OBJECTIVE OF THE STUDY The first objective of writing this report is to fulfill the partial requirements of the M.B.

A program. Other objective of the report is to familiarize with the operation in the Banking arena including Management overview of bank and analysis of banking operation in different section. To grasp an idea about bank involvement in Foreign Exchange including import and export and credit facilities provided by the bank in Foreign Trade. More especially the objectives of the Internship Program are as follows:

To Identifying the difference between theory and practice overall Management. To know the general banking function, its procedures, rules and regulations. To know the activities of the foreign exchange department To know the activities of the loans and advanced department

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METHODOLOGY OF THE STUDY In order to complete this report I proceeded through a work plan. I physically visited and discussed with executives and top level management of Bank of Small Industries and Commerce Bangladesh Limited become conversant with the banks philosophy, working procedures, management system and decision making process of the banks. The details of the work plan are furnished below: Data collection method Relevant data for this report has been collected primarily by direct investigations of different records, papers, documents formal activities consulting personnel. Data sources The information and data for this report have been collected from both the Data Processing Data collected from secondary sources have been processed manually and qualitative approach has been used throughout the study. Data analysis and interpretation Qualitative approach has been adopted for data analysis and interpretation taking the processed data as the base. primary and secondary sources. and of etc. operational process and No different structured through office concerned personnel. The interviews were administered by informal the bank records discussion. has and been questionnaire has been used. Information regarding office collected bank discussion with

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So the report relies primarily on an analytical judgment and critical reasoning.

LIMITATIONS OF THE STUDY Objective of the practical orientation program is to have practical exposure for the students. Our tenure was for one month only, which was somehow not sufficient. After working whole day in the office it was very much difficult, if not impossible to study again the theoretical aspects of banking. Other limitations are as follows: For the lack of our practical knowledge, some shortcoming may be available in the paper. The bank has naturally shown us some indifference connecting its most confidential information. The executives of Export Import Bank of Bangladesh Limited were too busy to spare time for the internee. The duration of our internship program is only 2 months. The allocated time is not sufficient for us to gather knowledge and to make the study a complete and fruitful one. The study also suffered from inadequacy of data provided by EXIM Bank.

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CORPORATE INFORMATION AT A GLANCE (Up to 31st Dec.2005) Name of the bank Status Date of Incorporation Inauguration of the first branch Head Office : : : : Exim Bank of Bangladesh Limited Private Limited company: : 2nd June, 1999. 3rd August, 1999. 5, Rajuk Avenue, Printers Building (5th, 6th & 10th floor), Dhaka. Chairman Managing Director Authorized Capital Paid up Capital Number of branches Deposits Loan Number of Emloyees : : : : : : : : Mr. Md. Nazrul Islam Mazumder Mr. Mohammed Lakiotullah Mr. Mohammad Abul Hashem Tk. 100.00 crore Tk. 87.90 crore 30 branches 2831.90 Tk. crore 91.97% as a % of total Deposit 1000+

In a u g u ra tio n o f th e C D A A v e n u e b:ra n7th December, 2005 ch

Manager of CDA Avenue Branch :

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CORPORATE CULTURE This bank is one of the most disciplined Banks with a distinctive corporate culture. Here we believe in shared meaning, shared understanding and shared sense making. Our people can see and understand events, activities, objects and situation in a distinctive way. They mould their manners and etiquette, character individually to suit the purpose of the Bank and the needs of the customers who are of paramount importance to us. The people in the Bank see themselves as a tight knit team/family that believes in working together for growth. The corporate culture we belong has not been imposed; it has rather been achieved through our Corporate conduct.

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Our vision and mission are stated in the following bullets:

To be the finest bank in the banking arena of Bangladesh under the Shariah guidelines. To maintain Corporate and business ethics. To become a trusted repository of customers' money and their financial advisor. To make our stock superior and rewarding to the

customers/share holders.

To display team spirit and professionalism. To have a Sound Capital Base. To provide high quality financial services in export and import trade. To provide excellent quality Customer service

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FUNCTIONS OF THE EXIM BANK OF BANGLADESH LIMITED : a. The main task of the EXIM Bank is to accept deposited from various customers through various accounts. b. Provides loans on easy terms and condition. c. It creates loan deposit. d. The bank invest it fund into profitable sector e. It transfers money by Demand Draft (DD), Pay Order(PO) and Telegraphic Transfer etc. f. The bank is doing the transaction of bill of exchange, Cheque etc. on behalf of the clients. g. EXIM Bank assists in the Foreign Exchange by issuing Letter of Credit. h. The bank insures the securities of valuable documents of clients. i. It brings the increasing power of dimension of transaction. j. Above all, EXIM bank helps the businessmen financially by giving discount facility for bill of exchange and by providing the facility of Letter of Guarantee.

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BOARD OF DIRECTORS Chairman Md. Nazrul Islam Mazumdar Directors Mr. Md. Nazrul Islam Mazumder Mr. Md. Faiz Ullah Mrs. Nasima Akhter Mr. A.K.M. Nurul Fazal Mr. Zubayer Kabir Mr. Md. Habibullah Mr. Md. Abdul Mannan Al-haj Md. Nurul Amin Mr. Abdullah Al-Zahir Swapan Mr. Mohammed Shahidullah Professor Suraiya Begum

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MANAGEMENT PROFILE Mr. Mohammed Lakiotullah Managing Director Mr. Ekramul Hoque Deputy Managing Director Mr. Mohammed Haider Ali Miah Executive Vice-President Name Mr. Sirajul Haque Miah Mr. Fazal Akhter Mr.Md. Fazlur Rahaman Mr. Md. Akhtar Hossain Mr. Khondoker Rumy Ehsanul Haq Mr. Mohd. Alamgir Mr. Md. Shahjahan Shiraj Mr. Md. Zakaria Faruq Mr. Md. Golam Mahbub Mr. A.Y.M. Naimul Islam Mr. Khondoker Nayeemul Kabir Mr. Md. Feroz Hossain Mr. Md. Humayun Kabir Mr. Shahidur Rahman Mr. Md. Muhibbul Abrar Choudhury Mr. Shah Md. Abdul Bari Mr. Sheik Moyeen Uddin Mr. Shaikh Bashirul Islam Mr. Muniruzzaman Chowdhury Mr. Md. Muniruzzaman Designati on SVP SVP SVP SVP SVP SVP SVP SVP SVP SVP VP VP VP VP VP VP VP VP VP VP Mr. Kazi Masihur Rahman Additional Managing Director Mr. Md. Sirajul Islam Bhuiyan Deputy Managing Director Mr. Karimuzzaman Executive Vice-President Place of Posting Motijheel Branch, Dhaka Gulshan Branch, Dhaka Narayangonj Branch RMG Division, Head Office Uttara Branch, Dhaka Regional Manager of Chittagong HRD, Head Office Dhaka Nawabpur Branch, Dhaka Board Secretariat, Head Office Satmasjid Road Rranch, Dhaka Panthapath Branch, Dhaka Motijheel Branch, Dhaka Financial Administration Div. Head Office Motijheel Branch, Dhaka Khatungonj Branch, Chittagong Human Resources Division, Head Office Motijheel Branch, Dhaka International Division, Head Office EXIM Bank Training Institute HRD, Head Office, Dhaka

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Mr. Md Shahid Ullah Mr. Md. Shahjahan Mr. Md. Anisul Alam Mr. Khorshed Alam Chowdhury Mr. Md. Zoshim Uddin Bhuiyan Engr. Shamsur Rahman Chowdhury, MBA Mr. Md. Mosharraf Hossain Mazumder Mr. Mohammad Hanif Mr. Md. Nasir Uddin Ahmad Mr. Md. Abduz Zaher Mr. S.M. Abu Zaker Mr. Abu Hena Md. Mohsinn Mr. Md. Moidul Islam Mr. Md Mozaffor Hossain Mr. Abdul Jobbar Chowdhury Mr. M. Sakhawat Hossain Mr. Tariqul Islam Choudhury Mr. Md. Zakir Hossain Mr. F.M. Nawaz Ali Mr. Kazi Nesar Uddin Ahmad Mr. Rafiqur Rahman Mr. Md. Shah Alam Mr. Md. Abdur Rahman Mr. Mosleh Uddin Ahmed Mr. Md. Abdul Halim Mr. Md. Rashedul Hasan Ms. Maksuda Khanom Mr. Md. Zakir Anam Mr. Mefta Uddin Khan Mr. Khandker Md. Mostasir

VP VP VP VP VP VP VP SAVP SAVP SAVP SAVP SAVP SAVP SAVP SAVP AVP AVP AVP AVP AVP AVP AVP AVP AVP AVP AVP AVP AVP AVP AVP

Agrabad Branch, Chittagong Malibag Branch, Dhaka Gulshan Branch, Dhaka New Eskaton Branch, Dhaka Rajuk Avenue Branch, Dhaka Information Technology Division, Head Office Special Audit Division, Head Office, Dhaka CDA Avenue Branch, Chittagong International Division, Head Office Imamganj Branch, Dhaka Jubilee Road Branch, Chittagong FAD, Head Office Dhaka Motijheel Branch , Dhaka Bogra Branch Gazipur Chowrasta Br Jessore Branch Rajuk Avenue Branch, Dhaka Uttara Branch, Dhaka Mirpur Branch, Savar, Dhaka ICCD, Head Office RMG, Head Office Dhaka Ashugonj Branch Chowmuhuni Branch Shimrail Branch Ashulia Branch Mawna Branch Gulshan Branch Panthapath Branch Satmasjid Road Branch FAD, Head Office

10

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Mr. Md. Mostafa Mr. Md. Shah Azam Mr. Md. Jashim Uddin Mr. Md. Solaiman Mridha Mr. Hasan Faruk Mr. Md. Abdul Qaium Khan Mr. Md. Mahbub Alam

AVP AVP AVP AVP AVP AVP AVP

Agrabad Branch Information Technology Division, Head Office, Dhaka Sylhet Branch FAD, Head Office Elephant Road Branch Information Technology Division, Head Office, Dhaka Information Technology Division, Head Office, Dhaka

11

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SHARIAH BOARD The Board of directors has formed a Sharia Supervisory Board for the Bank. Their duty is to monitor all the Banks transactional procedures, & assuring its Sharia compliancy. This Board consists of the following members headed by its Chairman: The tasks of the Sharia supervisor in summary is replying to queries of the Banks administration, staff members, shareholders, depositors, & customers, follow up with the Sharia auditors and provide them with guidance, submitting reports & remarks to the Fatwa & Sharia Supervision Board and the administration, participating in the Banks training programs, participating in the supervision over the AlIqtisad AlIslami magazine, & handling the duty of being the General Secretary of the Board. MEMBERS OF SHARIAH COUNCIL Professor Moulana Mohammad Salah Uddin Moulana Mohammad Sadequl Islam Professor H.M. Shahidul Islam Barakaty Mr. A.S.M. Fakhrul Ahsan Hafez Moulana Mufti Mohammad Khair Ullah Hafez Quari Moulana Mufti Mohammad Nur Uddin Mr. Md. Nazrul Islam Mazumder Mr. A.K.M Nurul Fazal Mr. Md. Abdul Mannan Mr. Zubayer Kabir Mr. Abdullah Al-Zahir Sawpan Mr. Mohammed Lakiotullah

12

SHARIAH AUDITING This is the civil supervisory aspect that shapes the Banks main feature. Its existence is part of the Sharia Supervision procedures. One of its main task is to check the Sharia compliancy in the Banks transactional procedures in accordance to the Fatwas issued in that regard, under the guidance of the Sharia Supervisor. The Sharia auditor is assigned the task of revising the Banks transactional procedures throughout the year to check the extent to which the staff members and the different departments have abided by the regulations, advices, and Fatwas issued by the Fatwa & Sharia Supervision Board, forums, & banking conferences. As well as, assuring that all the contracts that states a right for the Bank or an obligation on the Bank is certified by the Fatwa & Sharia Supervision Board. Moreover, the Sharia Auditing submits periodic reports to the Sharia Supervisor in order to be proposed to the Fatwa & Sharia Supervision Board to state what it finds appropriate in that regard. BANKING WITH SHARIAH PRINCIPLES Export Import Bank of Bangladesh Limited is the 1st bank in Bangladesh who has converted all of its operations of conventional banking into shariah-based banking since July/2004. We offer banking services for Muslims and non-Muslims alike allowing our customers choice and flexibility in their savings and investments. Our products are approved by our Shariah Board comprising of veteran Muslim scholars of our country who are expert in all matters of Islamic finance. The process by which Noriba's investments are designed and executed allows the Bank to offer a combination of Sharia compliance and capital markets expertise that is unique throughout the world.

13

Noriba is committed to the strict adherence to the requirements of the Sharia as a result of the Bank's sole focus on Sharia-compliant investments and the full supervision of its financial products and transactions by the Noriba Sharia Board.

Noriba experts specifically design each of the Bank's investment vehicles with the approval of the Noriba Sharia Board. Once the given product or transaction has been arranged, the Noriba Sharia Board carefully screens it for compliance before giving final approval for its implementation. This control mechanism guarantees that all aspects of Noriba's final products and banking transactions are in adherence with the guidelines of the Sharia.

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EXIM Bank of Bangladesh Ltd. (Head Office) Chairman Managing Director Deputy Managing Director

Executive Vice President Senior Vice President Vice President Assistant Vice President Senior Principle Officer Principle Officer Executive Officer Officer

Management Trainee Officer

Junior Officer Trainee Assistant Officer Assistant Officer

15

Organizational Structure of CDA Avenue Branch Vice President

Assistant Vice President

Senior Principle Officer

Principle Officer

Executive Officer

Officer

Management Trainee Officer

Junior Officer

Assistant Officer

Trainee Assistant Officer

16

EXIM Bank Branch Information: At present the bank has total 30 branches in Bangladesh.

17

List of branches in Chittagong division

Sl. No 1 Branch Information AGRABAD BRANCH Mawla Chember, 6 Agrabad C/A, Chittagong Phone: 031-715795, 031-715796, 031-727657, 031-727658 Fax: Mobile:011-701810 Swift: EXBKBDDH003 E-mail: agrabad@eximbankbd.com KHATUNGONJ BRANCH Union Square Building, 1078 Ramjoy Mahajan Lane, Khatungonj, Chittagong Phone: 031-615544 Mobile: 0189-319337 Swift: EXBKBDDH004 E-mail: khatungonj@eximbankbd.com JUBLEEROAD BRANCH 63-64, Jubilee Road, Enayet Bazar, Chittagong Phone: 031 - 611170 Mobile: Swift: EXBKBDDH018 E-mail: jubleeroad@eximbankbd.com SONAIMURI BRANCH Mohammadia Super Market, Sonaimuri Bazar, Sonaimuri, Noakhali Phone: 0171-750610, 0171-885754 Mobile: 0171-750610, 0171-885754 Swift: E-mail: sonimuri@eximbankbd.com LAKSHAM BRANCH Doulotgonj Bazar, Laksham, Comilla Phone: 08032 - 333 Mobile: 0171-726302 Swift: EXBKBDDH018 E-mail: laksham@eximbankbd.com CDA AVENUE BRANCH Commerce View Complex, 191, CDA Avenue, East Nasirabad, Chittagong Phone: 031-652074 Mobile: 0189325000, 0189647564 Fax: Swift: E-mail: cadavenue@eximbankbd.com CHOWMUHANI BRANCH 60/231, D.B. Road, Chowmuhani, Noakhali Phone: 0321 - 52700 Mobile: 0174084311 Swift: E-mail:chowmuhani@eximbankbd.com

List of branches in Dhaka division

18

Sl. No 1

Branch Information MOTIJHEEL BRANCH Sharif Mansion, 56-57,Motijhil C/A, Dhaka. Phone: 9568534, 9552800, 9568093, 9554988, Dir-9553788 Fax: 880-2-9569983 Mobile:011-804057 Swift: EXBKBDDH001 E-mail: motijheel@eximbankbd.com PANTHAPATH BRANCH 19/2, West Panthapath, North Dhanmondi, Dhaka. Phone: 8124261, 8126191 Mobile: 0189-242433 Fax: 880-2-8126191 Swift: EXBKBDDH002 E-mail: panthapath@eximbankbd.com GAZIPUR CHOWRASTA BRANCH Nasir Super Market(1st Floor), Chandana, Gazipur P.O.Gazirchat Savar, Dhaka Phone: 9256492-3 Fax:880-2-9256493 Mobile: 0173- 040558 Swift: E-mail: gazipur@eximbankbd.com IMAMGONJ BRANCH Haji Abdul Kader Mansion, 139 Chawk Mogoltuli, Imamgonj, Dhaka Phone: 7315527-9, Mobile: 011807054 Fax: 880-2-7315530 Swift: EXBKBDDH006 E-mail: imamgonj@eximbankbd.com GULSHAN BRANCH 75, Gulshan Avenue, CWSA-10, Gulshan, Dhaka. Phone: 9862262.9886296 Mobile: 0189-240830 Fax: 880-2-8818703 Swift: EXBKBDDH007 E-mail: gulshan@eximbankbd.com NAWABPUR BRANCH 198/1, Nawabpur Road, Dhaka - 1100 Phone: 7125306, 7125307, Direct:7125308 Mobile: 0189-244534 Fax: 880-2-7125308 Swift: EXBKBDDH010 E-mail:nawabpur@eximbankbd.com

NARANYANGONJ BRANCH 14/1, SM Maleh Road, Narayangonj Phone: 7610213, 7610214, 7610215 Mobile: 0171-439385 Fax: 880-02-7610215

19

10

Swift:EXBKBDDH011 E-mail: narayangonj@eximbankbd.com SHIMRAIL BRANCH Al-Haj A. Rahman Super Market & Shopping Tower, Chittagnong RD, Chowrasts, Shimrail Phone: 7609268, 7609672, 7609673 Mobile: 0189-253283 Fax: 7609268 Swift: E-mail: shimrail@eximbankbd.com RAJUK AVENUE BRANCH 9, Rajuk Avenue, Motijheel, Dhaka - 1000 Phone: 9555132, 9556884, , 9565397 Mobile: Fax: :880-2-9555132 Swift: EXBKBDDH013 E-mail: rajuk@eximbankbd.com NEW ESKATON BRANCH 27/1, New Eskaton Road, Dhaka Phone: 9349196, 8314159, 8314435 Mobile:0189-254621 Fax: 880-2-9349196 Swift: E-mail: neweskaton@eximbankbd.com

11

12

UTTARA BRANCH House # 61/A, Road # 7, Sector # 7, Uttara Model Town, Dhaka Phone: 8919785.8952847 Mobile: Fax: 880-2-8952838 Swift: EXBKBDDH015 E-mail: uttara@eximbankbd.com MIRPUR BRANCH Shreyasi Tower, 10 No. Crossing, Mirpur, Dhaka - 1212 Phone: 8054226, 8056776 Mobile: Fax: 880-2-8054226 Swift: E-mail: mirpur@eximbankbd.com

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ELEPHANT ROAD BRANCH 218, Elephant Road, Bata Signal, Dhaka - 1205 Phone: 9667097, Mobile: 0189-240830,0174-021767 Fax: 880-2-9667097 Swift: E-mail: elephantroad@eximbankbd.com MAWNA BRANCH

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15

16

17

18

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Kitab Ali Plaza, Mawna Chowrasta, Sreepur, Gazipur Phone: 06825 - 52359 Mobile: 011-883390 Swift: E-mail: mawna@eximbankbd.com MALIBAGH BRANCH 484, DIT Road, Malibagh Rail Crossing, Dhaka - 1217 Phone: 9357057,9340444,83119076 Mobile: 0189-214681 Swift: Fax: 880-2-9357057 E-mail: malibagh@eximbankbd.com ASHULIA BRANCH Rifat Square Plaza, Jamgara, Savar Phone: 0174-007155 Mobile: 0174-007155 Swift: E-mail: ashulia@eximbankbd.com ASHUGONJ BRANCH Haji Zahirul Haque Munshi, Shoping Complex, Main Road,Char Chartala , Ashugonj Phone: Mobile: 0173-063433 Swift: E-mail: Ashugonj@eximbankbd.com SAT MOSJID ROAD BRANCH 47 Sat Mosjid Road, Dhanmondi, Dhaka - 1217 Phone: 011-807061 Mobile: 0717048608 Swift: E-mail: dhanmondi@eximbankbd.com BASHUNDHARA ROAD BRANCH 11/4, Bashundhara Road, Badda Dhaka-1212 Mobile: 01713-145499 List of branches in Khulna division

Sl. No 1

Branch Information JESSORE BRANCH 37, M.K. Road, Jessore Phone: 0421 - 679801,679802,679803 Fax: Mobile:011-887537 Swift: E-mail: jessore@eximbankbd.com

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List of branches in Rajshahi division Sl. No 1 Branch Information BOGRA BRANCH Sheikh Mansion, Baragola, Bogra Phone: 051 - 60702,607023,607024,607025 Fax: Mobile:011-883407 Swift: E-mail: bogra@eximbankbd.com

List of branches in Sylhet division Sl. No 1 Branch Information SYLHET BRANCH Al-Hamra Shopping City, Zinda Bazar, Sylhet Phone: 0821-723612,723672 Fax: Mobile:0171-879790 Swift: E-mail: sylhet@eximbankbd.com FENCHUGONJ BRANCH Samad Plaza, Fenchugonj, Sylhet Mobile: 01713-145497

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ORGANIZATION OF HEAD OFFICE

Head Office

General Service Division

Establishment & Business Division

Credit Division

International Banking Division

Law & Recovery Division

Financial Administration Division

Import Credit Division

General Credit Division

Export Credit Division

ORGANIZATION OF CDA Avenue Branch

Head Office

General Banking Incharge

Cash Incharge

Credit Incharge

Foreugn Exchange Incharge

Information Technology Incharge

Deposit & Account

Remittance

Import

Export

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RESOURCES AND CAPABILITIES EXIM is well prepared to and capable of meeting the demand for a broad range of banking services. It has got adequate resources, both human and physical, to provide the customers with the best possible services. Physical and Technological Resources A great deal of investment for developing the physical resource base of the Bank has been made. EXIM has its presence in all the major industrial and commercial hubs of Bangladesh in order to cater to the needs of industry and trade. At present, there are thirty conveniently located branches throughout Bangladesh. There are eight branches in the capital city of Dhaka, three in Chittagong and one each Narayangonj, Narsingdi, Rajshahi, Saidpur, Bogra, Khulna, Jessore,Sylhet, Moulvibazar , Comilla and Barisal. EXIM bank brought 6 of their branches under SWIFT network. The SWIFT services help in sending and receiving the message and instruction related to NOSTRO related account and L/C related matters. Besides this EXIM bank has BKE arrangements with 430 Bank Branches in 100 countries. MAJOR FEATURES OF THESE BRANCHES ARE: Fully computerized accounts maintenance. Well decorated and air conditioned facilities. A fully operational computer network, which is currently being implemented. The work of Local Area Network (LAN) and Wide Area Network (WAN) installation to facilitate fast communication between the branches and the Head Office is in progress. Money counting machine and Money detecting machine for making cash transactions easy and prompt.

24

HUMAN RESOURCES Quality human resources denotes an organization worthy, knowing of ones job and having interest in it, is a precondition of good functioning. EXIM has a well-diversified pool of human resources, which is composed of people with high academic background. Also, there is a positive demographic characteristic. Most of the employees are comparatively young in age and mature in experience. As at end 2005 the total employee strength is 974. As on 31-12-2005 the total manpower of the Bank in different grades as under:Grades Executives Officers Staff Casual and Others Total years: Year 2004 2005 2006 Personnel 17 19 20 Personn el 37 288 84 91 500 Percenta ge 7.40% 57.60% 16.80% 18.20% 100% The total manpower of CDA Avenue branch for the last three

TRAINING Training, on a regular basis, is being imparted to employees of both management and non-management levels. Human resource is a precondition of good functioning; with this view in mind EXIM bank trained their Officers and Executives both home and abroad.

25

RECRUITMENT OF NEW OFFICERS The Bank follows a strict recruitment policy in order to ensure that only the best people are recruited. With view to improving efficiency of human resource EXIM bank always recruit fresh and enthusiastic youth who have completed their studies from universities examination. MONETARY / FINANCIAL RESOURCES Like any other financial intermediaries, EXIM is no exception in performing its core functions viz. Mobilization of fund and utilizing such mobilized fund for profitable purpose. 1. Mobilization of Fund: The main sources of fund for BASIC are: Deposit Capital and Reserve Fund directly as officers through competitive

Deposit Deposit constitutes the core of EXIM Banks fund mobilization. Total deposit of the Bank at the end of 2005 stood at Taka 2831.90 crore compared to Taka 1987.82 million in 2004. The growth was 42.08 percent. During 2005, the fixed deposit increased to Taka 7005.22 million from Taka 5029.61 million in 2004 registering a growth of 39.27 percent. Saving bank deposit increased to Taka 613.66 million in 2005 compared to Taka 243.19 million in 2004 with a growth rate of 152.33 percent. Deposit in current and other accounts including bills payable increased to Taka 949.04 million in 2005 from Taka 698.35 million in 2004, a growth of 35.90 percent. Capital and Reserve Fund

26

The authorized capital of the bank is Tk. 100.00 crore. The paid up capital of the bank at the end of 2005 stood Tk. 87.90 crore, compared to Tk. 62.78 in 2004. The bank raised its reserve from Tk.62.78 crore to Tk. 87.90 crore. 2. Utilization of fund EXIM utilizes its funds in accordance with its organizational goals and corporate strategy. Main use is for lending to industrial and trade sector. Maintenance of cash and statutory liquidity reserve with the Bangladesh Bank covers 20 percent of demand and time liabilities. Placement of funds in NOSTRO Accounts to handle foreign trade and investment in money market is also done as usual. Investment In an effort to secure more stable and predictable earning from its investment, the Bank focused its attenti9n on investment in Govt. securities, shares and call money market. The total investment of the bank stood at Tk. 3264.10 crore as on 31-12-2006 as against Tk. 2604.60 crore in the previous year showing an increase of 75.15%. (Amount in crore) Year General Shares & Bonds Total Investment Report 2006 Loan and Advances EXIM lends support towards development of trade, business and other commercial activities in the country. Short term trade finance and other non-fund services get full attention in the Bank. The Bank offers a complete range of services to the exporters and importers 2006 3264.1 0 223.30 3487.4 0 2005 2604.6 0 163.30 2767.9 0 2004 1933.2 4 154.30 2087.5 2003 1228.9 1 237.70 1466.3

4 1 Source : Annual

27

by extending various facilities. The bank provides cash credit for local trade, export cash credit, packing credit, and local bills purchased and foreign bills purchased facilities. As on 31.12.2005, total amount outstanding in respect of those facilities stood at TK. 7954.56 million including compared to Taka 5131.55 million of 2004 representing a growth of 55 percent. (Amount in crore) Year Loan Office) Report 2006. (Amount in crore) Year Loan and Advances (CDA Avenue Br.) 0 2006 1996.4 7954.5 6 1311.4 2004 1050.0 2003 506.9 and Advances 3 200 (Head 6 8779.9 200 5 7954. 56 200 4 5131.5 2003 2170.53

5 Source: Annual

0 0 Source: Statement of Affairs.

Foreign Trade The Bank handles foreign trade in which it has a comparatively large share despite its small size. EXIM provides various facilities related to L/C and post import finance like loan against imported merchandise (LIM), loan against trust receipt (LTR), back to back L/C and pre-shipment finance facilities like export credit and packing credit to exporters. So far the Bank has established correspondence relationship with as many as foreign banks in order to facilities foreign trade. The Bank handled total export business of Taka 3128.50 crore and import business of Taka 4143.30 crore in 2005. The import business increase by 54.37 percent and export business increase by 35.55 percent. Major items of exports were garment

28

sand jute products. Items of import included mainly industrial raw materials, garments accessories and capital machinery. Head Office ( Amount in crore) Year Import Finance Export Finance Remittance 2006 CDA Avenue Branch (Amount in crore) Year Import Finance Export Finance Other activities The Bank provides services for remittance, underwriting, guarantee, public Offering of shares etc. The Bank also provides funds to investment and leasing Companies. Investment / Finance: Corporate Finance Industrial Finance Project Finance Syndicate Investment Mode of Investment o Murabaha o Bai Muazzal o Izara Bil Baia o Wazirat Bil Wakala o Quard o Local Documentary Bill Purchased
o

2006 49596.7 3 46234.5 9 343.78

2005 4143.2 0 3128.5 0 22.30

2004 2678.1 0 2241.8 4

2003 1926.0 0 1512.4 6

11.31 23.50 Source:Annual Report

2006 3245.50

2005 2282.5

2004 2056.8

2003 991.20

0 0 541.50 500.50 458.40 107.00 Source: Statement of Affairs

Foreign Documentary Bill Purchased

Deposit:

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Al-Wadia Current Deposit Mudaraba Savings Deposit Mudaraba Short Term Deposit Mudaraba Term Deposit One Month Three Months Six Months Twelve Months Twenty Four Months Thirty Six Months

Foreign Currency Deposit Mudaraba Savings Scheme Monthly Savings Scheme(Money Grower) Monthly Income Scheme(Steady Money) More than Double the deposit in 6 years (Super Savings) More than triple the Deposit in 10 years (Multiplus Savings) Mudaraba Hajj Deposit The Bank emphasizes on non-fund business and fee based income. Bid

bond/ bid security can be issued at customers request. The Bank is posed to extend L/C facilities to its importers / exporters through establishment of correspondent relations and Nostro Accounts with leading banks all over the world. Moreover, Consumers can deposit their Telephone bill of Grameen Phone in all the branches except Motijheel and the consumers of Palli Buddut somity of Gazipur can deposit their electricity bill to Gazipur branch

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EXIM Bank at a Statistical Glance- 2005 Figure in Tk. crore Sl. No. 01. 02. 03. 04. 05. 06. 07. Particulars Authorized Capital Paid-up Capital Reserve Fund Deposits Investment(General) Investment(Shares & Bonds) Foreign Exchange Business a) Import Business b) Export Business c) Remittance 08. 09. 10. Operating Profit Loan as a % of total Deposit No. of Foreign Correspondent 11. 12. 13. Number of Employees Number of Branches Return on Assets 500 16 3.40% 627 19 3.15% 768 28 3.44% 934 28 1.65% 2002 100.00 25.31 29.84 994.52 795.45 141.90 2351.8 3 1315.2 5 1008.8 2 27.76 38.68 79.98 % 180 2003 2004 2005 100.00 87.90 57.00 2831.90 2604.60 163.30 7271.70 4143.20 3128.50 22.30 117.58 91.97% 212

100.00 100.00 31.39 22.82 62.78 35.73

1524.3 1907.8 0 2 1228.9 1933.2 1 4 237.70 154.30 3461.9 4931.2 6 4 1926.0 2678.1 0 0 1512.4 2241.8 6 23.50 56.27 80.62 % 185 4 11.31 83.58 101.33 % 200

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EXIM Bank at a Statistical Glance- 2006

32

GENERAL BANKING

Introduction Account Opening Section Various types of account offered by EXIM Documents to be obtained for different types of account

Remittance Section Clearing Bills Section Cash Section Mail Receive & Dispatch Section

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GENERAL BANKING INTRODUCTION: Out of three major sections General Banking is important one. General banking is the heart of total banking system. Through this section bank has to receive and disburse money, to develop banker customer relationship by opening different types of account and providing prompt services to the customers. This department collects money from the depositor and uses these deposits to earn profit. FUNCTIONS OF GENERAL BANKING: The functions of general banking department of EXIM Bank of Bangladesh Ltd. are as follows: 1. Maintenance of different types Deposit A/C: Saving Accounts Current Accounts Fixed Deposits Short Term Deposits Other Saving Schemes 1. Receipts & payment of cash. 2. Handling transfer transactions. 3. Operations of clearing house. 4. Maintenance of accounts with Bangladesh Bank & other banks. 5. Collection of Cheques & Bills. 6. Issue and payment of Demand Drafts, Telegraphic Transfers and Payment Orders. 7. Maintenance of Safe Deposit Lockers. 8. Maintenance of Internal Accounts of the banks. 9. Reporting to the Head Office about daily position of the bank. 10. 11. 12. 13. Saving record of all transactions in computer. Closing and transfer of different types of accounts. Keeping good relation with valued customer. Providing necessary support to the customers.

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SECTIONS OF GENERAL BANKING: During my practical orientation in EXIM Bank, CDA Avenue Branch, it came to my observation that general banking section is divided with four areas. These are: Account opening section Remittance section Bills and clearing section Cash section Mail receive and dispatch section

ACCOUNT OPENING SECTION: One of the vital sections under general Banking is the account opening section. Banker customer relationship begins through this section. Various tasks are performed in this section. Such as: Opening of different types of account. Issue of checkbook. Transfer and closing of account. Enquiry of account. Checking The Signature of the client.

Various types of account offered by EXIM Bank: EXIM Bank offers various types of account to its different types of customer. These are as follows: Current deposit (CD) account Savings bank (SB) account Short term deposit(STD) Fixed deposit (FDR)

Current Deposit (CD) Account: A current account is an account, which is generally opened by business people for their convenience. A current account is a running and active account, which may be operated upon any number of times during a working day. There is no restriction on the number & amount withdrawals from current a/c. It does not earn any interest.

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It has the following properties: Opening Amount/ Initial Deposit Service Charge (yearly) Minimum Balance Requirement Tk. 500 Tk. 100 Tk. 500

Current a/c may be individual or joint or partnership or can be formed on any name. It provides the following facilities: Overdraft facility. Other facilities like collection of checks, transfer of money, rendering agency and general utility services. Table showing the no. of Account and Amount of CDA Avenue Branch: Year 2003 2004 2005 2006 No. of Account 246 386 450 297 Amount (in Lac) 151 301 109 177

Savings Bank (SB) Account: This deposit is intended primarily for small-scale savers. The main object of this account is promotion of thrift. Savings account is meant for those who want to save a certain amount of their income and earn interest on that for future needs. All features are more or less like that of CD a/c except for some restriction that is imposed by the bank. Number of withdrawals over a period of time is limited. This A/C mainly open on person name. SB account has the following properties: Opening Amount/ Initial Deposit Service Charge (yearly) Minimum Balance Requirement Tk. 500 Tk. 100 Tk. 500

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Interest rate

7.5%

One cannot withdraw money more than two times in a week. The withdrawing amount is not to exceed 25% of the total balance. If customer withdraws money more than twice in a week than no interest is given to customers on his account.

Table showing the no. of Account and Amount of CDA Avenue Branch: Year 2003 2004 2005 2006 No. of Account 150 275 372 792 Amount (in Lac) 161 284 156 389

Fixed Deposit Receipt (FDR) Account: In this category are included the deposit with the bank for a fixed period which is specified at the time of making the deposit. Such deposits are therefore called fixed deposits or term deposits. A fixed deposit is repayable on the expiry of a specified period, chosen by the depositor to suit his purpose and to enable him to get back money as and when he needs it. The fixed deposit may be made for 3 months, 6 months, 1 year, 2 year or 3 year . As the date of repayment of fixed deposit is determined in advance, the banker need not keep more cash reserves against it and can utilize such amount more profitably. The banker therefore offers higher rate of interest on such deposits. Fixed deposit has grown in importance and popularity in our country during recent years. amount (deducting 10% tax from the total) is paid to the client. The rate of interest and the terms of the Fixed Deposit receipt are given below: Term Interest rate 3 months 8.50% 6 months 11.25% 1 year and above 11.50% When a matured FDR is withdrawn, the principle amount along with the interest

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(Up to Tk 50 Lac) Interest rate (Above Tk 50 9.00% 9.50% 10% Lac) Table showing the no. of Account and Amount of CDA Avenue Branch: Year 2003 2004 2005 2006 No. of Account 133 138 247 250 Amount (in Lac) 2253 3050 5118 5800

Short Term Deposit (STD): It is a deposit account open by customer where customer deposited money for short period. Customer can draw money after giving short notice. This account holder enjoys the same facilities of CD account including receiving interest on his deposited money. Interest rate of STD is less than the interest rate of SB account. STD account has the following properties: Opening Amount/ Initial Deposit Service Charge (yearly) Minimum Balance Requirement Interest rate % Tk. 50000 Tk. 100 Tk. 50000 6

Table showing the no. of Account and Amount of CDA Avenue Branch: Year 2003 2004 2005 2006 No. of Account 53 85 99 34 Amount (in Lac) 536 587 469 456

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Various types of Savings Schemes offered by EXIM Bank: EXIM Bank offers various types of Savings Schemes to its different types of customer. These are as follows: Monthly Savings Scheme (MSS). Monthly Income Scheme (MIS). Super Savings Scheme (SSS). Multi Plus Super Savings Scheme(MPSS).

Monthly Savings Scheme(MSS): Small savings can formulate large deposit. Savings increases mental power of a man, form capital and increases the confidence of a depositor. EXIM Bank introduces a saving scheme with high profit for the purpose of increases saving mentality. In this savings scheme one can deposit money in every month and will get a handsome amount of money at the end of certain period. The amount of savings/deposits as per monthly installment and period is shown in below: Rate of interest (10.35%-10.50%) Period 5 Years 8 Years 10 Years 12 Years Monthly Installment Tk.1000 Tk. 78082.00 Tk. 148404.00 Tk. 210190.00 TK. 288923.00 Monthly installment Tk.2000 Tk. 156164.00 Tk. 296809.00 Tk. 420380.00 TK. 577847.00 Monthly Installment Tk.5000 TK. 390411.00 Tk. 742024.00 Tk. 1050952.00 TK. 1444618.00

Monthly Incomes Schemes(MIS): In this type of scheme one can invest certain amount of money for certain period of time for receiving a steady return after every certain period of time. Lowest amount of investment is Tk. 1,15,000 and the period of this scheme is 5 years. The amount of money invest should be the multiple of 1,15,000. Table showing the income per deposited amount:

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Deposit Amount(Tk.) 1,15,000.00 2,30,000.00 4,60,000.00 Super Savings Scheme(SSS):

Rate of interest 12.00% Income(Tk.) 1000.00 2000.00 4000.00

Savings helps to build up capital and capital is the prime source of business investment in a country. Investment takes the country towards industrialization, which eventually creates wealth. That is why savings is treated as the very foundation of development to create more awareness motivates people to save. EXIM Bank offers Supers Savings Scheme. The client will get double amount of his principle amount after maturity. Minimum Amount Required Compound Interest rate Tk. 10000 12.25%

The amount should be the multiple of 10,000 The amount should be double after 7 years Tax rate is 10%

Multi Plus Savings Scheme(MPSS): Under this scheme the amount will be doubled in 11 years term. Compound interest rate is 12.10%. It has the same properties as like as Supers Savings Scheme. Table showing the no. of Account and Amount under Saving Scheme of CDA Avenue Branch : Year 2003 2004 2005 2006 No. of Account 654 1441 1932 1766 Amount (in Lac) 122 1904 3205 2491.13

Year wise No. of Account of the Branch: Name of Account Current 2003 246 2004 386 2005 450 As on 29.02.2006 463

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Savings FDR STD Deposit under Scheme Loan BCD FC Total Account

150 133 53 654 126 1362

275 138 85 1441 236 10 1 2572

372 247 99 1932 257 1 3338

383 275 103 1941 276 1 3438 (Figure in Lac)

Year wise Deposit mix of the branch: 2003 Name of Accou nt Curren t Saving s FDR STD Saving Schem e BCD Others Total Depos it 3515 Amou % of nt total Tk. in Depos lac it 151 4.30% 161 2253 536 414 4.58% 64.10 % 15.25 % 11.77 % 100% 95 7012 2004 2005 Amou nt Tk. in lac 109 156 5118 469 3205 2006

Amou % of % of nt total total Tk. in Depos Depos lac it it 301 1.15% 4.30% 284 3050 587 2695 1.64% 53.83 % 4.93% 33.71 % 4.05% 48.50 % 8.37% 38.43 % 1.35% 4.74% 100% 100%

451 9508

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Deposit mix of the year 2001

4%
12%

5%

Current Savings

15%

FDR STD Saving Scheme

64%

Deposit mix of the year 2002

1% 37% 46% 8% 4% 4%
Current Savings FDR STD Saving Scheme BCD

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Deposit mix of the year 2003

1% 5% 2%
Current Savings FDR

34% 53% 5%

STD Saving Scheme Others

Deposit Mix
1684.53

3463.31 316.71 87.91

29479.56 MSD (4.81%) AW Current & Others (9.89%) Bills Payable (0.90%) FC Deposit (0.25%) MTD (84.15%)

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Comparative Figure of Deposit as on 31.12.2006 Export Import Bank Of Bangladesh Ltd. (CDA Avenue Branch) Amount Tk. in Increase Increase lac in in Percent Percent age age 20 20 20 20 03 04 04 05 151 301 64% 301 109 64% 161 284 225 305 3 0 536 587 414 269 5 35 15 95 70 12 76% 284 156 35% 305 511 0 8 10% 587 469 65% 269 320 5 5 100% 95 - 451 70 95 12 08 45% 67% 20% 19% 35% 100% Amount Tk. in lac Amou nt Tk. in Lac 2006 82.44 205.89 2491.1 3 102.56 0.00 629.19 48.16 3559. 37

Name of Accou nt Curren t Saving s FDR STD Saving Schem e BCD Others Total Depos it

Increase in Percent age 2.32% 5.78% 69.99% 2.88% 0.00 17.68% 1.35% 100%

Comparative Figure of Interest Paid on Deposit as on 31.12.2006 Export Import Bank Of Bangladesh Ltd. (CDA Avenue Branch) (Amount Tk. in lac) Year Interest on Deposit 2003 208 2004 480 2005 850 2006 989

Comparative Figure of Deposit as on 31.12.2006 Export Import Bank Of Bangladesh Ltd. (Head Office) (Amount Tk. in million)

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Year

200 200 3 4 725 994 5 5

Increase in 200 200 Perce 4 5 ntage 37% 994 1500 5 0

Increase in Percenta ge 51%

200 6 350 3 2

Increase in Percent age 55%

Total De pos it

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Comparative Figure of Interest Paid on Deposit as on 31.12.2003 Export Import Bank Of Bangladesh Ltd. (Head Office) (Amount Tk. in million) Year 2000 2001 2002 2003 Interest on 143 441 647 767 Deposit
Deposit of the Khatungonj Branch of the last CDA Avenue Br. for three years
10000 Deposit(in lac) 8000 6000 4000 2000 0 2001 2002 Year 2003 Deposit

the last

2003

2004

2005

Deposit of the Head Office of the last three years

16000 14000 12000 10000 8000 6000 4000 2000 0 2001 2002 Year 2003

Deposit(in million)

Deposit

2003

2004

2005

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Documents to be obtained for different types of account: When anyone comes to open an account he has to submit some documents to the banker. Different types of document needs for different customer. Some common documents require for all types of account are: Introduction recommendation. Specimen signature card. Account opening agreement form. Two copies of Photograph of account holder and two copies of nominee (if any). Deposit slips book. Cheque-book requisition slip. Letter of mandate authorizing another person to operate the account on behalf of the account holder. Certain types of documents are needed for special customers. These are: Proprietorship Account: Document requires for proprietorship business to open an account are: Introducers with account number. Valid trade license from City Corporation, Attested copy should be submitted. Tax Identification certificate. Nationality certificate from local authority.

Partnership Account: Documents to be obtained for opening an account of partnership firm are: Trades license or board resolution. Deeds of partnership signed by all partners. Two copies photograph of each partner. Partnership resolution signed by all partners to open account.

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Resolution must indicate authorized person who operates the account.

Limited Company Account: Document required for Limited Company account to open an account are: Memorandum and Articles of Association of Company. Resolution of Board of Director. Certificate of incorporation. Certificate of commencement of business in case of public limited company. List of director. Two copies of passport size photograph of account operators. Others: name director s with signature, minutes of board of director. Remittance Section: The major function of commercial Banks is mobilization of fund. Other than this, banks provide supplementary services to its clients. Clients need to remit money from one place to another for their business or other purposes. Banks fulfill this need of customers by means of remittance service. Money can be remitted domestically or internationally, which known as local remittance and foreign remittance. There are three ways of transferring fund domestically. The modes of transferring funds are: Pay- Order (PO). Demand Draft (DD). Telegraphic Transfer (TT). Mail Transfer(MT).

Payment Order / Pay Order (P.O.): This is an instrument issued by the branch of a bank for enabling the Customer/Purchaser to pay certain amount of money to the order of a

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certain person/firm/organization/office within the same clearing house area of the pay order-issuing branch.

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Characteristics of P.O: The issuing branch and paying branch are same. Application for payment within the clearing house area of the issuing branch. This may be open or can be crossed.

Procedure of Issuing Payment Order: Obtain P.O. application from duly filled in and signed by the Purchaser/application. Receive amount. Issue Pay Order. Enter in Pay Order register. the amount in cash/transfer with commission

Table showing the Charge for Pay Order: Amount Less than TK.10,000 TK. 10,001-1,00,000 Tk. 1,00,001-5,00,000 TK. 5,00,001 above Demand Draft (D.D): This is an instrument through which customers money is remitted to another person/firm/organization in outside the clearinghouse area from a branch of one bank to an outstation branch of the same bank or to a branch of another bank (with prior arrangement between that bank with the issuing branch). This is an order instrument in which the issuing branch gives instruction to the payee/drawer branch to pay certain amount of money to the order of certain person/firm/organization. Commission, vat and postage are charged for issuing DD. Example: - To transfer money from Chittagong to Dhaka. Procedure for issuing D.D.: Commission 15 25 50 100 Vat 2 4 8 15 Total Charge 17 29 58 115

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Obtain D.D. application from duly filled in and signed by the purchaser/application. Receive the amount in cash/transfer with prescribed commission and postage amount. Issue the D.D. duly in and signed by the authorized officer. Insert test number (where applicable) Enter in the D.D. issue register. Issue advices to the payee branch.

Procedure for payment of D.D.: Examine the D.D. by verifying the signature, test number , serial number etc. Enter the D.D. payable register. Verify with the IBCA number. Pass necessary vouchers.

Charge for Demand Draft: Minimum amount for a DD is TK. 25. Commission is the 0.10% of the DD amount. Vat is TK. 15% on the commission amount.

Telegraphic/ Telephonic Transfer (T.T) This is a mode of transfer of customers money from a branch of one bank to another branch of the same bank through telegraphic/telephonic message. The issuing branch used to send the message of such remittance through telegraph/telephone adding certain code number or test number on the basis of test key apparatus developed by the concerned bank for its different branches. The drawer and the payee is required to have account with the bank in order for this transaction to take place. TT is issued against cash, check, letter of instruction etc.

Characteristics of T.T

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Issued by one branch to other branch and message is telecommunicated. Remittance/ transfer of money are done through tested talemessages. Remittance is affected on the basis of tested message. Test key apparatus is required.

Procedure for issuing T.T.: Obtain T.T. application from duly filled in and signed by the purchaser/application beneficiary. Receive the amount in cash/transfer with prescribed commission, telephone/telex and postage amount. Prepare T.T. message inserting the test no. Enter in T.T. issue register. Issue advice to the payee branch. with full A/C particulars of the

Procedure for payment of D.D.: Note the message T.T. and verify the test number and confirm the T.T. serial no. etc. is ok. If ok make entry in to T.T. payable Register Pass necessary vouchers for payment.

For quickest remittance customer use this means to transfer money from one place to another place. Within 10 minutes beneficiary will get the amount. Charge for T.T.: Minimum amount for a TT is TK. 25. Telephone Charge is TK. 50 Commission is the 0.10% of the TT amount. Vat is TK. 15% of the commission amount.

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Cash Section: Cash section is an important section where cash transactions are made. Cash sections demonstrate liquidity strength of a bank. It is also sensitive as it deals with liquid money. Maximum concentration is given while working on this section. Tense situation prevails if there is any imbalance in the cash account. There are various systems maintain by cash officer that is under: Vault Cash Payment Cash Receive Evening banking.

The cash department is the riskiest department of the bank. This is the section where tight security is required to avoid any accidents. There is a limit to be amount of cash that each counter can carry; carrying of excess cash is avoided for safety reasons. If there is any surplus in the cash then the excess amount should sent to the Bangladesh Bank or if there is any shortage in the cash then the shortage amount should be borrowed by the bank from Bangladesh Bank or from the Head Office or Other Banks. Cash Receipt: When clients deposit cash in the bank, the bank officer should follow the following common precaution: Check and count the received cash. Make sure that the amount in word and number in the deposit slip are same. Check the account title and the number. Both the deposit slip is in order. Depositors signature is in the slip. Receive seal in the slip is a must.

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Write the domination of the currency at the back of the pay in slip or the credit voucher and affix stamp in the slip/voucher. Enter particulars of in slip/credit voucher in the receiving cash officer book. At least, send the pay in slip/voucher to the deposit department or to the respective department. Deposit slip must be signed by the respective officer. Carbon copy of the deposit slip must be handover to the client with proper seal and signature.

Cash Payment : Cheques, demand drafts, pay orders, pay slips and debit cash vouchers etc. are received from various departments for payment of cash to customers/payees. Prior payment of cash it is the officers duty to make sure that the cheque/or the instrument has been genuinely passed. The following common precaution is thoroughly practiced before honoring a cheque: The branch name in the cheque. The date in the cheque is very crucial. Cheques are normally valid for six months and pre-dated cheques are asked to present after the date given. Tk in words and figure of the cheque is same. Balance in the account is available. The apparent tenor of the cheque. Whether any figure, date or anything has been altered in the cheque presented. If any, then the respective officer must check wheteher the client is making his signature for alteration or not. The specimen card signature and signature in the cheque should match. Signature of recipient is obtained on the reverse of cheque. In case, where a prior arrangement has been made with the bank, a client may overdraw against a cheque.

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Books maintained by cash department : Vault Register: This is the book where amount of cash available in the branch is maintained. That is, the amount in the vault register book. Cash Receive Register: This register keeps record of all incoming cash. Cash Payment Register: Similar to the cash register book, this books keeps tracks of all outgoing cash, that is all payments. Cash Position Register: This is the book where cash balance is recorded by counting the notes and coins that are physically available. The balance in this book is compare with the vault register, which should be the same. In case there is an error, then the figures would not match but if no discrepancy is found then nothing is to be worried about. Other Registers: Money Remittance Register Prize Bond Register Stamp in hand Register

Cash Section has two Automatic Machine: Money Counting Machine: With the help of this machine officer can easily count the money. It save time and also provide accuracy. Money Detector Machine: This machine helps officer to find out the fake money.

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Clearing and Bills Section: Clearing and bills section is an important section of General Banking. This is the section through which branch has to clear its inter branch and inter bank transaction. Customers do pay and receive the collecting branch the system is known as IBC. Clearing: As far as safety is concerned customers get crossed cheque for the transaction. As we know crossed cheque cannot be encased from the counter, rather it has to be collected through banking channel i.e. clearing. For example, a client of EXIM Bank received a cheque of another bank, which is located within the clearing range; deposit the cheque in his account at EXIM Bank. Now EXIM Bank will credit his account and collected it. Though the amount is credited in the customers account but he will not get the money until he cheque is honored. Types Of Clearing : 1. Outward Clearing: Outward clearing means when a particular branch receives instrument drawn on the other bank within the clearing zone and those instruments for collection through the clearing arrangement is considered as outward clearing for that particular branch. 2. Inward Clearing: When a particular branch receives instruments which on themselves and sent by other member bank for collections are treated as inward clearing. Clearing house: Clearing House is a place in the Central Bank where different banks come to settle their interrelated liabilities.

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Clearing House System: The mechanism of working at a Clearing House in general is as follows: Every Bank of the locality, which is a member of the clearinghouse, prepares a Bank-wish list of cheques after receive from customers and drawn on different Banks of the locality. An officer, in charge of clearinghouse, goes to the clearinghouse in the morning with the cheques and their list. He delivers the cheques to the officials of the respective banks. Similarly, he also receives the cheques drawn on his Bank from the officials of the other banks. The official of each bank computerizes the final balance, payable or receivable by his Bank after taking into account the various amount of receipt and payment. The official return of their respective Bank to meet again in the afternoon to return any dishonored instruments to the officials of the respective Banks. The final settlement is effective by the supervisor of the clearinghouse by debiting or crediting, as the case may be, the accounts of the respective Banks as maintained with the clearinghouse. Outward Bills for Collection (OBC): Customers deposit cheque, drafts etc. for collection, attaching their deposit slip. Instruments within the range of clearing are collected through local clearinghouse. But the other, which is outside the clearing range, is collected through OBC. A customer of EXIM Bank, CDA Avenue Branch, is depositing a cheque of Sonali Bank, Dhanmondi Branch. As a collecting bank EXIM , CDA Avenue Branch sends IBCA along with cheque to EXIM , Main Branch. EXIM Bank, Main Branch will collect it by EXIM Bank, Dhanmondi Branch, the agent. They will forward the bill to that particular (Dhanmondi) branch. OBC number given the on the forwarding letter.

57

Charge for OBC: Amount Tk. 1-5,00,000 TK. 5,00,000 Above Inward Bills For Collection (IBCA): In this case bank will work as an agent of the collection bank. The branch receives a forwarding letter and the bill. Next steps are: Entry in the IBCA register, an IBCA number given. The instrument is sent to clearing for collection. Minimum Amount TK. 25 Tk. 600 Commissio n 0.10% 0.10% Postage Charge 20 20 Vat 15% on Commissio n

An IBCA is dispatched in this regard. If dishonored in this case the instrument is returned to the collecting branch along with return Memo indicating the cause of dishonored. Mail Receive and Dispatch Section: Banking is the business of correspondence. Lot of mail comes to the bank and dispatch from the branch daily. Lot of my document causes much loss for bank. That is why bank has to record all Mail received and dispatched through the bank. Mail receiving: All mail comes to the bank recorded in this desk. For this reason a register book maintained called inward mail register. A number is given on receiving mail and records particulars of document in the register book. Mail Dispatching: Before dispatching mail from the bank must record in outward mail register. A number is given on the mail. Destinations, date of dispatch are recorded in that register book.

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ACCOUNTS DEPARTMENT Introduction: Accounts division is the nerve center of a bank. As all transactions carried by a bank is being legalized as far as accounting is concerned. If transactions were not recorded properly there would be dis-equilibrium in state of the bank. There can be imbalance in the cashbook thus the whole mechanism will collapse. The regular tasks of department are: To record all transactions in the cash book. To prepare daily fund position, weekly position, periodic statement of affairs. Prepare necessary statements for reporting purpose. To pay all expenditures on behalf of the branch. Make salary statements and pay salary. Branch to branch fund remittance and supporting accounting treatment. Prepare statements for customer. Publishing basic data of the branch etc.

General practices of an Accounts Department: EXIM maintains slip system of accounting. Scrutinizing Vouchers: At the day end all vouchers are sent to the accounts department by the respective department from where vouchers are originated. On the next day an `activity report is received from computer department. The activity report is the detail statement of all the transactions carried by the branch of a particular date. It is the summary of all account position. It also displays cash, clearing, transfer position, individual deposit account position etc.

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Statement Prepared in Account Section: The following weekly/ monthly/ quarterly and half-yearly statements should be submitted to Central Accounts Division of Head Office: SL No 01 02 03 04 05 06 Particulars of Statement Weekly Position S.B.S.1 S.B.S.2 Quarterly Statement of Scheduled Bank Statement of Deposit Landing and Borrowing Business Performance report This department also prints the following statements: Daily Statement of Affairs. Daily Statement of Income & Expenditure. Daily Loan Listing. Period Weekly Monthly Quarterly Quarterly Half Yearly Monthly Last date of submission to HO. By every Saturday 10th next month 5th next month 7th next month 7th next month 1st next month

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LOANS AND ADVANCES Introduction Forms of Loans and Advances Overdraft Cash Credit Term Loan Loan General Stuff Loan Commercial Loan Bills Portfolio

Procedure of Loan Sanction and Disbursement

LOANS AND ADVANCES

61

Introduction: The two main functions of a bank are borrowing money from public by accepting deposit and lending to the public for the development of trade, commerce, industry and agriculture. Banks give some interest to depositors for deposit and take higher interest for lending. The margin is the banks profit. So, lending is by far the most important function of modern bank. The strength of a bank is, thus, primarily judged by the soundness of its advances. A wise and prudent policy in regard to advances is considered an important factor inspiring confidence in the depositors and prospective customers of a bank.

Advances not only play an important part in gross earnings of bank, but also promote the economic development of the country. All types of business activity includes trade, industry and agriculture have to depend on bank finance in one form to offer. Bank by channeling accumulate savings of the nation into productive uses, help both the depositors and the borrowers. EXIM disburses advances in two broad areas. These are industrial credit and commercial credit scheme. Industrial credit: Industrial credits are given for industrial purpose. The sector where some process involves is called industry, such as shape of material. Industry can be two types: 1. Manufacturing industry- Cement, steel factory etc. 2. Service industry- Hotel, transport, etc. Industrial credit is given for two purposes: Term loan - fixed assets financing. Working capital - current assets financing.

Commercial Credit:

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Commercial credits are given for trading purpose. Where no process involved. EXIM lends support towards development of trade, business and other commercial activities in the country. Forms of Loans and Advances: The making of loans and advances has always been prominent and profitable function of a bank. Sanctioning credit to customers and others out of the funds at its deposal is one of the principle services of a modern bank. Advances by EXIM are made in different forms. Such as: Overdraft Cash credit Term loan Bills Portfolio Packing Credit Bank Guarantee Commercial Loan

Overdraft (OD): The overdraft is a kind of advances always on a current account operated upon by cheque. The customer may be sanctioned a certain limit upon which he can overdraw his current account within a stipulated period. Here, withdrawal or deposits can be made any number of times of the convenience of the borrower provided the total amount withdrawn does not, at any time exceed the agreed limit. Interest is calculated and charged only on the actual debit balance on daily (produced) basis. While in a current account cheques are honored if the balance is in credit, the OD arrangement enables a customer to draw over and above his own balance up to the extent of the limit stipulated.

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For example, if there is a credit balance of TK. 10,000/= in a customers current account and an OD limit of TK. 10, 000/- is sanction to the customer, then he can draw cheques up to TK. 20,000/-. There is no restriction unlike in case of loan, on drawing more then once. OD facilities are generally granted to businessman for expansion of their business. It is essential that a letter of continuity must be obtained in case of OD account. The letter makes the customer liable to the final balance of his account by confirming the intervening debits and credits in his account. Exim has the following types of OD: SOD against financial obligation SOD against FDR SOD general Others

Year wise Overdraft Position of the CDA Avenue Branch (Amount in Million Tk.) Year SOD against financial obligation SOD against FDR SOD general Total Cash Credit (C.C): A Cash Credit is an arrangement by which the customer is allowed to borrow up to a certain limit. This is a permanent arrangement and the customer need not borrow the sanctioned amount at once, but draw the amount as when required. He can put back any surplus amount, which he may find with him. Thus cash credit is an active and running account to which deposit and withdraws may be elected frequently. Interest is charged only for the amount withdrawn and not for the limit amount. If 2006 693 53 00 786 2005 137 37 36 210 2004 139 22 81 242 2003 65 58 123

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customer does not use the cash credit limit to fulfill extent, a commitment charge is made by the bank. Cash Credit provides elastic form of borrowing commercial since and the limit fluctuates for according to the needs of businessman. Cash Credit is favorite mode of borrowing by large industrialists meeting their working capital requirements. The limit of cash credit is allowed generally for one year. Interest rates for Cash Credit: Cash Credit C.C.(Industrial) Working capital requirement C.C. Commercial/ Trade Interest Rates 13% 13%

EXIM provides three types of Cash Credit (CC) facilities. These are --- Cash Credit (Hypothecation) Cash Credit (Pledge) Cash Credit(Export)

Year Wise Cash Credit Position of the CDA Avenue Branch (Amount in Million Tk.) Year Cash Credit (Hypothecation) Cash Credit (Pledge) Cash Credit(Export) Total 2006 875 0 875 2005 423 1 424 2004 336 0.60 336.60 2003 207 207

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Term Loan: The loan which, is repayable in fixed fixture date, is called term loan. This loan is made to large well-established business enterprise for financing capital expenditure. Businessman requires this loan for purchase or renovation of funds, buildings, and factory sheds, and machinery etc. the loan is to be repaid for according to a scheme of repayment by installments. Installments may be monthly, quarterly, semiannually, annually depending on type of loan. This type of is given for long term, mid term, short term and requires large investment. Market study and environment is necessary before allowing such loan. EXIM charges 13% interest for such loan. Year Wise Loans (General) Position of the CDA Avenue Branch (Amount in Million Tk.) Year Loans General Staff Loan: EXIM provides loan facilities to its employees. Interest rates vary on the nature and objective of loan. Basically staff loan is disbursed for staff house building purpose and household consumption. In case of staff loan repayment procedure is followed on monthly basis. Year Wise Staff Loan Position of the CDA Avenue Branch (Amount Tk.) Year Staff Loan 2006 40 2005 17 2004 9 2003 3 in lac 2006 623 2005 211 2004 66 2003 56

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Bills Portfolio: Bank can allow credit to customers in the way of purchasing and discounting bills. When client submit bills, a margin (covering also the interest on the loan) amount is deducted from the face value of the bill and the rest is provided to the client .Bills can be local or foreign. This may be clean or documentary. Documentary bill is supported by various documents such as -- Local Bill Purchase supported by Documents [LBP (D)] Foreign Bill Purchase supported by Documents [LBP (D)]

Year Wise Bills Portfolio Position of the CDA Avenue Branch (Amount in Million Tk.) Year Local Document Bills Purchase Foreign Document Bills Purchase Total Packing Credit: Packing Credit (P.C.) is provided to the client against confirmed export orders (Export L/C) covering maximum 90% of the value of the order. As the name implies this type of loan is provided to procure & process the raw materials for making finished goods to be exported.This loan is provided at reduced interest rate as per Bangladesh Banks instruction. However, Bank can avail refinance subsidy from Bangladesh Bank to compensate the reduced interest rate. The packing credit is adjusted through the export proceeds. 59 21 27 20 2006 59 0 2005 17 4 2004 21 6 2003 15 5

The Export L/C becomes primary security for the loan. The loan is sometimes collateralized by equitable mortgage of property. In any case

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Export Finance Guarantee from Sadharan Bima Corporation has to be obtained before the lain is disbursed. Year Wise Packing Credit Position of the CDA Avenue Branch (Amount Tk.) Year Packing Credit Bank Guarantee: Bank Guarantee is also a non-funded facility provided to the client. Bank on behalf of the client undertakes to pay agreed amount of money at certain time if client fails in due performance. Bank Guarantee is generally provided in Lieu of earnest money for bidding in tender by the client (Bid Bond) or as guarantee for due performance of contracted work (Performance Guarantee).EXIM Bank generally provides guarantee facility for maximum one year. Usually 10% - 25% margin is obtained from the client against the guarantee amount. Commercial Loan: This type of credit facilities is mainly related to post import financing. It is given for short period. PAD, LIM, LTR are fall in this category. A detail about these credits has been discussed in foreign trade part. PAD: This means payment against documents. After getting documents from negotiating bank-opening bank informs importer for clear the documents and bank creates a loan account. 30 days are allowed for this type of loan. Bank charge interest @ 13% in this credit facility. The Bank that establishes the letter of credit is bound to honor its commitment to pay for import bills when these are presented for payment, if drawn strictly in terms of the letter of credit. The foreign correspondent, who negotiates the documents, gets payment as per stipulated reimbursement terms of the L/C to the debit of the account of the L./C opening banks F. C account. The opening bank lodge the shipping documents in their books and 2006 30 2005 21 2004 10 2003 8 in lac

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responds to the debit advice originated by foreign correspondent to the debit of payment against documents (PAD) account. In fact, the amount stands as advance to the importer, which is adjusted by delivery of documents against payment, or by allowing post import finance such as LIM or LTR. LIM: Loan against Imported Merchandise (LIM) is connected with import facilities. As per pre-arrangement or under forced situation when the client is unable torture the LC documents, bank then clear the imported goods from the customs and store it in banks warehouse. LIM is given for maximum 60days within which customer has to adjust liability and take delivery of the imported goods from the banks custody. Bank charges interest @ 13% on this credit facility. Loan against imported merchandise is allowed against imported merchandise storing the same in banks custody. The bank through its approved clearing agent clears the merchandise. The advance is adjusted by delivering the goods against payment by the importer. The documents remain with the Bank. LTR: Loan against Trust Receipts (LTR) is also post-import finance facility. This type of facility is given to creditworthy and selective customer. In LTR goods are sent to the customers godown after clear from Port. Customer has to adjust liability within 30,60,90 days or the days determine by the client and banker of taking such facility. Bank charge interest @ 13% for this credit facility. Year Wise Commercial Loan Position of the CDA Avenue Branch (Amount in Million) Year 200 200 2004 2003 Payment Against Documents(PAD) Loan against Trust 6 200 389 5 128 312 225 166 40 71

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Receipts (LTR) Total = 580 440 391 111

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Year Wise Loans Position of the CDA Avenue Branch (Amount Miillion) Different Types of Loan Overdraft Cash Credit Loans General Staff Loan Packing Credit Bills Portfolio Commerci al Loan Total Distributi on In % 786 25% 875 23% 20 06 423 4 3 59 440 259 0 Distributi on In % 210 16% 424 32% 20 05 16% 0.30% 0.20% 1.5% Distributi on In % 242 23% 335 32% 20 04 69 1 1 11 7% 1% Distributi on In % 123 24% 207 41% 20 03 56 1 1 7 12% 1% 22% 100% in

16% 211 0.30% 0.20% 1.5% 4 2 20

34% 440 100% 131 1

34% 391 100% 105 0

37% 111 100% 506

Loans Position for the last 3 Years

500
Loan(in million)

400 300 200 100 0 2005 2003 2004 2002

Year

Overdraft Cash Credit Loans General Bills Portfolio Commercial Loan

2003 2001

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Comparative Position of the Loans of CDA Avenue Branch (Amount in million) Different Types of Loan Overdraft Cash Credit Loans General Staff Loan Packing Credit Bills Portfolio Commercial Loan Total 200 3 123 207 56 1 1 7 111 506 200 4 242 335 69 1 1 11 391 1050 Increa se in % 97% 62% 23% 57% 252% 108% 2004 242 335 69 1 1 11 391 1050 2005 210 424 211 4 2 20 440 1311 Increa se in % (13%) 27% 206% 300% 100% 82% 13% 25%

Loans Position of the CDA Avenue Branch

1400 1200 1000 800 600 400 200 0 1311 1050 506 Loans Loans(in million)

2003 2001

2004 2002 Year

2005 2003

Interest received from Loan for the last 3 years Year Interest Received from loan 2003 60 2004 132 (Amount in lac) 2006 2005 162 24.14

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Year wise Annual Investment- 2006

Investment
Figure in Million 40000 30000 20000 10000 0 7954.56 2002 32641.27 26046.34

19332.44 12289.12

2003

2004 Year

2005

2006

Year wise Annual Investment (Share & Bonds- 2006)

INvetments (Share & Bonds)
2500 2000 1500 1000 500 0 2002 2003 2004 Year 2005 2006 1419 2377.07 2233.25

Figure in Million

1542.991633.03

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Procedures of Loan Sanction and Disbursement: Bank follows some necessary steps to sanction loan to borrower. This procedure mainly applicable for sanctioning and disbursing term loan although other advancing procedures are also follows nearly the same procedure First Information Sheet

Loan Application From

Credit Investigation

Loan Appraisal

Credit List Proposal

Sanction Letter

Loan Documentation

Loan Disbursement

Follow Up

Loan Adjustment

Recovery of Loan

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Documents required for procuring Loan Proposal: Following are the documents should be supplied by the client: a. TIN certificate of the client. b. Bank statement for last two years. c. Up to date trade license. d. Present liability position of the company and owners. e. Name and Address of the Sister concern f. Export and Import performance. g. Personal information in a prescribed from. h. Balance sheet for the last three years i. Memorandum & Article of association signed by the Managing Director j. Profile of directors Or partners. Credit Investigation and Loan Appraisal: After getting Loan application from the customer, bank started appraisal of the loan. For this bank First collect necessary information about the client. And then with help of this information bank appraisal the loan application.

Collection Of Credit Information:

For the purpose of assessing the creditworthiness of a borrower a banker has to collect the above-mentioned information from a number of sources. Every bank maintains a Credit investigation department at its head office and main offices in larger cities to collect information regarding the financial position of its borrowers. At other centers, branch mangers perform credit investigation. The credit information is collected through the following sources:

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 Borrower: Most of the information may be secured from the borrower directly. The loan application form seeks basic information about the borrower and his business. The banker may examines his accounts books and note his past dealings with other banks or parties Market Reports: Banks try to find out the creditworthiness of the party by making enquiries from the brokers, traders and businessmen in the same trade or industry. Their individual opinions may differ but a balanced opinion may be formed about the borrower on the basis of the feelings expressed by a number of such persons. Exchange of Credit Information amongst Banks: It is the practice and customary usage amongst banks to exchange credit information relating to the constituents in their mutual interest. But the credit reports exchanged by banks are brief and superficial. They are in general and guarded terms. Banks are reluctant to exchange meaningful credit information because they apprehend that legal protection available to them will be lost if more facts are divulged to the enquiring banks. A study Group appointed by the Reserve Bank concluded the existing legal protection is adequate to permit banks to exchange meaningful credit information on their constituents. The study Group, therefore, suggested that: i) There should be free and frank exchange of credit information amongst the banks; and ii) There should be qualitative change in the contents of credit reports, which should highlight the management practices of the customers, their behavioral pattern with their buyers, sellers and with the bank instead of concentrating entirely on the worth of assets and financial strength. Similarly, the customers ability, business acumen and integrity and willingness to honor commitments should also be covered in the Credit Reports.

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iii) A central agency, to be called Credit Information Trust, i.e., CREDIT be established for organized collection, collation, storage and exchange of credit information amongst the banks.

Loan appraisal:

With the help of the above information the bank appraise the loan proposal by the following points: Credit Worthiness of the client on the basis of 5 Cs. i) Capital, ii) Character, iii) Capacity, iv) Control and v) Collateral Background of the Clients family. Nature and scope of the business of client. Market reputation of the client. Turnover of the business of client. Dealings of client with the bank and turnover in clients bank account. Clients business experience. Worth & property of the client. Location of business/firm/industry. Amount and Purpose of the loan. Turn over of the sister concern ( if any).

Risk Factors: Before Loan settlement the Banker must carefully remember the Risk Factor. The following situation and circumstances may tell upon the companys performance. a) investment. b) c) business. Sudden change in social economic environment. Continued political unrests leading to disruption in banking Unforeseen situations and circumstances leading to bad

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d)

Loans provided to the parties may turn bad to some extent leading to reduction of profit, which may require the Bank to make higher provision. This will result in lower profits.

e)

If contingent liability then net profit will be adversely affected. It will also adversely affect the cash flow of the Bank.

f)

Banking sector particularly nationalized commercial Bank have 40% Bad Loan but in private sector Bank, this rate comparatively lower at present. In this event if investment turns bad this percentage to up therefore bear risk.

g) h)

In the event of introduction of any new laws/regulations by any regulatory body of the country may lead to risk. Potential changes in global or national policy may impose risk.

Preparation of Loan Proposal and Sanction: Branch if satisfied with the client and want to sanction credit to the client then it prepare a loan proposal with all details as discussed above and send to the higher authority for approval. Credit proposal is include with the following: 1) Application of the borrower 2) Stock Report 3) Undertaking from the borrower 4) Valuation report of Collateral If higher authority approved then branch will sanction credit to the client. Necessary documents for Loan Settlement: For SOD against F.D.R/P.S.P./Saving Scheme/General Loan: a) Demand promissory (D.P.) note. b) Letter of Arrangement. c) Letter of Lien. d) Letter of Continuity.

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For SOD General, Cash Credit (C.C.) Hypothecation: a) Demand promissory (D.P.) note. b) Letter of Arrangement. c) Letter of Hypothecation. d) Letter of

continuity. e) Supplementary Arrangement. For Staff Loan: a) Demand promissory (D.P.) note. b) Letter of Undertaking. c) Letter of Authority. e) Letter of Disbursement. Arrangement. g) Letter of Hypothecation. h) Supplementary letter of Hypothecation/pledge. For Public Limited Company: With the above documents Personal Guarantee of all directors is necessary. Loan Disbursement: Loan is allowed for a single purpose where the entire amount may be required at a time or in a number of installments within a period of short span. After disbursement of the entire loan amount, there will be only repayment by the borrower. A loan once repaid in full or in part, cannot be drawn again by the borrower. Entire amount of loan is debited to the loan A/C in the name of the customer and is paid to him through his STD/CD Account. Some times loan amounts are disbursed in dash. Follow up and recovery of the Loan: After disbursement of lone to a client it is the sole duty of the disbursing branch to follow up loan, whether it is properly utilized or not. So report on d) Letter of installment. f) Letter of

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development and submit the same to the manager/sanctioning authority. If loans properly follow up by the disbursing branch, then the risk of default will minimize.

INTERNATIONAL TRADE FINANCE

Introduction Difference Between International Banking and Domestic Banking Risk in International Trade International Trade Considerations Political, Legal, Economic issues to be considered in International Trade

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FOREIGN EXCHANGE Introduction Summary of Foreign Exchange Procedure Foreign Exchange Mechanism Types of Foreign Exchange Limit Sanctioned by Commercial Bank

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 EXIM Bank of Bangladesh Limited deal in foreign exchange, which includes remittance of currency and financing, exports and imports. Foreign exchange dealing is one of the main functions of the bank and it generates a significant portions a banks income. Foreign Trade is one of the most important segments of Bank Business. With the changes of time international trade is diversifying gradually. Modern banks (like EXIM) are playing significant role in foreign trade. Foreign trade Comprises of Import & Export business. A lot of work relating to export and import are done by banks. While performing those tasks bank should be very much cautious as lot of complexities are there. Foreign trading is strictly controlled by the Bangladesh Bank. Therefore an deviation or mistake will cost bank a more. Dealing in foreign trading needs a lot of concentration, accuracy and technical know how as any mistake or malpractice may lead to disaster for a Banks Business. Personnel should posses the above qualities to work in this arena.

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Summery of Foreign Exchange Procedure: The buyer and the seller conclude a sales contract providing for payment by documentary credit. The buyer instructs his bank-the 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. As 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 requirements 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. Any 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.

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The issuing banks checks the documents and if they meet the credit requirements, either Effects 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 Reimburses in the pre-agreed manner the confirming bank or any bank that has paid accepted or negotiated under the credit.

When the documents have been checked by the issuing bank and found to meet the credit requirements, 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 goods.

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FOREIGN EXCHANGE MECHANISM

Sales/ purchase Contract

ISSUING BANK L/C OPENNING BANK

Issuing L/C Forwards Documents Makes payment

O R PAYING / REIMBURSING BANK Sources: International Trade Finance - Journal, (Page - 30) Bangladesh Institute of Bank Manage Management

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Pay or Reimburses

ADVISING BANK CONFIRMING BANK NEGOTIATING BANK

Makes Payment

BUYER/ IMPORTER

Present documents

Advises or confirms L/C

INDENTOR

SELLER/ EXPORTER/ BENEFICIARY

Application for opening L/C

Makes Payment against documents

Submits documents

Instructs to pay or Reimburse

Types of Foreign Exchange Limit Sanctioned by Commercial Banks Foreign Exchange Limits can be broadly into these categories: Letter of Guarantee. Export Business. Import Business. Foreign Exchange Remittance. I shall discuss the above mentioned in detail next.

LETTER OF GUARANTEE Guarantee Tender Guarantee/ bid bond/Tender bond

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Performance Guarantees Other sort of Guarantees Precaution for issuing Bank Guarantee Banks liability

INTRODUCTION: A guarantee is an irrevocable undertaking to pay in case of a certain eventuality. Guarantee serves as a protection against losses, which may occur if anyone of the party fails to fulfill his/her contractual obligations. Coverage is also required if one partner make advance performance of some kind i.e.; a down payment before he/she has obtained the relevant counter performance form his/her partner. According to contract act-1872 under section 126 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. A guarantee is usually for a specified time period.

Letter of Guarantee:

Inland and Foreign

Export Performance bonds Backed by Counter Guarantee of party Backed by ECGS cover Fully secured (backed by 100% cash margin) Fully secured by approved securities. Partly secured (with minimum cash margin of say 25%) Unsecured guarantees (with a margin less than 25%) Deferred Payment Guarantees (DPG) (Fully secures by collateral) Tender guarantee/bid bond/Tender bond:

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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 he/she will also sign the contract in the event of the order being granted. A 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 bank-issuing 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 project, varying from 1% to 5% of the contract value. Performance guarantee: A performance guarantee expires 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 favour. 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.

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Other sort of guarantees: Down payment guarantee: Down payment guarantee assures to the importer that his down payment or advance payment will be refunded if the exporter fail to comply in full or in part with his contractual obligations.

Warranty guarantee: In most cases, it is not possible for the importer to check immediately the quality of the goods he has ordered and received. A warranty guarantee provides a security that within the specified period he will receive a certain amount if the goods are not the agreed quality specifications and the exporter does not honour his obligations to remove discrepancies, defects or repair damage.

Payment guarantee: Through the payment guarantee, the buyers 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 request to the bank to issue the guarantee with the terms and conditions specified by him. The banks resource is the counter guarantee. The terms and conditions of the guarantee should be covered by the terms and conditions of counter guarantee. Normally banks prepare the format of the counter Guarantee by the banks approved lawyer. At the request of the account party the bank issues the guarantee in favour of the beneficiary.

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In foreign trade, guarantee is demanded by the buyer to ensure secured performance to the sellers ability. When the exporters bank assumes a direct obligation vis--vis beneficiary then it is a direct guarantee. If a bank in the importers country gives the relevant undertaking to the beneficiary at the request of the exporters bank, whereby the latter bank bears full liability is an indirect guarantee. In the Bank guarantee following particulars are normally mentioned. Beneficiary (Name and Address) Amount Expiry (with claim period) Delivery object Information relating to a guarantee issued under a documentary credit (In case of foreign guarantee) Special conditions Handing over to principal/beneficiary/representative/third party. Bank guarantee is normally issued on non-judicial stamp while in the format of counter guarantee adhesive stamp is affixed. Precaution for issuing Bank guarantee: For issuing bank guarantee following measures should be carefully observed: Genuinity of the client who approaches to issue Bank Guarantee. As such credit worthiness of the client should be judged. 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. As such if possible higher cash margin should be taken.

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 Guarantee should be issued with the approval form the competent authority. Guarantee should specify expiry period along with claim period. Proper entry of Bank Guarantee should be given in the register and voucher should be passed. Particulars 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 examined.

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EXPORT (BUSINESS) FINANCING AND TYPES OF PROCEDURES Introduction Fiscal Incentives Financial Incentives Financing at Pre-shipment stage

Documentation for Pre-shipment Credit Operation of B.B.L.C: Paper /Documents Required for Opening B.B.L.C

Financing at Post Shipment Stage Some Defective Point/Clause Appeared In the export L/C Dealing in Foreign Business by EXIM

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Introduction: Export brings the foreign currency in the economy. Higher the export higher the reserve of foreign currency. The export section of EXIM is engaged with various export-related activities for the encouraging the exporter. The major function of this section is comprises with purchase, collection and negotiate the export bill, provide the exporter in export financing and helps the exporter in different issues. A person desired to export should make application to obtain ERC (Export Registration Certificate) from CCI&E. Then the person should step in to a bank along with ERC to obtain EXP from the bank. He must submit: Trade license. ERC. Membership Certificate from chamber of commerce. Pre - Shipment Finance Advance against duty drawbacks (DDs) Advance against cash incentives. Advance against Recluses. Shipping Loan (with ECGS cover) Shipping Credits (with ECGS cover)

Post - Shipment Finance Foreign bills purchased (FOBP sight bills DP under LCs of Prime bank) FOBP (sight/ DP bill without LC) FOUBP (usance) without LC but with ECGS cover Advance against DDS Advance against cash incentives Advance under IPRS (International Price Reimbursement Scheme)

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Expansion of the countrys supply base is important to any export strategy. Removal of constraints to supplies and improvement in the incentive structure will enhance the export performance of the country. At the same time expansion of production across the industries along with adaptation and development of products to complete in the overseas market constitutes a medium to long-term priority. The strategy thus intends to turn the drive for export-led growth into an economic development. In the line with the above objectives and strategies of an incentive package has been worked out in Fifth Five-year plan. Main incentives in this package may be summarized as follows: a) Fiscal incentives b) Financial incentives Fiscal incentives: Duty on import of capital machinery for cent percent exportoriented industries outside Export Processing Zones (EPZs) has been withdrawn; Provision for bonded warehouse to facilitate duty-free import of raw materials for export production; Provision for duty drawback, if the bonded warehouse facilities is not availed of: Provision for sale of 20% of the products by the cent percent export oriented industries in the local market on payment of duties and taxes; Exemption to the extent of 50% of income arising out of export business from income tax; Provision for tax holidays; and Provision for duty-free import of samples.

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Financial incentives: Provision for local currency export credit at a concessional rate of interest within a band Provision for foreign currency export credit under Export Development Fund (EDF) at a concessional rate of interest (rate of interest applicable is LIBOR +1%); Provision for back-to-back letter of credit for import of raw materials for export production on deferred payments basis; Retention of export earnings by the exporters in their own foreign currency accounts. Following are the highlights of Export Policy (1997-2002) announced in Dhaka on 05th August 1998. Reducing foreign trade deficit and achieving highest national growth. Raising export to 8.1 billion US dollar by the year 2001-2002 Thrust sectors: leather and leather goods, ready-made garments, computer and agro processing industries. Expanding duration of export credit from 180 days to 270 days. Allowing exporters to deposit 40 percent of their export earnings instead of 20 percent Priority to new entrepreneurs in allocating export credit Income tax rebates on export earnings. Duty free import facility of capital machinery for the 100 percent export oriented industries. Tax exemption on export-oriented industries till the year 2000 in line with the industrial policy. Reduced rate of air cargo charges for exporting goods under crash program, including fruits and vegetable. Multiple entry visas for importers and foreign investors. Incentives to backward linkage industries and ensuring optimum utilization of domestic raw materials in producing export products.

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 Setting up of IT village and building trained manpower in computer software. Allowing exports and import without L/Cs. Exporters requires financial services from the bank at different stages of their export operations such as receiving of L/C from the advising bank, at the pre-shipment and post shipment stages for the procurement or production of export goods. Financing at Pre-shipment stage: Pre-shipment credit covers credit facilities extended to the exporters by the commercial banks at the pre-shipment stage i.e. prior to the actual shipment of goods for export. Credit can be allowed for the following purposes: Cash for local procurements and meeting related expenses Procuring and processing raw materials Packing and transporting of goods for export Payment of Insurance premium Inspection fees Freight charges etc.

Pre-shipment credit facilities are essentially a short-term credit, which is to be liquidated by negotiation/purchase of export bills covering the particular shipment. Pre-shipment credit facilities can be allowed against irrecoverable letter of credit of a good foreign Bank considering the credit worthiness of the exporters. Pre-shipment credit is allowed in the following forms: 1. Export Cash Credit (Hypothecation) 2. Export Cash Credit (Pledge) 3. Export credit against trust receipt 4. Packing credit 5. Back to Back letter of Credit Back to Back letter of Credit (Inland) Back to Back letter of Credit (Import)

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1.

Export Cash Credit (Hypothecation): Such credit facility is allowed to the credit worthy exporters for procuring and processing of goods or raw materials into finished goods for export against hypothecation of stock of raw materials into finished goods for export against hypothecation of stock of raw materials/goods-in-process/finished goods meant for export. Normally collateral securities are obtained in case of such facility

2.

Export Cash Credit (Pledge): Such a credit facility is allowed against pledge of exportable goods or raw materials. Sometimes collateral securities may be obtained which may depend on the quality of goods pledged generally.

3.

Export Credit against Trust receipts: Such a credit is allowed to a credit worthy exporters against exportable goods where retaining the goods under banks pledge. The exporter by signing the stamped trust receipt holds the goods in trust on behalf of the bank. Collateral security is generally obtained.

4.

Packing Credit: Such advance is provided to the exporter against: Lien on the Export L/C Copy of Invoice The security of Railway Receipt/Steamer Receipt/Barge Receipt/Truck Receipt evidencing transportation of the goods to the port. Undertaking of the C&F 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.

5. Back to back letter of Credit:

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Operation of BBLC: Before opening B.B.L.C credit report on the applicant, the supplier / beneficiary and on the buyer of R.M.G. to be prepared (Credit report on the beneficiary of the B.B.L.C. is not a must if the L/C limit does not exceed TK. 5 Lac). Report from CIB of BB is to be obtained and LRA is to be prepared. If necessary B.B.L.C may be opened up to the extent of 75% of F.O.B value of export L/C in case of both woven and knit garments. Where FOB value exceeds US$ 60/ dozen and cutting and making charges not less than US$ 12 per dozen, back to back L/C may be opened up to 80% and 85 % of FOB value of export L/C for quota and non quota category (of woven ready made garments respectively). B.B.L.C up to 805 of F.O.B value for all children items may be opened. B.B.L.C may be opened on usance basis covering usance period of not more than 120 days and interest for usance period shall not exceed L.I.B.O.R. The production capacity of the factory and the time gap available between the shipment date (of export L/C) and expected arrival date of raw materials must be examined carefully to ascertain whether the garment products can be exported within the shipment validity to avoid stock lot. Branch will obtain pre and post shipment Export credit guarantee from Shadharan Bima Corporation to safe guards the banks interest. Adequate insurance policy covering the risk of fire, R.S.D. (Riot, Strike and Damage), flood, cyclone and burglary should be obtained from the bonded warehouse and the factory. On receipt of import bills drawn under B.B.L.C, the branch will examine the documents very carefully and must inform the negotiating bank over telex about the discrepancy if found within 7 banking days following the day of receipt of the documents.

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The importer must also be notified as to discrepancies if the documents comply all the terms and conditions of B.B.L.C. acceptance is communicated to negotiating bank fixing up the maturity date for payment of import bills without delay. Branch will arrange clearance of imported consignment by deputing suitable banks representative to escort the consignment from the port up to the factory premises. Goods to be cleared through a C&F agent nominated by the garments industry and approved by the bank. During the course of production, the branch will exercise close supervision and control over manufacturing process. If the goods become stock lot the matter should be advised to National Board of Revenue (N.B.R) and Bangladesh Bank immediately. Paper / Documents Required For Opening BBLC Master L/C Valid Import Registration Certificate (IRC) and Export Registration Certificate (ERC) issued by C.C.I & E. L/C application form and L.C.A. form duly filled in and signed. Performa Invoice and Indent. Insurance cover note with money receipt. Duly signed IMP form. Back to Back Letter of Credit (Inland): Such facility is allowed to the exporter who received export letter of credit from overseas buyer but is not the actual producer/manufacturer of the goods for export. In such a case, the bank at the request of the exporter opens Inland letter of credit in favour of the actual producer within the country. The inland letter of credit on the strength of export letter of credit must confirm to the terms and conditions of the export letter of credit with the following exceptions: Name of the beneficiary will be actual supplier.

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 L/C value will be less than that of the export letter of credit i.e. less margin of profit of the exporter. Period of validity will be earlier than the expiry of the export L/C Back to Back Letter of Credit (Import): Where permitted by CCI & E and Bangladesh Bank, Back-to-Back L/C can be opened in favour of foreign supplier for import of raw materials for manufacture of exportable items. Documentation for pre-shipment Credit: Lien on confirmed irrevocable and unrestricted Letter of Credit from a etc.) Letter of Hypothecation duty stamped (in case of facility allowed under hypothecation) Letter of Pledge duly stamped (in case of facility allowed under pledge) Detailed stock statement duly verified by Bank officials. Insurance Coverage under Bank mortgage clause. Letter of disclaimer to be signed by the owner of the godown in case of rented godown. Documents of title to goods. Trust receipt Export credit Guarantee Scheme Insurance where applicable Export form duly signed by the exporter. Charge, and other documents, if any. Financing at Post Shipment Stage: Banks in this country generally extend post-shipment credit to the exporters through: Negotiation of documents under letter of credit Purchase of DP and DA bills good foreign bank (ascertain about world ranking and country ranking from the Bankers Alamance, Polack Directory

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 Advances against Export bills surrendered for collection.

1. Negotiation of Document under letter of Credit: Under this arrangement, after the goods are shipped, the exporter 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. 2. Purchase of DP and DA Bills In such a case, the banks purchase/discount the DP (Documents against payment)and DA (Documents against acceptance) bills at a rate published by the International Division of the Bank. While doing so, the banks should scrutinize all the export documents carefully and clear instructions have to be obtained from the drawer of the bill in regard to all-important issues related to the negotiation of the bills. In case of purchase of export bills, the bank requires 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 documents: Protest clause Notice of dishonor Collection charges and interest Protection clause Presentation clause 3. Advances against Bills for collection: If an exporter fails to get the documents negotiated by the bank, he has to take resort to alternative course of obtaining advance from the banks

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against the security of export bills surrendered for collection. In such a case, banks may give advance to the extent of certain percentage of the value of goods depending upon the standing of the exporter and importer, nature of the good etc. Year Wise Advances against Bills for collection Position (CDA Avenue Branch) (Amount in Million) Year 2006 2005 2004 2003 Local Document Bills Purchase 59 15 8 5 Foreign Document Bills Purchase 0 5 4 3 Total 59 20 12 8 Some Defective Point / Clause Appeared In the Export L/C: Issuing bank is not reputed. Credit advised by the advising bank without authentication. Port of destination absent. Nomination of specific shipping / air line. No specific reimbursement clause. UCP clause not mentioned. Shipment or presentation period is not sufficient. Original documents to be sent to buyer or nominated agents. Part shipment is restricted. Negotiation is restricted. Shippers load and count is not acceptable.

Import (Business) Financing and types of Procedures

Introduction Sources of Financing Imports Types of Importer Financing of Importer by Commercial Banks Pre-Import Business (Finance) Letter of Credit: Special Documentary Credit Red Clause

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Operation of Documentary Letter of Credit Presentation of Documents Settlement Loan against Imported Merchandise (LIM) Cash Credit (C C) Account Loan Against Trust Receipt (LTR)

Post Import Finance

Dealing in Import Business by EXIM

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Import Business (Financing) and Types of Procedures Introduction: Bangladesh is one of the poorest countries of the world. Import of goods into Bangladesh is regulated by the Ministry of commerce in terms of the Import and Export (Control) act, 1950, various import policy orders and also public notices issued from time to time by the office of the CCI & E. In Bangladesh now emphasis is giving on export led growth strategy. Further for liberalizing the trade sector following measures have been taken: Import lubrication through removal of significant reduction of tariff & non-tariff barriers. Rationalization of tariff structure. To promote export through simplification of the procedure. The import section comprising with the function of opening LC, pre-import and post-import financing and other function of doing the import business. Import can be two types: Cash Import (usually): In this case margin should deposit in issuing bank for import. Back to back Import: In this case import can be done on the basis of Master LC Sources of Financing Imports The sources of financing imports available to us are as under: Cash Foreign Exchange Resources of the country. External Economic Aid (Commodity Aid, Loan or Credit & Grant) Commodity Exchange: Barter Special Trading Arrangement (STA)

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Types of Importers Actual users Commercial Importers Industrial Consumers Import by Ministers, Govt. Departments & other Public Sector Agencies. Lease Financing Importers. Financing of importers by commercial banks: Commercial Banks play an important role in financing imports of the country. A substantial portion of the total bank credit is deployed for financing import trade. Major import items receiving bank finance are iron, steel, engineering & other Textiles, fuel & lubricants, Food grains, oil seeds, consumer goods and miscellaneous important merchandise. Imports into our country are allowed only against opening of Irrevocable Letter of Credit except a few exceptional 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. Financing of imports by the banks may broadly be classified as under: Pre-Import finance Post-Import finance

Pre-import business (finance):

The finance, which is extended poorer to the arrival of the imported merchandise, is termed as Pre-Import finance. Pre-Import finance is allowed in the form of Letter of Credit: Letter of credit (L/C) can be defined as Credit Contract whereby the buyers bank is committed (on behalf of the buyer) to place an agreed amount of money at the sellers 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 Documentary Letter of Credit. The Uniform Customs & practices for

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Documentary Credit (UCPDC) published by International Chamber of Commerce (1993) Revision, Publication No. 500 defines Documentary credit. Any arrangement, however named or described, whereby a bank (the issuing bank), acting at the request and on the instructions of a customer (the Applicant) 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 exchange (Drafts) drawn by the Beneficiary, or Authorizes another bank to effect such payment, or to accept and pay such bills of exchange (Drafts) Authorizes 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 L/C amount to the foreign seller subject to submission of documents drawn in strict compliance with the credit terms. With the negotiation of import documents NOSTRO A/C of the L/C opening bank is debited. Types Documentary Credits may be either: Revocable Irrevocable. Revocable credit: Revocable credit is a credit, which can be amended or canceled by the issuing bank at any time without prior notice to the seller.

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 Irrevocable Credit: An 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. An 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 Documentary Credit: (1) Revolving 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 non-cumulative. (2) Transferable Credit: A transferable credit is one that can be transferred by the original beneficiary in full or in part to one or more subsequent beneficiaries. Such credit can be transferred separately, provided partial shipments are not prohibited. (3) Back to Back Credit: The back to back credit is a new credit opened on the basis of an original credit in favour or another beneficiary. Under the back to back concept, the seller as the beneficiary of the first credit offers it as security 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 beneficiarys country. (4) Anticipatory Credits: The anticipatory credits make provision for pre-shipment payment, to the beneficiary in anticipation of his effecting the shipment as per L / C conditions.

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Red Clause: When the clause of the credit authorizing the negotiating bank to provide pre-shipment advance to the beneficiary is printed / typed in red, the credit is called Red Clause Letter of Credit. Under the above mentioned clauses, the opening bank is liable for the pre-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 L/C and the rights & obligations of the different involve parties also differ from each other. The involved parties can be named below: Importer / Buyer Opening / Issuing Bank Exporter / Seller / Beneficiary Advising / Notifying Bank Confirming Bank Negotiating Bank Paying / Reimbursing Bank. Importer / Buyer is the person who requests/ instructs the opening bank to open a L / C. He is also called Opener or Applicant of the credit. Opening / Issuing Bank is the bank which opens / issues an L/C on behalf of the importer. It is also called the importers / buyers bank. Exporter / Seller / Beneficiary is the party in whose favour the L / c is advised to the exporter. It is bank situated in the exporting country and it may be branch of the opening bank or a correspondent bank. It may also assume the role of confirming and / or negotiating bank depending upon the conditions of the credit.

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Confirming Bank is a bank, which adds its confirmation to the credit, and it is done at the request of the issuing bank. The confirming bank may or may not be the advising bank. Negotiating 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. Paying / Reimbursing 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. Details regarding the rights and obligations of the different parties involved in the documentary credit operations may be had from UCPDC. Operations of Documentary Letters of Credit: The following five major steps are involved in the operation of a documentary letter of credit: Issuing Advising Amendment (if necessary ) Presentation Settlement Issuing a Letter of Credit: Before issuing an 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 instructs the bank - the issuing bank - to issue a credit in favour of the seller (beneficiary). Instruction / Application for issuing a credit should be made by the buyer

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(importer) in the issuing banks standard form. The credit application which contains the full details or the proposed credit Also serves 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 the 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 regulations relating to export. In such act of advising, the advising, the advising bank does not undertake any liability. Amendment of Credit: Parties involved in a L / C, particularly the seller and the buyer, can not 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. 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. Presentation of Documents: The seller being satisfied with the terms and conditions of the credit proceed to dispatch the required goods to the buyer and after that, has to present the documents evidencing dispatching of goods to the negotiating

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bank on or before the stipulated expiry date of the credit. After receiving all the documents, the negotiating bank then checks the documents against the credit. If the documents are found in order, the bank will pay, accept or negotiate to the issuing bank. The issuing bank also checks the documents and if they are found as per credit requirements, either Effects payment, or Reimburses in the pre-agreed manner. 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:

a) Settlement by Payment:
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 requirements, is obtained by the paying bank from the issuing bank.

b) Settlement by Acceptance:
Under 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. 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.

c) Settlement by Negotiation:
This settlement procedure starts with the submission of documents by the seller to the negotiating bank accompanied by

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a draft drawn on the buyer or any other drawee, at sight or at the tenor, as specified in the credit. After scrutinizing that the documents meet the credit requirements, the bank may negotiate the draft. This bank, if other than the issuing bank, then sends the documents and the draft to the issuing bank. As usual, reimbursement will be obtained in the pre-agreed manner. Post-Import Finance: The finance extended after arrival of the goods is termed as PostImport finance, which may be in the form of Loan against Imported Merchandise (LIM) Cash Credit (CC) & Loan against Trust Receipt (LTR). Loan Against Imported Merchandise (LIM) LIM is created under two circumstances. Firstly, 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 LIM to avoid demurrage/pilferage/damage etc. also to safeguard the interest of the bank, which is called Forced LIM. The sets of documents usually obtained are: DP Note Letter of Arrangement Letter of disbursement Letter of pledge Insurance policy covers. Cash Credit (CC) Account In some cases of Industrial importers with prior arrangement with the import documents are retired through financing from cash credit account of the party.

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The following charge documents are to be obtained: D.P. Notes Letter of Arrangement Letter of Continuity Letter from the borrower handling over physical possession of the goods. Letter of Pledge Letter of Disclaimer from the landlord in case of rented Letter of owner of rented godown acknowledging banks prior lien on the goods stored. Letter 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 Letter of Pledge. Other documents as above are to be taken as usual. Loan Against Trust Receipt (LTR) The bank handover the shipping documents to the importer for taking delivery of the goods from the port without receiving payment thereagainst 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 extent. As such, the loan is usually allowed only to corporate bodies and first class parties. It is allowed for a period of 30 days to 90 days. In addition to the Trust Receipt the following documents are also to be obtained: DP Note Letter of Arrangement Letter of Disbursement Import letter of Credit (L/C) limit - on DP/DA basis.

godown.

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 Inland L/C limits - on DP/DA basis Loan against merchandises (Pledge). Trust Receipt facility. Revolving inland L/C including back to back L/Cs / Transferable L/Cs.

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Comparative Position on overall Import Performance for the last 3 Years (HEAD OFFICE)

(Amount in Million) 2003 Item 1. Import a) Cash b) BTB (F) c) BTB (L) d) EDF TOTAL: Amou nt 4153.1 3 2200.6 5 1837.1 6 328.78 8519.2 5 191 2 113 1 237 9 113 545 4 No. 2004 Amou nt 6804.7 7 3380.8 5 2400.0 0 566.91 13152. 53 239 8 174 7 424 6 184 857 5 No. % of Growth Amou No nt 64% 54% 31% 72% 54% . 25 % 54 % 78 % 63 % 55 % 6804.77 3380.85 2400.00 566.91 13152.53 2398 1747 4246 184 8575 2004 Amount No. 2005 Amoun t 10326.1 6 4675.99 3452.26 805.65 19260.0 6 3856 2475 6151 210 1269 2 No. % of Growth Amou No. nt 52% 38% 44% 42% 46% 61 % 42 % 45 % 14 % 48 %

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Comparative Position on overall Import Performance for the last 3 Years (CDA AVENUE BRANCH) (Amount in Million) Item 1. Import a) Cash b) BTB (F) c) BTB (L) d) EDF TOTAL: 895.77 268 80.64 14.71 52 32 1910.0 460 8 109.77 36.94 76 80 113% 36% 151% 0% 108% 72% 46% 150 % 0% 75% 1910.08 109.77 36.94 0 2056.79 460 76 80 0 616 2046.93 156.00 79.60 0 2282.53 497 135 162 0 794 7% 42% 115% 0% 11% 8% 78% 103 % 0% 29% 2003 Amou No. nt 2004 % of Growth Amou No. Amou No. nt nt 2004 Amount No. 2005 Amoun No. t % of Growth Amou No. nt

0 0 991.12 352

0 0 2056.7 616 9

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Year wise Annual Export Business- 2006

EXPORT 50000 Figure Million 40000 30000 46234.59

31285.37 22418.4 20000 15124.6 10088.3 10000 0 2002 2003 2004 Year 2005 2006

Year wise Annual Import Business- 2006

IMPORT
Figure in Million 50000 40000 30000 49596.73 41432.1

26781.8 19260.1 20000 13152.5 10000 0 2002 2003 2004 Year 2005 2006

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Remittance Introduction Foreign remittance refers to the transfer of fund from one country to another either through the office channel i.e. banking channel, Post 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. BASIC places an important role to transfer money from other countries to Bangladesh and Bangladesh to other countries. Inward and outward T.T, M.T and draft are the main components of foreign exchange remittance. Foreign exchange earnings are very low as export earnings are very limited while import spending are huge which makes the balance of trade position in a chronic deficit situation. Foreign remittance is very important for the country as valuable foreign exchange is involved in the transfer mechanism. From the year 1990, financial liberalization has been started which is still going on. Due to liberalization, restrictions on foreign remittance become ease. Bangladeshi Taka. is convertible for current account transactions on March 24, 1994 with the view to achieve better exchange rate management system. And from April 1994 Bangladesh Government has accepted the status of Article VIII of international monetary fund. Foreign remittance has two wings i.e. inward and outward remittance. This can be shown below:
Foreign Remittance

Foreign Inward Remittance

Foreign Outward Remittance

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Before discussing foreign inward remittance & outward remittance, I may discuss following relevant topics in brief: AD Branch: Authorized dealer branches of the bank are those who are permitted by the Bangladesh Bank to deal in foreign exchange business subject to the fulfillment of foreign exchange rules & regulations of the country. Agency Arrangement: To facilitate foreign exchange 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. Drawing Arrangement: Drawing arrangement is made to facilitate remittances through concluding accounting relationship between a bank & corresponding bank or exchange house. NOSTRO Account: When a local bank maintains account in another bank in abroad. VOSTRO Account: When a foreign bank maintains account in local bank. LORO Account: When account is maintained by the third party is known as LORO account. Foreign inward remittance

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Foreign inward remittance refers to the currency remitted from abroad to our country. Now I shall describe inward remittance

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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, TT/MT/Drafts etc. are drawn in local bank by the foreign banks of exchange houses. When foreign bills, TCs & cash foreign currency is purchased by a local bank is also known as inward remittance. A local bank also receives indenting commission of local firm, trademarks, patent fee etc. Inward remittance can be classified into two groups: Visible inward remittance such as export 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 telex/cable or authentically faxes in foreign bank on local bank. Normally 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. FDD: Foreign Demand drafts normally issued by the foreign bank/exchange company in local bank. Foreign Currency Notes: Authorized dealers are permitted to purchase foreign currency, notes.

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TC: Issued Travelers cheques may be purchased by local bank. Cover of Export: Local banks receive export cover from foreign banks after negotiation of bill or in advance. Problem faces in inward remittance: Required particulars of the beneficiary such as name of the beneficiary A/C No. Or correct branch name may not be given in the TT. Further geniuses or signature of drafts may be forged. In case of payment, sometimes branches of the bank may create certain problem: Delay in making payment against remittance against remittance to the beneficiary. Without ascertaining genuinely, drafts may be paid. Lack of timely response/communication against the queries of remitter/beneficiary. Credit TRVs may not be timely sent to head office. Moreover particulars may not be given in the TRVs. 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 non-availability of beneficiary, the AD must report the cancellation of the remittance as an outward remittance on TM form. Foreign Outward Remittance Foreign outward remittance refers to the remittances in foreign currency made from this country to abroad. Foreign outward

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remittance includes issuance of TT, MT, FDD issued by local banks on foreign banks. Further it includes rate of foreign currency, notes, TCS, reimbursement against import, bills retired etc. Forward outward remittance can be divided into two groups: Visible outward remittance such as payment against import. Invisible outward remittance such as membership fee, subscription fee etc. Outward remittance can be made for traveling purpose, educational purpose, attending seminar & workshop, medical treatment, business travel quota, evaluation fee, membership fee, visa fee, pre-shipment fee, advertising of Bangladesh commodities etc. In case of purchase of foreign currency, an applicant must be made to an AD and if necessary requires to Bangladesh Bank. For payment against imports the prescribed application form is IMP form & for other types of remittance TM form. In the following manner outward remittance is made: TT: Local banks can draw telegraphic transfer to those banks with which they have accounting relationship & message should contain test & brief description of the beneficiary. FDD: Any authorized dealer branches can issue foreign drafts draw on the bank with which they have an accounting relationship. Foreign Currency, Notes: Authorized dealer branches are permitted to safe foreign currency notes as per ceiling fixed by Bangladesh Bank.

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TC: AD branches can sale Travelers cheques as per the ceiling fixed by Bangladesh Bank. Reimbursement against Import: Local banks can reimburse funds against import through their account. In following outward remittance, authorized dealer branches do not require prior permission of Bangladesh Bank: Profits: Foreign organization can freely remit their past tax profit to their head office. Dividend/Capital gain: Dividend income to non residents dividend declared out of previous years accumulated reserve & dividend & sales proceeds including capital gain can be remitted. Salaries & Savings by expatriates: Approved expatriates working in Bangladesh can remit 50% of salary & 100% of their salary. Technical/royalty fee: In the total fees & other expenses connected with technology should not exceed, I) 6% of the previous years sales of the enterprises as declared in their tax returns or II) 6% of cost of import machinery in case of new projects subject to the BOI registration or approval. Training & Consultancy: For the purpose of training & consultancy services, industrial enterprises may remit 1% of their sales as declared in their previous years tax return. Shipping lines, airlines, courier services: They can remit their funds locally collected towards freight & postage after the adjustment of local costs & taxes.

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When quota is exhausted, special permission is required from Bangladesh Bank. On the basis of sanction, AD branches will send outward remittance subject to the within valid time period. When 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 Foreign Exchange Policy Dept. of B.B the Ads should carry out the transactions on behalf of the original applicant for whom the forms were approved. Cancellation of MT/DD: Foreign remittance can be cancelled such as unutilized foreign currency against passport endorsement or cancellation of locally issued foreign demand drafts etc. MT/DD may be cancelled and payment against therein may be executed to the applicant only after observing all the existing formalities. In this case Bangladesh Bank must be reported and the cancellation of outward remittance will be considered as inward remittance. Outward remittance can be reported in the following form: Invisible payment schedule should be reported in schedule E-3/P-3 or schedule E-4/P-4 depending on Code No, from 0001 to 5999 & 6000 to 9999 respectively along with TM form. When bank sales foreign currency to other banks then report should be done in schedule G. In case of foreign currency sale reporting should be done in the schedule S-6 along with TM form. In case of import, reporting should be done in the schedule E-2/P-2 along with IMP form.

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All AD branches must sent statement of L/C commitment to their respective Head Office & after consolidating all the figures by the Head Office; they must submit the figure to the Bangladesh Bank. For 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. An overview of the functions catered to by a foreign exchange branch of EXIM Dealing Section 1.Quoting Rates of Exchange 2. Forward Cover (Banking of contracts) Imports Exports Remittances 1.Inward

1.Opening of L/C 1.Exprot L/C Advising 2. Payments against Documents

3. Reconciliation (Foreign Bank Accounts)

3. Loan against Merchandise (Pledge) 4. Loan against Trust Receipts (LTR)

2. Pre-shipment 2.Outward Finance - Demand Draft - Mail Transfer - Telegraphic Transfer 3. Post-shipment Finance 3.Foreign Inward Remittance Payment 4. Foreign Bills System for collection (FIRPS)

5..Export 5. In ward Bill Certificates (for collection) 6.Realization 6.Guarantees Inland and Foreign

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Concluding Part Of The Report

Analysis Of The Report Findings Conclusions and Recommendation Glossary Appendix Bibliography

SWOT ANALYSIS
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By analyzing the credit performance of the Bank, we get the following Strength, opportunity, weakness and threat (SWOT). STRENGTHS : a) It has well reputation in the market b) Not engaged in unfair business practice. c) Concentrated market. d) Increase in deposit, advance & profit compared to previous years. e) Officers are high educated. f) Executives are high qualified and experienced. g) Bank has many attractive deposit schemes. h) Well-furnished and Air-conditioned Bank. i) Efficient management practice in the Banks.

WEAKNESSES: a) Deposit is lower than advance. b) Short time experience of the Bank. c) Officer has limited experience ad not enough trained. d) Long-term credit is not sufficient. e) The number of employees are lower than work .

OPPORTUNITIES : a) Can increase the credit scheme.

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b) Can increase the advertising of the Bank. c) Private Banks becomes more reliable to local public. d) Govt. has banned some Jatiya Sanchaya patra.

THREATS : a) There are many competitions is the market. b) Competitors may have more deposit. c) Ruling Government is not conducive in the viewpoint of the Bank. d) Govt. imposes tax and VAT on profit. e) Govt. pressure to reduce interest rate.

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FINDINGS
Bank faced with higher operating cost in recent year have increasingly turned toward automation and electric equipments to replace labor based production systems. Especially for taking deposits, dispensing payments and taking credit available. The most prominent examples include ATMS (automated teller machines); which give customers 24 hours accounts to their deposit accounts.

Bangladesh is a developing country. If bank service replaced by electronic communication and automated as a result further loss of jobs as capital equipments is substituted for labor. So bank employment will be come declined.

a)

The controlling officers are effective in providing necessary guidance and support to the branch.

b)

Branch Manager Conscious efforts to achieve the targets and knows how to motivate employees and how to represent the Bank well in the local community.

c)

There are a number of banks are available. From those EXIM bank CDA Avenue Branch is successfully operating its activities.

d)

With in 2.5 years this Bank has came into competition with the oldest banks in CDA Avenue.

e)

EXIM Bank CDA Avenue Branch has earned highest profit in 2002 in comparison to other banks in CDA Avenue Area.

f)

The strategy and policy making is effective of Branch Manager. So in spite of intensity of banks, the bank has possessed its place in the competition.

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g)

As the bank uses some modern technology such as: Fax, Telex, SWIFT. So their service is better then most of the bank.

h)

The bank has no bad debt in CDA Avenue Branch. Because the credit analysts have a strong background in accounting financial statement analysis, business law and economics along with good negotiating skills.

i)

Their are professional career opportunity in banking for those who have received the necessary education and training. More over, with recent changes in services offered, technology and regulations, banking can be an exciting and challenging career. If such a career sounds interesting to any body, there is no substitute for study of the industry (bank), its history, services and problems. It is also important to visit with current bank personnel to learn more about the daily work environment inside a bank.

j)

Banks are not just financial service provider; they can also be vehicle for a satisfying professional career.

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SUGGESTIONS AND RECOMMENDATION

1. Officers to be posted in Foreign Exchange, General Banking and credit Department should be commerce background. 2. The number of employees & Officers should increase for operating official activities smoothly. 3. The employees hired into management position typically go through changing programs that vary considerably in length and content. Trainees are generally related through different department of the bank and also can given classroom instruction. 4. Most bank training programs can encourage their trainees to seek additional education including computer classes, accounting, MBA programs and foreign language instruction. 5. Bank should use more automated and electronic modern

equipments like ATM, debit card, credit card, smart card etc. 6. The banks should powerful economic and social trends effecting banking customer base with intensifying competition from non-bank financial service institution. Such as: insurance.

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CONCLUSION
The banking sector of the country has gone through a remarkable transformation since the emergence of Bangladesh 1971. Nationalized Banks enjoyed a monopoly for more than a decade when people had no alterative but to accept the poor service offered by the banks. The sceneries began to change since 1983 when the sector was opened to the private sector. The private banks are now at cutthroat competition among themselves and also with the foreign banks operating in Bangladesh. At present 54 banks including nationalized, private, specialized and foreign banks are operating in Bangladesh keeping a direct impact on the trade and business. With the opening up of the banking sector to the private entrepreneurs, there is a significant improvement in services. In addition, govt. also took initiative to reform the sector. The supervision and monitoring of the Bangladesh Bank has been strengthening resulting in improvement in the management of banks in both private and public sector. Introduction at CAMEL rating and early warning system are the major steps for bringing discipline in the banking sector. EXIM Bank has to bear the social costs by advancing credit facilities to the weaker section of the society and the budding or up coming entrepreneurs. Industry and trade will create and business conditions in the country have been extremely favorable to the growth of bank deposits in the country. Despite all of the epic changes sweeping through this vital industry, same things in banking never seem to change. It is and probable always will be a service industry, producing and intangible product that is hard to differentiate from the products offered by competitors. One banks deposit, loan looks pretty much like anothers deposit, loan. However, service accuracy, friendliness and quality of service vary from bank to bank. Service accuracy, friendliness new ways of meeting customer needs and good quality of service rendered by EXIM Bank.

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I hope this bank will go ahead with its mission and will play very significant role towards economic development in our country. BIBLIOGRAPHY

1. Annual Reports Of Exim Bank Limited. 2. Various leaflets of the Bank. 3. Daily affairs of Exim Bank Limited CDA Avenue Branch. 4. Previous years internship report. 5. Iqbal Kabir Mohon-Modern Banking.

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