Chapter -01 ________________________________________ 1.

1 ORIGIN OF THE REPORT The title of the report is Foreign Exchange Business (Letter of Credit Operation) of Prime Bank Ltd. The report entails my internship experience at Foreign Exchan ge Department of Prime Bank Ltd. (Gulshan Branch). 1.2 OBJECTIVE OF THE STUDY The objective of the report is to gather practical knowledge and experience abou t the banking activities performed by the different officials into the Foreign E xchange Department. The report is prepared with the purpose of getting an overvi ew of Foreign Exchange Business through LC operation at Prime Bank Ltd. This stu dy attempts to pursue the following tasks: To understand the import procedure To understand the export procedure To know about the various documents and procedures which are used in banking ser vices of International Trade. To gain the depth knowledge of import and export portfolio of the Bank. To find out the performance of import and export business in recent years. To recommend actions that may be necessary to redesign the foreign trade procedu re of Prime Bank Ltd. 1.3 SCOPE OF THE STUDY This study covers the details of Prime Banks practices about foreign exchange act ivities emphasizing Activities regarding Import and Export Procedure under Letter of Credit at Prime bank Ltd. This study consists the observations and on the job experiences during the internship period in the Foreign Exchange Departments at Prime Bank Ltd, Gulshan Branch. This study also emphasizes on the sequential activities involved and used by Pri me Bank Ltd for foreign exchange transaction. The study also focuses on the impa ct of the foreign exchange activities upon the client. 1.4 METHODOLOGY The report has been prepared basically through the practical work experience at the branch. The information has been collected from the most credible sources. I have categorized it into two sections. The first one is Primary Source and the other is Secondary Source. Quantitative and Qualitative judgments are also appli ed in this report which has made the study more meaningful and presentable. Primary Sources: Major sources of information were done through the discussion with the officers of Foreign Exchange Dept. specially Mr. ATM Zakaria, (Assistant Vice President), Mr. Moshiur Rahman Khan (First Assistant Vice President), Mr. Abdullah Al Mamun (Principal Officer), Sumya Fayez (Assistant Officer) and other respected offici als of that department. Informal conversation with the clients. Practical work experience from different desks of Foreign Exchange Department of the Branch. Secondary Sources: Annual Reports of Prime Bank Limited. Foreign Exchange Guidelines Periodicals Published by Bangladesh Bank. Various books. Articles, regarding Foreign Exchange operations. Articles written on Banking Websites on Banking and international trade.

Bank Website. Relevant documents related to the study provided by the officials.

1.5 LIMITATION OF THE STUDY Every study has its distinct limitations. Preparing this report I have also face d some certain limitations which are summarized below: The main hindrance behind preparing this study was time. The span of the interns hip program is only three months. But I have got only two months due to some una voidable circumstances. Since Foreign Exchange is a vast area, it is not possibl e to cover or go through within this short span of time. There is also insufficiency of current information, relevant to the study. Consolidated data related to the study were not available for the current year. So the most of the information is used from the previous years. Inaccurate or Contradictory information created huge confusion during preparatio n of this study. Bank secrecy posed a major problem since disclosure of some information has been restricted. Relevant documents were not available as it is a technical issue.

Chapter -02 ________________________________________ Prime Bank Ltd --- A Snapshot 2.1 PRIME BANK LTD. [BACKGROUND] In the backdrop of economic liberalization and financial sector reforms, a group of highly successful local entrepreneurs conceived an idea of floating a commer cial bank with different outlook. For them, it was competence, excellence and co nsistent delivery of reliable service with superior value products. Accordingly, Prime Bank Ltd. was created and commencement of business started on 17th April 1995. The sponsors are reputed personalities in the field of trade and commerce and their stake ranges from shipping to textile and finance to energy etc. As a fully licensed commercial bank, Prime Bank Ltd. is being managed by a high ly professional and dedicated team with long experience in banking. They constan tly focus on understanding and anticipating customer needs. As the banking scena rio undergoes changes so is the bank and it repositions itself in the changed ma rket condition. Prime Bank Ltd. has already made significant progress within a very short perio d of its existence. The bank has been graded as a top class bank in the country through internationally accepted CAMEL rating. The bank has already occupied an enviable position among its competitors after achieving success in all areas of business operation. Prime Bank Ltd. offers all kinds of Commercial Corporate and Personal Banking services covering all segments of society within the framework of Banking Company Act and rules and regulations laid down by our central bank. Diversification of products and services include Corporate Banking, Retail Bank ing and Consumer Banking right from industry to agriculture, and real state to s oftware. Prime Bank Ltd., since its beginning has attached more importance in technology

integration. In order to retain competitive edge, investment in technology is a lways a top agenda and under constant focus. Keeping the network within a reason able limit, our strategy is to serve the customers through capacity building acr oss multi delivery channels. Our past performance gives an indication of our str ength. We are better placed and poised to take our customers through fast changi ng times and enable them compete more effectively in the market they operate. 2.2 COMPANY VISION Every Company has its own vision. By fixing the vision they can forecast their f uture growth and predict their perspective. Prime Bank Ltd has also a vision whi ch states that: To be the best Private Commercial Bank in Bangladesh in terms of efficiency, capi tal adequacy, asset quality, sound management and profitability having st rong liquidity. 2.3 COMPANY MISSION To build Prime Bank Limited into an efficient, market driven, customer focused in stitution with good corporate governance structure. Continuous improvement in our business policies, procedure and efficiency through integration of technology at all levels. 2.4 CORE VALUES: Prime Bank nurtures a very profile value to all its stakeholders. Basically they maintain four kinds of core values to its different stakeholders. They are as f ollows: For our Customers To become most caring Bank - by providing the most courteous and efficient servi ce in every area of our business. For our Employees By promoting well - being of the members of the staff. For our Shareholders By ensuring fair return on their investment through generat ing stable profit. For our Community By assuming its role as socially responsible corporate entity in a tangible mann er through close adherence to national policies and objectives. and Upholding ethical values and best practices 2.5 EXPANSION IN THE GLOBAL ARENA: The Bank has successfully expanded its services beyond cross border to provide a nd establish an efficient banking system globally. It has opened a fully owned s ubsidiary at Singapore. Prime Exchange Co. Pte. Ltd., a fully owned subsidiary c ompany of Prime Bank Limited was incorporated in Singapore on January 06, 2006 a nd commenced its remittance business with effect from July 08, 2006 under the re mittance license issued by the Monetary Authority of Singapore (MAS) under secti on 7A(3) of the Money Changing and Remittance Business Act (Chapter 187), Singap ore. 2.6 ORGANIZATIONAL STRUCTURE: Prime bank Limited is being managed by highly skilled professionals with long ex perience in banking. They constantly focus in understanding and anticipating in customer needs and operate according to it to survive in the changing market con dition of the country. In the Branch Based Approach, each individual branch is treated as separate iden tity and is headed by a branch manager. The branch manager is liable to the top management for that particular branch. Before starting a fiscal year it is the d

uty of branch manager to see that targets are being fulfilled. Profit Targets, d eposit targets, and other targets alike are all delegated to these individual br anches. Given below is an organ gram of an individual branch of Prime Bank for better u nderstanding.

Fig: 1 Organizational hierarchy of an Ideal Branch (Gulshan Branch) The Department Based Approach is similar to that of the branch based approach, w here each dept. operates as a separate unit but sometimes collaborates in order operate more efficiently or solve a common problem. Such department is also trea ted as separate entity but is much more specialized in one particular area of bu siness unlike a branch which has to be involved in multiple tasks. Examples of f ew other department of Prime Bank Ltd are given below: Human Resource Department Financial and Administrative Department Monitoring And Inspection Department Marketing Personal Relation Department Merchant Banking and Investment Department Treasury division International division General Service Division Information Technology Department Credit Division Card DivisioPrime Bank maintains a strong organizational hierarchy in which ever y individual performs their duty very sincerely. The full hierarchy of Prime Ban k Ltd. is given below: Fig: 2 Hierarchy of Prime Bank Ltd. 2.7 PRODUCTS AND SERVICES OF PRIME BANK LTD: Prime Bank Limited offers various kinds of deposit products and loan schemes. Th e bank also has highly qualified professional staff members who have the capabil ity to manage and meet all the requirements of the bank. Every account is assign ed to an account manager who personally takes care of it and is available for di scussion and -inquiries, whether one writes, telephones or calls. DEPOSIT SCHEMES Monthly Contributory Savings Schemes (CSS): Under this scheme Minimum si ze of the monthly installment is Tk.500.00 and multiples of Tk.1000.00. Maximum installment size shall be 25000.00 for live year period. Lump sum amount shall b e paid after maturity or monthly pension shall be paid for the next 5 years acco rding to size of deposit. Lackhopati Deposit Scheme: Under this scheme size of the monthly install ments are Tk.250.00, Tk.500.00, Tkl285.00, Tk.2400.00 depositor will receive Tk. 1,00,000.00 after a number of period depending on installment size .Higher the installment size lower will be the maturity period .

Prime Millionaire Scheme: This scheme is similar as Lackhopati deposit s cheme only the installment amounts is larger and at maturity depositor will get 10, 00,000.00. Education Savings Scheme (ESS): Under this scheme parents can save for their children s education by paying a certain amount of monthly installment an d Lump sum amount shall be paid after maturity. Monthly Benefit Deposit Scheme (MBDS): Under this scheme customer can de posit a fixed amount of money for five years the amount has to be 100,000 or mul tiple of 100,000 he / she will receive 900 per month as interest on every lac du ring those five years. Double Benefit Deposit Scheme (DBS): Under this scheme a customer can ke ep a fixed amount of money for six year end of the maturity period the amount wi ll become double .The amount has to be multiple of 25000. Fixed Deposit Receipt Scheme (FDR): Under this scheme customer can devot e a fixed amount of money for one month, three months, six months or twelve mont hs for interest rate of 7.5%, 11 % or 11.5%. Current Account: Current Account is a non interest bearing checkable dep osit (Demand Deposit) which allows the owner of the bank accounts to write check s to third parties. Savings account: Savings Account is an interest bearing checkable deposi t (Negotiable order of withdrawal) which allows the owner of the bank accounts t o write checks to third parties. Interest rate of Savings Deposit Account is 6. 00% for the year 2008. CARD DIVISION SERVICE ATM Card: Automated Teller Machine (ATM) card is new concept in modem ba nking, has already been introduced to facilitate subscribers 24 hour cash access through a plastic card. Prime Bank Limited has started their ATM card services from 15th March 2008 by opening a ATM booth at Motijheel Branch. After that Prim e Bank Limited made an agreement with Dutch Bangla Bank to use their ATM Booth. Credit Card: Very stiff competition prevails in credit card market. Many players have entered the market and competition is growing. Prime Bank Ltd star ted its credit card operation in 1999 by introducing Master Card and is now prin cipal member of both worldwide accepted plastic money network i.e MasterCard and VISA, thus positioned itself with strong footing within the industry, the risk of loss to credit card customers. Call center of the Bank provides 24 hours serv ice to the credit card customers. LOAN/ADVANCE PRODUCTS: Loan and advances have primarily been divided into two major groups: Fixed term: These are the loans made by the Bank with fixed repayment sc hedules Fixed tern loans are categorized into three based upon its tenure which is defined as follows: Short term : Up to 12 months Medium term : More than 12 and up to 36 months Long Term : More than 36 months Continuing Loans: These are the loans having no fixed repayment schedule , but have an expiry dale at which il is renewable on satisfactory performance o f the customer. Furthermore, all categories of loans are accommodated under the following prime sectors: i Agriculture: Credit facilities to the customers of doing agro business falls

under this category. ii. Term Loan to Large &. Medium Scale Industry: This category of advances accommodate the medium and long term financing for capital formation of new Industries or for an existing units who are engaged in manufacturing of goods an d services. iii. Term Loam to Small & Cottage Industries: These are the medium and long term loans allowed to small & cottage manufacturing industries. No short term or con tinuous credits will be included in this category. iv. Working Capital: Loans allowed to the manufacturing units to meet their work ing capital requirements, irrespective of their size - big, medium or small, fal l under this category. These are usually continuous credits and as such fall und er the head "Cash Credit" v. Export Credit: Credit facilities allowed to facilitate export of all items ag ainst Letter of Credit and/or confirmed export orders fall under this category. It is accommodated under the heads "Export Cash Credit (CCC)", Packing Credit (P C), Foreign Documentary Bill Purchased (FDBP) etc. vi. Commercial Lending: Short term Loans and continuous credits allowed for comm ercial purposes other than exports fall under this category. It includes import financing for local trade, service establishment etc. No medium and long term lo ans arc accommodated here. This category of advance is allowed in the form of (i ) Loan against Imported Merchandise (LIM), (ii) Loan against Trust Receipt (LTR) , (iii) Payment against Documents (PAD), (iv) Secured Overdraft (SOD), (v) Cash Credit etc. for commercial purposes. TYPES OF CREDIT FACILITIES: Depending on the various nature of financing , all the credit facilities have been brought under two major groups; (a) Funded Credit and (b) Non-funded Credit. Under non-funded credit, there are basically two major products namely Letter of Credit and Letter of Guarantee. Under Funded Credit, there are the following products: Loan (General): Short, Medium & Long term loans are allowed to l/firm/industries for a specific purpose. But this loan for a definite d generally repayable by installments falls under this type. These are lowed to accommodate financing under the categories (I) Large & Medium ustry and (II) Small & Cottage Industry. individua period an mainly al Scale Ind

Housing Loan (Commercial): Loans allowed to individual/enterprises for c onstruction of house for commercial purpose only fall under this type. The amoun t is repayable by monthly/quarterly installments within a specified period. Home Loan: Loans allowed to individuals for purchase of apartment or con struction of house for residential purpose fall under this type. The amount is r epayable by monthly installments within a specified period. House Building Loan (Staff): Loans allowed to the employees of PBL for p urchase of apartment/construction of house shall be known as House Building Loan (Staff) or HBL (Staff). Lease Financing: Lease Financing is one of the most convenient sources o f acquiring capital machinery and equipment whereby a customer is given the oppo rtunity to have an exclusive right to use an asset usually for an agreed period of time against payment of rental. Consumer Credit Scheme (CCS): It is a special credit scheme of the Bank

to finance purchase of consumer durable by the fixed income group to raise their standard of living. The loans are allowed on soft terms against personal guaran tee and deposit of specified percentage of equity by the customers. The loan is repayable by monthly installments within a fixed period. The CCS is becoming mor e and more favorable to consumers having different needs. Under CCS the followin g loans are available for the customers at the bank in every branch. Household Loan. Doctors Loan. Any Purpose Loan. Travel Loan. CNG Conversion Loan. Advance against Salary. Education Loan. Marriage Loan. Hospitalization Loan. SOD (Financial Obligation): SOD (Financial Obligation) is allowed to ind ividuals/firms against financial obligations (FOR, MBDS, and Scheme Deposits of PBL or similar products of other banks). This is a continuous loan having usual maturity period of 1 (one) year and renewable for further periods at maturity. SOD (General): SOD (General) is allowed to individuals/firms for miscell aneous purpose. This is a continuous loan having usual maturity period of I (one ) year and renewable for further, periods at maturity. SOD (Work Order): Advances allowed against assignment of work order for execution of contractual works falls under this type. This advance is generally allowed for a definite period and specific purpose. It falls under the category "Others". SOD (Export): Advance allowed for purchasing foreign currency for paymen t of Back to Back (BTB) L/C liability where the exports do not materialize befor e due the date of import payment. This is an advance for temporary period and ca tegorized "Export Finance". PAD: Payment made by the Bank against lodgment of shipping documents of goods imported through L/C falls under this type, ft is an interim advance conne cted with import and is generally liquidated against payments usually made by th e customer for retirement of the documents towards release of imported v consign ment from the customs authority. LIM: This is funded credit facility allowed for retirement of shipping d ocuments and release of goods imported through L/C taking effective control over the goods by pledge in go downs under Bank s Jock & key. This is a temporary ad vance connected with import which is known as post-import finance and falls unde r the category "Commercial Lending". LTR: Advance allowed for retirement of shipping documents and release of goods imported through L/C falls under this type. The goods are handed over to the importer on trust with the arrangement that sale proceeds will be deposited to liquidate the loan account within the specific time. ECC: Funded credit facility allowed to a customer for export of goods fa lls under this type and is categorized as "Export Cash Credit". The advances mus t be liquidated out of export proceeds within ISO days. Packing Credit (P.C.): Advance allowed to a customer against bills under BTB L/C and/or firm contract for processing/packing of goods to be exported fal

ls under this type and is categorized as "Export Credit". Packing Credit must be adjusted from proceeds of the relevant exports within 180 days. FBP: Payment made to a customer through Purchase or Foreign Currency Che ques/Drafts falls under this type. This temporary advance is adjustable from the proceeds of the cheque/draft. Beside those services Prime Bank also maintains foreign currency account and ser ve the Bangladeshi and foreign nationals residing home and abroad. Different for eign currency accounts maintained by the bank are as under: Non Resident Taka Account Resident Foreign Currency Deposit Account Non Resident Foreign Currency Deposit Account Wage Earners development Bond Chapter -03 ________________________________________ Foreign Exchange Business [Letter of Credit operation] at Prime Bank Ltd. The export and import business is now are executed through the intervention of c ommercial banks. Banks make the way through which the exporter can get payment f rom importer. Foreign exchange is the department of commercial banks which facil itates importers and exporters in their trades. It is very significant departmen t in the financial sector of the country especially in the developing countries. Bangladesh bank has some regulations regarding the foreign exchange to maintain for the authorized dealer. Authorized dealer is the dealer of the foreign curre ncy who is authorized by the Bangladesh Bank to exchange foreign currency. Prime Bank Ltd has --------- branches which are authorized by the Bangladesh Bank to exchange foreign currency. The Basic functions of foreign exchange department are: Facilitating Import Trade Facilitating Export Trade Provided funded and non funded credit facility Providing non commercial remittances Maintaining foreign currency accounts Selling of foreign currency. The above functions are done by three sections: Import Section Export Section The Foreign Remittance Section

Now the division of foreign exchange department is stated below in a pictorial f ormat:

Fig: Foreign Exchange Department of Prime Bank Ltd. 3.1 FOREIGN EXCHANGE TREND AT PRIME BANK LTD The study is based on the current Foreign Exchange Trend for Prime Bank Ltd. It

deals with Export, Import and Remittance services that the bank provides, giving us the current trend of business in each of this area s. In addition in-depth a nalysis of statistical data covering the types of commodities, amount of foreign currency that is being traded has also been covered in this report. But first l et us take a look at the role of foreign trade in Bangladesh. Foreign Trade plays an important role in the economic advancement of every natio n. So the government of almost all developing countries including Bangladesh foc uses on the import and export relations of foreign countries. In our country, th e foreign trade is controlled by Bangladesh Bank under the Import and Export Con trol Act, 1950. Here any importer and exporter who are not registered with CCI & E are not allowed to import the goods in the country or export goods to other co untries. While the foreign Exchange Business was becoming more complex and hound ed by more rules and regulations, the L/C is one type of undertaking that could reduce the risk and legalize the contract between buyer and seller. And through the L/C, the contract between the importer and exporter is given a legal shape b y the Authorized Dealer-the bank .As the banks are included in the process, the contract becomes more reliable for both the importer and exporter to both the pa rties. While through the L/C a reputed bank guarantees the payments for imported goods on the behalf of the importer, the exporter gets the security for payment .Therefore; the Letter of Credit constitutes one of the most important methods of foreign trade. All documentary credit covering imports into Bangladesh are su bjected to the provisions of UCPDC500 (Union Customs and practices for documenta ry credit 1993 revision ICC Publication 500). We can see the achievement of fore ign exchange division during the year 2008 and 2007 in a diagram with financial data: (See Appendix-A; Page ) 3.2 OPERATIONAL PROCESSES IN PRIME BANKS FOREIGN EXCHANGE DEPARTMENT The International Division placed at the Prime Bank s head office at Motijheel i s the backbone of all international transaction that is conducted through the va rious branches of the bank. A total of 42 branches of Prime Bank have the licens e to carry " out international trade functions. Each of these AD branches have fo reign exchange department whose sole purpose is to carry out cross border transa ction demanded by the customers. The functions of such Foreign Exchange Department can be divided into three sect ions: (a) Import Section (b) Export Section, and (c) The Foreign Remittance Section The following is a brief description of each of these sections. Import Section This section deals with the import of foreign commodities into Bangladesh. It st arts with the opening of an L/C till the payments arc made to the foreign export ers. The import section is in turn is divided into two divisions. One division l ooks after Sight L/C and another one looks after Back to Back L/C. The Basic dif ference between these two types of L/C is that, sight L/C requires at sight paym ent for the imported items, the buyer should pay within three days of documents arrival. And on the other hand, (the issuance period for Back to Back credit can range from two months to even a year depending on the L/C terms. Export Section All Export departments of Prime Bank s branches are equipped with facilities tha t would help an exporter ship their good beyond the nation s boundary, thus earn ing foreign currency for the country. And majority of such customers for Prime B ank Ltd are involved in the Ready Made Garment sector with only a few exporting other different commodities. Foreign Remittance Section

Foreign remittance can be stated as the purchase and sale of freely convertible foreign currency as admissible under Exchange Control Regulations of the country . Inward remittance is the purchase and outward remittance is the sale of foreig n currency. Later this section will be discussed. 3.3 ONCEPT OF LETTER OF CREDIT A letter of credit is an instrument issued by a bank to a customer placing at th e letters disposal such agreed sums in foreign currency as stipulated. An import er is a country requests his bank to open a credit in foreign currency in favor of his exporter at a bank in the letters country. The letter of credit is issued against payment of amount by the importer or against satisfactory security. The L/C authorizes the exporter to draw a draft under is terms and sell to a spe cified bank in his country. He has to hand over to the bank, will the Bill of ex change, shipping documents and such other papers as may be agreed upon between t he exporter and the importer. The exporter is assured of his payment because of the credit while the importer is protected because documents in respect of expor t of goods have to be delivered by the exporter to the paying bank before the pa yment is made. In the Import Policy Order 2003-2006 Letter of Credit denoted as - "Letter of C redit" means a letter of credit opened for the purpose of import under this Orde r The expression "Documentary Credit^)" and "Standby Letter(s) means any arrangements, however named or described, whereby a bank ("the issuing ban k") acting at (he request and on me instruction of ;i customer (the "Applicant") or on its own behalf. Is to make a payment to or the order of a third party ("the Beneficiary" ), or is to accept and pay bills of exchange (Draft s) drawn by the Beneficiary, Or authorizes another bank to effect such payment, or to accept and pay suc h bills of exchange Draft(s),Or authorizes another bank to negotiate, Against stipulated document(s), provided that the terms and conditions o f the Credit arc complied with. The uniform customs and practices for documentary Credit (UCPDC) published by In ternational! Chamber of Commerce (2007) revision, publication no, 600 define Doc umentary Credit: Any arrangement however named or described whereby a bank (the issuing b ank) acting at the request and on the instructions of a customs (the Applicant) or on it s own behalf, Is to make a payment to or to the order of a third party (the beneficiar y) or is to accept and pay bills of exchange (Drafts) drawn by the beneficiary o r Authorize another bank to effect such payment or to accept and pay such bills of exchange (Drafts) Authorize another bank to negotiate against stipulated documents provide that terms and conditions are complied with. 3.4 TYPES OF LETTER OF CREDIT There are many types of Letter of Credits that are used in different countries o f the world. But International Chamber of Commerce (ICC) vides their UCPDC- 600, which denotes only two types of LETTER OF Credits; mentioned: Revocable Letter of Credit A revocable credit may be amended or cancelled by the issuing bank at any moment and without prior notice to the beneficiary. This type of letter of credit can be revoked or cancelled at any time without consent of, or notice to the benefic iary. The buyer maximum flexibility, as it can he amended or cancelled without p

rior notice to the seller up lo the moment of payment but the issuing bank at wh ich the issuing bank has made the credit available. In the modern banking the us e of revocable credit is not widespread. Irrevocable Letter of Credit An irrevocable credit is a documentary credit, which cannot he revoked, varied o r changed/amended or cancelled without the consent of all parties- buyer (Applic ant), seller (Beneficiary), Issuing Bank, and Confirming Bank (in case of confir med Letter of Credit). Irrevocable Credit gives the seller greater assurance of payments, but he/she remains dependent on an undertaking of a foreign bank. In t he issuance of Irrevocable Letter of Credit both the Issuing and Conforming Bank have some liability.

3.5 SOME SPECIAL LETTER OF CRERDIT Revolving Letter of Credit Revolving L/C can be used when goods are to be delivered in installment at speci fied intervals. The amount available at any one time is equivalent to the value of one partial delivery. A revolving credit can be cumulative or non-cumulative means that amount from unused or incompletely used portions can be carried forw ard to subsequent period. Standby Letter of Credit Stand by credit are encountered principally in the US. Under the laws of most US states, banks are prohibited from issuing regular quarantines, so credits are u sed instead. In Europe, too the use of this type of credit is increasing by virt ue of their documentary credit, stand-by credit are governed by the UCP. However , their function is that of a grantee. Back to Back Letter of credit: The Back to Back letter of Credit is a wing of Export department at the advisin g bank on behalf of beneficiary. If the beneficiary exports readymade garments p roducts then he may have to open this letter of credit for import of raw materia ls. It is a sort of Pre-shipment finance before export of products. Transferable Letter of Credit: Transferable credit is particularly well adapted to the requirements of internat ional trade. A trader who receives payment from a buyer in the form of a transfe rable documentary credit can use that credit to pay his own supplier. This enabl es him to carry out the transaction with only a limited and lay of his own funds . The costs of the transfer are usually charged to the trader and the transferri ng bank is entitled to delete them in advance. Red Clause In the case of a red clauses credit, the seller can obtain an advance for an agr eed amount from the correspondent bank, goods that are going to be delivered und er the documentary credit. On receiving the advances, the beneficiary must give a receipt and provide a written undertaking to present the required documents be fore the credit expires. The advance is paid by the correspondent bank, but it i s the issuing bank that assumes liability. If the sellers does not present the r equired documents in time and fails to refund the advance, the correspondent ban k debits the issuing bank with the amount of the advance plus interest. The issu ing bank, in turn, has reveres to the applicant, who therefore bears the risk fo r the advance and the interest accrued. Green Clause The clause which is printed /typed in green is an extension of Red Red Clause. Thi s clause authorizes the negotiating bank to grant advance to the beneficiary for storage facilities at the port in addition to the earlier stated pre shipment a

dvances. The following types of Letter of Credits arc used in the Prime Bank. Gulshan Bra nch: Cash or Sight Letter of Credit: The most commonly used credits are Cash Letter of Credit or sight payment credit s. These provide for payment to be made to the beneficiary immodestly after pres entation of the sstipulated documents on the condition that the terms of the cre dit have been complied with. The banks are allowed reasonable time to examine th e documents. Deferred Letter of Credit: A deferred letter of credit is a credit in which the seller will be paid on a fi xed or determinable future time. The buyer is obligated to pay the face amount a t maturity. The only difference between cash Letter of Credit and deferred letter of Credit lied in the terms of payment. Payment under deferred Letter of Credit is made af ter certain days of presentation of the export bill.

Deferred Letter of Credit may be opened for the following cases: Items Industrial Raw Materials (For own use) Back to Back Imports Agricultural Implements & Chemical Fertilizer Capital Machinery Coastal Vessel Life Saving Drugs Period Maximum 180 Days Maximum 180 Days Maximum 180 Days Maximum 360 Days Maximum 360 Days Maximum 360 Days.

Acceptance Payment at Maturity: With an acceptance credit payment is made in the form of a tern bill of exchange drawn on the buyer, the issuing Banker the pendent bank. Once he has fulfilled the credit requirements, the beneficiary can demand that the bill of exchange be accepted and returned to him. Thus the accepted bill takes the place of a cash payment. Bill of exchange drawn under acceptances credit usually has a term of 6 0-180 days. The purpose of an acceptance is to give the importer time to make payment. It he sells the goods before payments fall due, he can use the proceeds to meet the b ill of Exchange in this way, he does not have to borrow money to finance the tra nsaction.

3.6 PARTIES INVOLVED IN LETTER OF CREDIT: MAIN PARTIES: I. The issuing Bank: Issuing Bank is the bank which opens / issues a L/C on behalf of the importer. I

t is also called importers/ buyers bank. II. The Confirming Bank: Confirming is a bank which adds its confirmation to the credit and it is done at the request of issuing bank. The confirming bank may or may not be the advising bank. III. The Beneficiary The exporter in whose favor the credit is opened and to whom the letter of credi t is addressed is known as the beneficiary. As the seller of goods he is entitle d to receive payment which he does by drawing bills under the letter of credit ( L/C). As soon as he has shipped the goods and has collected the required documen ts, he draws a set of papers and presents it with the documents to the opening b ank or some other bank mentioned in the L/C. OTHER PARTIES: I. The Applicant: The importer at whose request a letter of credit is issued is known as the appli cant or buyer. On the strength of the contract he makes with the exporter for th e purchase of some goods that the letter of credit is opened by the opening bank . II. The Advising Bank: Advising Bank is the bank through which L/C is advised to the exporter. It is a bank situated in the exporters country and it may be a branch of the opening bank or a correspondent bank. It may also assume the role of confirming bank and /or negotiating bank depending upon the conditions of the credit. III. The Negotiating/Paying Accepting Bank: The bank which negotiates the bill and pays the amount to the beneficiary is ref erred to the Negotiating Bank. It has to carefully scrutinize the documentary cr edit before negotiation in order to see whether the documents apparently and in order to see whether the documents apparently and in order. The advising bank an d negotiating bank may or may not be one and same. Sometimes it can be the confi rming bank. IV. Reimbursing Bank: The Reimbursing or paying bank only pays the drafts ndertakes no opening bank, by debating the latters uch an account or by any other measured up, between the beneficiary has received payment for the draft, the rest of the operation concerns only the paying drawn under the credit but u accounts with it if there is s the two bankers. As soon as he is out of the picture and bank and the opening bank.

Chapter -04 ________________________________________ Import Procedure through Letter Of Credit Operation of Prime Bank Ltd. Import is the process of purchasing goods and services from foreign countries in to Bangladesh. It is the flow of goods and services purchased by economic agents staying in the country from economic agents staying abroad. Individuals, firms and Government of Bangladesh import foreign goods to meet their various necessit ies. In ease of international trade, buyers and sellers are mostly unknown to each ot her. Therefore, seller always seeks guarantee for that is payment of his goods e xported and bank plays the role exactly at this phase. Bank gives export guarant ee that it will pay for the goods on behalf of the buyer. This guarantee is call

ed Letter of Credit. Thus, the contract between importer and exporter is given a legal shape by the banker through Letter of Credit . When a buyer goes to impo rt some goods from a foreign buyer, he requests his bank to make payments to the exporter of goods, and the bank recovers the amount from the importer. The impo rt procedure under L/C is discussed below: 4.1 LEGISLATION OF IMPORT POLICY: Imports are foreign goods and services purchased by consumers, firms & Governments in Bangladesh. According to Import and Export Control Act , 1950, the Office of Chief Controller of Import and Export (CCl & E) provides t he registration (IRC) to the importer. Import of goods in Bangladesh is regulate d by the Ministry of Commerce in terms of the Import and Export Control Act 1950; Import Policy Order and the Public Notice issued by the Office of the Ch ief Controller of Imports and Exports (CCI&E); At present it is regulated by the Import Policy Order (2003-2006), which was come into effect on March 14, 2003. And Import Policy directs certain Imp ort Procedure, which administers the whole activity. Import section of Foreign Exchange Department facilitates import related banking services concerned to import of goods in cash foreign exchange. The main facili ties provided by the import section are; Opening of Letter of Credit; Facilitating Payments to the Exporter on behalf of the Importer Providing Funded and Non-funded Credit Facility; Issuing Bank Guarantee in foreign currency on behalf of Foreign Companie s. Receive and Scrutinize of Export Documents sent from beneficiarys country . 4.2 GENERAL CONDITIONS OF IMPORT OF GOODS Import Trade Control Schedule Number For import purpose, use of ITC Number (H.S. Code) with at least six digits corre sponding to the classification of goods as given in the Import Trade Control Sch edule I98.S, based on the Harmony Commodity Description and Coding System, shall be mandatory. But in cases where a particular aim has been classified under a H . S. Code Number (having more than six digits). The seven Digit H.S, Code publis hed by Bangladesh Bureau of Statistics may also be mentioned in the Letter of Cr edit Authorization Form, Letter of Credit and other relevant paper within a brac ket in addition to normal H. S. Code as mentioned above. No bank shall issue Let ter of Credit Authorization form or open Letter of Credit without properly menti oning I. T. C. number (H. S. Code) thereon. NOC (No Objection Certificate) On the basis of ROR (Right of Refusal) A. No Objection Certificate on the basis of Right of Refusal (ROR) form any aut hority shall not be required for import of any freely importable item by any Pub lic Sector agency. However, in case where a public sector agency is required to import banned/restricted items included in the Control List, prior permission of the Ministry of Commerce .shall have to be obtained on the basis of ROR issued the Ministry of Industries or by Sponsoring Ministry/Division, or by both as the case may be. B. In case of import of banned/restricted items for approval projects financed u nder foreign aid the concerned Government Department/Agency will approach the Ch

ief Controller of the Import and Export directly for necessary permission togeth er with a list of items duly certified under proper seal and signature giving "d escription, quantity/number, price and H.S. Code Number against each item requir ed to be imported. The details about the aided project and specific provision of the relevant contract and other necessary information shall also have to be fur nished along with the list of the items. The Chief Controller shall issue permis sion/permit on the basis of above documents. Restriction regarding source of procurement of goods a. Goods from Israel or goods originating from that country shall not be importa ble. Goods are not also importable in the flag vessels of that country. b. All kinds of import from and export to Serbia and Montenegro, fragments of fo rmer Socialist Republic of Yugoslavia, shall be banned. Pre-shipment inspection Unless otherwise specified, pre-shipment inspection of imported goods shall not be obligatory in case of import by private sector importers. Shipment of Bangladesh Flag Vessels Subject to waiver specified below shipment of goods shall not be made on Bangladesh Hug vessels: a. Imports of goods up to maximum twenty metric tons in case of single individu al consignee or up to maximum 100 (one hundred) metric tons in case of group imp ort may be made in non Bangladeshi flag vessels. However the Director General of Shipping may notify general waivers in the following cases, such as (1) shipmen t of goods from foreign ports which are not visited by Bangladeshi Vessels, and (2) import of goods on the basis of specific agreement which provides C & F (Cos t & Freight) contract. In all other eases a certificate of waiver shall be obtai ned from the Director General of Shipping of Importation of goods in non-Banglad eshi flag vessels, [f there appears to be possibility of any Bangladeshi Hag ves sels, visiting a port with in next seven days, waiver shall be given within twen ty-four hours of application for waiver. Otherwise, it will be considered that w aiver has been given. However, the specific condition of compulsory shipment of goods on Bangladeshi flag vessels, or the condition of obtaining certificates of waiver form the Director-General of Shipping shall not apply in cases of import under such foreign aids, loans or grants which contain specific provisions rega rding shipment of goods. b. In case of import and export of goods by export oriented industries shipment may be made in non-Bangladeshi Flag vessels. Import at competitive rate a. Import shall be made at the most competitive rate and importers may be recrui ted, at any time, to submit documents regarding the price paid or to be paid by them. b. In case of import under United Commodity Aid in the Private sector, goods sha ll be imported at the most competitive rate by obtaining quotations from a minim um of three suppliers indenters representing at least two countries abroad. This condition shall however not apply for opening of I .Letter of Credit up TK. One lac. For import at most competitive rate by the Public Sectors the condition me ntioned at Para 27(8) of this order shall apply. Import on C & F and FOB (free on Board) basis All imports by sea, air and land route shall be made either on C & F or FOB basi s. However in ease of import on FOB basis the concerned importer shall have to p roperly comply with the circular issued by Bangladesh Bank in this regard. Befor

e opening L.C necessary insurance cover note shall have to be purchased form the Shadharan Bima Corporation or any other Bangladeshi insurance company. Unless t here are specified provisions in the relevant loan agreement/projects agreement concluded with the foreign donors for import of CIF (Cost, Insurance & Freight) basis, no import shall be allowed on C1F basis without prior approval from the M inistry of Commerce. However, Bangladesh nations, living abroad, for sending goo ds against their earned foreign exchange and foreign investors, for sending capi tal machines and raw materials against their equity share portion shall be allow ed on C1F basis. Import by Mentioning "Country of Origin" a. In all cases of import, "country if origin shall be mentioned clearly on good s, package/container. A certificate regarding "country of origin" issued by the concerned Government agency/approved authority/organization of the exporting cou ntry must be submitted, along with import documents to the Customer Authority at the time of release of goods. However, the provisions of "country of origin" sh all not be applicable to coal and export oriented garments industries. In case o f this cotton import, it shall not be required to mention the country of origin on each bale. But "country of origin" shall be mentioned in the phyto sanitary c ertificate. Besides, 100% export oriented industries, which arc recognized by Cu stom Authority, shall be waived from the restriction of "country of origin" subj ect to the conditions imposed by the Foreign Exchange Regulation Act, Bangladesh Bank and Commercial bank, b. In case of import of Limestone, in different consignments/lot by the rope-way or by river, as raw-materials for Chattak Cement Factory, "country of origin" c ertificate from the exporting country s Government/approved authority/organizati on shall be submitted once to the customs authority at the time of release of go ods, instead of each consignment/Jot for the quantity mentioned in Letter of Cre dit, in case of river-way and as per supplied carrying list as case of road-way. 4.3 INSTRUCTIONS ISSUED BY BANGLADESH BANK FOR OPENING AND OPERATION OF L/C FOR IMPORT OF GOODS All Letter of Credits and similar undertakings covering imports into Ban gladesh must be documentary Letter of Credits and should provide for payment to be made against full sets of onboard (shipped) transport documents (BL, AIB, TR etc.) showing dispatch of goods covered by Credit to a destination in Banglades h; They must ensure that they deal only with known customers having a place of business in Bangladesh and can be traced easily if any occasion arise for th is purpose; They should establish Letter of Credit against specific authorization on behalf of their own customers who maintain accounts with them with and know to be participated in the trade; It is not permissible to open to clean or revolving credits; They are allowed to open divisible, transferable Letter of Credits for i mport into Bangladesh under cash LCAF (Letter of Authorization Form); It is not permissible to open Letter of Credits in favor of beneficiarie s in countries from which import into arc banned by the component authority; Letter of Credits to be opened only against firm contract between the A pplicant and beneficiary. Bankers should sec documentary evidence, before openin g Letter of Credit, that a firm order for the goods to be imported has been plac ed and accepted; The full description of goods to be imported along with unit price and q uantity to be given in the Letter of Credit; Confidential report of the exporter to be obtained by the bank, where th e amount of Letter of Credit exceeds TK. 2,00,000 in case of import against pro

forma invoices issued direct by foreign supplier and TK. 5,00,000 against indent issued by local agents of the suppliers; Payments against discrepant documents may be made after the goods have b een cleared from the customs on the basis of the locative LCAF; Advanced remittance against import may be made after getting prior permi ssion from Bangladesh Bank where the goods arc of specialized or capital nature. 4.4 DOCUMNTS REQUIRED FOR OPENING OF L/C: L/C application and agreement Form (Bank s prescribed application form) with adhesive stamp of Tk. 150 (Flexible) [From June 3rd 1998] Letter of Credit authorized Form (LCAF) CIB. Proforma Invoice (Approved by BRTC in case of Mobile Set) Import Registration certificate. Tax Identification Number, VAT (IRC ren ew) Membership Certificate. Last tear income tax assessment. Harmonized System Code (HS Code) Charged Documents. Under Charged Documents the following letters are required: o o o o o o o o Demand Letter Letter Letter Letter Letter Letter Letter Promissory Note. of Disbursement of Agreement of Authority. of Undertaking of Continuity. of Revival of Guarantee. (Signature without Seal)

Some Exemption: No IRC required for importation of capital machinery for setting up new industry . Only BOI approval required. Country of origin issued by government/competent body. Trade body CO is not requir ed in case of importation of raw materials for Coal & RMG industry 4.5 MARGIN AND OTHER CHARGES Before issuing Letter of Credit, bank asks the applicant to deposit Letter of Cr edit margin according to the terms of sanction and other necessary charges which includes commission, handling charges, foreign correspondence charge, telex/SWI FT charge etc, as per terms and conditions of sanction. Before issuing Letter of Credit Bank asks the applicant to deposit the following , as per the terms of the sanction: Letter of Credit Margin As per Government. Circular Commission As per internal policy (Letter of Credit value .005 for first quarter, S ubsequent Quarter .003 Document Handling Charge

1500 SWIFT Charge 3500 Courier Charge (except India) Courier (India) 1500 300 VAT 15% on Commission and SWIFT charge

Margin charged against any particular Letter of Credit depends upon the Item or Goods of the import. Margin varies between nil to 100%. Generally the higher val ue of margin, the higher it means that Bangladesh Bank discourages to import tha t goods or items. Some goods are imported at 100% margin, as per the circular of 14th November, 2001

4.6 ISSUING THE LETTER OF CREDIT In this stage, the issuing bank fills the bank-specified-form for issuing Letter of Credit. Generally a Letter of Credit contains the following information and terms and conditions: Charges; Country of origin of goods; Currency and amount; Date and place of the expiry of the Documentary Credits ; Description of goods and quantity ; Documents required for negotiation; Instruction for negotiating bank; Last date of shipment; Letter of Credit Authorization Form (LCAF) number, IRC (Import Registrat ion Certificate) number and Harmonized System (HS) code; Mode of Carrying -Air/Ship/Truck; Name and address of beneficiary ; Name and address of the advising bank; Name and address of the applicant; Name of the issuing Bank and Branch; Negotiating bank preferably freely negotiable in any bank; Number of Letter of Credit and date of opening ; Payment Term-Sight Period of Negotiation ; Period of presentation ; Port of Loading and port of Discharge; Reimbursing Bank and payment mode; Terms and conditions regarding Transshipment and Partial Shipment; Depending on the specific provision in the underlying sales-contract (mentioned below), it may be necessary to incorporate one or more of the following addition al terms in the Letter of CreditWhether the pay of the bank charges is on account of the opener or selle r Whether short from of Bill of Lading (B/L) is acceptable Whether, in case of bulk import, charter-party Bill of Lading (B/L) is a cceptable or not Whether shipment by chartered vessel is allowed, the following causes mu st be stipulated in the Letter of Credit. Shipping documents must include copies of Charter-party agreements. Bill of Lading must be signed by named carrier or his authorized agent.

4.7 DIFFERENT MEANS OF PAYMENT Importer settles the means of payment with the seller after making the purchase contract. Import procedure differs with relation to different means of payment. In our country in most cases, the Documentary/Letter of Credit makes import paym ent. Purchase Contract contains which payment procedure has to be applied. a) Cash in Advance: Importer pays lull, partial or progressive payment by a fore ign DD, MT or TT. After receiving payment, exporter will send the goods and the transport receipt to the importer. Importer will take delivery of the goods from the transport company. b) Open Account: Exporter ships the goods and sends transport receipt to the imp orter. Importer will take delivery of the goods and makes payment by foreign DD, MT, or IT at some specified date. c) Collection Method: Collection methods are either clean collection or document ary collection. Again, Documentary Collection may be Document against Payment (D /P) or Document against Acceptance (D/A). The collection procedure is that the e xporter ships the goods and draws a draft/ bill on the buyer. The exporter submi ts the draft/bill (only or with documents) to the remitting bank for collection and the bank acknowledges this. Then the remitting bank sends the draft/bill (wi th or without documents) and a collection instruction letter to the collecting b ank. Acting as an agent of the remitting bank, the collecting bank notifies the importer upon receipt of the draft. The title of goods is released to the import er upon full payment or acceptance of the draft/bill. d) Letter of Credit: Letter of credit is the well-accepted and most commonly use d means of payment. It is an undertaking for payment by the issuing bank to the beneficiary, upon submission of some stipulated documents and fulfilling the ter ms and conditions mentioned in the letter of credit. 4.8 TRANSMISSION OF LETTER OF CREDIT PAYMENT The Letter of Credit duly signed by the authorized persons of the bank is then s ent to the advising bank. There are three modes of sending the Letter of Credits which are as follows: A. By Mail/Courier Letter of credit can be sent to the advising bank by mail /courier. B. By TELEX: It was practiced earlier in the other branches, but from the very beginning of t he Gulshan branch it did not transmit Letter of Credit though Telex. C. By SWIFT: SWIFT Stands for Society of World Wide Inter bank Financial Telecommunication. This is special format maintained round the world. Through this facility party c an communicate within few minutes with other party staying any part of the world . Prime Bank Limited, Gulshan Branch Provides this facility to the clients. The advising bank verifies the authenticity of the Letter of Credit. Prime Bank has corresponding relationship or arrangement throughout the world by which the Letter of Credit is advised. Actually the advising bank does not take any liability if otherwise not requested. 4.9 RECEIPT OF DOCUMENTS After opening the Letter of Credit the next step would be to await shipment foll owed by negotiation of documents by a bank abroad. The beneficiary of the Letter of Credit (supplier), after effecting shipment of the goods as per Letter of Cr

edit terms, prepare or collect necessary documents as required under the terms o f Letter of Credit and presents the drafts to the negotiating bank along with th e supporting documents for negotiation. The negotiating bank negotiates the draft if the documents are found in order as per terms of the Letter of Credit, pays the beneficiary. The negotiating bank w ill reimburse itself either by debiting Prime Bank s Account, if any, maintained with them (the NOSTRO Account) or will seek reimbursing bank mentioned in Lette r of Credit, if there is no account. Simultaneously, the bank will send the docu ments to Prime Bank. The nature of documents has to be sent by the negotiating b ank will depend primarily on the terms of the Letter of Credit and secondly the sales contact between the buyer and seller. However, generally the following doc uments are asked to send: Bill of Lading or Airway Bill or other evidence of shipment (e.g. Railway Receip t, Truck Receipt, Barge Receipt) Certificate of Origin; Commercial Invoice; Draft or Bill of Exchange; Inspection of Survey Certificate; Marine Insurance Policy; Packing List; Quality Control Certificate. 4.10 SCRUTINY OF DOCUMENTS On receipt of the documents, the branch shall immediately set itself to the task of .scrutinizing the documents, What they would ensure is that the documents re ceived from the negotiating bank are drawn strictly in conformity with the terms of the Letter of Credit and respond to the requirement of the underlying Letter of Credit in every respect, examination of the documents generally includes the following points: Completeness of the documents; Consistency of the documents with each other; Compliance with the Uniform Customs and Practices for Documentary Credit s (UCPDC) issued by the International Chamber of Commerce, Paris. One of the basic principles of documentary credit is that all parties deal with document and not with goods (Articles 6 of UCPDC-600). That is why the documents should be scrutinized properly. If any discrepancy in the documents is found, t hat is to be informed to the party. A checklist may be followed for examining th e documents. In the UCPDC the Standard for Examining of Documents is mentioned as follows: a) Banks must examine all documents stipulated in the Credit with reasonable car e, to ascertain whether of not they appear, on their face, to be in compliance w ith the terms and conditions of the Credit. Compliance of the stipulated documen ts on their face with the same terms and conditions on the Credit shall be deter mined by international standard banking practice as reflected in these Articles. Documents which appear in their face to be inconsistent with one another will b e considered as not appearing on their face to be in compliance with (he terms a nd conditions of the credit. Documents not stipulated in the credit will not be examined by banks. If they receive such documents, they shall return them to the presenter. b) The Issuing Bank, the Confirming Bank, if any or a Nominated bank acting on t heir behalf, shall each have a responsible time, not to exceed five banking days following the day of receipt of the documents, to examine the documents and det ermine whether to take up documents and inform the party from which it received

the documents accordingly. c) If a credit contains conditions without stating the document(s) to be present ed in compliance there with, bank will deem such conditions as not stated and wi ll disregard them. 4.11 LODGMENT After the scrutiny the following steps are taken step-by-step to process for lod gment of import documents received form the negotiation bank. Lodgment means ret irement of funds. Usually payment is made within five days after the documents h ave been received. If the payment is become deferred, the negotiating bank may c laim interest (LIBOR) for making delay. However, after receiving the documents G ulshan branch authority contacts with an importer, in which procedure they want to collect the documents. If requested PAD is facilitated for twenty one days on ly. Lodgment Constitutes the Followings: Conversion of foreign currency amount of the bill and the foreign bank charges s eparately into Taka by applying Bills Collection (B.C.) selling rate ruling on t he date of lodgment is done. If forward exchange was, the booked rate is applied .T24 Payment against Documents (PAD) is created by Debiting PAD Account and Cred iting I lead Office Account Full particulars of the documents are entered in the prescribed PAD Register allotting a consecutive serial number in the register. If the forward exchange rate is booked then the booked rate is applied. Payment against Documents (PAD) is created by Debiting PAD Account and Crediting Head Office Account. Full particulars of the documents are entered in the pres cribed PAD Register allotting a consecutive serial number in the register. Documents are endorsed by putting seal and signature. ETCA "Exchange Transaction Credit Advice" is sent to the Head Office alo ng with a prescribed statement to provide them credit for the payment from their overseas account through Prime Bank Limited General Account. Head Office (International Division) in receipt of the IIJCA and the sta tement will respond the entry by debit to branch account (through Prime Bank L imited General Account) and contra credit to NOSTRO Account of the negotiating b ank abroad. To arrange necessary fund for payment, a requisition is sent to the Inte rnational Department. As the T.T & O.D rate is paid to the ID, the difference between these tw o rates remains as exchange gain for the Branch. As soon as above formalities are completed the importers are served with PAD bill intimations for retirement of concerned import document. A letter of intimation (P.A.D. intimation) regarding receipt of the documents should be sent to the applicant with a request to lake delivery of the document s on settlement of all dues against it and mentioning the maturity date of P.A.D . 4.12 RETIREMENT OF THE DOCUMENTS On receipt of cost memo/lodgment voucher the importer pays the necessary amount. This stage of the documentary credit operation is known as Retirement of Import Bills. The branch will prepare the retirement voucher to reflect the amount of co st and other charges to be collected from the importer, adjustments of margin an d PAD Account. Thereafter the documents may be handed over to the importer again st proper acknowledgement after certification and endorsement. The certification s by authorized personnel of the bank are as follows: The invoice is certified by the authorized officer of the bank with the exchange rate as applied in lodgment; The Bill of Exchange received from negotiating bank on issuing bank by t he beneficiary;

The Transport Documents evidencing the carrying of goods as per Letter o f Credit term has to the endorsed by the AD branch. On receipt of intimation, the importer is given necessary instructions with rega rd to retirement of the bill, disposal of the shipping documents and clearance o f the goods from the Customs -authorities. The importer may ask the bank to retire the bill by debiti ng his account or may request for the providing LIM or LTR facility, if arranged earlier. On intimation the importer approaches with a letter for retirement of the docume nt against full payment with up to dale interest and charges payable. Hank prepa res cost memo in printed form on account of the concerned party giving details h ead of charges payable. As the vouchers are passed and necessary entries are given in PAD Ledger endorse ments arc made fewer than two authorized signature of the Banks officers (P.A. Ho lder). Then the documents are delivered to the importer. 4.13 DELIVERY OF SHIPPING DOCUMENTS If the bill is to be realized by debit to (he importer s account, the documents are handed over lo the importer to his duly authorized clearing und forwarding a gent for clearance of the goods form customs at his own account.

4.14 PAYMENT TO THE FOREIGN BANK IMPORT OF GOODS Negotiating Bank is authorized to Debit Head Office Account (PBL) directly, if t he account is maintained with them. Negotiating Bank is authorized to obtain rei mbursement claim form foreign correspondent with which account is maintained by Head Office (PBL) Where reimbursement is provided subsequent to the receipt of documents, an autho rity Letter is to send to correspondent abroad with whom account is maintained b y Head Office to make payment to the Negotiating Bank to debit of PBL account ma intained with them for the amount of the documents. 4.15 IMPORT PORTFOLIO OF PRIME BANK LTD. Import portfolio consists of the goods or items are being imported through the b ank, total letter of credit opened by the bank, volume of goods etc. In Our Country fast moving consumer goods to Capital machinery are imported. The re are basically two types of importer. They are as follows: Industrial Importer: Industrial importer basically imports raw materials for fur ther processing. They sell the finished goods to the abroad or in Bangladesh. Ot her than raw materials they imports Capital Machinery for different industrial pur pose. Commercial Importer: Commercial importers import finished goods. They import th ose goods directly for selling into the market. But they are very limited in nu mber. Through this branch the majority of the goods imported are raw materials b y the industrial users. Now we can see from the following table that how many commodities are imported b y this branch:

Name of the Commodities Industrial Import Commercial Import Industrial Raw Materials Yarn Dyes Aluminum Ingot Chemicals Pharmaceutical Raw Materials Pharmaceuticals Packing materials Capital Machinery Mobile Phone Diesel generator Laboratory Reagents Spare Parts Gas Pressure Regulator Air Cooler Toiletries Passenger Elevator Lighting Fixture Food Products Reconditioned Vehicle. Printing Ink. As the most numbers of Importers are Industrial Importers. The percentage of imp orted raw materials is the maximum volume of imports all over the year. We can e asily trace the percentage of total L/C opened at this branch at 2006& 2007 thro ugh the following two Pie Charts, where Industrial Raw Materials secured almost half of the L/C, and the remaining secured different percentages according to th e demands of those years. (See Appendix B and Appendix C at Page no: ) In the branch I have also observed the frequency of imported goods. The Industri al Raw Materials Always stayed at the top position. But the most interested thin g is that the next frequent item of imported good is Mobile Phone. The importation of mobile phones through this branch is done only by one company which is Elect ra Telecom BD Ltd. Electra is the authorized dealer of Samsung Mobile Phone. The frequency of imported capital machinery is very low, but the value of import of capital machinery through each L/C is very high compared to all other imported goods. The total scenario will be transparent through a graph: (See Appendix-D at page no: )

Chapter -05 ________________________________________ Export Procedure through Letter Of Credit Operation of Prime Bank Ltd. Creation of wealth in any country depends on the expansion of production and inc reasing participation in international trade. By increasing production in the e xport sector we can improve the employment level of such a highly populated coun try like Bangladesh. Bangladesh exports a large quantity of goods and services t o foreign households. Readymade textile garments (both knitted and woven), Jute , Jute-made products, frozen shrimps, tea are the main goods that Bangladeshi ex porters export to foreign countries. Garments sector is the largest sector that exports the lion share of the country s export. Bangladesh exports most of its readymade garments products to U.S.A and European Community (EC) countries. Ba ngladesh exports about 40% of its readymade garments products to U.S.A. Most of the exporters who export through PBL are readymade garments exporters, They open

export L/Cs here to export their goods, which they open against the import L/C opened by their foreign importers. Export L/C operation is just reverse of the import L/C operation. For exporting goods by the local exporter, bank may act as advising banks and collecting bank (negotiable bank) for the exporter. Prime Bank Ltd as an authorized dealer (AD) deals a lot of letter of credit on behalf of beneficiary. Here Prime Bank Ltd acts as an advising or negotiating bank which advise the L/Cs. Now the whole pr ocess of export in pictorial format is given below:

Fig: Export procedure in pictorial format 5.1 DOCUMENTS REQUIRED FOR EXPORT TRANSACTION There are two types of document for export transaction. They are Substantive Doc ument and auxiliary document. The name of the documents under these two categori es is given below: o o o o o o o o o o Substantive Document: Draft or Bill of Exchange. Commercial Invoice. Bill of Lading or Airway Bill. Marine Insurance Policy. Auxiliary Document: Packing List. Consular Invoice. Certificate of Origin Quality Control Certificate. GSP Certificate. Inspection Certificate.

Other documents and formalities: For Export of jute, jute goods, tea and tobacco, an exporter, in addition to Exp ort Registration Certificate, needs a separate license to be issued by the conce rned agencies. Sanitary certificate is required for all livestock and plants and plant products (except fruit and vegetable) certifying that they are free of injurious insects , pests and diseases. 5.2 REGISTRATION OF EXPORTERS Under the export policy of Bangladesh the exporter has to get valid Export regis tration Certificate (ERC) from Chief Controller of Import & Export (CCI&E). The ERC is required to renew every year. The ERC number is to incorporate on EXP f orms and other papers connected For obtaining ERC, intending Bangladeshi exporte rs are required to apply to the controller/ Joint Controller/ Deputy Controller/ Assistant Controller of Imports and Exports, Dhaka/ Chittagong/ Raishahi/ Mymen singh/ Sylhet/ Comilla/ Badshal/ Bogra/ Rangpur/ Dinajpur in the prescribed form along with the following documents: a. Nationality and Assets Certificateb. Memorandum and Article of Association and Certificate of Incorporation i n case of Limited Company-, c. Bank Certificate d. Income Tax Certificate e. Trade License etc. with exports. 5.3 SECURING THE EXPORT ORDER: After getting ERC Certificate the exporter may proceed to secure the export orde r. He can do this by contacting the buyers directly or through agent. In this purpose the exporter may get help from: a. License Officer

b. Buyers Local Agent c. Export Promoting Organization d. Bangladesh Mission Abroad e. Chamber of Commerce (local & foreign) f. Trade Fair etc. 5.4 SIGNING THE CONTRACT & RECEIVING LETTER OF CREDIT: After communicating buyer, exporter has to get contracted (writing or oral) for exporting exportable items from Bangladesh detailing commodity, quantity, price, shipment, insurance and marks, inspection and arbitration etc. After getting contract for sale, exporter should ask the buyer for Letter of Cre dit (L/C) clearly stating terms and conditions of export and payment. The following are the main points to be looked into for receiving/ collecting ex port proceeds by means of Documentary Credit-. The terms of the L/C are in conformity with those of the contract" The L/C is an irrevocable one, preferably confirmed by the advising bank; The L/C allows sufficient time for shipment and negotiation. (Here the regulatory framework is UCPDC-500, ICC publication) Terms and conditions should be stated in the contract clearly in case of other m ode of payment: (a) Cash in advance-, (b) Open account, (c) Collection basis (Documentary/ Clean) (Here the regulatory framework is URC-525, ICC publication) 5.5 EXPORT FINANCING: Financing exports constitutes an important part of a bank s activities. Exporte rs require financial services at four different stages of their export operation . During each of these phases exporters need different types of financial assis tance depending on the nature of the export contract. 1. Pre-shipment credit 2. Post-shipment credit 1. Pre-shipment credit: Pre-shipment credit, as the name suggests, is given to finance the activities of an exporter prior to the actual shipment of the goods for export. The purpose of such credit is to meet working capital needs starting from the point of purch asing of raw materials to final shipment of goods for export to foreign country. Before allowing such credit to the exporters the bank takes into consideration about the credit worthiness, export performance of the exporters, together with all other necessary information required for sanctioning the credit in accordan ce with the existing rules and regulations. Pre-shipment credit is given for th e following purposesa. Cash for local procurement and meeting related expenses. b. Procuring and processing of goods for export. c. Packing and transporting of goods for export. d. Payment of insurance premium. e. Inspection fees. f. Freight charges etc. An exporter can obtain credit facilities against lien on the irrevocable, confir med and unrestricted export letter of credit in form of the followings-. a. Export cash credit (Hypothecation) b. Export cash credit (Pledge) c. Export cash credit against trust receipt. d. Packing credit. e. Back to back letter of credit. f. Credit against Red-clause letter of credit. 5.6 POPULAR FORM OF PRE SHIPMENT CREDIT: 5.6.1 Packing Credit: Packing Credit is essentially a short-term advance granted by a Bank to an expor ter for assisting him to buy, process, manufacture, packs and ships the goods. Generally for movement of goods from the hinterland areas to the pots of shipmen

t the Banks provide interim facilities by way of packing credit. This type of credit is sanctioned for the transitional period starting from disp atch of goods till the negotiation of the export documents. Practically except for single transaction, most of the pre-shipment credits are allowed in the form of limits duly sanctioned by Bank in favor of regular exporters for a particula r period. The drawings are required to be adjusted fully once within a period o f 3 to 6 months. Suiting to the breed and nature of export, sometimes an export er may also be allowed to avail a combined Cash Credit and Packing Credit limit with fixed ceiling on revolving basis. But in no case the borrower would be all owed to exceed individual credit limit fixed for the purpose. The drawings under Export Cash Credit limits are generally adjusted by the drawing in packing cred it limit, which is, in turn liquidated by the negotiation of export documents. 5.6.2 Charge Documents for P.C: Banker should obtain the following charge documents duly stamped prior to disbur sement: Demand Promissory Note Letter of Arrangement Letter of Lien of Packing Credit (On special adhesive stamp) Letter of Disbursement Packing Credit Letter 5.6.3 Additional Documents for P.C. Letter of Partnership along with Registered Partnership Deed in case of Partners hip Accounts. Resolution of the Board of Directors along with Memorandum & Articles of associa tion in case of Accounts of Limited Companies. In case of Corporation, Resoluti on of the Board Meeting along with Charter. Personal Guarantee of all the Partners in case of Partnership Accounts and all t he Directors in case of Limited Companies. An undertaking from the Directors of the Public Limited Company to obtain prior clearance from the Bank before declaring any intend/final dividend. 5.6.4 Back to Back Letter of Credit (BTBL/C): Bangladesh is a developing country. After receiving order from the importer, ve ry frequently exporters face problems of scarcity of raw material. Because, some raw materials are not available in the country. These have to be collected from abroad. In that case, exporter gives lien of export L/C to bank as security an d opens an L/C against it for importing raw materials. This L/C is called Back To Back L/C. In back to back L/C, PBL keeps no margin. Sometimes there is provision in the export L/C that the importer can use the cer tain portion of the export L/C amount for importing accessories that are necessa ry for the making of the product. Only in that case, BTB is opened. 5.6.5 Payment of Back to Back LC: Client gives the payment of the BTB L/C after receiving the payment from the imp orters. But in some cases, client sells the bills to the PBL. But if there is discrepancy, the PBL sends it for collection. In case of BTB L/C, PBL gives the payment to the beneficiary after receiving the payment from the finished product (i.e. exporter). Bank gives the payment from DFC Account (Deposit Foreign Currency Account) where Dollar is deposited in nat ional rate. For BTB L/C, opener has to pay interest at LIBOR rate (London Inter Bank Offerin g Rate). Generally LIBOR rate fluctuates from 5% to 7%. A schedule named Payment Order; Forwarding Schedule is prepared while making the payment. This schedule contains the followings: Reference number of the beneficiary s bank and date. Beneficiary s name. Bill value. Payment order number and date. Equivalent amount in Taka. 5.6.6 Entitlement of BTB LC as per Import Policy Order 2006 2009

BTB LC entitlement of garments items are assessed on the basis of value addition to be made depending on the category of garments in line with the import policy in order, which are as under: Knit Garments : Value addition at least 20% Woven Garments ( Non Quota) : Value addition at least 20% Woven Garments (Quota) : Value addition at least 20% for FOB value of e xportable goods up to US$.40/Dz High value Garments ( Non Quota) : Value addition at least 10% for FOB va lue of exportable goods at least US$.60/Dz High value Garments (Quota) : Value addition at least 15% for FOB va lue of exportable goods at least US$.60/Dz 2. Post Shipment Credit: This type of credit refers to the credit facilities extended to the exporters by the banks after shipment of the goods against export documents. Necessity for such credit arises as the exporter cannot afford to wait for a long time for wit hout paying manufacturers/suppliers. Before extending such credit, it is necess ary on the part of banks to look into carefully the financial soundness of expor ters and buyers as well as other relevant documents connected with the export in accordance with the rules and regulations in force. Banks in our country exten d post shipment credit to the exporters through-. Negotiation of documents under L/C Foreign Documentary Bill Purchase (FDBP)-. Advances against Export Bills surrendered for collection; Negotiation of documents under L/C: The exporter presents the relative documents to the negotiating bank after the s hipment of the goods; a slight deviation of the documents from those specified i n the L/C may raise an excuse to the issuing bank to refuse the reimbursement of the payment already made by the negotiating bank. So the negotiating bank must be careful prompt, systematic and indifferent while scrutinizing the documents r elating to the export. Foreign Documentary Bill Purchase (FDBP): Some clients of the bank always enjoy credit facilities against their export doc uments. They submit the bill of export to bank for collection and payment of the BTB UC. In that case, bank purchases the bill and collects the money from the exporter. PBL subtracts the amount of bill from BTB and gives the rest amount t o the client in cash or by crediting his account or by the pay order. For this purpose, PBL maintains a separate register named FDBP Register. This r egister contains the following information: Date Reference number (FDBP) Name of the drawer Name of the collecting bank Conversion rate Bill amount both in figure & in Taka. Export form number Export L/C number Advances against Export Bills surrendered for collection: Banks generally accept bills for collection of proceeds when they are not drawn under an L/C or when the documents, even though drawn against an L/C contain som e discrepancies. The bank generally negotiates bills drawn under L/C, without a ny discrepancy in the documents, and the exporter gets the money from the bank i mmediately. However, if the bill is not eligible for negotiation, the exporter may obtain advance from the bank against the security of export bill. In additi on to the export bill, banks may ask for collateral security like a guarantee by a third party and equitable/registered mortgage of property.

5.7 CERTIFICATION OF EXP FORM BY AUTHORIZED DEALER: Before lodging the EXP Forms with the customs/ Postal authorities, the exporter should get copies of forms certified by an AD. Now the AD will see and ensure th at each set of the forms is duly filled in. Thereafter, they will record full pa rticulars of the in the Export Register. In order to avoid any loss of foreign e xchange to the country, AD shall not certify any EXP form unless they have satis fied the following: I. Arrangements made for realization of export proceeds within the pres cribed period. II. The Exp form is either signed either by the exporter or one holding val id legal power of attorney from the exporter. III. For delay in repatriation of export proceeds the exporter as well as t he AD and its officials certifying the export form render themselves liable to p unitive action under the FER act. Therefore in their own interest both exporters and the Ads should be alert and active in ensuring timely repatriation of expor t proceeds. 5.8 MAKING OUT AND DELIVERY OF SHIPPING DOCUMENTS: In case of export of goods, full payment for which the value has been receive d by the exporter in advance through the AD, the bill of lading and other docume nts may be endorsed by the AD in favor of foreign importers and the same may be sent directly to the importers abroad by the AD Sometimes the shipping documents may reach after the arrival of the exported goo ds to the importers country. This cause inconveniences and involves payment of de murrage. at the port of destination due to delay in receipt of the shipping docu ments. To overcome this problem, shipping company may at the request of negotiat ing bank in Bangladesh issue Telegraphic Delivery Order on their agents. A copy of this document duly authenticated by the shipping company or agents should be passed on to the relevant AD. The AD then sends his instruction of telegraphic t ransfer to hid overseas correspondence to hand over it to the consignee and stat ing the amount of the consignee before the delivery order is released. The usual shipping documents are Bill of Lading, Invoice etc which can be dispatched to t he correspondent bank as well. 5.8.1 Submitting of Documents to the AD The exporter must submit all the exp documents to the AD. The EXP documents are four in number. Bank only works with the three copies. The copies are : 1. Original: Retained by customs and forward to Bangladesh bank. 2. Duplicate: Submit to Bangladesh bank with 14 days of shipment throu gh AD along with invoice. 3. Triplicate: Submit to the Bangladesh bank after realize the export p roceeds with the usual monthly returns. 4. Quadruplicate: Copy retained by AD for record. 5.9 SCRUTINY OF DOCUMENTS: The authorized dealer scrutinizes the documents very carefully. Because, they ha ve to report it to the Bangladesh Bank at the interval of every fifteen days in a month. The following process is done by the authorized dealer for scrutiny of the documents. On receipt of the EXP form and documents covering exports the AD compares the a uthorized signature with the specimen signature of the duly authorized officer o f the shipping company to ensure the genuineness of the documents. The AD should also compare the relative bill and /or documents with the relative form and satisfy itself that the declaration made on the form is correct and th e amount for which the bill is drawn or the invoice is written is not less than the invoice value stated on the form. If the difference between the value stated on the form and the amount of the bil l is small the AD may accept bill /documents for collection. The details of such adjustment must be given on the relative form and must be authenticated by the AD under its stamp and signature. After negotiation of the bill or acceptance of the documents for collection, th

e ADs should complete the certificates in this behalf on the space provided on t he duplicate copies of the EXP form. If the payment is received in foreign currency or nonresident taka account of a bank branch correspondent abroad the Ads shall certify on the reverse of the tr iplicate copy of the form retained with them and forward it to Bangladesh Bank w ith the usual return. The quadruplicate will be retained by the AD for record. 5.10 DEDUCTION OF CHARGES: Commissions, brokerage or other trade charges due to be paid to foreign importer s or agents by the exporters in Bangladesh relating to the particular shipment m ay be deducted from the relative bill or the amount of the sale proceeds or remi tted from Bangladesh after the full proceeds have been realized only up to a max imum of 5% by deduction from the invoice value of the goods. If the rate exceeds then special order must have to be granted from Bangladesh Bank with some condi tion. 5.11 FOREIGN CURRECY EXCHANGE RETENTION QUOTA: (FCERQ) Foreign Exchange retention quota is a system where authorized dealer retained a certain percentages of the total exported or billed amount for meeting up the e mergency need of the customers. Merchandise exporters are entitled to a foreign exchange retention quota of 40% of repatriated value F.O.B value of their exports. Foreign exchange out of the retention quota may be maintained in FC accounts wit h the concerned Ads in US Dollar, Pound Sterling, Deutschemark or Japanese Yen u pon the realization of the export proceeds. Balances in these accounts may be us ed by the exporters for bonafide purposes. The purpose may be the following: o Business Visits Abroad. o Participation in Export Fairs and Seminars, o Establishment and maintenance of offices abroad. o Import of raw materials. o Machineries & Spares etc. But Foreign Exchange from the exporters retention quota cannot be used for invest ment abroad by the exporter. Foreign Exchange out of exporters retention quota may also be kept as interest be aring renewable term deposits with the concerned Ads in Bangladesh in US dollar, Pound Sterling, DM or Japanese Yen, with minimum balances of US$ 2000, or1500 P ound or equivalent. 5.11.1 TREATMENT OF FCERQ AT PRIME BANK LTD: Prime Bank Ltd., Gulshan Branch maintains different amount in export retention q uota based on the negotiation with the customers or sometimes the department hea d assumed a particular amount or the full amount that are transferred to the exp ort retention quota. The bank maintains its record regarding the bill amount and the realized amount in the Master L/C file. In that file a separate column is created named FCERQ. A fter realization of export proceeds a particular amount is transferred, which ma y be stated in Export Proceed Realization Sheet or may be negotiated by the cust omers later. 5.12 SHIPMENT ON F.O.B. TERMS: Generally goods are exported on F.O.B terms to the exporters country. It means th at buyers pay the carriage when goods pass the ship. The AD should verify that t he bills of lading freight has not been prepaid in Bangladesh. All cases where f right or insurance has been paid in Bangladesh but export documents are made out on FOB basis should be reported to the Bangladesh Bank. 5.13 SHORT SHIPMENTS OR OVER SHIPMENTS: If the amount of bill value and Invoice value differs, at that time short/over s hipment arises. If the invoice value is greater than bill value then over shipme nt arises and if it reverses then Short shipment arises. The reason may be: The differ of quantity shipped than original amount but the rate may be same. The total price of the goods may be increased or decreased. In all cases of short shipments, the exporters should give notice of short shipm ent on the prescribed form in duplicate to the Customs who will forward a certif ied copy of the notice to the Bangladesh Bank. The notice should bear the number

and date of the relative EXP form in respect of which goods have been short shi pped. 5.13.1 TREATMENT OF SHORT SHIPMENT AT PRIME BANK LTD: Prime Bank at first checks the difference between Bill Value and Invoice value. If difference arises then the bank attaches the certificate with duplicate as we ll as at triplicate after proceeds realization and then reports it to the Bangla desh Bank. 5.14 LODGEMENT OF FDBP: Lodgment of FDBP (Foreign Documentary Bill Purchase) is nothing but purchase of L/C taking the loan facility provided by the advising or other bank to the expor ter against the document and L/C keeping them as mortgage. The loan facility is given up to a certain percentages of the L/C Value. In case of Purchase of the L /C by the advising bank or other negotiating bank the bank will keep a signed co py of guarantee paper named Set of Charged Documents. This provides guarantee that the signed person on that will be liable for amount mentioned in L/C with matur ity with due care and diligence. This is only requirement for the valued client in certain case. For safety the bank may seek for other necessary documents whic h must be supported by the exporter. In this case different collateral has also been taken as for security. Prime Bank Ltd in case of all the application of regarding FDBP uses Temenous Gl obus (T24), which, purchases and receives the bill at fully automatic system. 5.15 VERIFICATION OF PROCEED REALIZATION CERTIFICATE: (PRC) Sometimes exporters are required to submit to the various Government agencies ev idence of export and of realization of export proceeds. In such cases, Proceeds Realization Certificate may be issued by the ADs in the prescribed form after ge tting them authenticated by the Bangladesh Bank. Prime Bank Ltd at the last phase of its documentary work, Check the PRC from its record of Quadruplicate EXP form very carefully and make necessary amendment. A fter that necessary amendment it submits the certificate to the Bangladesh Bank. In this way all the documentary work related Letter of Credit is completed 5.16 EXPORT PORTFOLIO OF PRIME BANK LTD. Export Portfolio consists of the items exported, the value of export bills that Prime Bank gets from issuing banks from foreign countries as well as Bangladesh. Various sorts of commodities are exported abroad through Prime Bank Ltd. But Re adymade Garments consist of most of the foreign exports. Other exported items ar e shrimp, jute and jute goods, leather tobacco, ceramic tiles, fresh vegetables, tempered coated glass, bone crust, betel- nut etc. There are two modes of export payments that are practiced in foreign trade world wide. They are 1. Sight Bill: In this bill the exporters are paid at sight for the product s they just exported. 2. Usance Bill: In this bill the exporter gets payment after a certain peri od of time depending on the L/C terms and condition. This bill is usually for ra w materials or semi finished products that are exported from Bangladesh and once the goods reach in final destination they are employed for further processing. From the table we can realize the actual scenario about the values of export bil ls for the year 2006 & 2007 (See Appendix E page no: ) Foreign Export: In the branch foreign export activities play a vital role in the export division. About 75% of the total export comes from this section. At this branch majority of the foreign exports are Ready made garments. Local Export: Local export indicates that goods are exported within the boundari es of Bangladesh. Local exports consist 25% of the total export as it is not ver y common practice in Bangladesh. Yarn and Accessories are the main commodities of the local export at this branch. Chapter -06 ________________________________________ Foreign Remittance Section of Prime Bank Ltd. The functions of this department are outward and inward remittances of foreign

exchange from one country to another country. In this process of providing this remittance service, it sells and buys foreign currency. 6.1 Modes of Foreign Remittances: The remittance process involves the following four modes: Cash Remittance: The bank sells dollar/pound for using the abroad by purchaser. The maximum amoun t of such sell is mentioned in the Bangladesh bank publication of "Convertibilit y of Taka for current transactions In Bangladesh". They can purchase dollar from resident and nonresident Bangladeshi or foreigner. Most dollars purchased cones from realization of Export Bill of Exchange. Traveler s Cheque: Traveler s cheques are useful to persons, who frequently traveled abroad this b ank issue Traveler s cheque of AMEX. Customers can en-cash the TC in abroad from the drawers bank. Customers buy TC for use in abroad. But some leave may be rema ined unused. The customer can surrender these unused leaves against payment of e quivalent amount. Generally it takes 21 days for collection of TC and customers can draw cash after one month. Telex Transfer: Bank also remit fund by tested telegraphic massage via its foreign correspondenc e bank in which it is maintaining its NOSTRO account. In the same manner, it mak es payment according to telegraphic massages of its foreign correspondence bank from the corresponding VOSTRO account. Foreign Demand Draft: Bank issues demand draft in favor of purchaser or any other according to instru ction of purchaser. The payee can collect it for- the drawer bank is which the i ssuing bank of demand draft holds it NOSTRO account. Bank also makes payment on DD drawn on this bank by its foreign correspondence bank through the VOSTRO acco unt. 6.2 SCENARIO OF FOREIGN REMITTANCE OF PRIME BANK LTD: Prime Bank Ltd maintains strategic initiative to handle this department. The ba nk has already added a good number rural and semi urban branches with the existi ng network to ensure wider reach and coverage. For purchase of foreign currency through Prime Bank Limited, an application mus t be made to a specific AD branch and Bangladesh Bank. The application form is c alled IMP () form if the purpose is import payments or for other purposes, the T M Form is used such as request for foreign currency in case of dollar. T.C (Trav eler cheque) Foreign Demand Draft (F.D.D), Telegraphic Transfer (T.T).etc, If th e bank is empowered to approve the application, it affects the sale of foreign e xchange. And if the transaction requires prior Approval from Bangladesh Bank, th e T.M form is forwarded to Bangladesh bank. In Prime Bank, (the mode of remittan ces are bank draft, mail transfer and taka remittances. Inward Remittances: Inward Remittances include the TT, FDD, purchase of bills and drafts under L/C, purchase of foreign currency, etc. But the most sign ificant amount in the inward remittances of Prime Bank Limited is the remittance s from wage earners. The bank maintains proper records of ail inward remittances and provides particulars as required by the Exchange Policy Departmen t of Bangladesh Bank in Returns. Outward Remittances: The outward remittances include M.T, Draft, sale of Foreign Exchange under L/C and against Import Bills, etc .To facilitate foreign exchange transaction, and each bank maintains accounts with foreign banks in pr incipal financial centers. Prime Bank also have NOSTRO Accounts for dollar payme

nts and other currency accounts for payment in currencies like pound, yen, rupee , etc, The Bank has a list of foreign correspondents and arrangements with thei r agencies in Bangladesh. When deciding which correspondent (reimbursing bank in case of import) is to be chosen for payment, the list is used. 6.2.1 Some Measures of Improving this department performances 1. Prime Bank Ltd. has arranged 24 (twenty four hours leading exchange companies and banks including the global money transfer giant Western Union as a principa l agent. 2. Establishes wide variety of branches from where remittance flow may be receiv ed easily. 3. Introduction of ATM as the alternate delivery channel increase in the number of remittance arrangements with leading overseas exchange companies and banks. 4.The Banks fully owned exchange company in Singapore have ensured sustain inflow of foreign remittances supplementing export receipts making import payment wit hout depending on the volatile foreign exchange market. From the following diagrams we can easily identify the pie chart dictates the C ountry wise Inflow Remittances from January to December 2007 and a line diagram dictates that Inflow of foreign remittance trend (2003-2007) (See Apendix F & Appendix-G) From the Pie Chart, we can see that most inflow of remittance comes from the UA E because we supply manpower at vast size in the Middle East which is 29% and th e next highest remittance comes from UK (Europian Country) which is 23%. In the Line Diagram, we see the remittance jumps from 3688 to 15050 at the year 2005-2006, which is very much positive of our economy. But we see steady growth from the year 2006-2007 as overall financial recession is going on all over the world. Chapter -07 ________________________________________ Recent Performance of Prime Bank Ltd at Foreign Trade Bangladesh is an underdeveloped country. Its financial structure is still not so und. It depends many also many donor agencies like IMF, World Bank and so on. So this is a Import oriented country. Though facilities of different export incen tives are getting available but the balance of trade is always is in negative si de. As a result our national reserve is in shortfall situation. Though this posi tion in financial sector different banks are doing well in serving both the impo rters and exporters as well. They are now able to such condition which is better congenial environment to the Import & Export business. Prime Bank ltd is one of those banks whose performance in this area is satisfact ory. From the financial data 2007 (as 2008 is not available to the Public) Total import and export business transacted were TK 70,616 million and Tk 51,316 mill ion respectively. The growth rate of the import business is 34%. On the other ha nd the growth rate of export is 23%. The growth of foreign trade has given the b ank a new dimension to go forward. This growth rate is very much effective in me eting the L/C commitments. The Export and Import Business are contributed by its corporate clients On the remittance side there is also a sign of increasing growth rate. As the wo rld is facing at severe financial crisis the growth of the overall remittance wi ll be a milestone to the banking industry. Foreign Currency Balances with banks outside the country maintaining NOSTRO accounts are also accelerated with the ba nks efficient management policy. From the table and the bar diagram it is very evident that in foreign trade it proves the most efficient performance ever. According to an official Year 2008 w ill be an another milestone regarding its overall performance especially in fore ign trade. The overall performance regarding foreign trade operation from the y ear 2003-2007 are placed in the table. (See Appendix-H page: ) 7.1 Some Incoterms used in Foreign Trade :

01. EXW : EX works Buyer arranges carriage from sellers prem ises. Risks n Cost transfers to buyer. 02. FCA : Free Carrier Buyer arranges carriage at named place. Risks n Cost transfers to buyer. 03. FAS : Free Alongside ship Buyer arranges carriage from alo ngside ship. Risks n Cost transfers when goods placed alongside ship. 04. FOB Free on Board Buyer arranges carriage. Risks n Cost transfers when goods pass ship. 05. CFR Cost and Freight Seller arranges carriage. Risk t ransfer when goods pass ship. Cost transfer at destination port 06. CIF Cost, Insurance and Freight Seller arranges Carriage and Insurance. Risk and cost transfer at destination port 07. CPT Carriage Paid to Seller arranges carriage. Risk t ransfer when goods delivered ship. Cost transfer at destination port. 08. CIP Carriage and insurance paid Seller arranges Carriage and Insurance. Risk and cost transfer at destination port 09. DAF Delivered at Frontier Seller arranges Carriage. Risk a nd cost transfer when goods delivered at frontier. 10. DES Delivered EX Ship Seller arranges Carriage. Risk a nd cost transfer when goods at buyers disposal on ship. 11. DEQ Deliver Ex Quay Seller arranges Carriage. Risk and cost transfer when goods at buyers disposal on quay. 12. DDU Delivery duty Unpaid Seller arranges Carriage. Risk a nd cost transfer when goods at buyers disposal 13. DDP Delivery duty paid Seller arranges Carriage and Dut y. Risk and cost transfer when goods at buyers disposal.

Chapter -08 ________________________________________ Reccomendation Though Prime Bank is providing a very efficient Foreign Exchange services, there is also room for improvement to provide their services even better and of inter national standards. Some recommendations that the Bank may benefit from are give n below: Upgrade the Online Banking Services Prime Bank is among the few banks in Bangladesh, which provides the online banki ng services to its customers. By using the modern banking services, a Prime Bank customer can withdraw or deposit an amount of cash under the Prime Bank account no matter in which branch the actual account exist. This service gives its cust omer huge flexibility. However, there is sonic leaking in [heir online bunking s ervices. PBL should pay attention to this issue. Automation Prime Bank has already brought software called Temenos Globus and Oracle special ized for (Import and Export Letter of Credit entry) famous core banking software , which is now being implemented to all of its branches. However, the employees are still struggling to conduct foreign exchange services through this software because of its complexity. As a result, valuable time and energy are being waste d while conduction such foreign exchange services. Some further simplification a nd modification of this software might actually help the bankers to work more ef ficiently in providing international trade services like Export, Import and Remittance.

Increase the number of Nostro Accounts: Nostro Accounts are Foreign Currency accounts that the banks hold with foreign b anks operating in different courtiers. If they increase the number of such accou nt then, payments for L/C could be easily made through those accounts rather tha n forwarding the foreign currency through other foreign banks, which results in higher expenses. Increase the Limit on L/C Value Every L/C has limits on its total value, imposed on them according to the Bangla desh Banks regulations, and based on the risk factors. However, the Bank still h as the authority to make some changes to the limit within a certain specified ra nge. If Prime Bank become more flexible, than it can open more L/C s with higher values thus increasing their profitability; however in this case there will be more risk, d Reduce the Rate of Interest on LTR Payments for L/C s could also made through pre-arranged credit facilities that t he customer may have with the Bank. Usually, the rates of interest on these -cre dits are excessively high which actually discourage the customers. Reducing inte rest on such credit facilities would actually induce the clients to do more glob al trade thus increasing the banks profit as well as the well being of the count ry s Economy. L/C margin A customer is required to pay the bank a certain percentage of the total L/C val ue in advance before opening an L/C, which is called L/C margin. If Prime Bank L imited reduces the rate of margin then perhaps they can attract more customers. At the moment, companies with good relationship with the bank only benefits with lower-margin level over others. Reduce Charges In order to do any kind of foreign trade whether be it Remittance, Export or eve n Import charges are applicable everywhere. Charges includes: SWIFT charges (Cha rge for sending the L/C electronically), Document Handling Charges, Stamps Charg es as well as VAT. Prime Bank will be able to attract more customers by reducing these charges. Encourage to open smaller L/C value Being a well reputed Bank, PBL no longer wants to conduct smaller L/C request co ining form SME s. As a result, they are disregarding a huge number of potential customers. The bank now pays more attention to big customers and if their attitu de toward smaller business does not change soon, they might fall far behind its competitor. Expansion of its Network outside Dhaka and Chittagong The bank has not been effective in increasing the number of branches outside Dha ka and Chittagong. Most of Prime Bank s braches are targeted at the city people only; they have not concentrated of the rural people too much. That s why the co mpany could not capture a large portion of the market as well as market share. T he authority of the bank needs to take this into consideration not only for them but also for the poor rural people

8.1 CONCLUSION This report is prepared based on the knowledge and experienced gathered while wo rking in the Prime Bank Ltd, Gulshan Branch. Every points and recommendations ar

e made observing the facts and figures during my internship program. Working and getting involved in this bank is really a great pleasure for me. Again I want t o thank to all of the officials of the branch who have given me appropriate oppo rtunities to apply theoretical knowledge in the practical field. During the internship program I was assigned to work in the Foreign Exchange Dep artment of Prime Bank Ltd of that branch. In that division I especially involved to observe the Letter of Credit Operation operated by the import & export depar tment. No matter whatever the challenges are in the area of Foreign Trade, the b ank is fully equipped to face any obstacle. For the last 5 Years they have hold the number one position in the Bangladesh Banks CAMELs rating and hopes to be on top this year as well. As the economy of Bangladesh is swelling and the import-export is one of the maj or sector that plays important role in the economy, Prime Bank Ltd always have p layed its role in making a difference in the banking sector. The total condition of Import and Export though L/C is showing a positive trend in the last five ye ars. It is undoubtedly a positive though the world is going on a global financia l challenge. .If the bank reduces the margin of opening L/C then it will be able to attract more customers. On the other hand they should take the opportunity t o open the L/C in smaller amount to encourage the SMEs sector. Along with maint aining standard level of services Prime Bank is playing a leading role in the ec onomic development of the country. Its contribution to the economy along with hi gh level of corporate social responsibility is providing it a way to move ahead and grow faster and better than others.