reporting should be done in the schedule S1B along with T% form. In case of import, reporting should be done in the schedule -1A9/1A along with I%/ form. (ll (. branches must sent statement of 9C commitment to their respective Head 3ffice , after consolidating all the figures by the Head 3ffice= they must submit the figure to the Bangladesh Bank. "or a country like Bangladesh, foreign remittance are valuable for which proper utilization is needed , bank should act as a check , balance so that misappropriation of foreign remittance do not happen.

(n overview of the functions catered to by a foreign e!change branch of =#8#T# #8>

.ealing Section >.Quoting 2ates of -!change A. "orward Cover &Banking of contracts+ Imports -!ports 2emittances

>.3pening of 9C A. /ayments against .ocuments

>.-!prot 9C (dvising A. /re1shipment "inance

>.Inward A.3utward 1 .emand .raft 1 %ail Transfer 1 Telegraphic Transfer 5."oreign Inward 2emittance /ayment System &"I2/S+

5. oan against %erchandise &/ledge+ K. oan against Trust 2eceipts & T2+ D. In ward Bill &for collection+ B.;uarantees Inland and "oreign

5. /ost1shipment "inance

5. 2econciliation &"oreign Bank (ccounts+

K. "oreign Bills for collection

D..-!port Certificates B.2ealization

Summery and Suggestion Foreign Exchange &epartment

Customer#s business involves the management of risk, from the ordering of goods or raw
materials to the receipt of payments after production and sale of goods 1 each stage of customer trade cycle puts different demands on customer#s cash flow. By working with customer and understanding customer#s business, '()(T( B()* is able to help customer and customer#s trade cycle.

=#8#T#

#8>#s business solution teams can assist in providing technology1based solutions. In %y investigation I have seen the various problems faced by the =#8#T# #8> personnel and business community at the time of dealing in foreign e!change. 3n the basis of the above discussion and findings we may draw some conclusions that are as follows4 /roper decentralization of power is necessary for promoting such dealings. This may be done on the basis of e!amination by delegating more powers to a few branches. 3fficers to be posted in "oreign -!change .epartment should be efficient. %ore training facilities should be e!tended in this area of banking. "acilities of modern e0uipment like computer, telephone, tele!, fa! and S$I"T should be given to the clients by the Bank of Small Industries and Commerce Bangladesh imited International "oreign -!change 2ules, Internal foreign -!change 2ules, %anuals, "oreign -!change 2egulations (ct etc. should be given to all officers and clients involved in this dealing.

"raphical #nalysis
&.-/3SIT+

Comparative "igure of .eposit as on 5>.>A.A66? -!port Import Bank 3f Bangladesh td.

& %otiEheel Corp Branch+

)ame of (ccount Current Savings ".2 ST. Saving Scheme BC. 3thers Total &eposit (mount Tk. in crore A66> >D> >B> AAD5 D5B K>K 1 1 24.4 A66A 56> A?K 56D6 D?@ ABMD MD 1 ?@.1 Increase in /ercentage >66C @BC 5DC >6C BD6C 1 1 .@@A (mount Tk. in l crore A66A 56> A?K 56D6 D?@ ABMD MD 1 ?@.1 A665 >6M >DB D>>? KBM 5A6D 1 KD> B4@9 Increase in /ercentage 1BKC 1KDC B@C 1A6C >MC 1 1 24A

Source4 Statement of (ffairs

Deposit Position of Khatungonj Branch 10000 Deposit(in lac) 8000 6000 4000 2000 0 3515 7012 9508

2005 3515

2006 7012
Year

2007 9508

Deposit

"rom the above analysis it is found that the .eposit mobilization of the bank is increasing steadily. In the year A66A .eposit is increased >66C as compared with the year A66>. (nd in the year A665 .eposit is increased 5DC as compared with the year A66A .ue to the increased of (ccount in the Branch, which means the branch shows greater performance in this area Comparati,e Figure of Interest Paid on &eposit as on 2./.1/1@@?

-!port Import Bank 3f Bangladesh td. &%otiEheel Branch+

&(mount Tk. in crore+

8ear Interest on .eposit

A66D A6?

A66B A66@ K?6 ?D6 Source4 Statement of Income ,-!penditure

Interest paid on Deposit

1000 Interest( in lac) 800 600 400 200 0 2005 2006 Year 2007 208 480 850

"rom the above analysis it is found that the Interest paid on deposit by the branch is increased 0uite steadily. In the year A66B it is increased by >5>C as compared with the year A66D. (nd in the year A66@ it is increased by@@C as compared with the year A66A. .ue to the increased of (ccount in the Branch, which means the branch shows greater performance in this area. Cear (ise 8o/ %f #ccount of the ranch
)ame of (ccount Current Savings ".2 ST. .eposit under Scheme oan BC. "C Total (ccount A66D AKB >D6 >55 D5 BDK >AB A66B 5?B A@D >5? ?D >KK> A5B >6 > AD@A A66@ KD6 5@A AK@ MM >M5A AD@ > 555? Source4 Statement of (ffairs

>5BA

Deposit Position of Khatungonj Branch For the Last Three Years

Deposit(in lac)

10000 8000 6000 4000 2000 0

2005

2006 Year

2007

In the above graph it is shown that the no. of (ccount of the branch is increased year by year. $hich means the branch shows greater performance in this area.

Cear 'ise &eposit mix of the branch:

)ame of (ccount A66D (mount Tk. in crore >D> >B> AAD5 D5B K>K 1 1 24.4 C of total .eposit K.56C K.D?C BK.>6C >D.ADC >>.@@C 1 1 .@@A A66B (mount Tk. in crore 56> A?K 56D6 D?@ ABMD MD 1 ?@.1 C of total .eposit K.56C K.6DC K?.D6C ?.5@C 5?.K5C >.5DC

&"igure in crore+
A66@ (mount Tk. in crore >6M >DB D>>? KBM 5A6D C of total .eposit >.>DC >.BKC D5.?5C K.M5C 55.@>C

Current Savings ".2 ST. Saving Scheme BC. 3thers Total &eposit

KD> K.@KC .@@A B4@9 .@@A Source4 Statement of (ffairs

"ollowing /ie Charts are showing the .eposit /osition of the K?, %otiEheel Corp. Branch for the last 5 8ears4

&eposit mix of >hatungon; ranch for the Cear 1@@.

4%

12%

5%

Current
15%

Savings ".2 ST. Saving Scheme

64%

In the (bove analysis it is found that4 In the year A66Dthe Bank makes maEor .eposit as ".2, which is BKC, and after that as ST. which is >DC of the total .eposit of In the year A66Dthe Bank makes maEor .eposit as ".2, which is BKC, and after that as ST., which is >DC of the total .eposit of that 8ear,
&e posit mix of >hatungon; ranch for the Cear 1@@?

5%1%2%

Current Savings ".2 ST.

53%

34%

Saving Scheme 3thers

5%

In the (bove analysis it is found that4 In the year A66@the Bank makes maEor .eposit as ".2 which is D5C and after that as Saving Scheme which is 5KC of the total .eposit of that 8ear. L%#8S #8& #&<#8CES:

Comparati,e Position of the Loans of Moti;heel ranch

.ifferent Types of oan 3verdraft >A5 AKA A66D A66B Increase in C M@C AKA A>6 A66B &(mount in million+ A66@ Increase in C &>5C+

Cash Credit oans ;eneral Staff oan /acking Credit Bills /ortfolio Commercial oan Total

A6@ DB > > @ >>> D6B

55D BM > > >> 5M> >6D6

BAC A5C 1 1 D@C ADAC >6?C

55D BM > > >> 5M> >6D6

KAK A>> K A A6 KK6 >5>>

A@C A6BC 566C >66C ?AC >5C ADC

Source4 Statement of (ffairs

Advance Position of The Branch
Advance(in miillion)

1500 1311 2007 1000 506 500 0 2005 2006 Year

"rom the above analysis it is found that the loan and advance is increased gradually. in A66B it is increased >6?C as compared with A66D.and in A66@ it is increased ADC as compared with A66B.

Interest recei,ed from Loan for the last 2 years &(mount in million+
Cear Interest from loan 1@@4 B6 1@@D >5A Increase in A >A6C 1@@D >5A 1@@? >BA Increase in A A5C

Source4 Statement of Income and -!penditure

illion)

"raph sho'ing the income from #d,ance

200 150 100 50 0 2005 2006 2007 60 132 162

Interest(in

1050

Year

"rom the above analysis it is found that the income from loan and advance is increased gradually. In A66B it is increased >6?C as compared with A66D.and in A66@ it is increased ADC as compared with A66B

Cear (ise #d,ances Position of the 39: Moti;heel ranch &(mount in %iillion+
.ifferent Types of oan 3verdraft Cash Credit oans ;eneral Staff oan /acking Credit Bills /ortfolio Commercial oan Total A66@ A>6 KAK A>> K A A6 KK6 >5>> .istribution In C >BC 5AC >BC 6.56C 6.A6C >.DC 5KC >66C AKA 55D BM > > >> 5M> >6D6 A66B .istribution In C A5C >A5 5AC A6@ @C DB 1 > 1 > >C @ 5@C >>> >66C D6B Source4 Statement of (ffairs A66D .istribution In C AKC K>C >AC 1 1 >C AAC >66C

"ollowing /ie Charts are Showing the (dvance /osition of the last5 8ears
Compe rati,e position of the #d,ance in the ye ar 1@@.

3verdraft
22% 1% 11% 42% 24%

Cash Credit oans ;eneral

Bills /ortfolio

Commercial oan

In the (bove analysis it is found that4

In the year A66D the Bank makes its maEor advance as Cash Credit which is K>C and after that as 3ver .raft which is AKC of the total advance of that 8ear.
Compe rati,e position of the #d,ance in the year 3verdraft 1@@D

Cash Credit
23% 37%

oans ;eneral
1% 7% 32%

Bills /ortfolio Commercial oan

In the (bove analysis it is found that4

In the year A66B the Bank makes its maEor advance as Commercial oan which is 5@C and after that as Cash Credit which is 5AC of the total advance of that 8ear

C omperati,e position of the #d,ance i n the year 1@@?

3verdraft Cash Credit

16 % 34%

oans ;eneral
16 % 32% Bills /ortfolio

2%

Commercial oan

In the (bove analysis it is found that4 In the year A66@ the Bank makes its maEor advance as Commercial oan which is K>C and after that as Cash Credit which is 5AC of the total advance of that 8ear

Comparati,e Position on %,erall Export Performance for the last 2 Cears +39: Moti;heel ranch&"igure in %illion Tk+
Item -!port A66D >6@.6D A66B KD?.5B C of ;rowth 5A?C A66B KD?.5B A66@ D66.KB C of ;rowth MC

Source4 Statement of (ffairs

Export Performance

Export+in million-

600 500 400 300 200 100 0

458.36

500.46

107.05 2005 2006 Cear 2007

"rom the above graph it is observed that the e!port is increased steadily.In the year A66B is increased 5A?C as compared with A66B.(nd in the year A66@ t is increased MC as compared with A66B.

Comparati,e Position on%,erall Import Performance for the last 2 Cears + =anata an! 39: Moti;heel Corp/ ranch-

&"igure in %illion Tk+

Item Import A66D MM>.>A A66B A6DB.@M C of ;rowth >6?C A66B A6DB.@M A66@ AA?A.D5 C of ;rowth >>C

Source4 Statement of (ffairs

Import Performance

Import+ in million-

2500 2000 1500 1000 500 0 2005 2006

991.12 2056.79

2282.53

2007

Year

From the abo,e graph it is obser,ed that the Import is increased steadily/ In the year 1@@D is increased .@9A as compared 'ith 1@@4/#nd in the year 1@@D it is increased ..A as compared 'ith 1@@?/ %perating Profit

Comparative /osition on3verall /rofit /erformance for the last 5 8ears+ &'anata Bank,K?, %otiEheel Corp. Branch+
&"igure in crore Tk+
Item /rofit A66D ADD A66B B66 C of ;rowth >5DC A66B B66 A66@ DAA C of ;rowth 1>5C Source4 Statement of Income , -!penditures

!perating Profit Perfor ance

600

Profit+in million-

600

500 400 300 200 100 0 2005 255

2006 Year

2007

In the above graph it is shown that the 3perating /rofit is increased steadily. In the year A66B is increased by >5DC as compared with A66D.(nd in the year A66@ it is decreased by >5C as compared with A66B.

C#LC7L#TI%8 F%5 T0E 5#TI%S

/23"IT(BI IT8 2(TI3S4 +Figures in million./ Calculation for 5%#: 1@@4 )et /rofit (fter Ta! Total (ssets 55,@KK.MB 23( 1/ Calculation for 5%I: 1@@4 1@@D 1@@? R>.5KC R>.>6C R6.?@C AD5.DB >?,??A.K 1@@D ADB.6B A5,>5D.@ 1@@? AMK.BM

522

)et /rofit (fter Ta! Total Investment4 23I

AD5.DB AA?A.6? R>>.>>C

ADB.6B AD?>.B> RM.M>C

AMK.BM 5>M6.>D RM.A5C

2/ Calculation for 5eturn on Fixed #ssets: 1@@4 )et /rofit (fter Ta! "i!ed (ssets 2eturn on "i!ed (ssets RM5.MKKKKKKKKKKKKKKKK 3/ Calculation for Earning Per Share: 1@@4 )et /rofit (fter Ta! )o. of shares -arning /er Share AD5.DB >BBB R6.>DA 1@@D ADB.6B AM>A R6..?@M 1@@? AMK.BM K@6K R6.6BA AD5.DB K?.?> RD>M.K?C 1@@D ADB.6B A??.6A R??.M6C 1@@? AMK.BM 5>5.@5

/23.7CTI<IT8 2(TI3S4
./ Calculation for &eposit Per Employee: +Figures in million1@@4 .eposit A@,M56.?K )o. of employees .eposit /er -mployee K?? E2./33 D?B E22/3? B?D >D5K5.KD 1@@D >MB>?.?A 1@@?

1/ Calculation for operating profit per employee: +Figures in crore1@@4 3perating /rofit )o. of employees S K?? 1@@D >6K5.> D?B R>.@? B?D R>.?? 1@@? >AM5.DK

3perating /rofit per employee R

2/ Calculation for ad,ance per employee: +Figures in crore-

1@@4 (dvance )o. of employees (dvance per employee >56A@ K?? RAB.BM

1@@D >DDK>.D D?B RAB.DA

1@@? AA66>.@ B?D R5A.>>

3/ Calculation for deposit per branch: +Figures in million1@@4 .eposit )o. of branches .eposit per branch R>65K.K@ 4/ Calculation for net profit after tax per branch: +Figures in million1@@4 )et /rofit (fter Ta! )o. of branches )/(T per branch AD5.DB >M 1@@D ADB.6B A5 R>5.5K R>6.M> E3@/?? R>>.>5 1@@? AMK.BM A@ >D5K5.KD >M R?6@.DD 1@@D >MB>?.?A A5 R?DA.MM 1@@? A@,M56.?K A@

(C23)8%S4
C. SB ST. /3 TT %T Current .eposit Savings Bank Short Term .eposit /ay13rder Telegraphic Transfer %ail Transfer

.. IBC 3BC S3. CC &H+ CC &/+ -CC .( ./ /(. I% T2 B/ &.+ B/&C+ B/ &"+ /C ; I2C -2C ST(

.emand .raft Inward Bills for Collection 3utward Bills for Collection Secured 3verdraft Cash Credit &Hypo+ Cash Credit &/ledge+ -!port Cash Credit .ocuments (gainst (cceptance .emand /romissory )ote /ayment (gainst .ocument oan (gainst Imported %erchandise oan (gainst Trust 2eceipts ocal Bill /urchase by .ocuments ocal Bill /urchase by Clean ocal Bill /urchase by "oreign /acking Credit etter of ;uarantee Import 2egistration Certificate -!port 2egistration Certificate Special Trading (rrangement

BIB I3;2(/H8
The Annual Report of Janata Bank Ltd. Official Web site of JanataBank Ltd. Previous Reports. Statement of affairs and statement of income & expenditures. Lecture Sheets of BIBM.

 Research Methodology - C R Kothari. Business Research Method William G Zikmund.

Findings
.uring my two months internship in the 'anata Bank td, K?, %otiEheel,Corporate Branch, %otiEheel, .haka following positive things are found from my observation4 There are a number of banks are operating in the %otiEheel Commercial (rea But the 'anata Bank td, K?, %otiEheel,Corporate Branch from these, Branch is successfully operating its activities. 2ecently , this Bank has come into competition with the other commercial Bank in %otiEheel, .haka 'anata Bank td, K?, %otiEheel, Corporate Branch has earned e!emplary profit in A66@and A66? in comparison with other banks in %otiEheel (rea.. The bank has marginal bad debt in K?, %otiEheel Branch. Because the credit analysts have a strong background in accounting financial statement analysis, business law and economics along with good negotiating skills. Branch %anager puts Conscious efforts to achieve the targets and knows how to motivate employees and how to represent the Bank well in the local community. (s the bank uses some modern technology such as4 "a!, Tele! , other electronic devices, hence its service is better than other banks. The controlling officers are effective in providing necessary guidance and support to the branch. The strategy and policy of Branch %anager are effective. So in spite of cut throat competition, the bank has a sound position in the competitive environment

The Bank Introduce )B2 &)on Bangladeshi 2esident+ branch, which is new idea in Bangladesh.

#reas need to be impro,ed

However the satisfaction level of '()(T( B()* T. is good enough. But some customers have e!pressed their dissatisfaction about the '()(T( B()* T. in various aspects. It has a profound effect on the overall satisfaction level of '()(T( B()* T.. "ollowing are the problems found which 'anata Bank td faces4 abel of adoption to the modern technology is poor. ike The great problem of '()(T( B()* T. is the absence of Credit Card, (T% Card, .ebit Card, on line banking service. 3n line banking service means any one can deposit or draw money in any branch of '()(T( B()* T.. '()(T( B()* T. is giving the lowest interest rate to its saving account holders. owest interest rate makes them demoralize and conse0uently they are shifting their accounts to other banks to make more money. ack of promotional activity is another problem that is responsible for the decline of the customers# satisfaction of '()(T( B()* T.. It has been found that people could hardly recall any advertisement of '()(T( B()* T.. Some customers said that the services Time of '()(T( B()* comparatively higher than other bank. (s the bank is moving towards semi1multinational culture, some employees are resisting the change, as they are accustomed to traditional banking system and do not want to change. (nother important problem is most of the officials who are working in the "oreign -!change, ;eneral Banking and Credit .epartment are not commerce background. T. are

 %ost of the people of the Bangladesh are poor. But '()(T( Bank td does not provide any special facility to them. They do not have any short1term scheme like %icro credit for poor people. %oreover they do not have merged Some rural area. Interest rate is same for both high1risk borrowers and low risk borrowers. It is another problem of '()(T( Bank td

There is lack of Training program which necessary for the officials to update themselves. %a!imum -mployee are older so they do not serve 0uickly. %ost 3f the C.B.( leader are not done his duty, The CB( hamper the Eob in time. The facilities both financial and non1financial are poor.

Possible Measures
I have to make some recommendations based on the findings that I have got from my research. The recommendation will help the bank to take necessary steps in order to increase the satisfaction level of customers of '()(T( B()* T.. The following are some recommendations for the company '()(T( ()* T. must be introducing credit card and (T%. )ow a day#s most of the banks are providing various service facilities like as AK hours service, credit card, (T% etc. If S '()(T( B()* T. does not introduce those facilities immediately then customers will shift to other banks that provide these services. 3nline banking is very much in practice in today#s modern world. I highly recommend launching of such services.

 '()(T( B()* T. should give the competitive interest rate, so that the clients are not shifting their accounts to other bank. '()(T( B()* T. should develop advertisement that promotes the service attributes and benefits with the models reflecting the target segments they are approaching. To promote the image promotional activity can play an important role. /reparing a television advertisement that would reflect the benefits and attributes of the service to the target market. (llotting a handsome amount for the making and broadcasting of new advertisement. The serving time of '()(T( B()* T. should be reasonable (s it has been found that the present products can no longer satisfy the customers so new products should be introduced. The institution should completely change its current product positioning and positioning strategies to establish their products in the appropriate target market segments. 3fficials to be posted in "oreign -!change, ;eneral Banking and credit .epartment should be commerce background. '()(T( B()* T. should provide short1term scheme like %icro credit for poor people. They should spread their service to the rural area by introducing branch in that area. It may be a fair deal if the high1risk borrowers and the low risk borrowers should not have to pay the same interest rate. Interest rate could be arranged according to the sum they borrow. The bank should send the 2elationship %anagers and C2% employees to various training programs for increasing the efficiency of employees to provide better service to customers. The institution should conduct some primary research to get a better understanding of the target market. They should also conduct surveys to find the e!tent to which their services are meeting the needs and wants of target market. /roper decentralization of power is necessary for promoting such dealings. This may be done on the basis of e!amination by delegating more powers to a few branches.

Conclusion4
There are a number of nationalized and foreign banks operating their activities in Bangladesh. (mong them 'anata Bank imited is one of the leading commercial bank. 'anata Bank td has introduced a new dimension in the field of innovative and

benevolent banking in our country. The bank has successfully made a positive contribution to the economy of Bangladesh. Its profit is gradually increasing. It plays a great role in collecting scattered .eposit, oan settlement and International Trade etc. The Bank ensures 0uality services to the customers. "or better growth and healthy economic position, it should introduce new and lucrative long1term credit schemes especially for new investors and schemes for poverty alleviation like micro credit. I hope 'anata Bank td will do more work for socio1economic development besides their banking business. To keep pace with ever1changing uncertain domestic business environment and face the challenges of revised global economic scenario, the bank should be more pro1active and responsive to introduce new marketing strategy to hold the strong position in home and abroad. "or the future planning and the successful operation in its prime goal in this current competitive environment I hope this report can provide a good guideline. I wish continuous success and healthy business portfolio of 'anata Bank imited, K?,%otiEheel Corporate Branch %otiEheel, .haka.

The End