Foreign Exchange of MTB

ADVANCE WORKING REPORT ON FOREIGN EXCHANGE OPERATION AND
PERFORMANCE EVALUATION ON
MUTUAL TRUST BANK LIMITED

BY

FIROZA BEGUM
ID: 0920623

AN INTERNSHIP REPORT PRESENTED IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE DEGREE
BACHELOR OF BUSINESS ADMINISTRATION

INDEPENDENT UNIVERSITY, BANGLADESH
NOVEMBER, 2012

ADVANCE WORKING REPORT ON FOREIGN EXCHANGE OPERATION AND
PERFORMANCE EVALUATION ON
MUTUAL TRUST BANK LIMITED

BY

FIROZA BEGUM
ID: 0920623

has been approved
November, 2012

Hanif Mahtab
Lecturer,School of Business
Independent University,Bangladesh

TABLE OF CONTENTS
LIST OF TOPICS: PAGE
EXECUTIVE SUMMARY 1
ORIGIN OF THE REPORT 2
PROBLEM STATEMENT 2
LITERATURE REVIEW 3
OBJECTIVES OF THE STUDY 3
METHODOLOGY OF THE STUDY 4
SOURCES OF DATA 4
DATA ANALYSIS AND INTERPRETATION 5
LIMITATIONS OF THE STUDY 5
COMPANY PROFILE 6
MTB MISSION 7
MTB VISION 7
MTB BOARD OF DIRECTORS 8
F FO OR RE EI IG GN N E EX XC CH HA AN NG GE E 9
M ME EA AN NI IN NG G O OF F F FO OR RE EI IG GN N E EX XC CH HA AN NG GE E 9
REGULATORY REQUIREMENTS OF FOREIGN EXCHANGE 9
F FU UN NC CT TI IO ON NS S O OF F F FO OR RE EI IG GN N E EX XC CH HA AN NG GE E D DE EP PA AR RT TM ME EN NT T 10
DOCUMENTS USED IN FOREIGN EXCHANGE 10
LETTER OF CREDIT (L/C) 14
PARTIES OF LETTER OF CREDIT TRANSACTION 14
BASIC FORMS OF DOCUMENTARY LETTER OF CREDIT 15
STEPS IN LETTER OF CREDIT OPENING 16
REQUIRED DOCUMENTS FOR LETTER OF CREDIT OPENING 17

O OP PE ER RA AT TI IO ON N O OF F D DO OC CU UM ME EN NT TA AR RY Y L LE ET TT TE ER R O OF F C CR RE ED DI IT T
17

SETTLEMENT
19

P PR RE ES SE EN NT TI IN NG G A A L LE ET TT TE ER R O OF F C CR RE ED DI IT T
21

I IM MP PO OR RT T
23
M ME EA AN NI IN NG G O OF F I IM MP PO OR RT T 23
G GE EN NE ER RA AL L P PR RO OV VI IS SI IO ON NS S F FO OR R I IM MP PO OR RT T 23
I IM MP PO OR RT T P PR RO OC CE ED DU UR RE E 24
D DO OC CU UM ME EN NT TS S N NE EE ED D T TO O O OP PE EN N A A C CA AS SH H L L/ /C C 25
P PR RO OC CE ED DU UR RE E T TO O B BE E F FO OL LL LO OW WE ED D B BY Y B BA AN NK KS S F FO OR R A AC CC CE EP PT TA AN NC CE E/ /I IS SS SU UA AN NC CE E O OF F L LC CA A
F FO OR RM MS S
25
I IN NS ST TR RU UC CT TI IO ON NS S I IS SS SU UE ED D B BY Y B BA AN NG GL LA AD DE ES SH H B BA AN NK K F FO OR R O OP PE EN NI IN NG G A AN ND D O OP PE ER RA AT TI IO ON N O OF F
L LE ET TT TE ER R O OF F C CR RE ED DI IT T F FO OR R I IM MP PO OR RT T O OF F G GO OO OD DS S
26
P PR RE EP PA AR RA AT TI IO ON N O OF F P PR RO OP PO OS SA AL L A AN ND D S SU UB BM MI IT TT TI IN NG G I IT T T TO O T TH HE E C CO OM MP PE ET TE EN NT T
A AU UT TH HO OR RI IT TY Y F FO OR R O OB BT TA AI IN NI IN NG G P PE ER RM MI IS SS SI IO ON N O OF F O OP PE EN NI IN NG G L LE ET TT TE ER R O OF F C CR RE ED DI IT T
27
D DO OC CU UM ME EN NT TS S R RE EC CE EI IP PT T A AN ND D S SC CR RU UT TI IN NY Y 27
E EX XP PO OR RT T 29
D DO OC CU UM ME EN NT TS S U US SE ED D I IN N E EX XP PO OR RT T 29
R RE EG GI IS ST TR RA AT TI IO ON N F FO OR R T TH HE E E EX XP PO OR RT TE ER R 31
P PR RO OC CE ES SS SI IN NG G O OF F E EX XP PO OR RT T O OR RD DE ER R 32
M MA AK KI IN NG G S SA AL LE ES S C CO ON NT TR RA AC CT T A AN ND D R RE EC CE EI IV VI IN NG G L L/ /C C 33
E EX XP PO OR RT T F FI IN NA AN NC CE E 34
PRE SHIPMENT FINANCE IN EXPORT TRADE 34
P PO OS ST T S SH HI IP PM ME EN NT T F FI IN NA AN NC CE E 34
F FO OR RE EI IG GN N D DO OC CU UM ME EN NT TA AR RY Y B BI IL LL L P PU UR RC CH HA AS SE E 34
P PR RE EP PA AR RI IN NG G O OU UT T A AN ND D D DE EL LI IV VE ER RY Y O OF F S SH HI IP PP PI IN NG G D DO OC CU UM ME EN NT TS S 35
E EN ND DO OR RS SE EM ME EN NT T O OF F S SH HI IP PP PI IN NG G D DO OC CU UM ME EN NT TS S B BY Y A AU UT TH HO OR RI IZ ZE ED D D DE EA AL LE ER RS S 35
F FO OR RE EI IG GN N R RE EM MI IT TT TA AN NC CE E O OF F M MT TB B 37
M ME EA AN NI IN NG G O OF F R RE EM MI IT TT TA AN NC CE E 37
R RE EM MI IT TT TA AN NC CE E P PR RO OC CE ED DU UR RE ES S O OF F F FO OR RE EI IG GN N C CU UR RR RE EN NC CY Y 37
1. INWARD FOREIGN REMITTANCE 37
OUTWARD FOREIGN REMITTANCES 40
FINANCIAL PERFORMANCE ON MTB 42
PERFORMANCE ANALYSIS ON FOREIGN EXCHANGE 44
FINANCIAL PERFORMANCE OF MTB COMPARE TO COMMERCIAL BANK 46
FINDINGS 55
RECOMMENDATIONS 56
CONCLUSION 57
REFERENCES

Letter of Transmittal
November 28, 2012
Hanif Mahtab
Lecturer
School of Business
Independent University

Dear Sir,
This is to inform you that I have completed my internship report relating to Mutual Trust Bank
Ltd. on the topic Foreign Exchange Operation and Performance. I have prepared this report
as a requirement of the internship program BBA 499 under the BBA program of Independent
University, Bangladesh.

In writing this report, I have followed your instructions as well as those given by my
organizations supervisor. I have also tried to apply relevant concepts that I have learnt during
the entire BBA program and my internship period at the Mutual Trust Bank Ltd.. However, I will
be glad to clarify any discrepancy that may arise.

Thank You
Yours Sincerely,

Firoza Begum
ID: 0920623

ACKNOWLEDGEMENT

First of all, I would like to express my heartiest gratitude to all those respondent employees who
attended the survey. Also, the co-operation of my internship supervisor, along with the other
members of the Mutual Trust Ltd., was truly unforgettable. In addition to that, I was blessed to
have an instructor like Hanif Mahtab who had the attitude and the substance to be a true mentor
as he guided me throughout the preparation of the report.
Finally, I would like to thank everyone at Mutual Trust Bank Ltd. who provided me with
ideas, data and invaluable experience of the corporate culture.

1
Foreign Exchange Operation and Performance Evaluation on MTB
Executive Summary:

This report focuses on the Foreign Exchange Operation and Performance evaluation on Mutual
Trust Bank.

In this report consist up with seven individual parts. In here the First part is the Introduction part
& here briefly describe Background of the Study, Origin, Objective, Scope, Methodology and
Limitations of the report. The Second part is Overview of Mutual Trust Bank Here describe the
Bank Profile, Vision, Mission, Board of Directors, Objectives, The part Third is Foreign
Exchange of Mutual Trust Bank(MTB). Here described about the Foreign Exchange department
of MTB. The Final part consists up with the Financial analysis, Foreign Exchange Operation
analysis, Summary Findings and Recommendations.

Foreign exchange is an important department of Mutual Trust Bank, which deals with import,
export and foreign remittances. It bridges between importers and exporters. This department is
playing an important role in enhancing export earnings, which aids economic growth and in turn
it helps for the economic development. On the other hand, it also helps to meet those goods and
service, which are most demandable and not adequate in our country.

2
ORIGIN OF THE REPORT
As a mandatory part the BBA Program, all the students of the faculty of Business Students have
to undergo a three month long internship program with an objective of gaining practical
knowledge about current business world. After this internship program each and every students
have to submit an internship report mentioning their activities during the internship program.
Ive started my internship at the Mutual Trust Bank (MTB),Gulshan Branch,under the foreign
exchange department. At the end of the program I am submitting my internship report focusing
on the contribution of Foreign Exchange operation to the overall performance of bank especially
on profitability perspective under the supervision of Hanif Mahtab, Lecturer , Management
school of business, Independent University, Bangladesh

Problem Statement
Bangladesh Bank performs all the functions that a central bank of any country is expected to
perform, and such functions include maintaining the price stability through economic and
monetary policy measures, managing the countrys foreign exchange and the gold reserve and
regulating the banking sector of the country. Foreign exchange is an important department of
Mutual Trust Bank Ltd., which deals with import, export and foreign remittances. Foreign
Exchange is an International Department of the Bank. It facilitates international trade through its
various modes of services. It bridges between importers and exporters I hereby through the
internship program in Mutual Trust Bank, wanted to find out whether the process of their foreign
exchange operation is good enough to avoid any unwanted risk such as money
laundering,foreign remittance fluctuation, the future direction of foreign exchange and financial
performance compare to commercial bank in Bangladesh to identify the performance of Mutual
Trust Bank Ltd.

3
Literature Review:
Foreign exchange exposure is very crucial now a days as cross border trade is increasing day by
day at a very fast pace. But it is also regarded as very complex. One possible reason for the
absence of empirical evidence in the literature may be related to the difficulty in devising the
appropriate measures of a firms ability to construct its hedging strategies. There is a dearth of
good literature on this subject, especially in India. Some of the studies identified in this area are
as follow; Bengt Pramborg, in this study, Foreign Exchange Risk Management by Swedish and
Korean Non Financial Firms: A Comparative Survey, 2002, makes a comparison of hedging
practices of Swedish and Korean Firms. The evidence suggests that Korean firms are more
concerned about fluctuations in their cash flows whereas Swedish firms focus on accounting
numbers. Derivatives usage is more popular for hedging among Swedish firms as compared to
Korean firms. It may be a result of relative immaturity of Korean derivative markets. In both of
the countries, majority of firms use a profit based approach to evaluate any risk management
strategy. The study depicts that the decision to hedge foreign exchange exposure is driven by the
level of exposure and size of a firm.
Bradford Cornell and Alan C. Shapiro, in their article, Managing Foreign Exchange Risks,
provide step by step guidance for the formulation of an effective strategy for managing currency
risk.

OBJECTIVES OF THE STUDY
The general objective of the study is to gather practical knowledge regarding banking system and
operation. The practical orientation gives us a chance to relate the four year long theoretical
learning of BBA Program with the practical experience. This consists the following:
To get an overall idea about the Foreign exchange Business procedure of Mutual Trust
Bank Ltd(MTB).
To describe the organizational structure, management, background, functions and
objectives of the bank.
To examine the profitability of the bank compare to the commercial bank.
To know the performance of foreign exchange department of MTB

4
METHODOLOGY OF THE STUDY
The report is prepared on the basic of foreign Exchange of Mutual Trust Bank. To conduct the
overall study, at first I explored the sources of Primary and Secondary information and data.
Different files of the department and statement prepared by Foreign exchange department( FED )
helped me to prepare this report. To present financial performance of MTB, I used the Annual
Report of 2009, 2010 & 2011 of Mutual Trust Bank.I also used Annual report of commercial
Bank of Bangladesh. For preparing this report I have used some graphical representation to find
out different types of analytical and interpretation.

SOURCES OF DATA
As mentioned earlier, mainly primary and secondary data has been used. Sometimes the
customers gave some important information regarding the services of the Bank:
PRIMARY DATA
Official records of Mutual Trust Bank(MTB).
Face to face conversation with the client.
Personal Interview Face-to-face conversation and in depth interview with the respective
officers of the branch.
Personal observation Observing the procedure of banking activities followed by each
department.
Practical work exposures on different areas of the branch
Informal conversation with the clients or customers.

SECONDARY DATA
Monthly Statement of MTB.
Annual Report of MTB.
Official Files.
Other manual information.
Websites.
Various publications on the Bangladesh Bank.

5
DATA ANALYSIS AND INTERPRETATION
Both quantitative and qualitative analysis will be performed on the findings. Qualitative
analysiss will be based on the foreign exchange policy provided by Bangladesh bank, the central
bank of Bangladesh. Different statistical tools will be used for the analysis of the findings.
LIMITATIONS OF THE STUDY
To provide current information and to make the report read-worthy, support from various sources
is essential. In spite of having my wholehearted effort, I could not collect some information
required at the time of the study. So this study is not free from the following limitation:
Due to unavailability of latest annual report (Annual report 2012), I have to prepare the
report on the basis of annual report 2010 & 2011. As a result, analysis, presentation of
data may not show the existing position/present condition of Mutual Trust Bank.
Lack of previous experience to prepare this type of report and it is totally new to me as an
intern.
Learning all the banking functions within just three months was really difficult.
Sometimes the officers of Mutual Trust Bank were very busy. For this reason they
personally did not co-operate me.
Another limitation of this report is Banks policy of not disclosing some data and
information for obvious reason, which could be very much helpful.

6

COMPANY PROFILE:

The Company was incorporated on September 29, 1999 under the Companies Act 1994 as a
public company limited by shares for carrying out all kinds of banking activities with Authorized
Capital of Tk. 38,00,000,000 divided into 38,000,000 ordinary shares of Tk.100 each.
The Company was also issued Certificate for Commencement of Business on the same day and
was granted license on October 05, 1999 by Bangladesh Bank under the Banking Companies Act
1991 and started its banking operation on October 24, 1999. As envisaged in the Memorandum
of Association and as licensed by Bangladesh Bank under the provisions of the Banking
Companies Act 1991, the Company started its banking operation and entitled to carry out the
following types of banking business:

(i) All types of commercial banking activities including Money Market operations.
(ii) Investment in Merchant Banking activities.
(iii) Investment in Company activities.
(iv) Financiers, Promoters, Capitalists etc.
(v) Financial Intermediary Services.
(vii) Any related Financial Services.
The Company (Bank) operates through its Head Office at Dhaka and 77 branches. The
Company/ Bank carries out international business through a Global Network of Foreign
Correspondent Banks.

Registered Name of the Company
Mutual Trust Bank Limited
Legal Form
The Company was incorporated on September 29, 1999 under the Companies Act 1994 as a
public company limited by shares for carrying out all kinds of banking activities with Authorised
Capital of Tk. 38,00,000,000 divided into 38,000,000 ordinary shares of Tk.100 each.
7
Company Registration No.
c38707(665)/99 on September 29, 1999
Bangladesh Bank Permission No.
BRPD (P)744(78)/99-3081 on October 5, 1999
Registered Office:
MTB Centre, 26 Gulshan Avenue
Plot 5, Block SE(D), Gulshan 1, Dhaka 1212
SWIFT CODE
MTBL BD DH
Corporate Website
www.mutualtrustbank.com
MTB MISSION:
We aspire to be the most admired financial institution in the country, recognized as a dynamic,
innovative and client focused company, that offers an array of products and services in the search
for excellence and to create an impressive economic value.
MTB VISION:
Mutual Trust Banks vision is based on a philosophy known as MTB3V. We envision MTB to
be:
One of the best performing banks in Bangladesh
The Bank of choice
A truly world-class Bank

8
MTB Board of Directors:

The following are members of the MTB Board of Directors. To view their brief biographies
please click on the names.

Dr. Arif Dowla, Chairman
Mr. Rashed Ahmed Chowdhury,Vice chairman
Mr. Sayeed Manzur Elahi
Mr. Md. Hedayetullah
Mr. Mohammed Abdur Rouf
Mr. Md. Abdul Malek
Mr. Md. Wakiluddin
Mrs. Khwaja Nargis Hossain
Mr. Anjan Chowdury
Mr. Q.A.F.M Serajul Islam
Mr. Anis A. Khan,Managing Director & CEO

9
F FO OR RE EI IG GN N E EX XC CH HA AN NG GE E
M ME EA AN NI IN NG G O OF F F FO OR RE EI IG GN N E EX XC CH HA AN NG GE E
Foreign Exchange means exchange foreign currency between two countries. If we consider
Foreign Exchange as a subject, then it means all kind of transactions related to foreign currency.
In other wards foreign exchange deals with foreign financial transactions.
H.E. Evitt defined Foreign Exchange as the means and methods by which rights to wealth
expressed in terms of the currency of one country are converted into rights to wealth in terms of the
currency of another country

REGULATORY REQUIREMENTS OF FOREIGN EXCHANGE
Any import and export of our country is regulated by different local and international laws and
regulatory bodies. The core guidelines under the preview of which import and export of our
country have to be performed are:
Import Policy
Export Policy
Guidelines for foreign exchange transaction of Bangladesh Bank (Vol.1 &2).
Circular issued by Bangladesh Bank
Circular issued by NBR
Circular issued by CCI&E
UCPDC (ICC publication no.600) & ISBP, URC, URR.
Public Notice
Ministry of Commerce Circular
Other Authorization (i.e. NBC Dept)

Among the regulatory bodies, Chief Controller of Import and Export, Bangladesh Bank play
major role in monitoring and ensuring compliance of various regulations

10
W WH HY Y E EX XC CH HA AN NG GE E I IS S T TO O B BE E C CO ON NT TR RO OL LL LE ED D
Foreign Exchange is to be controlled for the following reason:
To stabilize the rate of exchange.
To protect domestic Industries.
For proper implementation of plans.
To increases the bargaining strength.
To check over invoicing & under invoicing.
To check the black marketing and smuggling.
For regulating the international movements of goods.

F FU UN NC CT TI IO ON NS S O OF F F FO OR RE EI IG GN N E EX XC CH HA AN NG GE E D DE EP PA AR RT TM ME EN NT T: :
Foreign Exchange is mainly combination of three parts:
Foreign Remittance.
Export.
Import.
These three parts are most essential part of Foreign Exchange Operations of MTB at Foreign
Exchange Branch . Not only MTB but also all banks of Bangladesh have to play these roles in
Foreign Exchange Operation.
DOCUMENTS USED IN FOREIGN EXCHANGE
LETTER OF CREDIT (L/C):
It is the most important and commonly used in connection with foreign trade. Letter of Credit is
an undertaking by a banker of the importer to the exporter, to the effect that the amount of the
L/C will be duly paid. The banker on behalf of the importer issues the L/C in favor of the
exporter (beneficiary) and forwards the same to the exporter to the effect that the bill drawn by
him shall be duly accepted and paid. It creates confidence in the mind of the exporter so far as
payment of the bill is concerned. It is also facilitate the exporter to get the benefit of discounting
the bill before the date lf maturity.

11
BILL OF EXCHANGE
A Bill of Exchange is an instrument in writing, containing an unconditional order, signed by the
maker, directing a certain person to pay on demand or on fixed or determinable future time a
certain sum of money only to or to the order of a certain person or to the bearer of the instrument. From
the definition - we get the features of bill of exchange. In generally there are three parties like-
Drawer: The person who prepare the bill; Drawee: The person who is ordered for the payment in
future specified time; Payee: The person who is the amount of bill receiver as per the order of the
drawer to the drawee.

BILL OF LADING
A bill of lading is a document that is usually stipulated in a credit when the goods are dispatched
by sea. It is evidence of a contract of carriage, is a receipt for the goods, and is a document of
title to the goods. It also constitutes a document that is, or may be, needed to support an
insurance claim. The detail on the bill of lading should include:
A description of the goods in general terms not inconsistent with that in the credit.
Identifying marks & numbers (if any).
The name of the carrying vessel.
Evidence that the goods have been loaded on broad.
The ports of shipment & discharge.
The names of shipper, consignee and name & address of notifying party.
The number of original bills of lading issued.
The date of issuance.
A bill of lading specifically stating that goods are loaded for ultimate destination specifically
mentioned in the credit.

12
COMMERCIAL INVOICE
A commercial invoice is the accounting document by which the seller charges the goods
to the buyer. A commercial invoice normally including the following information:

Date
Name & address of buyer & seller.
Order or contract number, quantity & description of the goods, unit price and the total
price.
Weight of the goods, number of packages and shipping marks & number.
Terms of delivery & payment.
Shipment details.

CERTIFICATE OF ORIGIN OF GOODS
A certificate of origin is a signed statement providing evidence of the origin of the goods.

INSPECTION CERTIFICATE
This is usually issued by an independent inspection company located in the exporting country
certifying or describing the quality, specification or other aspects of the goods, as called for in
the contract and / or the letter of credit. The buyer who also indicates the type of inspection
usually nominates the inspection company he /she wish the company to undertake.

INSURANCE POLICY OR CERTIFICATE
The insurance certificate document must.
Be that specified in the credit.
Cover the risks specified in the credit.
Be consistent with the other documents in its identification of the voyage and description
of the goods.
Unless otherwise specified in the credit
Be a document issued and / or signed by an insurance company or its agent, or by
underwriters.
Be dated on or before the date of shipment as evidenced by the shipping documents or
establish that cover is effective at the latest from such date of shipment.
13
Be for an amount at least equal to the GIF value of the goods and in the currency of the
credit.

PROFORMA INVOICE OR INDENT
Seller's quotation or agreement between seller & buyer. In this-the seller declared the rate,
quantity, quality, manufacturing & other information about goods and that accepted by buyer.
.
G.S.P. CERTIFICATE (GENERALIZED SYSTEM OF PREFERENCE)
When tariff concession is sought from those developed countries providing preferential treatment
to exporters of the developing countries, a GSP certificate should be obtained from the EPB. In
GSP scheme the tariff providing country is payer country & tariff consumer or receiver country
is receiver country. Up to the period there are 16 developing countries under this scheme facility.
From Bangladesh export development burro the industrialists may get necessary information &
practical procedure.

PACKING LIST
Here the detailed descriptions of goods packed in cases are written. Such as total quantity in lot,
per packet, total weight of the shipment, per packet etc are written.

DOCUMENTARY CREDIT
In simple terms a documentary credit is conditional bank undertaking of payment. Expressed
more fully, it is written undertaking by a bank (Issuing Bank) given to the seller (Beneficiary) at
the request and in accordance with the instructions of the buyer (applicant) to effect payment (i.e.
by making a payment or by accepting or negotiating bills of exchange) up to a stated sum of
money, within a prescribed time limit & against stipulated documents.
These stipulated documents are likely to include those required those required for commercial
invoice, certificate of origin, insurance policy or certificate and bill of lading or combined
transport document.

14
LETTER OF CREDIT (L/C)

Letter of Credit is an undertaking by a banker of the importer to the exporter, to the effect that
the amount of the L/C will be duly paid. The banker on behalf of the importer issues the L/C in
favor of the exporter (beneficiary) and forwards the same to the exporter to the effect that the bill
drawn by him shall be duly accepted and paid. It creates confidence in the mind of the exporter
so far as payment of the bill is concerned. It is also facilitate the exporter to get the benefit of
discounting the bill before the date lf maturity.

PARTIES OF LETTER OF CREDIT TRANSACTION:

Issuing Bank: It is the buyer's bank. The bank that agrees to the request of the applicant
and issues its letter of credit in terms of the instructions of the applicant.
Advising Bank: It is the seller's or beneficiary's Bank. The bank usually situated in the
seller's or beneficiary's country (most of the time with which there exists corresponding
relationship with the buyer or issuing bank), request to advice the credit to the
beneficiary.
Confirming Bank: Sometimes issuing bank request advising bank or another bank to
add confirmation to the letter of credit. When that bank do this then such bank is called
confirming bank. So advising bank can be act as confirming bank.
Reimbursing Bank: This is the bank that is nominated by the issuing bank to pay (it is
also known as paying bank) or to accept drafts. It can be situated in another country
Negotiating Bank: The bank, which makes payment to the exporter after scrutiny, the
documents submitted by the exporter with the original letter of credit then it is called
Negotiating Bank.
Nominated Bank: The bank that is nominated by the issuing bank to pay (nominated
bank is known as paying bank) or to accept drafts (nominated bank is known as accepting
bank) or to negotiate (nominated bank is known as negotiating bank). Usually the
advising bank is request & authorized to be the nominated bank unless the credit allows
negotiation by any bank.
Seller: Beneficiary of the letter of credit is seller.
15

BASIC FORMS OF DOCUMENTARY LETTER OF CREDIT

The letter of credit can be either revocable or irrevocable. It needs to be clearly indicated
whether the letter of credit Revocable or Irrevocable. When there is no indication then the letter
of credit will be deemed to be a revocable L.C. The details are as follows:

Revocable letter of credit: A revocable credit is one, which can be amended or
cancelled by the issuing bank. At any moment without "prior notice" to the beneficiary.
So this is clear that revocable credit can be revoked any time without prior notice.
Irrevocable letter of credit: An irrevocable credit is one, which cannot be cancelled or
amendment able any time without the consent of each party. Through this letter of credit
the issuing bank gives a definite, absolute and irrevocable undertaking to honor its
obligations, provided the beneficiary complies with all the terms & conditions of the
credit.
Government letter of credit: That letter of credits, which are done by the Defense
Ministry and other Ministries of the government.
Master or mother letter of credit: The L.C. which come from outside the country to the
exporter from importer that is mother or master letter of credit.

Other classes of letter of credit:

Revolving letter of credit: When the L.C. is used again & again in same amount for a
specific period of time that is called revolving letter of credit.
Transferable letter of credit: Exporter can transfer his / her right of letter of credit in
full or partly to a third party. In generally, the exporter is not the supplier but act as a
middleman with in the supplier & importer.
Back-to-Back letter of credit: The letter of credit, which done by the security of mother
letter of credit.
Clean or open letter of credit: The letter of credit, which provides assurance of payment
bill of exchange without submission, of any export documents that is called clean letter of
credit.
16
Confirmed letter of credit: When the Irrevocable letter of credit issued by issuing bank
to the exporter as assurance of the L.C., then as per advice or documents the authorized
representative or representative bank's provide assurance or payment guarantee that is
confirmed letter of credit.
Deferred payment letter of credit: That letter of credit which expires one hundred &
eighty days i.e. within this period the documents must be send to the negotiating bank.
STEPS IN LETTER OF CREDIT OPENING:
On receiving the documents or papers from the importer the letter of credit opening bank is to
perform the following functions in connection with opening the letter of credit:
To scrutinize the documents thoroughly and to consult with import policy, Bangladesh
Bank & International Division's circular.
To prepare an "offering sheet". This offering sheet is nothing but a prescribed office
note on which the branch manager will sanction the margin to be obtained from the
importer.
Commission of letter of credit to be calculated as 50% of the total amount, equivalent to
Bangladesh currency.
P&T charges to be realized for TK. 100 (fixed charge) if the letter of credit dispatched
through Airmail. If it is a cable or telex letter of credit the P&T charges to be realized at
actual.
Foreign correspondents adjusting charges (FCC) to be realized TK. 1500 (Fixed amount).
To make entry in "letter of credit opening register".
To dispatch the letter of credit as follows:
1.First & second copy - Advising Bank, which in turn forward the original copy to the
exporter.
2.Third copy - Reimbursing Bank.
3.Fourth & Fifth copyImporter
4.Sixth copyC.C.I. & E.
5.Seventh to Ninth copyLetter of credit opening bank's copy.

17
REQUIRED DOCUMENTS FOR LETTER OF CREDIT OPENING:

Proposal letter (in proposal letter it must be mentioned that - price of goods, CCI & E
registration, pass book number, LCA form dully filled in signed & sealed, Import form
full set, insurance policy & addendum, P.I. number).
Application and agreement for irrevocable LC with adhesive stamp of TK.150.
Import license
HS. Code.
TIN.
VAT registration.
Indenting certificate.
Performa invoice - two copies (with in this it indicate - Performa bill no. & date, item,
particulars, quality, quantity, rate, and amount of goods, total invoice value (E &O.E.)
LCA (Letter of Credit Authorization) form for industrial consumer - four copies. (Within
this - IRC number, total amount)
Signature of Director of the firm and manager of Mutual Trust Bank.
IMP form - Four copies (by this the declaration of the firm's directors)
Money receipts of insurance policy.
After preparing the procedure the bank provide offer in prescribed "offering sheet".
Approval certificate of Bangladesh Bank on behalf of the importer.

O OP PE ER RA AT TI IO ON N O OF F D DO OC CU UM ME EN NT TA AR RY Y L LE ET TT TE ER R O OF F C CR RE ED DI IT T
The following five (5) major steps are involved in the Operation of Documentary Letter of Credit
Issuing,
Advising,
Amendment(if necessary),
Presentation,
Settlement,

18
ISSUING A LETTER OF CREDIT
Before issuing a L/C, the buyer and seller located in different countries, concludes a sales
contract providing for payment by documentary credit. As per requirement of the seller, the
buyer then instruct the bank - the issuing bank to issue a credit in favour of the
seller(beneficiary). The credit application which contains the full details of the proposed credit,
also serve as an agreement between the bank and the buyer. After being convinced about the
necessary conditions contained in the application form and sufficient conditions to be
fulfilled by a buyer for opening a credit, the opening bank then proceeds for opening the credit to
be addressed to the beneficiary.
ADVISING A LETTER OF CREDIT
Advising 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 existing exchange control regulations and other regulation relating to export.
AMENDMENT OF L/C
Parties involve in a particularly the seller and the buyer cannot always satisfy the terms and
conditions in full as expected due to some obvious and genuine reasons. In such a situation, the
credit should be amended. Amendment of L/C may be for:
Time Extension:The time duration of L/C can be extended by writing an application by
the opener of L/C and signature of the opener should be verified provided the LCA is
valid or the agreement is valid up to that period.
Change in L/C amount: Increase of L/C amount may be done provided that the LCA
covers the increase in amount. L/C amount can be decreased provided the relevant
contract or indent is amended accordingly and with the consent of beneficiary.
PRESENTATION OF DOCUMENTS
The seller being satisfied with the terms and conditions of the credit proceeds to dispatch the
required goods to the buyer and after that, has to present the documents evidencing dispatching
of goods to the negotiating bank on or before the stipulated expiry date of the credit. After
19
receiving all documents, the negotiating bank then checks the documents against the credit. If the
documents are founded in order, the bank will pay, accept or negotiate to the issuing bank.

SETTLEMENT:
Settlement means fulfilling the commitment of issuing bank in regard to effecting payment
subject to satisfying the credit terms fully. This settlement may be done under three separate
arrangements as stipulated in the credit, these are
Settlement by payment
Here the seller presents the document to the paying bank and the bank then scrutinizes the
documents, if satisfied the paying bank makes payment to the beneficiary and in case this bank is
other than the issuing bank, then send the documents to the issuing bank. If the issuing bank is
satisfied with the requirements, payment is obtained by the paying bank from the issuing bank.
Settlement by Acceptance
Under this arrangement, the seller submits the documents evidencing the shipment to
the accepting bank accompanied by the draft drown on the bank at the specified tenor. After
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 pre-agreed manner.
Settlement by Negotiation
This settlement procedure starts with the submission of document by the seller to the negotiating
bank accompanied by a draft drown on the buyer or any other drawee, at` sight or at a tenor, as
specified in the credit.

W WH HE EN N U US SI IN NG G L LE ET TT TE ER RS S O OF F C CR RE ED DI IT T, , B BE E A AW WA AR RE E O OF F T TH HE E F FO OL LL LO OW WI IN NG G
A letter of credit is about documents and not goods. It will not insure the quality of the
goods received.
It is important to understand all required documents before signing and it is also
important to be sure all stipulated conditions can be met.
20
Ensure time frames can be met since the inability to meet time schedules is the number
one reason letters of credit fail.
The failure to produce the required documentation on time can nullify the letter of credit.
Even minor errors in documentation such as spelling mistakes can render a letter of
credit invalid, so it is critical to be careful with the documentation.
A letter of credit is not an absolute guarantee the beneficiary will receive payment. The issuing
bank is obligated to pay under the letter of credit only when the stipulated documents are
presented, and all the terms and conditions of the letter of credit have been met to the bank's
satisfaction.

H HO OW W L LE ET TT TE ER RS S O OF F C CR RE ED DI IT T W WO OR RK K
A letter of credit is a promise to pay. Banks issue letters of credit as a way to ensure sellers that
they will get paid as long as they do what they've agreed to do. Letters of credit are common in
international trade because the bank acts as an uninterested party between buyer and seller.
A documentary letter of credit is opened by the purchaser's local bank (the credit-opening
bank).
Via the credit-transmitting bank, the documentary letter of credit reaches the vendor. It
checks whether the terms of the documentary letter of credit match the terms of your
commercial contract. Only if the vendor is convinced can he send the goods to the
purchaser.
The necessary documents (invoice, transport document, insurance documents) are handed
over by the vendor to the credit-transmitting bank. After checking these documents, the
credit-transmitting bank pays the sum that the purchaser owes to the vendor directly.
The credit-transmitting bank sends the documents to the credit-opening bank that, after
checking the documents in turn, pays the amount due to the credit-transmitting bank.
Via the credit-opening bank, the documents finally reach the purchaser, who can use
these documents to collect the shipped goods.
Finally, the buyer pays the amount owed to the local bank.

21

The processing of Letter of Credit

P PR RE ES SE EN NT TI IN NG G A A L LE ET TT TE ER R O OF F C CR RE ED DI IT T
Once a letter of credit has been received, it needs to present to the bank for payment along with
other documents which may include:
Commercial invoice
Consular invoice
Insurance documents
Bill of lading
Certificate of origin
Packing list
Inspection certificates
Import permits
The bank will not pay if there are discrepancies and the documentation is not in order.
Importer or
Applicant
Issuing Bank
Advising Bank
or confirming
Bank

Exporter or
Beneficiary
2. Applicant
for LC issue
3. Issue of LC
4. Advising of
LC
8. Payment against
documents to
beneficiary
7. Send document to
issuing bank
6. Taking up
documents and
payment
5. Shipment of goods
and presenting
documents
9.
Receipt of
goods
1.
Internation
al sale
contract
22
I IM MP PO OR RT T
M ME EA AN NI IN NG G O OF F I IM MP PO OR RT T
An import is any good or service brought into a country from another country in a fair and
acceptable fashion, typically for use in trade. Imported goods or services introduce domestic
consumers to newer things by foreign producers. Companies usually import goods and services
to supply to the domestic market at a cheaper price and provide goods that are superior compared
to goods manufactured in the domestic market.
W WH HO O I IS S A AN N I IM MP PO OR RT TE ER R? ?
The person who deals in import business obtaining import Registration Certificate (IRC) in terms
of importers, exporters and indenters (registration) order-1981 from the CCI&E submitting the
following papers is treated as importer.
Valid Trade Lice
National ID Card
Asset Certificat
VAT Registration Certificate
Bank solvency Certificate
Trade Association Certificate
Certificate of Incorporation
Memorandum and Articles of Association

G GE EN NE ER RA AL L P PR RO OV VI IS SI IO ON NS S F FO OR R I IM MP PO OR RT T
Bangladesh import policy order 2006-2009 places control on the importation of some specific
products. The import of a number of products is the sole reserve of nominated government
trading organizations. The import regime consists of:
A banned list: Unless otherwise specified the items banned for import in this list shall
not be importable
A restricted list: Items which are importable on fulfillment of certain conditions
specified in the list shall be importable on fulfillment of certain conditions.
23
Freely importable items: Unless otherwise specified, any item, which does not appear
either in the restricted list or which has been mentioned as importable subject to certain
condition shall be freely importable.

I IM MP PO OR RT T P PR RO OC CE ED DU UR RE E ( (S ST TE EP PS S I IN NV VO OL LV VE ED D I IN N D DE EA AL LI IN NG G W WI IT TH H L L/ /C C) )
Procurement of IRC from the concerned authority.
Signing purchase contract with the seller
Requesting the concerned bank importers bank/ issuing bank to open L/C on behalf of
importer favoring the exporter/ seller/ beneficiary.
The issuing bank open/ issue the L/C in accordance with the instruction/ request of the
importer and request other bank (advising Bank) located in sellers/ exporter to advise the
L/C to the beneficiary. The issuing bank may also request the advising Bank to confirm
the credit, if necessary.
The Advising Bank advises/ inform the seller that the L/C has been issued.
As soon as the exporter/ seller receive the L/C and is satisfied that he can meet the L/C
terms and conditions; he is in a position to make shipment of the goods.
After making shipment of goods in favor of the importer the exporter/ seller submit the
document to the negotiating bank for negotiation.
The negotiation Bank scrutinized the documents and if found ok negotiates the
documents and sends the documents to the L/C issuing Bank.
After receiving the documents the L/C issuing bank also examines the documents and if
found ok makes payment to the negotiating bank.
The L/C opening bank then requests the importer to receive the document on payments
The importer after paying all dues receives the documents from the L/C issuing bank and
then releases the importer goods from the port authority.

24
D DO OC CU UM ME EN NT TS S N NE EE ED D T TO O O OP PE EN N A A C CA AS SH H L L/ /C C
To open cash LC MTB wants some documents from importer. These are given below
Valid IRC
Valid Trade license
TIN Certificate
VAT Certificate
Up to date income tax certificate
CIB (Credit Information Bureau) report
Pro-forma invoice
Application (in importer pad)
Credit report
Fill up IMP form
LC authorized form
Insurance cover etc.
P PR RO OC CE ED DU UR RE E T TO O B BE E F FO OL LL LO OW WE ED D B BY Y B BA AN NK KS S F FO OR R A AC CC CE EP PT TA AN NC CE E/ /I IS SS SU UA AN NC CE E O OF F
L LC CA A F FO OR RM MS S
(1)Acceptance of LCA Forms by the nominated banks:
a. LCA Forms and other relevant papers shall be submitted by the recognized industrial
units to the private sector and registered commercial importers to their respective
nominated bank for the purpose of import by opening L/C.
b. While accepting LCA Forms from a private sector importer the nominated banks shall
ensure that the concerned importer has a valid Import Registration Certificate (IRC).
Unless a private sector importer specifically is exempted from IRC, LCA Forms shall not
be accepted from him/her, or L/C shall not be opened in his/her favor without valid and
legally renewed IRC.
c. L/C for import of capital machinery and initial spares for setting up a new industrial unit
may, however, is opened without any Import Registration Certificate (IRC) and without
obtaining exemption certificate from the Chief Controller.
(2) Compulsory recording of ITC Number
25
Bank shall not process any LCA Form or open L/C without properly recording the appropriate
ITC Number on the LCA Form or L/C. Bangladesh Bank shall monitor the compliance by the
banks of the above requirements.
(3) Registration of LCA Form and opening of L/C
In case of import under cash foreign commodity aid, grant, loan and other sources for which
registration with Bangladesh Bank is necessary, the nominated bank shall forward the L/C
Authorization Form in quintuplicate to the nominated bank concerned and third and the fourth
copies thereof to the nominated bank concerned and third and the fourth copies thereof to the
concerned Import Control Authority with in fifteen days for record.
(4) LCA Forms under cash foreign exchange
In case of import under cash foreign exchange L/C Authorization Forms shall be required to be
registered with the Bangladesh Bank duty in those instances where prior approval from the
Bangladesh Bank is required for buying foreign exchange.
(5) Transmission of the copy of L/C and copy of amendment if any for record of the Import
Control Authority within fifteen days.

I IN NS ST TR RU UC CT TI IO ON NS S I IS SS SU UE ED D B BY Y B BA AN NG GL LA AD DE ES SH H B BA AN NK K F FO OR R O OP PE EN NI IN NG G A AN ND D O OP PE ER RA AT TI IO ON N
O OF F L LE ET TT TE ER R O OF F C CR RE ED DI IT T F FO OR R I IM MP PO OR RT T O OF F G GO OO OD DS S
All Letter of Credits and similar undertakings covering imports into Bangladesh must be
documentary Letter of Credits and should provide for payment to be made against full sets
of onboard (shipped) transport documents (BL, AIB, TR etc.) showing dispatch of goods
covered by Credit to a destination in Bangladesh;
Authorized Dealer is allowed to open divisible, transferable Letter of Credits for import
into Bangladesh under cash LCAF (Letter of Authorization Form);
It is not permissible to open Letter of Credits in favor of beneficiaries in countries from
which import into are banned by the component authority;
The full description of goods to be imported along with unit price and quantity to be given
in the Letter of Credit;
26
Confidential report of the exporter to be obtained by the AD himself where the amount of
Letter of Credit exceeds TK. 2,00,000 in case of import against proforma invoices issued
direct by foreign supplier and TK. 5,00,000 against indent issued by local agents of the
suppliers;

P PR RE EP PA AR RA AT TI IO ON N O OF F P PR RO OP PO OS SA AL L A AN ND D S SU UB BM MI IT TT TI IN NG G I IT T T TO O T TH HE E C CO OM MP PE ET TE EN NT T
A AU UT TH HO OR RI IT TY Y F FO OR R O OB BT TA AI IN NI IN NG G P PE ER RM MI IS SS SI IO ON N O OF F O OP PE EN NI IN NG G L LE ET TT TE ER R O OF F C CR RE ED DI IT T
Before opening Letter of Credit the applicant must take permission from the competent authority.
Whether the authority has to be taken form the Branch or from the Head Office of MTB depends
on the amount of Letter of Credit and the percentage of margin. A proposal for obtaining
permission for opening Letter of Credit generally contains the following points:
Name and address of the importer;
Name and address of the Guarantor if any;
Particular of Merchandise to be imported along with name of the item Harmonized System
(H.S.) Code, country of origin, quantity, unit price and purpose of import.
Particulars/ Terms of LC along with name and address of the beneficiary, tenor of payment,
port of loading and discharge, shipment validity and expiry date etc.;
Landed cost of the goods;
Market price of the goods at Dhaka and Chittagong (if applicable);
Name of the previous banker with outstanding liability (if any);
Number of CD accounts and transaction performance through this account;
Present liability position with the bank;

27
D DO OC CU UM ME EN NT TS S R RE EC CE EI IP PT T A AN ND D S SC CR RU UT TI IN NY Y
After opening the Letter of Credit the next step would be to await shipment followed by
negotiation of documents by a bank abroad. The beneficiary of the Letter of Credit (supplier), after
effecting shipment of the goods as per Letter of Credit terms, prepare or collect necessary
documents as required under the terms of Letter of Credit and presents the drafts to the negotiating
bank along with the supporting documents for negotiation.
However, generally the following documents are asked to send:
Bill of lading or Airway Bill or other evidence of shipment (e.g. Railway Receipt, Truck
Receipt, Barge Receipt)
Certificate of Origin;
Commercial Invoice;
Draft or bill of exchange;
Inspection of Survey Certificate;
Marine Insurance Policy;
Packing List;
Quality Control Certificate.

28

E EX XP PO OR RT T
A good or service that is produced in one country and then sold to and consumed in another
country. Because many companies are heavily dependent on exports for sales, any factors such
as government policies or exchange rates that affect exports can have significant impact on
corporate profits. A good produced in one country and sold to a customer in another country.
Exports bring money into the producing country; for that reason, many economists believe that a
nation's proper balance of trade means more exports are sold than imports bought. Exports may
be difficult to sell in some countries, as the importers may put up various protectionist measures
such as import quotas and tariffs. Most governments seek to promote exports, while they have
differing positions on imports.
D DO OC CU UM ME EN NT TS S U US SE ED D I IN N E EX XP PO OR RT T
When a firm sells its goods abroad, it must arrange for each export shipment to be accompanied
by various documents. Depending on the country to which the goods are being sent, these
documents will vary. But for exporting we can divide those documents in two types:
a. Substantive Documents
b. Auxiliary Documents

S Su ub bs st ta an nt ti iv ve e D Do oc cu um me en nt t: :
Draft or bill of exchange:
Bill of Exchange is an instrument in writing containing an unconditional order or at a fixed
determinable future time a certain sum of money only to, or to the order of a certain person or to
the bearer of the instrument.
Commercial Invoice:
Commercial Invoice is the export firm's invoice, addressed to the foreign importer describing the
goods shipped and the total price that it must pay. However, some countries require the
commercial invoice to be prepared on their own forms. Such forms are called customs invoices.
Bill of lading or Airway Bill:
Bill of Lading is a document supplied to the exporter by the shipping company that is
transporting the goods to their foreign destination, listing, item by item, the goods being shipped.
29
A Au ux xi il li ia ar ry y D Do oc cu um me en nt ts s: :
Auxiliary Documents are given below-
Cargo manifest or packing list:
When quantities, weights or contents of the various packing cases in an export shipment
vary, it is usual to prepare a separate list for each case indicating its contents, weight and
measurements. It also often includes the outside dimension of each case and the total cubic
content and total weight of the shipment.
Usually, cargo manifests or packing lists are not specifically required by the Customs
authorities, from various importing countries. However, they serve as useful supplements to
the commercial invoice that accompanies the export shipment.
Certificate of Origin:
Certificate of Origin is a document, which indicates the country in which the goods were
produced, is required whenever preferential duties are claimed. Sometime, consular
legalization of the document is necessary. Also, certification of the document by a Chamber
of Commerce is required.
Quality control certificate:
While exporting products for which quality control certificate is obligatory, the exporter
will have to submit, to the Customs Authorities, a quality control certificate issued by the
appropriate authority.
Consular Invoice:
Some country required consular invoice. Countries that require a consular invoice also
require a commercial invoice as additional proof of the details of the export shipment.
Countries that do not require a consular invoice, uses the commercial invoice as the
document upon which the import duty is based.
Certificate of free sale:
This certificate required for pharmaceuticals and certain chemicals entering a number of
countries.

30
Export Declaration Forms:
It is usually necessary for the exporter wishing to ship goods abroad, to fill out a form called
an Export Declaration. This form required by the government whenever the value of the
shipment exceeds a certain minimum amount or whenever a duty drawback is claimed; it is
available at local Customs offices.
The document is also used for statistical purposes so that government authorities know
exactly what has been exported from the country in each month and year and to which
country. The information required include a description of the goods, their quantity, value
and destination of the goods and whether the goods originated in the exporting country or are
the goods of foreign origin being re-exported.

R RE EG GI IS ST TR RA AT TI IO ON N F FO OR R T TH HE E E EX XP PO OR RT TE ER R
In the export policy of Bangladesh any one can not export goods in abroad. To export goods an
exporter needs a valid Export Registration Certificate from the Chief Controller of Import and
Export (CCI&E). Exporters find an Export Registration Certificate (ERC) number which is
incorporate on Export form and papers connected for obtaining Export Registration Certificate.
A Bangladeshi exporter has to apply to the controller or joint controller or Deputy Controller or
Assistant Controller of Import and Export to get an ERC. The ERC have to renew every year. An
exporter can do this registration from Dhaka, Chittagong, Sylhet, Comilla, Barishal, Borga,
Rangpur, Dinajpur and from Mymensingh. The following documents are required for ERC-
National ID card
Memorandum and Article of Association and Certificate of Incorporation in case of
limited company
Trade license
Bank Certificate
Assets certificate
Income Tax certificate etc.

31

P PR RO OC CE ES SS SI IN NG G O OF F E EX XP PO OR RT T O OR RD DE ER R: :

Setting up the deal:
First an exporter and importer have to establish sales contract, by either being in possession of an
international purchase order or a documentary credit stating exporter as the beneficiary. Now
exporter in a position to process the order.
Shipping the goods:
Once the deal has been set up, the following steps take place:
Read the purchase order/documentary credit very carefully and take note of the
requirements of the buyer. If there are any pre-shipment actions that must occur, these
activities must take place before book the freight and load the container. Pre-shipment
activities could include pre-shipment inspections, health inspections or product analyses,
all of which must be carried out before the goods have been packed for shipping.
A declaration is a commitment to the Bangladesh Bank that funds will be brought into
the country in exchange for goods.
Now get ready to pack and label the goods. At this point, exporter can contact freight
forwarder to make a booking on the next available carrier.
Freight forwarder will deliver the goods to the carrier and obtain a transport document as
proof of receipt. He is now in a position to arrange for customs clearance, which will
require the submission of a customs bill of entry and a transport document (in the case of
air, road and rail exports). Then hand over the transport and insurance documents to
Exporter.
Now exporter assemble all export documentation such as the commercial invoice,
packing list, transport document, insurance document, as well as the verification
documents issued by third parties.
Getting Paid:
Once all documents are ready and completed in accordance with the documentary credit,
exporter now in a position to present the documents for payment. In the case of documentary
credits submit the documents to the negotiating bank, which will check the documents, ensuring
32
that they are in accordance with the L/C, and make payment to Exporter. Of course, if selling on
an acceptance L/C, the bank will accept drafts, and give payment at maturity of the draft.

Follow-up and service:
The most important part is export market development process has now arrived. It is sometimes
more difficult to secure a follow-up order than it is to achieve the first order. It is vital, at this
point, to get feedback from the buyer as to whether exporter has met buyer needs. It might be
necessary, to plan a follow-up visit to secure exporter position with the buyer and check to see
whether his needs have changed.

M MA AK KI IN NG G S SA AL LE ES S C CO ON NT TR RA AC CT T A AN ND D R RE EC CE EI IV VI IN NG G L L/ /C C: :
To export goods an exporter and importer have to do a sale contract. They contract each other
and do a sales contract which may be written or oral contract. In this contract given details
description of exportable goods, quantity, price, shipment, insurance, inspection of goods etc.
After getting sales contract exporter want letter of credit from importer. All activities related to
letter of credit are done through Bank. In letter of credit clear stating about terms and condition
of export and method of payment. The following main point to be looked into for receiving or
collecting export proceeds
The terms of the L/C in conformity with those of the contract.
The L/C is an irrevocable one, preferably confirmed by the advising bank.
The L/C allows sufficient time for shipment and negotiation.
Terms and condition of the mode of payment should be stated clearly in case of other mode
of payment
Cash in advance
Open account
Collection basis (Documentary or clean)

33
E EX XP PO OR RT T F FI IN NA AN NC CE E
PRE SHIPMENT FINANCE IN EXPORT TRADE
Pre Shipment Finance is issued by a financial institution when the seller wants the payment of
the goods before shipment. The main objectives behind pre shipment finance or pre export
finance are to enable exporter to:

Procure raw materials.
Carry out manufacturing process.
Provide a secure warehouse for goods and raw materials.
Process and pack the goods.
Ship the goods to the buyers.
Meet other financial cost of the business.
.
P PO OS ST T S SH HI IP PM ME EN NT T F FI IN NA AN NC CE E
Post shipment finance is a kind of loan provided by a financial institution to an exporter or seller
against a shipment that has already been made. This type of export finance is granted from the
date of extending the credit after shipment of the goods to the realization date of the exporter
proceeds. Exporters don't wait for the importer to deposit the fun

F FO OR RE EI IG GN N D DO OC CU UM ME EN NT TA AR RY Y B BI IL LL L P PU UR RC CH HA AS SE E ( (F FD DB BC C) )
Bank gives the credit facilities against the export documents. Mutual Trust Bank also gives the credit
facilities to their clients against the export documents. Clients submit the bill of export to bank
for collection and payment of the back to back letter of credit. After that bank purchases the bill
and collects the money from the exporter.
MTB subtracts the amount of bill from back to back and gives the rest amount to the client in
cash or transfer his account or pay by the pay order. For this purpose, MTB maintains a separate
register called Foreign Documentary Bill Purchase (FDBC) register.

34
This register contains the following information-
Date
Reference number of FDBC
Name of the drawer
Name of the collecting bank
Conversion rate
Bill amount both in figure and in taka
EXP form number
Export L/C Number

P PR RE EP PA AR RI IN NG G O OU UT T A AN ND D D DE EL LI IV VE ER RY Y O OF F S SH HI IP PP PI IN NG G D DO OC CU UM ME EN NT TS S

All carriers whether common or private (railway, steamship, and motor trucking or airline
companies) and their agents have been directed by the Bangladesh Bank as under:
a. In respect of export of goods from Bangladesh to foreign countries by land route or by
sea, the Railway Receipts, Bills of Lading, Truck Receipts or any other documents of title
to Cargo should be drawn only to the order of an Authorized Dealer designated for the
purpose by the exporter. This restriction will not apply if the exporter produces a
certificate to the carriers from the Authorized Dealer concerned in the prescribed form.
b. The certificate will be issued by the Authorized Dealers only if the shipment is being
made against an advance payment or against an irrevocable Letter of Credit which calls
for drawing of documents of title to cargo to the order of the opening bank, or the
importer, or the exporter or to order and blank endorsed.
c. In respect of export of goods to foreign countries by air, the airway bills and any other
documents of title to cargo should be drawn to the order of a bank in the country of
import nominated by the Authorized Dealer designated for this purpose by the exporter.

E EN ND DO OR RS SE EM ME EN NT T O OF F S SH HI IP PP PI IN NG G D DO OC CU UM ME EN NT TS S B BY Y A AU UT TH HO OR RI IZ ZE ED D D DE EA AL LE ER RS S
The Authorized Dealers to whose order the relative railway receipts, bills of lading etc., are
drawn shall endorse the same to the order of their foreign correspondent but in no case shall they
make any blank endorsement thereon or endorse them to the order of the consignor unless they
35
have obtained specific or general approval of the Bangladesh Bank. However, in the case of
exports through third country intermediary i.e. under merchanting arrangements, it will be in
order for Authorized Dealers to make blank endorsement where advance payment has been
received or where documents are negotiated under letters of credit which call for such blank
endorsement.

S SU UB BM MI IT TT TI IN NG G O OF F E EX XP P F FO OR RM M T TO O T TH HE E A AU UT TH HO OR RI IZ ZE ED D D DE EA AL LE ER RS S
All exporters must be declared on the EXP Form. On EXP Form statutory declaration is
furnished by exporter before shipping goods to countries outside Bangladesh and certificate on it
is given by their banker (Authorized Dealer). The Foreign Exchange Regulation Act in force
prohibits export of goods outside Bangladesh unless a declaration is furnished on EXP Form that
foreign exchange representing the full export value of the goods has been or will be disposed of
in a manner and within a period specified by Bangladesh Bank. The period prescribed by
Bangladesh Bank is four months for receiving full foreign exchange proceed of export by the
exporter.

C Ch he ec ck k l li is st t f fo or r h ha an nd dl li in ng g E EX XP P f fo or rm m: :
On receipt of EXP Form the same shall have to be scrutinized to ensure the following-
All columns of EXP Form have been properly filled in.
The exporter is registered with CCI&E and the export registration number has been
quoted on the EXP Form correctly.
A Photostat copy of valid ERC is obtained for branchs record duly verified with the
original.
The export form has been duly signed by the exporter or his duly authorized agent as
recorded with us
Arrangement has been made with the branch for payment of customs duty on export
where applicable.
The exporter must submit all the exp documents to the authorized dealer. There are four types of
EXP documents.
36
Four types of EXP documents are
a. Original copy- The Customs authorities will detach the original copy and after filling in
the portion relating to them and affixing their seal and signature thereon forward it to the
Bangladesh Bank.
b. Duplicate copy- Duplicate copy submits to Bangladesh Bank with 14 days of shipment
through bank with invoice.
c. Triplicate copy-Triplicate copy submit to Bangladesh Bank after realized the export
proceeds
d. Quadruplicate copy- Quadruplicate copy keeps by MTB for their own record.

O OV VE ER RD DU UE E E EX XP PO OR RT T B BI IL LL LS S
Overdue Export Bill will be reviewed by the Manager, export periodically to protect the interest
of bank through appropriate action with due reference to the track of the goods dispatched
shipped. All export bills, overdue for 21 days in case of sight bill or after expiration, must be
monitored closely for realization.

37
F FO OR RE EI IG GN N R RE EM MI IT TT TA AN NC CE E O OF F M MT TB B
M ME EA AN NI IN NG G O OF F R RE EM MI IT TT TA AN NC CE E
The word remittance originates from the word remit which means to transit money/fund. In
banking terminology, the word remittance means transfer of fund from one place to another and
when money is transferred from one country to another then it is called Foreign Remittance.
Mutual Trust Bank is an authorized dealer to deal in foreign exchange business. As an authorized
dealer, a bank must provide some services to the client regarding foreign exchange and this branch
provides these services through foreign remittance department.
The basic function of this department is outward and inward remittance of foreign exchange from
one country to another country. In the process of providing this remittance service, it sells and buys
foreign currency. The conversion of one currency into another takes place at an agreed rate of
exchange, which the banker quotes, one for buying and another for selling. In such transactions the
foreign currencies are like any other commodities offered for sales and purchase.

R RE EM MI IT TT TA AN NC CE E P PR RO OC CE ED DU UR RE ES S O OF F F FO OR RE EI IG GN N C CU UR RR RE EN NC CY Y

There are two types of remittance:
Inward remittance
Outward remittance

INWARD FOREIGN REMITTANCE
The remittance of freely convertible foreign currencies which Mutual Trust Bank Foreign
Exchange branch is receiving from abroad against which the authorized dealers making payment
in local currency to the beneficiaries may be termed as foreign inward remittance.

Mode of inward remittances
The term inward remittances includes not only remittances by TT., MT., Drafts etc. but also
purchases of bills, purchases of drafts under travelers letter of credit and purchases of travelers
cheques. Foreign currency notes against which payment is made to the beneficiary also a part of
inward remittances. Thus the following are the Mode of inward remittances:
38
TT: Telegraphic Transfer.
MT.: Mail Transfer.
FD: Foreign Drafts.
TC: Travelers Cheque.
Foreign currency notes.

Purpose of inward remittance
The purpose of remittance is of various reasons. Such as:
For family maintenance.
Realization of exports proceeds.
Gift.
Donation.
Export brokers commission.

About Form-C"
The authorized dealer should obtain 'Form - C' from the beneficiary to know the purpose of the
remittances in all cases and they are to submit the "Form - C' to Bangladesh Bank along with the
monthly returns where the proceeds of the remittances is TK. 5000/= & above. 'Form - C' is a
prescribed declaration form & this 'Form -C' is to be filled up and signed by the beneficiary
himself.
Payment procedure of FD, MT, & PO Drawn on MTB
The above investments that are drawn on MTB Foreign Exchange Branch may be paid on the
spot before making payment the following procedures to be observed by the authorized dealer:

To obtain Form-C.
To verify the signatures of the instrument.
To convert the foreign currency into Bangladesh TK. with O.D. (On Demand Transfer)
Buying rate prevailing on the date.
To make entry in TTs, drafts & Mails received register.

39
Payment procedure of T.T.:
To verify the 'test number'.
To inform the beneficiary for submission of "Form - C".
To confirm from issuing bank or reimbursing bank.
To covert of foreign currency into Bangladesh currency with T.T.
To make entry in T.T.s, drafts, M.T.s, received registration.
To prepare vouchers.
To prepare FET schedule.
Payment of traveler's cheque (TC):

To checkup the custom declaration (if any).
To consult with purchase agreement (if any).
To obtain signature on TC and to verify the same with the previous signature of the
beneficiary of the TC.
To make entry in register for TC & drafts purchased.
To convert foreign currency into Bangladesh currency.
To send the TC for collection.
To prepare the vouchers.

Payment of foreign currency notes:

To check the custom declaration (if any).
To made entry in (kateha) raw register.
To convert foreign currency into Bangladesh currency.
To prepare vouchers.
No FET schedule is required to be prepared & sent to head office because in this case
there is no transaction with head office.

40

Cancellation of inward remittance:
In the event of any inward remittance which has already been reported to the Bangladesh Bank
being subsequently cancelled, either in full or in part because of non-availability of beneficiary.
Authorized dealers must report the cancellation of the inward remittance as an outward
remittance of "Form-T/M". Required documents are:

The date of return in which the inward remittance was reported.
The name & address of the beneficiary.
The amount of the purchase as effected.
Reasons for cancellation.

Reporting to Bangladesh Bank:

On the last working day of each month the transaction during the month to be reported to
Bangladesh Bank through the following schedule:
Schedule -J-l / 0-3 for TK. 5000 & above.
Inward remittance voucher-1/04 for below TK. 5000.

FOREIGN OUTWARD REMITTANCES
The remittance in foreign currency which is being made from our country to abroad, is known as
foreign outward remittance.
Mode of outward remittance:
Thus the following are the Mode of outward remittances:

TT. Telegraphic Transfer
MT: Mail Transfer.
FD: Foreign Drafts.
PO: Payment Order
TC: Travelers Cheque.
Foreign currency notes.
41
Approval of Bangladesh Bank:
Bangladesh Bank provides permission or approval for outward remittances to the applicants who
are to lodge an application for the purpose on the following prescribed forms with an authorized
dealer who forwarded the same to Bangladesh Bank for approval:
The IMP form (cover remittances for imports).
Form T/M (Traveling & Miscellaneous).

Issuance procedure of FD, MT. & TT.:
To prepare the instrument.
To make entry in DD, MT, TT issued register.
To prepare draft advice in duplicate one for drawee bank & one for reimbursing bank.
To make entry in draft advice dispatched register.
To send reimbursement authority in case of MT & TT.
Issuance procedures of traveler cheque:
To verify the approved T / M form or Bangladesh Bank permit.
To issue TC by obtaining signature of the purchaser on the TC.
To endorse in the passport.
To make entry in the travelers cheque issue register.
The TC issuing slip of the issued TC to be sent to that bank (whose TC issued)
With reimbursement instruction.

Issuance procedure of foreign currency notes:
To verify the approved T.M form or Bangladesh Bank permit.
To issue foreign currency notes by endorsing in the passport.
Voucher preparing with accounting treatment.

42
Financial Performance at a Glance on MTB:
Earnings Per Share:
In 2009 to 2010 the banks Earning Per Share increases 3.2 to 3.89. But in 2011 EPS decreases
3.89 to 1.59 and it reflects that the growth decreases 58.88%. Its not a good sign for the bank and
the shareholder.
Information per Share 2009 2010 2011
Earnings Per Share(BDT)
(Share valueBDT10)
3.2 3.89 1.59

Figure: 1
Total Assets:
The banks total assets posted a 32.69% increase in 2011, rising from BDT 57,529 million to
BDT 76,331 million but in 2009 to 2010 total asset decreases. Otherwise total deposit 2009 to
2011 constantly increases. Shareholders fund step by step increases. Its a good sign for Mutual
Trust Bank Ltd.
At the Year End(BDT
in million)
2009 2010 2011
Shareholders Fund 3,685 4,379 4,815
Total Deposit 42,354 45,129 59,051
Total Loans &
Advances
33,884 39,676 47,005
Total Assets 52,775 57,529 76,331

2009
2010
2011
3.2
3.89
1.59
1 2 3
Earning Per Share
Series1 Series2
43

Figure: 2
Ratio Analysis:
In 2009 Return on average Equity 26.61% and 2010 was 24.52% so it shows decreasing
otherwise 2011 return on average equity fall by 8.84% .Ratio analysis also shows that
Return on average assets year to year also decreasing.

Ratios 2009 2010 2011
Return on average
Equity (%)
26.61% 24.52% 8.84%
Return on average
Assets (%)
1.79% 1.79% 0.61%
Capital Adequacy
Ratio (%)
9.20% 11.49% 11.96%

.

Figure: 3
2009 2010 2011
52775
57529
76331
1 2 3
Total Asset
Series1 Series2
2009
2010
2011
26.61%
24.52%
8.84%
1 2 3
Return On Average Equity
Series1 Series2
44
Foreign Exchange Performance Analysis:
IMPORT:
Year 2009 2010 2011
Import(USD in millions) 362.45 333.15 440.56

Figure: 4

Import volume of MTB during the year 2011 was USD 440.56 million compared to USD 333.15
million in 2010, which showed increased by 32.24% but in 2009 import was USD 362.45 and
that shows a fall by 6.96%. The major import finance was in the areas of raw materials, fabrics
and accessories, chemicals, electronic goods and other consumer products, capital machinery,
food grains etc.
E EX XP PO OR RT T: :
Y YE EA AR R 2 20 00 09 9 2 20 01 10 0 2 20 01 11 1
Export (USD in
millions)
2 23 39 9. .9 95 5 2 22 20 0. .1 19 9 2 27 70 0. .2 29 9

2009 2010 2011
362.45 333.15
440.56
1 2 3
IMPORT
Series1 Series2
45

Figure: 5

In 2011, the total export volume of MTB stood at USD 270.29 million compared to USD 220.19
million, which reflects an increase by 22.75% over the previous year. In 2009 total export was
USD 239.95 million compare to 2010 it shows in 2010 it falls by 14.40%.But in 2011 total
export increasing.
F FO OR RE EI IG GN N R RE EM MI IT TT TA AN NC CE E: :
Y YE EA AR R
2 20 00 09 9 2 20 01 10 0 2 20 01 11 1
F FO OR RE EI IG GN N R RE EM MI IT TT TA AN NC CE E
(USD In millions)
1 11 15 5. .7 76 6 1 12 23 3. .4 45 5 1 13 36 6. .1 11 1

Figure: 6

2009 2010 2011
115.76
123.45
136.11
1 2 3
Export
Series1 Series2
2009 2010 2011
115.76
123.45
136.11
1 2 3
Foreign Remittance
Series1 Series2
46
In 2011 MTB procured inward foreign remittance USD 136.11 million equivalent to BDT 10.04
billion. Otherwise in 2010 was inward foreign remittance USD 123.45 million and in 2009
inward foreign remittance was USD 115.76 million. This growth was possible due to
introduction of different instant payment products and technology including extending SWIFT,
Online, EFT etc. and further efforts are being made for more speedy payments.
Financial Performance Analysis of MTB compare to Commercial Bank:
Commercial Bank in Bangladesh:
AB Bank Ltd.
Bank Asia Ltd.
BRAC Bank Ltd.
Dutch-Bangla Bank Ltd.
Dhaka Bank Ltd.
Eastern Bank LTd.
IFIC Bank Ltd.
Jamuna Bank Ltd
Mercantile Bank Ltd.
Mutual Trust Bank Ltd.
National Bank Ltd.
NCC Bank Ltd.
ONE Bank Ltd.
Pubali Bank Ltd.
Prime Bank Ltd.
Southeast Bank Ltd.
Standard Bank Ltd.
The City Bank Ltd.
The Premier Bank Ltd.
Trust Bank Ltd.
United Commercial Bank Ltd.
Uttara Bank Ltd.
Rupali Bank Ltd.

Here, I want to find out the financial performance of MTB compare to the commercial bank in
Bangladesh. For financial performance evaluation I analyze earning per share, profit margin and
ratio.
47

Return on Asset:
ROA
2010 2011 Average
AB Bank Ltd. 2.79% 0.87% 1.83%
Bank Asia Ltd. 1.83% 1.63% 1.73%
BRAC Bank Ltd. 1.55% 1.36% 1.46%
Dutch-Bangla Bank Ltd. 1.99% 1.75% 1.87%
Dhaka Bank Ltd. 2.22% 2.00% 2.11%
Eastern Bank LTd. 3.19% 2.52% 2.86%
IFIC Bank Ltd. 2.37% 0.89% 1.63%
Jamuna Bank Ltd 1.80% 1.69% 1.75%
Mercantile Bank Ltd. 1.64% 1.49% 1.57%
Mutual Trust Bank Ltd. 1.79% 0.61% 1.20%
National Bank Ltd. 5.09% 3.60% 4.35%
NCC Bank Ltd. 2.84% 2.12% 2.48%
ONE Bank Ltd. 3.63% 2.29% 2.96%
Pubali Bank Ltd. 2.52% 2.00% 2.26%
Prime Bank Ltd. 2.01% 1.83% 1.92%
Southeast Bank Ltd. 2.09% 1.23% 1.66%
Standard Bank Ltd. 2.06% 1.73% 1.90%
The City Bank Ltd. 2.20% 2.00% 2.10%
The Premier Bank Ltd. 0.68% 2.60% 1.64%
Trust Bank Ltd. 2.19% 0.81% 1.50%
United Commercial Bank
Ltd.
1.68% 1.74% 1.71%
Uttara Bank Ltd. 1.91% 1.69% 1.80%
Rupali Bank Ltd. 0.88% 0.41% 0.64%
Total ROA = 44.91%
Mean = 1.95%

Return on Assets(ROA)
Mutual Trust Bank Ltd. 1.20%
Commercial Bank Average 1.95%
48

Figure:5
The return on assets (ROA) percentage shows how profitable a company's assets are in
generating revenue.
ROA can be computed as:
ROA =
Net Income
Total Asset
Here , the graph shows that Mutual Trust Bank return on assets 1.20% otherwise commercial
Bank average return on assets 1.95% .In commercial Bank, National Bank shows higher ROA
4.35% where MTB only 1.20%. MTB return on assets is less than 0.75% compare to
Commercial Banks. It shows that MTB return on asset is near to the average Commercial Bank,
but in 2010 to 2011 MTB return on assets ratio is decreasing which is not good for the Mutual
Trust Bank Ltd.

0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
Mutual Trust Bank Ltd. Commercial Bank Average
49
Return on Equity:
ROE
2010 2011 Avarage
AB Bank Ltd. 26.65% 8.94% 17.80%
Bank Asia Ltd. 27.33% 15.36% 21.34%
BRAC Bank Ltd. 18.95% 17.90% 18.43%
Dutch-Bangla Bank Ltd. 28.63% 24.09% 26.36%
Dhaka Bank Ltd. 23.49% 25.52% 24.51%
Eastern Bank Ltd. 23.64% 19.03% 21.34%
IFIC Bank Ltd. 33.12% 11.60% 22.36%
Jamuna Bank Ltd. 20.52% 19.43% 19.98%
Mercantile Bank Ltd. 19.84% 17.95% 18.90%
Mutual Trust Bank Ltd. 24.52% 8.84% 16.68%
National Bank Ltd. 35.91% 28.28% 32.09%
NCC Bank Ltd. 25.35% 18.98% 22.17%
ONE Bank Ltd. 38.80% 22.83% 30.81%
Pubali Bank Ltd. 22.48% 18.17% 20.33%
Prime Bank Ltd. 18.34% 19.13% 18.74%
Southeast Bank Ltd. 16.12% 10.03% 13.07%
Standard Bank Ltd. 27.81% 20.75% 24.28%
The City Bank Ltd. 21.30% 13.70% 17.50%
The Premier Bank Ltd. 28.23% 7.66% 17.95%
Trust Bank Ltd. 25.37% 11.15% 18.26%
United Commercial Bank Ltd. 27.92% 18.45% 23.18%
Uttara Bank Ltd. 18.02% 17.13% 17.58%
Rupali Bank Ltd. 7.71% 3.94% 5.82%
Total ROE = 469.45%
Mean = 20.41%

Return on Equity (ROE)
50

Figure: 6

Return on equity (ROE): ROE measures the rate of return on the ownership interest
(shareholders' equity) of the common stock owners. It measures a firm's efficiency at generating
profits from every unit of shareholders' equity (also known as net assets or assets minus
liabilities). ROE shows how well a company uses investment funds to generate earnings growth.
ROE =
Net Income
Stockholder
Equity

Here , the graph shows that MTB average return on equity 16.68% otherwise commercial bank
average return on equity 20.41%.In 2010 to 2011 MTB return on equity fall by 15.68% which
does not show good indicator for shareholder and bank performance.

0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
51
Profit Margin:
Profit Margin

2010 2011 Avarage
AB Bank Ltd.
33.91% 17.15% 25.53%
Bank Asia Ltd.
29.33% 28.72% 29.03%
BRAC Bank Ltd.
17.53% 16.80% 17.16%
Dutch-Bangla Bank Ltd.
28.02% 23.70% 25.86%
Dhaka Bank Ltd.
30.22% 34.77% 32.50%
Eastern Bank Ltd.
37.53% 32.35% 34.94%
IFIC Bank Ltd.
25.91% 12.86% 19.39%
Jamuna Bank Ltd.
28.46% 27.35% 27.90%
Mercantile Bank Ltd.
29.84% 28.42% 29.13%
Mutual Trust Bank Ltd.
25.14% 21.04% 23.09%
National Bank Ltd.
52.63% 47.75% 50.19%
NCC Bank Ltd.
41.80% 37.17% 39.48%
ONE Bank Ltd.
42.25% 31.42% 36.83%
Pubali Bank Ltd.
35.77% 33.19% 34.48%
Prime Bank Ltd.
31.66% 31.45% 31.56%
Southeast Bank Ltd.
32.54% 24.10% 28.32%
Standard Bank Ltd.
37.65% 36.18% 36.92%
The City Bank Ltd.
25.33% 26.02% 25.68%
The Premier Bank Ltd.
37.10% 11.01% 24.05%
Trust Bank Ltd.
34.99% 20.13% 27.56%
United Commercial Bank Ltd.
27.79% 31.69% 29.74%
Uttara Bank Ltd.
26.72% 25.31% 26.01%
Rupali Bank Ltd.
22.78% 8.23% 15.50%

Total PM = 670.87%

Mean = 29.17%

Profit Margin (PM)
52

Figure: 7

Profit Margin:
A ratio of profitability calculated as net income divided by revenues or net profits divided by
sales. It measures the dollar amount of the sales that a company actually retains in earnings.
Profit margin is very useful in comparing companies in similar industries. A higher profit margin
indicates a more profitable company.
Profit
Margin
=
Net Income
Sales

Here, the graph shows that profit margin of MTB is less than Commercial Bank by 6.08%.
Otherwise MTB profit margin 2010 to 2011 is decreasing by 4.10% which is not favorable for
Mutual Trust Bank.

0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
Profit Margin (PM)
Profit Margin (PM)
53
Earnings per share:
Earnings Per Share (EPS)
2010 2011 Avarage
AB Bank Ltd. 10.03 3.60 6.82
Bank Asia Ltd. 6.43 3.65 5.04
BRAC Bank Ltd. 5.05 5.15 5.10
Dutch-Bangla Bank Ltd. 10.01 10.80 10.41
Dhaka Bank Ltd. 6.03 4.68 5.36
Eastern Bank Ltd. 5.36 5.57 5.47
IFIC Bank Ltd. 5.95 2.58 4.27
Jamuna Bank Ltd. 2.92 3.65 3.29
Mercantile Bank Ltd. 4.10 3.49 3.80
Mutual Trust Bank Ltd. 3.89 1.59 2.74
National Bank Ltd. 7.97 7.07 7.52
NCC Bank Ltd. 5.33 3.70 4.52
ONE Bank Ltd. 5.92 4.54 5.23
Pubali Bank Ltd. 4.82 4.68 4.75
Prime Bank Ltd. 3.98 4.70 4.34
Southeast Bank Ltd. 2.34 3.77 3.06
Standard Bank Ltd. 3.39 3.36 3.38
The City Bank Ltd. 3.70 4.00 3.85
The Premier Bank Ltd. 6.08 1.34 3.71
Trust Bank Ltd. 4.79 2.32 3.56
United Commercial Bank Ltd. 4.20 3.49 3.85
Uttara Bank Ltd. 5.40 5.74 5.57
Rupali Bank Ltd. 4.37 7.94 6.16
Total EPS = 111.74
Mean = 4.86

Earnign Per Share (EPS)
Mutual Trust Bank Ltd. 2.74
Commercial Bank Average 4.86
54

Figure: 8
Earnings per share:
Earnings per share (EPS) are the earnings returned on the initial investment amount. The term
earnings per share (EPS) represents the portion of a company's earnings, net of taxes and
preferred stock dividends, that is allocated to each share of common stock. The figure can be
calculated simply by dividing net income earned in a given reporting period by the total number
of shares outstanding .
Earnings
per Share
=
Profit
Weighted Average
common shares

Earnings per share of Mutual Trust Bank are 2.74 otherwise Commercial Bank average EPS 4.86
In 2010 to 2011 MTB EPS is decreasing and compare to commercial bank EPS is lower by 2.12
which is not good for MTB.

0.00
1.00
2.00
3.00
4.00
5.00
6.00
Mutual Trust Bank Ltd. Commercial Bank
Average
Earnign Per Share (EPS)
Earnign Per Share
(EPS)
55
M MA AJ JO OR R F FI IN ND DI IN NG GS S
Banking sector being a vital sector of Bangladesh continues to a great deal in the economy of
Bangladesh. Lot of new commercial bank has been established in last few years and these banks
have made the banking sector very competitive. So now, banks have to organize their operation
and do their business according to the need of the market. Banking sectors no more depends on a
traditional method of banking. In this competitive world, this sector has trenched its wings wide
enough to cover any kind of financial services anywhere in this world. The major task for banks,
to survive in this competitive environment is by managing its assets and liabilities in an efficient
way. The Mutual Trust Bank is one of the leading banks in the private sector, and it gives a vast
service to its customer. I observed the foreign exchange department, general banking area and
also loans and advance department very carefully. With a keen attention and observation, the
study has been tried to complete. The following are some extract of the major findings:
MTB financial growth rate is not good in 2011 compare to 2010 and 2009.
MTB earning per share is decreasing and EPS is lower than average commercial Bank
EPS.
MTB foreign exchange department is doing well and it shows the growth compare to
previous year.
Ratio analysis shows that MTBs ROA,ROE,CAR is not good in 2011
Export, Import, Foreign Remittance growth rate increasing in 2011 compare to previous
year.
For the effectiveness of the foreign exchange department, MTB has divided the whole
department into three major parts, which are Export, Import, and Remittance.
The monitoring system of the foreign exchange department of MTB is excellent. The
chain of command is strictly maintained here. The executives now and then visit the
department, which keeps all the officers alert about their duty.
It may be strictly observed that loan procedure is not influenced by the various factors.
Some rules and regulations of government work as barrier for the free flow of remittance,
export and import of profitable goods.

56
R RE EC CO OM MM ME EN ND DA AT TI IO ON NS S
As per earnest observation some suggestions for the improvement of the situation are given
below:
To attract more clients MTB has to create a new marketing strategy, which will increase
the total export import business.
Attractive incentive packages for the exporter will help to increase the export and
accordingly it will diminish the balance of payment gap of MTB.
Long term training very much required for the foreign exchange officers.
In our country financial problem is a great constrain in foreign trade. MTB is very
conservative for post shipment finance. If it stays in liberal position the exporters can
easily overcome their financial constrains.
Bank can provide foreign market reports, which will enable the exporter to evaluate the
demand for their products in foreign countries.
Segregation of International Trade transaction from the existing situation i.e. Credit
aspects to be looked after by credit analysis department.
The department shall only remain engaged with the documentary aspects of International
Trade like opening L/Cs for all types of import and negotiation of export bills.
New investment sector is booming rapidly. MTB should identified those untapped areas
of business and invest in those sector such as Gas plant, condensed milk project, ship
breaking etc.
Efforts may be initiated to bring in the fold of MTB more short term deposits particularly
cost free current deposits.
It is noted that delay in service is one of the problems faced by the clients. Attempts
should be made to straighten the banking procedure.
Effective Management Information System must be evolved by MTB so that correct
decisions may be taken at correct time at policymaking level.
Proper communication needs to establish with clients.
Arrangement of monthly /quarterly training courses /workshops for the selected by the
authority in order to promote employee to their desired level.

57

CONCLUSION
This report is prepared to fulfill one of the requirements of BBA program to submit internship
report under Business students. It is an effort to cover the foreign exchange activities in general
which has been observed during the internship period in the Mutual Trust Bank Ltd. The main
objective of the report is to know the overall operations of the Foreign Exchange Department and
to measure actual performance of foreign trade of MTB. This report tries to identify the major
tasks of different section of foreign exchange department of MTB and tries to find out the overall
financial performance through ratio analysis, profit margin,earning per share compare to
commercial Bank.

58

References:
1. Annual Report 2011 & 2010 On Mutual Trust Bank
2. http:// www.mutualtrustbank.com
3. http://www.facebook.com/Mutual.Trust.Bank
4. http://www.wikipedia.com
5. http://en.wikipedia.org.com
6. http://bangladesh-bank.org

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